SPECIAL ECONOMIC ZONES BILL, 2013 PRESENTATION TO PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY 26 APRIL 2013

INTRODUCTION  Background to Special Economic Zones Bill, 2013  Purpose of Special Economic Zones Bill, 2013  Discussion of Special Economic Zones Bill, 2013  Bodies consulted on Special Economic Zones Bill, 2013  Critical steps taken so far

BACKGROUND TO SEZ BILL, 2013 (1) Industrial Development Zones Programme, an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ Programme has performed below expectation Policy review process to review the challenges experienced by the IDZ Programme BACKGROUND

BACKGROUND TO SEZ BILL, 2013 (1) Industrial Development Zones Programme, an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ Programme has performed below expectation Policy review process to review the challenges experienced by the IDZ Programme Industrial Development Zones Programme, 2000 – as an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ: 4 IDZs (Coega, East London, Richards Bay & OR Tambo IDZ) were designated and 3 are fully functional in Coega, East London and Richards Bay. Even though there are major achievements with the IDZs, there were some weaknesses (weak governance, lack of IDZ incentives, poor stakeholder coordination, lack of integrated planning, etc) that were identified - leading to the policy review and new SEZ Policy. Policy review process to review the challenges experienced by the IDZ Programme

BACKGROUND TO SEZ BILL, 2013 (2) National Development Plan (NDP),New Growth Path (“NGP”) and National Industrial Policy Framework (“NIPF”): Responding to challenging global and domestic economic conditions demands a sharper focus on new sources of competitiveness Achieved through innovation and productivity, with an entrenched base in skills, infrastructure and efficient and responsive state action Boost private investment (domestic and foreign) to labour-intensive areas, competitiveness and exports

BACKGROUND TO SEZ BILL, 2013 (3) National Development Plan (NDP), New Growth Path (“NGP”) and National Industrial Policy Framework (“NIPF”): (continues) Measures must be implemented to: enhance domestic and regional demand extend export promotion strategically strengthen South African industrial base promote labour-absorbing industrialisation path

BACKGROUND TO SEZ BILL, 2013 (4) Draft Policy on Special Economic Zones - June 2011: SEZs as a mechanism to contribute towards realisation of economic growth and development goals in NDP, NGP & NIPF SEZ Bill an instrument to address shortcomings of IDZ Programme by creating formal a regulatory framework

BACKGROUND TO SEZ BILL, 2013 Industrial Development Zones Programme, an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ Programme has performed below expectation Policy review process to review the challenges experienced by the IDZ Programme NEDLAC CONSULTATION

NEDLAC Consultation  Areas of Agreement: General definitions and types of SEZs to be designated, The purpose and objectives of the Bill, The governance model proposed in the Bill, Funding mechanisms, Incentives, One Stop Shop, Designation of SEZs and the roles of the licensees (owners) and operators, Accountability and monitoring of SEZs, and The development of SEZ Regulations

NEDLAC Consultation  Areas of Disagreement: 1)Composition of the SEZ Advisory Board: Bill provision: 15 Member Board made of 9 representatives of government departments and agencies plus 6 independent experts. Labour proposal: 3 of the 6 independent experts must come from NEDLAC constituencies. DTI view: Labour proposal can be supported provided the 3 representatives of constituencies meet the criteria.

NEDLAC Consultation  Areas of Disagreement: 2) Eligibility to apply for an SEZ by municipalities: Bill provision: Any of the tiers of government can initiate an SEZ. Business proposal: Municipalities are failing to provide basic and core services, and should therefore be excluded from this provision. The dti’s view: Not all municipalities are failing to provide basic services. In addition, designation is only after a rigorous process of evaluation.

NEDLAC Consultation  Areas of Disagreement: 3)Private ownership of SEZs: Bill provision: No private ownership of SEZs but PPPs are encouraged. Business proposal: Global trends show a shift from public ownership to private ownership of SEZs. DTI view: Collaboration between the public and private sectors through PPPs seem to be the ideal route for South Africa.

