21 MAY 2013

1. SUBMISSION BY BUSA TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY REGARDING THE SPECIAL ECONOMIC ZONES BILL 21 MAY 2013 Presenters Ms Nomaxabiso Majokweni – BUSA Chief Executive Mr Kgatlaki Ngoasheng – Executive Director: Economic Policy

2. About us: • Confederation of business organisations including Chamber of Commerce and Industry. • Official voice of business in South Africa • Represent RSA businesses on macro economic issues at national and international levels. • Main aim is to ensure that business plays a constructive role in the country’s economic growth, development and transformation. • We want to create an environment in which businesses of all sizes and in all sectors can thrive, expand and be more competitive.

3. About us: • Our members include associations representing small, medium and big businesses including chamber of commerce, financial institutions, professional organisations, constructions, manufacturing, engineering, PEA, retail, roads and transport, IT, etc. • We represent Business at NEDLAC • Member of International Labour Organisation • Member of the SADC Employer Group • Member of the B20 • Member of the OECD Business Industry Advisory Committee • This submission is supported by all BUSA members

4. GENERAL COMMENTS • In principle BUSA welcomesand supportsthe new approach to special economic zones. • We believe that the new approach can potentially enhance South Africa’s global competitiveness, a message also emphasised in the National Development Plan (NDP) • South African exporters compete in highly competitive markets with some exporters operating in duty-and tax free environment and therefore this strengthens the case for focused investment promotion and export mechanisms such as SEZ. • However, the new approach must be tested for global competitiveness and international best practice.

5. Agriculture: 37.3% Manufacturing: 28.2% Mining: 21% REFLECTION ON THE ECONOMY Source: Nedbank

6. REFLECTION ON THE ECONOMY Source: SARB Ratio of Gross value add to GDP has been declining

7. South Africa should aim at increasing the export ratio and decreasing import penetration rate. • The current status quo negatively affects our balance of payment position and pose upward inflationary risks • Therefore we must guard against factors that will hamper efforts to grow exports by 6% per annum as per the NDP

8. Current incentives need to be benchmarked against those in successful SEZ elsewhere in order to realise the objectives of the NDP. • Participation by private sector in SEZs must reflect that investment will be private sector driven.

9. Some factors that adversely affected the IDZ • lack of coordination • Insufficient guidance • Dependence on government funding • A lack of targeted investment measures • Inadequate coordination across government agencies.

10. The Committee will be aware that a NEDLAC report has been prepared on the legislation under review. • BUSA supports the majority of proposals in the Bill • However, the following are some of the concerns raised by our members:

11. Section 1: Definitions • BUSA generally supports the definitions, however; • The current definition of “port of entry” does not reflect the original intention

12. Section 7(1): Establishment of special economic zones advisory board • BUSA does not support constituency based representation. The Board must comprise of experts Section 21: Support measures • We welcome the support measures proposed. However, these should be tested against international best practice for their global competitiveness before finalization.

13. Section 22: Application for designation • Including municipalities will have negative impacts on business outside the SEZ • Delivery capacity • Significant challenges already exist in accessing services from municipalities and we fear that the situation will be exacerbated by allowing them to take on additional responsibilities • Financial management capacity • If municipalities are included, then local authorities failing to demonstrate a clean audit in the preceding year should not be considered.

14. Section 23: Designation of special economic zones • The scope of the geographic area of the SEZ is a key element of its success • A big issue is the impracticality of certain businesses that are already established outside of SEZ having to relocate. • SEZs should be allowed their existing specific locations and expand opportunities.

15. Section 39 (1): Guidelines • BUSA believes that the guidelines should be applicable to all because the purpose in developing guidelines is to ensure they are binding to all affected parties. • Inaddition, the Guidelines should be gazetted for public comment and not merely for information.

16. CONCLUSION • We trust that the above comments clearly articulate our position regarding the Special Economic Zones • Failure or success of Zone development is a function of its policy, incentive framework and the way it is located, developed and managed. • Therefore the overall test of the SEZ legislation will be the extent to which its efficacy will enhance competitiveness. • We thank the Department for taking our comments into consideration and we are grateful for the opportunity to engage further on this matter.