A comparison of export processing zones and industrial development zones in Africa : key factors for success

Matthysen, Carlo (2006-03)

Thesis (MBA)--Stellenbosch University, 2006.

Thesis

ENGLISH ABSTRACT: 'Our industrial development zones have not performed as we have expected - we need to revisit the incentives that we give in these zones', says the deputy president of South Africa, Phumzile Mlambo-Ngcuka (Business Report, 2005: http://www.ecdc.co.za/media/article.asp?pageid=929). This statement raises 2 important questions. Firstly, how was the deputy president able to conclude that these zones have underperformed and secondly, which incentives must South Africa offer potential investors to turn around the fortunes of their programme? To determine how performance can be measured, two investigations were consulted to come up with a list of ten criteria against which export processing zones can be measured to determine whether they have performed successfully or not. As experts are of the opinion that industrial development zones run along similar lines to export processing zones, these criteria could very easily be applied to measuring the success of the former as well. The list includes: • Location • A politically and socially stable host country • High business confidence • Adequate infrastructure • Incentives on offer and administrative set-up • Employment creation • Backward linkages and technology transfer • Foreign exchange eamings • The availability of a competitive labour force • Market accessibility By assessing the zones in Mauritius and Namibia in terms of these criteria, it becomes clear why Schulze (1999: 182) states that Mauritius has become the shining star on the horizon of successful export processing zones and why Tabby Moyo (1999: 1), deputy news editor at The Namibian, is of the opinion that Namibia has so far achieved dismal results. The South African industrial development zone programme was started in the late 1990's and the zones - which are located at Coega, East London, Richards Bay and the Johannesburg International airport - have been in operation for too short a period to allow accurate conclusions to be made about their performance in terms of the ten criteria listed above. However, since their inception, these zones have attrac1ed less than R3.5-billion in planned investments despite the government spending more than R4-billion on infrastructure (www.eedc.co.zalmedia/article.asp?pageid=929). To make these investment-starved zones more attractive to foreign investors, the South African government and the National Treasury, in particular, will have to offer potential investors a much more comprehensive incentive package. They need to: • Review the tax incentives they offer; • Maintain the country's general business; • Make the country's labour laws more flexible; • Increase the literacy rate of the labour force; • Lower the cost of transport, energy and telecoms; • Articulate a vision, build consensus around It and move to action this vision. South Africa needs a world class industrial development zone programme as Schulze (1999: 170) sums it up nicely when he says that free trade zones can indeed contribute to domestic economic growth which will thereby help to alleviate the country's dramatic unemployment rate in addition to enhancing foreign commerce, generating additional foreign exchange and attracting foreign investment. Improvements that South Africa can greatly benefit from.

AFRIKAANSE OPSOMMING: 'Our industrial development zones have not performed as we have expected - we need to revisit the incentives that we give in these zones', verklaar die adjunkpresident van Suid-Afrika, Phumzile Mlambo-Ngcuka (Business Report, 2005: hltp:/lwww.ecdc.co.za/media/article.asp?pageid=929). Hierdie stelling wek twee belangrike vrae. Eerstens, hoe was dit vir die adjunk-president moontlik om tot die slotsom te kom dat hierdie sones onderpresteer en tweedens, watter tipe aanmoedigingsmaatreels moet Suid Afrika aan potensiele beleggers bied om 'n ommekeer in die voorspoed van die programme te bewerkstellig? Twee ondersoeke is geraadpleeg ten einde vas te stel hoe prestasie gemeet kan word. Hieruit is 'n Iys van tien kriteria bepaal waarteen uitvoerproseseringssones gemeet kan word om vas te stel of hulle suksesvol presteer of nie. Aangesien deskundiges van mening is dat nywerheidsontwikkelingssones op soortgelyke basis as die van uitvoerproseseringssones funksioneer, kan hierdie kriteria ewe maklik toegepas word om die sukses van die eersgenoemde te bepaal. Die Iys sluit die volgende in: • Ligging; • 'n Politieke en sosiaal standvastige gasheerland; • Hoe handelsvertroue; • 'n Bevredigende infrastruktuur; • Die aanbieding van aanmoedigingsmaatreels en 'n administratiewe opset; • Werkskepping; • Terugskakeling en tegnologiese oordrag; • Buitelandse valuta inkomste; • Die beskikbaarheid van 'n kompeterende werksmag; • Toegang tot die mark. Deur die sones in Mauritius en Namibia te evalueer na aanleiding van hierdie kriteria, word dit duidelik waarom Schulze (1999:182) verklaar dat Mauritius die skynende ster op die horison geword het van suksesvolle uitvoerproseseringssones en waarom Tabby Moyo (1999:1), adjunk-redakteur vir The Namibian, van mening is dat Namibia tot dusver uiters swak resultate behaal het. Die Suid Afrikaanse nyweheidsontwikkelingssone program het in die laat 1990's begin en die sones - Coega, Oos Londen, Richardsbaai en die Johannesburgse Internasionale Lughawe - is nog vir te kort 'n periode in werking om 'n akkurate gevolgtrekking te maak van hulle prestasie in terme van die voorafgenoemde tien kriteria. Nogtans, sedert hul begin, het hierdie sones minder as R3.5b in beplande investering gelok ten spyte daarvan dat die regering meer as R4b op infrastruktuur spandeer het (www.eedc.co.za/media/article.asp?pageid=929). Om hierdie beleggingshonger sones meer aanloklik te maak vir buitelandse beleggers, sal veral die Suid Afrikaanse Regering en die Nasionale Tesourie 'n meer omvattende aanmoedigingspakket aan potensiele beleggers moet bied. Hulle sal die volgende moet doen: • Die belastingsaanmoedigings wat hulle tans bied, te hersien; • Die land se algemene sakebedryf te ondersteun; • Arbiedswetgewing meer buigbaar maak; • Die geletterdheid onder die ambagsmag te verhoog; • Vervoer-, energie- en telekommunikasie koste te verlaag; • 'n Visie artikuleer, konsensus daar random bou en hierdie visie tot aksie te transformeer. Suid Afrika benodig 'n wereld-gehalte industriele ontwikkelingssone-program soos wat Schulze (1999:170) goed opsom wanneer hy sê dat vrye handelsones inderdaad kan bydra tot binnelandse ekonomies groei wat kan help om die land se dramatiese werkloosheid syfer te verlaag asook om buitelandse handel te bevorder. Hierdeur kan addisionele buitelandse valuta gegenereer word en buitelandse beleggings gelok word. Suid-Afrika kan baie baat vind by hierdie verbeterings.

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