NEDLAC Consultation  Areas of Disagreement: 4) Private Public Partnership provision: Bill provision: Development of an SEZ can be done through PPP arrangements. Labour proposal: PPPs are a disguised form of private ownership of SEZs. The dti’s view: PPPs are a form of joint ownership, and in SA are supported through a rigorous legislative framework.

NEDLAC Consultation  Areas of Disagreement: 5) Consultation with NEDLAC on the SEZ Regulations and Guidelines: Bill provision: Trade and Industry Minister empowered to make regulations and guidelines to support the planning, development and management of SEZs. Business and Labour proposal: Regulations and guidelines must be discussed at NEDLAC prior to finalisation. The dti’s view: Regulations are developed through public consultations and can be consulted on, but not guidelines.

BACKGROUND TO SEZ BILL, 2013 Industrial Development Zones Programme, an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ Programme has performed below expectation Policy review process to review the challenges experienced by the IDZ Programme PROGRESS WITH CURRENT IDZs

Progress with Existing IDZs

Designation of Saldanha Bay IDZ  New IDZ: 1)The application for designation of the Saldanha Bay IDZ was received by the dti and the Manufacturing Development Board (MDB) recommended for the 60 day Public Consultative Process, which was concluded on the 18 th January )The general public response was positive and very supportive of the IDZ initiative at Saldanha Bay and the West Coast. 3)One out of two portions of land has been secured and the applicant is working towards securing the rest of the IDZ earmarked pieces of land with the relevant landlord. Once this process has been finalised, the Minister of Trade and Industry will be able to designate the IDZ and issue an Operator Permit. 4)The anchor industry will be Oil and Gas services, which is estimated to attract foreign direct investments approximately R9.3bn and create over 11,000 jobs.

IDZs in Picture Coega IDZ East London IDZ

SEZ BILL, 2013 Industrial Development Zones Programme, an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ Programme has performed below expectation Policy review process to review the challenges experienced by the IDZ Programme THE SEZ BILL

PURPOSE OF SPECIAL ECONOMIC ZONES BILL, 2013 The Bill seeks to: provide for the designation, promotion, development, operation and management of Special Economic Zones; provide for the establishment of the Special Economic Zones Advisory Board; empower the Minister to establish the Special Economic Zones Fund; regulate the application, issuing, suspension, withdrawal and transfer of Special Economic Zones operator permits; and provide for functions of Special Economic Zones operators.

DEFINITION OF SPECIAL ECONOMIC ZONES Section 1 – Definitions Defines terms used in the Bill Special Economic Zone: is an economic development tool to promote economic growth and export uses support measures to attract targeted domestic and foreign direct investment

OBJECTS OF SPECIAL ECONOMIC ZONES BILL Section 2 – Objects of Act Determination of SEZ Policy and Strategy Establishment of SEZ Advisory Board and SEZ Fund Designation, promotion, development, operation and management of SEZs Regulatory measures and incentives for SEZs to attract domestic and foreign direct investment Establishment single point of contact or one-stop shop to deliver government services

PURPOSE OF SPECIAL ECONOMIC ZONES (1) Section 4 – Purpose of SEZs Purposes include facilitating creation of an industrial complex with strategic economic advantage for targeted investments and industries in manufacturing sector and tradeable services; developing infrastructure to support development of targeted industrial activities; attracting foreign and domestic direct investment; providing location for establishment of targeted investment; enabling beneficiation of mineral and natural resources

PURPOSE OF SPECIAL ECONOMIC ZONES (2) Section 4 – Purpose of SEZs (continues) Purposes include: taking advantage of existing industrial and technological capacity, promoting integration with local industry and increasing value added production; promoting regional development; creating decent work and other economic social benefits and promoting skills and technology transfer.

