Presentation on theme: "INDUSTRIAL ECONOMIC HUBS & SPECIAL ECONOMIC ZONES 30 April 2013"— Presentation transcript:
1INDUSTRIAL ECONOMIC HUBS & SPECIAL ECONOMIC ZONES 30 April 2013 PRESENTATION TO THE PROVINCIAL LED FORUM
2Table Contents Introduction Policy Alignment and catalytic InterventionsSpecial Economic Zones (SEZs)Types of SEZsFoundation for SEZ successExport opportunitiesKZN ApproachComparative AdvantageIndustrial Economic HubsSEZ Selection CriteriaRichards Bay IDZ SEZDube Trade Port SEZProgress ReportConclusion
3IntroductionThe current global economic trends dictate that it cannot be business as usualThe developed nations economies are under siege whilst the developing nations economies are growing steadilyChallenges of unemployment, inequalities and poverty remain a challenge for developing nationsThe emergence of developmental state and the “BRICS fever”Provincial space economy and need for alignment - Vision 2013 (re- industrialisation and decentralisation)Our approach needs to be innovative and creative – thinking outside the boxThe approach to growing the KZN economy firmly revolves around infrastructure development; enterprise support; investment & trade linkages; support to key priority sectors (manufacturing, agriculture, tourism, ICT and green economy).
4Policy Alignment and Catalytic Interventions New Growth Path (NGP)National Development Plan (NDP)SEZs BillIPAP2Policy TargetsNational Legislative and Policy EnvironmentKwaZulu-Natal Policy and Strategy developmentsUnemploymentPovertyInequalitySustainable Economic GrowthProvincial Growth and DevelopmentProvincial Spatial Economic Development Strategy (PSEDS)Industrial Development Strategy (PSEDS)Maritime StrategyExport StrategyInvestment StrategyKZN Tourism Master PlanRural Development StrategyHuman Settlement StrategyGreen EconomyAirportFreight and LogisticsCatalytic InterventionsInfrastructure DevelopmentSpecial Economic ZonesCorridor DevelopmentSmall Town RehabilitationIndustrial Economic HubsAerotropolisEnterprise DevelopmentGreen EconomyMaritime Industry DevelopmentRobust Implementation Critical
5Special Economic Zone (SEZs) SEZs are loosely defined as “Designated areas in countries that possess special economic regulations that are different from other areas in the same country. Moreover, these regulations tend to contain measures that are conducive to foreign direct investment. Conducting business in a SEZ usually means that a company will receive tax incentives and the opportunity to pay lower tariffs”SEZs are a tool for government intervention into the economyMost critical instruments to advance government’s strategic objectives of industrialization, regional development and job creationSEZs can help improve attractiveness of SA as a destination for foreign direct investmentSEZs are introduced to improve on the concept of IDZs which have enjoyed mixed successes since introduced in 2000An IDZ is a purpose-built industrial estate linked to an international airport or seaport which is tailored for the manufacturing and storage of goods
6Special Economic Zone (SEZs) IDZ’s are export oriented & only found near airports & seaports. SEZs cover wide range of sectors that could be developed anywhere in the countrySEZs will help stimulate industrial decentralization from the province’s main urban centres of Durban, PMB, Richards bayDTI Minister indicated that IDZs will not be scrapped but will continue to exists as SEZs under the new BillSEZs scope will be beyond export industries to include a focus on research, innovation and regional development in areas such as science parks, industrial parks and sector development zonesIDZs tended to favour only few regions and their financing arrangement made it impossible to do long term planningTo remedy this, the new Bill provides for the setting up of a SEZ fund, which is not only intended for feasibility studies, but for incentives as well
7Special Economic Zone Types There are different categories of SEZSometimes countries use different names for the same concept, but the strategic intention is more important than the name usedExamples of SEZsIndustrial Development ZonesFree PortsIndustrial Parks/EstatesScience and Technology ParksSector Development ZonesSpatial Development Corridors
