ADVERSE INTERNATIONAL AND LOCAL CONDITIONS FOR SOUTH AFRICA’S SPECIAL ECONOMIC ZONES
Summary
South Africa’s Special Economic Zones (SEZs) have, for the last two decades, contributed to a core – albeit underperforming – economic policy strategy known as export-led growth. They were devised by the Department of Trade and Industry as a response to a longer-lasting crisis dating back not just to liberation in 1994, but at least to the early 1980s: the country’s diminishing international competitiveness and narrow internal market. However, as Finance Minister Tito Mboweni’s August 2019 policy paper – Economic transformation, inclusive growth, and competitiveness – implicitly admits, SEZ policies have not made a substantial difference to either export competitiveness or expanding employment. The concerns of SEZ workers, nearby residents, environmentalists and the general citizenry (who are responsible for paying subsidies into SEZs) are rarely considered seriously in this process, even when a deterioration in the overall economic context leads to even worse forms of exploitation than are typically found in non-SEZ sites. Since the ‘New Dawn’ of Cyril Rampahosa’s government, there has been a renewed push to expand SEZs and promote exports, in part through the objective of attracting $100 billion in Foreign Direct Investment (FDI) from 2018-22. Although 2018 offered an encouraging start, as FDI rose rapidly from 0.3% to 2.23% of GDP, this proved to be a chimera. As the main UN investment agency reported, “(t)he surge in inflows was largely due to intracompany loans” – at a time South Africa is risking a foreign debt crisis because of a sustained current account deficit (due to the profit, dividend and interest outflows from SA, in spite of a trade surplus).
In addition to local problems, the overall context for SEZ promotion is even more gloomy: globally, in China and in Africa. Trade and currency wars involving two of South Africa’s major trading partners – the US and China – broke out in 2018 following a decade of economic ‘deglobalisation,’ signifying a profound global trade disentanglement process, similar to the 1880s-90s and 1930s-40s. Since 2007, South Africa has suffered not just diminished FDI, but also declining relative trade rates. Main reasons are that the economy has become less competitive, production of inputs into well-established value chains is in decline, and established trading partners are shifting both towards inward-oriented markets (especially China’s) and into ‘dematerialised’ trade in services and data. Moreover, hopes for Africans buying more South African products have faded decisively since the bust of the commodity super-cycle.
Along with rising world financial volatility, these conditions should encourage a rapid rethink of South Africa’s economic policy, especially its purported developmental commitments to societal upliftment. Global geopolitical and environmental crises add to the economic arguments for a dramatic change in approach. One option discussed is to progressively move away from the capital-intensive, carbon-intensive export sectors, towards labour-intensive, ecologically sustainable production prioritising local consumption (‘import substitution industrialisation’), as recommended by voices as diverse as the SA Federation of Trade Unions, the late African political economist Samir Amin, and the greatest 20th century economist, John Maynard Keynes.