SPECIAL ECONOMIC ZONES POLICY AND STRATEGY Section 5 – Special Economic Zones policy Minister may determine policy for designation, promotion, development, operation and management of SEZs, after consultation with Board Minister may review policy when necessary Section 6 – Special Economic Zones strategy Minister must determine SEZ strategy, after consultation with Board Minister may review policy when necessary Strategy must address designation of SEZs that best support industrialisation and economic growth strategies

SPECIAL ECONOMIC ZONES ADVISORY BOARD (1) Section 7: Establishment of SEZ Advisory Board Establishes SEZ Advisory Board Advisory Board consists of not more than 15 members representing: government, organised labour, organised business, civil society and independent persons on the basis of their knowledge and expertise relevant to SEZs

SPECIAL ECONOMIC ZONES ADVISORY BOARD (2) Section 11: Functions of Board include: (continues) advising Minister on policy and strategy re SEZs considering applications for designation as SEZ & recommending to Minister re issue of SEZ licence considering applications for SEZ operator permits and transfers and recommending to Minister liaising with SEZ licensees and operators on implementation of SEZ strategic plans

SPECIAL ECONOMIC ZONES ADVISORY BOARD (3) Section 11: Functions of Board include: (continues) recommending to Minister re approval of operator’s decision to locate new investor in SEZ advising Minister on initiatives to market SEZs; assess and review the success of SEZs in achieving purpose of the establishment of SEZs; conducting investigations on any matter arising from application of Act; and performing other functions consistent with the Act as Minister may determine

SPECIAL ECONOMIC ZONES ADVISORY BOARD (4) Section 17: Secretariat of Board Director-General must: establish dedicated secretariat in Department to support and facilitate functions of Board provide required human resources, financial and other resources

FINANCING & SUPPORT MEASURES Section 20 - SEZ Fund Minister with concurrence of Minister of Finance may establish SEZ Fund to support the promotion and development of SEZs; SEZ Fund may be established from money voted by Parliament as part of appropriation of DTI Section 21: Support measures Minister may determine and implement support measures, including incentive schemes for operators and businesses operating in SEZs; Minister may design and administer support measures or other support programmes to support development and operation of SEZs

DESIGNATION OF SEZs (1) Section 22 - Application for designation National, provincial government municipality, public entity, municipal entity or public-private partnership, acting alone or jointly, may apply for designation of a specified area as an SEZ; Applicant must demonstrate that the designation will further government’s industrial development objectives; Application must be in prescribed form and manner

DESIGNATION OF SEZs (2) Section 22 - Application for designation (continues) Applicant must: have sufficient access to financial resources and expertise submit comprehensive feasibility study indicate extent of ownership or control of area If PPP – indicate ownership structure

DESIGNATION OF SEZs (3) Section 23 - Designation of SEZs Minister designates geographically defined area, on recommendation of Board, with or without conditions Minister may initiate application to designate in pursuance of national interests

DESIGNATION OF SEZs (4) Section 23 - Designation of SEZs (continues) Minister may determine different categories of SEZs including: a free port; a free trade zone; an industrial development zone; or a sector development zone.

DESIGNATION OF SEZs (5) Section 23 - Designation of SEZs (continues) Minister may prescribe guidelines for each category of SEZ and conditions that may be imposed on SEZs; Minister may prescribe types of service and business located in SEZs.