8Foundation for SEZs success Zones will be designed such that they include key support platforms such as:Education and training facilitiesResearch, development and technology facilities (innovation)Incubation facilities to support business linkages and integrationTrade facilitiesCustoms controlled areasSEZs requires skills that are beyond the public sector hence partnerships with tertiary institutions and private sector investors is keyIt is highly unlikely that a relaxation of labour laws will be considered under SEZ initiative which is a norm in most countries
9Export opportunitiesThe importance of the global production network and value chains in international trade is unquestionableThe role of SEZs in stimulating export growth through various incentives is importantOverall SEZs are estimated to account for more than US$200 billion in global exports and employ directly at least 40 million workersIn KZN, we view SEZs as critical not only in export growth but job creation, foreign exchange earnings, industrial decentralization, access to foreign manufacturing technology and know howSEZs provides opportunities to exporters located throughout the province – you don’t necessarily have to be next to the sea and airport to benefitWe are not creating enclaves that are separated from the national markets which will effectively undermine creation of effective domestic linkages – at the same time we will guard against cannibalization of businesses outside the SEZs or hubs
10KZN ApproachThe MEC identified 11 industrial district SEZs and submitted these to the DTI for their review and supportThe MINMEC and DTI advised that too many SEZ in the country may not be sustainable and indicated that only a maximum of two per province may be establishedFurthermore, MINMEC encouraged provinces to adopt a provincial helicopter view in identifying SEZs and provided the following guidelines to provincesAligned with the national infrastructural programme;Should not be confined to a political geographical space such as a district municipality;Should not compete with each other in the country;Multi-site SEZs will be considered; andFocus on secondary sectors not primary and tertiary sectors such as agriculture, mining and tourism.
11KZN Approach…….contTo address MINMEC and DTI concerns, the workgroup convened a province wide multi- stakeholder workshop (including district municipalities & eThekwini Metro, DTI, the Provincial Planning Commission, business chambers, private consultants, tertiary institutions, Provincial SEZ workgroup members and interested individuals) to identify provincial SEZs in line with the provided criteria.The stakeholder meeting resolved that whilst the districts industrial hubs are critical to address the province’s key developmental aspirations such as job creation and economic growth, their large extent do not conform to the criteria set out by the DTI. However, the committee firmly believes that the concept of regional industrial hubs remain critical to the overall economic development in the province.These hubs will act as a feeder or part of the multi-site hub of the identified provincial SEZs.
12KZN Approach……..contIn identifying possible Special Economic Zones for KwaZulu-Natal, two principles have greatly informed our approach:Principle 1: SEZs should, as far as possible, not be directly competitive with each other (in order to avoid a race to the bottom)Principle 2: SEZs should be used as a tool to enhance spatial equity in the provinceIn regard to Principle 2 it was decided to be intentional about tackling spatial equity, by identifying the industrial (SEZ-related) potential of all 11 districts in KZN.However, in order to stay accordance with Principle 1, the implication is that SEZ-related opportunities in each district should be identified around that district’s unique comparative advantages.
13Comparative Advantage The theory of comparative advantage is an international trade theory but in its simplest form can be applied in a spatial development context.Simply put, the theory of comparative advantage would posit that each district has at least one area of economic activity which, relative to other districts it has an advantage in by having a lower opportunity cost of production.Efficient fiscal spending would then entail directing resources to each district’s comparative advantage focus area.The process of identifying comparative advantages became a useful tool for identifying potential SEZs and supporting industrial hubs.
