Given both short- and longer-term trends in the world and South African economies, there is a danger of government and society placing inordinate hopes in what are variously termed Export Processing Zones, Industrial Development Zones and Special Economic Zones (SEZs), as sources of economic vitality and job creation.
Specific South African SEZs are discussed in future Working Papers in this series, which acknowledge some limited successes with innovation and sustainability investments. However, a look at the big picture is urgently required, because too many debates over South Africa’s lack of economic dynamism focus on microeconomic conditions, such as the 4th Industrial Revolution, corruption, the strength of organised labour, state regulation, and youth employment subsidies.
The United Nations Conference on Trade and Development (Unctad) is a proponent of SEZs, and although the Geneva agency traditionally had a relatively progressive role in advocacy for Southern interests, Unctad appears to have shifted to a ‘neoliberal’ (corporate-friendly), export-fetishising bias. Many of the criticisms of SEZs we make in the following pages, based on the current fragile global macro-economic and tumultuous geopolitical contexts, are simply ignored in Unctad’s June 2019 World Investment Report, a study dedicated to promoting SEZs: “(w)e are seeing explosive growth in the use of SEZs as key policy instruments for the attraction of investment for industrial development. More than 1 000 have been developed worldwide in the past five years and, by Unctad’s count, at least another 500 are in the pipeline for the coming years.” To be fair, however, Unctad (2019, 205) concludes the report with this caution: “(t)he key objective should be to make SEZs work for the Sustainable Development Goals: from privileged enclaves to widespread benefits.”
Future working papers consider whether workers, residents (especially the two-thirds of South Africans below the Upper Bound Poverty Line), environmentalists and the citizenry at large gain widespread benefits, or instead suffer greater losses. In general, SEZ benefits go to ‘privileged’ foreign corporations. Following this global trend, South African SEZs provide investors with relief from Value Added Taxes, import duties and corporate taxes (the SEZ rate is typically about half that prevailing outside the zone, i.e., 15% instead of 28%). SEZ leaders include the Dube Trade Port in conjunction with the Durban Port, Coega north of Nelson Mandela Bay, and – if the Chinese follow through on commitments made in September 2018 – the planned Musina-Makhado metallurgical complex in Limpopo Province. All are sites worthy of deeper study in future Working Papers given the amounts of fixed capital already invested and envisaged.