GOVERNANCE AND MANAGEMENT OF SEZ (1) Section 24: Governance & management National or provincial government or public entity : establish SEZ as business enterprise in terms of PFMA Municipality or municipal entity: establish SEZ as municipal entity in terms of MFMA PPP: establish SEZ as a company Licensee must appoint SEZ Board which is responsible for efficient governance and management of business of SEZ SEZ Board must & comply with PFMA, MFMA or Treasury Regulations, whichever is applicable

GOVERNANCE AND MANAGEMENT OF SEZ (2) Section 25: Strategic plan of SEZ Each SEZ licensee to develop strategic plan within SEZ Strategy framework to achieve mandate, perform functions & comply with conditions prescribed Plan reviewed annually and submitted to Minister

GOVERNANCE AND MANAGEMENT OF SEZ (3) Section 26 : Business & financial plan Licensee must submit business and financial plan to Minister annually for approval Business and financial plan contains projection of revenue & expenditure for following year covers projected affairs of SEZ for 3 years

TAKING OVER ADMINISTRATION OF SEZ Section 28: Taking over administration of SEZs Minister may, after consultation with board and licensee, appoint administrator to take over administration or perform function of SEZ if: SEZ fails to comply with conditions prescribed by Minister; SEZ fails or is unable to perform its functions; or there is mismanagement of SEZ finances.

SUSPENSION OR WITHDRAWAL OF DESIGNATION (1) Section 29: Suspension or withdrawal of designation Minister may, on recommendation of Board, suspend or withdraw designation of area as SEZ which does not further government industrial development objectives; Minister may re-designate an area whose designation has been withdrawn;

SUSPENSION OR WITHDRAWAL OF DESIGNATION (2) Section 29: Suspension or withdrawal of designation (continues) Lawful activities of any business located in SEZ is not affected by suspension / withdrawal provided the business : has entered into agreement with SEZ operator; or is situated in the custom controlled area of the SEZ and has been authorised by any registration or licence issued in terms of the Customs and Excise Act, 1964

SEZ OPERATOR (1) Section 30: SEZ operator Licensee must appoint an operator to develop, operate and/or manage the SEZ on its behalf When appointing an operator, licensee must follow a fair, equitable, transparent, competitive and cost-efficient procurement process

SEZ OPERATOR (2) Section 31: Application for SEZ operator permit Only holder of SEZ operator permit may operate, develop and/or manage SEZ Person appointed by licensee must apply to Minister for SEZ operator permit in prescribed form and manner Minister, on considering recommendation of Board may issue permit

SEZ OPERATOR PERMIT (1) Section 32: Requirements for application for SEZ operator permit Applicant for operator permit must: be appointed by licensee to develop, operate and/or manage SEZ; be company registered in SA; have sufficient capital and expertise to develop, operate and manage SEZ; and comply with other criteria and requirements that Minister may prescribe.

SEZ OPERATOR PERMIT (2) Section 33: SEZ operator permit Before issuing permit Minister must be satisfied that agreement between licensee and operator adequately provides for duties, terms and conditions for development, operation and management of SEZ; and Minister must determine duration of permit.

FUNCTIONS OF SEZ OPERATOR (1) Section 34: Functions of SEZ operator implement strategic plan for SEZ make improvements to the SEZ site and its facilities according to the plans approved by the Minister and other relevant authorities provide or facilitate provision of infrastructure and other services required for SEZ provide adequate demarcation of SEZ from any applicable customs territory and suitable provision for movement of conveyances, vessels or goods provide adequate security for all facilities of SEZ

FUNCTIONS OF SEZ OPERATOR (2) Section 34: Functions of SEZ operator (continues) adopt rules and regulations for businesses within SEZ to promote safe and efficient operation maintain adequate and proper accounts and other records in relation to its business and report to Minister and other relevant authorities promote the SEZ as a foreign and domestic direct investment destination, in consultation with the Board ensure that business in SEZ are approved in terms of section 37 and achieves purpose of SEZ

FUNCTIONS OF SEZ OPERATOR (3) Section 34: Functions of SEZ operator (continues) apply to Minister for finance and support measures; facilitate a single point of contact or one stop shop that delivers the required government services to businesses operating in SEZ in order to provide simplified procedures for the development, and operation of the Special Economic Zone and for setting up and conducting business in the SEZ.