14Comparative Advantage Comparative Advantages ReportEconomic Drivers ProjectDistrict IndicatorsInterviews with DistrictsInterviews with Chambers of CommerceScanning of IDP documents
15Industrial Hubs Amajuba Ugu Umgungundlovu HUBS: KEY SECTORS: Metal ManufacturingCoal MiningTextiles and ClothingHUBS:Primary - Textiles & Clothing (Madadeni)Secondary - Metal Beneficiation (Newcastle)UguForestry and Timber productionAgriculture –sugar cane; macadamia nutsDomestic Beach TourismQuarryingFurniture productionFood processingPrimary - Perishable goods processingSecondary -Furniture Manufacturing SEZ in Harding and/or MarburgUmgungundlovuAgriculture: vegetables; chickenForestry and loggingLeather and Footwear productionPublic AdministrationCollection and purification of waterPrimary - Leather and Footwear SEZ)Secondary - Agro-processing Hub (focus on vegetables; crops and dairy)
17Industrial Hubs Ilembe Ethekwini Uthungulu Forestry and logging KEY SECTORS:Agriculture – sugar caneAgro-processingWood processingPlastics and packagingProperty development and real estateBeach resort tourismHUBS:Primary - Renewable Energy HubSecondary - Agri export hubEthekwiniChemical ManufacturingTransport and logisticsAutomotive manufactureAir transportElectronicsFinance and insuranceEvent tourismPrimary - AutomotivePrimary - Renewable Energy and Agri-processing SEZ at DubeUthunguluForestry and loggingWood products manufacturingCoal MiningMineral miningMetal manufacturingNon-metallic manufacturingPrimary - Richards Bay IDZ to become an SEZ (heavy industry)
19SEZ Selection Criteria In identifying potential SEZs for the province from the comparative advantages and industrial hubs of the districts, it was necessary to establish a set of guiding criteria.Is it aligned with National and Provincial Policies?Does it promote spatial equity and reduce geographical inequalities?Is it in a labour intensive sector?Is it accommodated in the infrastructural planning of the province?Is it in a sector in which the province has a comparative advantage?Will it be globally competitive?
20KZN implementation Model of SEZs and Feeder District Industrial Hubs
22Richards Bay IDZ SEZ Location Rationale: Focus industries: Located at the current Richards Bay IDZ, but including new parcels of land in the nearby Nseleni Area on the inland side of the N2Rationale:Sunk investment in IDZ50-year master planLocation near the largest and deepest Port in the countryHigh concentration of existing heavy manufacturing industriesFocus industries:Metal processing; machinery manufacturing; minerals beneficiationFeeder Industrial Hubs and Backward LinkagesNewcastle: Steel ManufacturingVryheid; Dundee; Newcastle: Mineral extraction and beneficiation
23Dube Trade Port SEZ Location Rationale: Focus industries: Located in and around the Dube Trade Port in the north of eThekwini and the south of iLembe.Rationale:Access to an international airport providing businessmen with connectivity to the rest of the country and the world.The ability of Dube Trade Port to facilitate the export of perishable agricultural products.The concentration of Food and Beverage processing in eThekwini and in the neighbouring iLembe district.The ‘Green’ momentum generated by the hosting of COP17Focus industries:Agro-processing and green technology development.Feeder Industrial Hubs and Backward LinkagesHibiscus Coast: Agro-productsIsithebe Industrial Estate: Biofuel and packagingDundee and Zululand: Meat and hide processingMkhuze: Agricultural mechanization
24Functional Architecture Policy FrameworkSpecialised Technical Teams(districts)Industrial Economic Hubs(2 DTI Type SEZs)ROAD MAPDistrict Co-ordinating Forums(Govt, business, Unions and community )
26IEH PROJECT MANAGERS Key Milestone Progress Appointment of the Project Specialists Teams for IEHThe Project Managers for the following IEH were appointed with effect from the 01 February 2013:Clothing and textile in Amajuba (Dr Padalkar);Electronics in UThukela (Mr Masilela);Renewable Energy in iLembe (Mr Ntsoane);Perishables in uGu (Mr Govender)Wood Processing in Sisonke (Mr Dobson)Leather Processing in UMgungundlovu (Mr Saflae)The Finance Specialist (Mr McDonalds) servicing Renewable and Leather Industrial Hubs has been appointedThe sector specialist for uGu IEH has been recommended to the HODThe sector specialist for uThukela IEH has been recommended to the HOD
