Accelerating and expanding industrialisation

Maoto Molefane, Acting Deputy Director General of the Department of Trade, Industry and Competition (dtic) explains how the Special Economic Zone Programme can boost local development and enhance regional connections.

How does the FTSEZ fit into the priorities of the dtic?

One of the strategic objectives of the dtic is to transform and build an inclusive economy through targeted spatial industrial development instruments such as SEZs and Industrial Parks, improving the investment climate and level of fixed investment in the economy, and increasing value-added exports.

The Special Economic Zone Programme, including the proposed Fetakgomo-Tubatse Special Economic Zone (FTSEZ), helps the dtic to achieve this. It is one of the key development mechanisms of the dtic’s National Industrial Policy. The purpose of the SEZ programme is to attract Foreign Direct Investments and build a solid manufacturing base into globally-integrated value chains which will provide an environment where the economy can provide more sustainable jobs and reduced levels of poverty and inequality.

Director General, dtic

Biography

Maoto Molefane has Master’s degrees from Wits (in Development Planning) and from the University of London (in Public Finance Management). After a stint as a researcher and a brief spell in the private sector, he had three years as the head of Industrial Planning and Development with the City of Tshwane Metropolitan Municipality. Since 2011 Maoto has been with the dtic. In 2018 he became Chief Director: Special Economic Zones and is currently Acting Deputy Director General.

How are decisions made about where to place SEZs in the country?

Special Economic Zones (SEZs) are established on the basis of the economic potential of a region. This could either be comparative or competitive advantages and the SEZ programme is used as a sweetener to attract foreign and domestic investors. SEZs are used to accelerate industrialisation through coordinated planning and the development of state-of-the-art infrastructure.

The FTSEZ proposal aims to complement and support the region’s comparative advantages, which will be corroborated through a detailed strategic-planning, feasibility and master-planning process. This will also consider commercial sustainability, target markets and businesses, growth trajectory, infrastructure availability, technology innovation capability and environment sustainability.

It further complements a new approach by government, aimed at addressing the uneven spatial industrial development that continues to undermine the country’s industrialisation efforts. This will unlock the latent economic potential of different districts.

The acceptance of the Tubatse region’s proposal is also based on its vast mineral resources. The zone is located within the eastern limb of the Bushveld Igneous complex (BIC), which is known to have the world’s largest deposits of Platinum Group Metals (PGMs), along with vast quantities of tin, iron ore, chromium, titanium and vanadium. The region’s 20 mines currently export minerals in raw form. The FTSEZ will further benefit the local economy by focusing on upstream and downstream beneficiation. This will promote larger-scale industrialisation for both the manufacturing of mining inputs and the beneficiation of the mining outputs.

What contribution will the dtic make to costs?

Through the SEZ Fund, the dtic will directly contribute to the establishment of the FTSEZ once it is designated as an SEZ. The funding is for top structures linked to specific investors and is financed through the SEZ allocation in the Industrial Finance Division of the dtic The dtic will also provide technical support in various ways, including resourcing the SEZ Project Management Unit at the IDC.

What role will the dtic play in the governance of the SPV?

Review and analysis has shown that some revisions to South Africa’s approach were required in terms of the ownership. The dtic can strengthen the programme by participating in the planning, development and management of new zones. It will also provide direction in respect of policy and regulations.

The dtic’s shared ownership encourages full support for implementation. This operational model has been tested in Gauteng with the proposed Tshwane Automotive SEZ. All newly-designated SEZs will operate under this revised framework.

In the case of the proposed FTSEZ, the dtic has concluded Memorandums of Agreement with the Limpopo Department of Economic Development, Environment and Tourism, Sekhukhune District and Fetakgomo Tubatse Local Municipality. In the MOA, all four stakeholders hold 25% of the shareholding in the Special Purpose Vehicle (SPV).

What role will the dtic play in investment facilitation and skills training?

The dtic will play a direct role in investment facilitation. The most important prerequisite for designation will be strong investment commitments. Before the FTSEZ application is submitted, proper planning will be undertaken by the dtic , the municipality and the private sector to establish a strong investment pipeline. The dtic will also be extending its role in order to operationalise the secured investments in the zone.

Through its capacity-development programme, the dtic will provide skills-development training in fields required to develop, manage and operate an SEZ. The programme has been running for more than five years. Linkages have been created with a number of countries that have SEZs, including China. The lockdown has facilitated the introduction of online training programmes with these countries.

Do SEZs contribute to the attractiveness of South Africa as an investment destination?

Yes. By offering world-class infrastructure, fiscal incentives, a protected environment and an easyto-navigate business environment using One Stop Shops, SEZs have directly contributed to the country’s attractiveness. The zones have 167 operational investors and almost half of these are FDIs.

The new SEZ approach advocates for integrated multi-use development where host regions will provide secured locations with improved living standards supported by industrial development, commercial spaces, tourism, better schools, entertainment, healthcare and recreational facilities.

What is the dtic hoping will be the major outcomes?

Through the establishment of the proposed FTSEZ, the dtic is not only hoping to attract investments, but also to create a platform to support and develop host and adjacent regions by providing connecting infrastructure, skills, research and development facilities and employment. When SEZs import specialised skills, this often results in a skills transfer to the host region. This will also provide opportunities for SMMEs to be integrated into procurement chains.

We also hope for more regional integration of Limpopo with Mozambique, Zimbabwe and other African regions. The FTSEZ will create opportunities for opening commercial routes to ports in neighbouring Mozambique, parts of South Africa and even possibly to Zimbabwe and Tanzania to accelerate trade efficiencies.

Furthermore, the proposed FTSEZ seeks to harness energies among public and private sector players with the aim of creating an integrated ecosystem that will change the socio-economic landscape and benefit all South Africans. ■