SUSPENSION OR WITHDRAWAL OF PERMIT (1) Section 35: Suspension or withdrawal of SEZ operator permit Minister may suspend or withdraw permit if operator: fails to comply with terms & conditions of permit; contravenes Act or any law of the Republic; contravenes of fails to comply with customs & excise rules and procedures; or on request from operator.

SUSPENSION OR WITHDRAWAL OF PERMIT (2) Section 35: Suspension or withdrawal of SEZ permit (continues) Before suspending or withdrawing permit Minister must: inform operator of intention to suspend or withdraw permit; and allow operator to make representations. Minster may make regulations on procedure to suspend or withdraw

TRANSER OF SEZ OPERATOR PERMIT Section 36: Transfer of SEZ operator permit Operator may transfer permit to another person if person: applies to Minister; and satisfies requirements for operator permit Transferee must in application stipulate any changes to the original development, business and operating plan; New operator must comply with all the obligations in terms of Act and has all the rights and obligations in terms of operator permit.

GENERAL PROVISIONS Section 38: Transitional provisions IDZ designation remains in force and regarded as SEZ designation IDZ operator permit remains in force for 5 years and must thereafter be converted to SEZ operator permit Applications in terms of IDZ Regulations to be dealt with in terms of SEZ Act Section 39: Guidelines Minister to issue guidelines after consultation with SEZ Board

GENERAL PROVISIONS Section 40: Regulations Minister may make regulations after consultation with SEZ Board

PROCESS FOLLOWED August 2011 MIN-MEC approved the draft SEZ Bill and Policy for submission before Cabinet December 2011 Cabinet approved public consultation on the draft SEZ Bill; January 2012 draft SEZ Bill published in Government Gazette for public comment; March 2012 draft SEZ Bill presented before Economic and Employment cluster for comments and inputs; July 2012 draft SEZ Bill discussed at Nedlac and process at Nedlac finalised on 13 July 2012

PROCESS FOLLOWED Draft SEZ Bill submitted to State Law Advisors; February 2013 draft SEZ Bill certified by State Law Advisors; March 2013 Cabinet approved introduction of SEZ Bill into Parliament; Special Economic Zones Bill, 2013 published in Government Gazette of 1 March 2013

BODIES CONSULTED The Department has consulted with: provincial departments responsible for economic development under the auspices of MIN-MEC; various national government departments including National Treasury, SARS, Department of Home Affairs and the Economic Development Department; existing Industrial Development Zones; and municipalities represented by the South African Local Government Association (“SALGA”) at meetings of MIN-MEC Eskom, National Planning Commission, DBSA

CONCLUSION Next steps on legislative path Bill serve before the National Assembly and National Council of Provinces in terms of section 76 of the Constitution This includes public hearing and debates on the Bill before Parliamentary Portfolio Committee including Further amendments and finalising SEZ Bill following Parliamentary process Drafting Regulations

SEZ BILL, 2013 Industrial Development Zones Programme, an incentive programme to establish IDZs Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas IDZ Programme has performed below expectation Policy review process to review the challenges experienced by the IDZ Programme CRITICAL STEPS TAKEN SO FAR

Special Economic Zones Planning Province and RegionProposal 1. Eastern CapeWild Coast: agro-processing and tourism 2. Free StateHarrismith: agro-processing, logistics 3. GautengNASREC: ICT 4. KwaZulu-NatalDube Trade Port: agro-processing 5. LimpopoTubatse: PGMs 6. LimpopoMusina: petro-chemicals, agro- processing and logistics 7. MpumalangaNkomati: agro-processing 8. Northern CapeUpington: Solar Corridor 9. North WestRustenburg: Platinum Hub 10. Western CapeAtlantis: Renewable Energy

Work Programme for SEZ Planning  Determining the long-term economic feasibility of the proposals of all proposed SEZs  Development and implementation of Investment and Marketing Plans of 4 SEZs whose planning work has significantly advanced: ICT, Solar Corridor, and Platinum Hubs  Capacity Building Programme

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