27THE ADVISORY TEAM Key Milestone Progress Future Actions Appointment of the Advisory TeamThe following Advisory Team Members were appointed with effect from the 01 February 2013:Project Manager (Mr Mkhwanazi)Finance Specialist (Ms Langeni);ICT Specialist (Mr Dlamini);Economist (Dr Mnyande)Legal (Mr Mulango)The role and responsibilities of the advisory team is indicated belowDevelopment of the Standard Framework for the hubsThe draft Standard Framework for the IEH has been drafted and will be presented to the HOD and the department on the 15 April 2013The final draft is due at the end of April 2013District Stakeholder EngagementsUGu Stakeholder Engagement took place on the 26 March 2013The rest of the other industrial hubs are planned for April/May 2013All district stakeholder engagements will be finalized in May 2013
28THE FEASIBILITY STUDIES Key MilestoneProgressFuture ActionsFeasibility StudiesThe draft feasibility studies for the following IEH have been submitted:Clothing and textile in Amajuba;Electronics in UThukela;Renewable Energy in ILembe;Perishables in UGuWood Processing in SisonkeLeather Processing in UMgungundlovuComments are currently being provided to Project managers regarding their draft feasibility studiesEconomic Planning is currently developing a standard format for the feasibility studies to ensure uniformityThe final draft feasibility studies are due in May 2013IEH LaunchThe Department is planning to launch the IEH initiative in May 2013
29Roles and Responsibilities Project Sponsor and IncubatorThe HOD is the Chief Incubator and Sponsor for the IEH initiative. The budget for the project is currently within the Office of the HOD.Project ManagerSihle Mkhize is the acting project manager for the IEH initiative. The full-time project manager is currently being procured through the normal SCM processes.Project AdministratorMs Fikile Nxumalo is the Project Administrator for the IEH initiative.
30Roles and Responsibilities Advisory TeamThe advisory team’s prime role is to advise the HOD (and the department) on the establishment, operationalization and management of the Industrial Economics Hubs in the province. This advice will entail inter alia the following:Providing a standard common framework to guide the establishment and roll-out of the hubsAssessing the deliverables of the district project specialist teams to assess if they are in line with the projects key goals and above-mentioned framework. For example, is the finance model in the feasibility study sound and completed according to acceptable standards, is the policy and legislative framework analysis accurate, is the market analysis sound?Advise on the value chain linkages of the Industrial Economics hubs and the SEZsProvision of on-going advice and guidance to the HOD/department
31Roles and Responsibilities Specialist Project TeamsThe multi-disciplinary project specialist team’s role and responsibilities are to support the establishment and operationalization of the IEH. The key objectives of the specialist project teams are to:Develop a comprehensive Strategy and Framework for each industrial with a detailed institutional and implementation planUndertake a feasibility study and business plan for each industrial hub which will include:A detailed industrial capacity assessment for each hub which will include: the comparative advantage of the area, the size and capacity of each industrial zone, indicate the industrial and business mix for each zone, condition of existing infrastructure, linkages with other zones within and outside the provinceIdentify and establish value chain linkages between industrial hubs and the designated Special Economic Zones for the province
32Roles and Responsibilities Specialist Project Teams (continued)Provide cutting edge research and development expertise for each industrial hubFacilitate and manage the actual operationalization of each industrial hub which will include:Identification and securing of industrial hub anchor investors andoperatorsIdentifying, leveraging and securing of funding for industrial hubs Packaging of incentive schemes for industrial hub locators Securing of sites (land and buildings)Provide necessary infrastructure including services (water, electricity,roads)Effective planning, management, monitoring and evaluation for eachindustrial hub.
33CONCLUSION The IEH is to launched in all districts at by May 2013; The IEH is a three year project – (Feasibility – Operationalization);The IEH is not a silver bullet to solve all our problems – other key initiatives to continueKZN opportunities to sustain higher growth path still remains – (manufacturing, tourism, agriculture- agro, transport – logistics, emerging industries)Need to harmonize and synergize our various initiatives and programmes
34THE END!!! THANK YOU!! Contact Details: Mr Sihle Mkhize General Manager: Economic PlanningDepartment of Economic Development & Tourism