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Presentation to the Portfolio Committee

Progress on Special Economic Zones 19 August 2014. Presentation to the Portfolio Committee. Policy on the development of SEZs in South Africa (2012).

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Presentation to the Portfolio Committee

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  1. Progress on Special Economic Zones 19 August 2014 Presentation to the Portfolio Committee

  2. Policy on the development of SEZs in South Africa (2012) The Special Economic Zones policy aims to position Special Economic Zones as an effective tool for industrial development, and is flexible and rigorous enough to be responsive to the development needs of all regions, as well as the needs of investors and other key role-players.

  3. Policy on the development of SEZs in South Africa (2012) • The SEZ Policy was introduced to provide clear policy framework with respect to the development, operations and management of SEZs including addressing challenges of IDZs.

  4. Policy on the development of SEZs in South Africa (2012) The modest performance of the IDZ programme can be attributed to: • Lack of IDZ-specific incentives • Ad Hoc funding arrangements • Lack of targeted investment promotion • Lack of focus on host regions

  5. Aim and Purpose of SEZ Policy • SEZ’s positioned as an effective tool for industrial development; • Expand strategic focus to cover diverse regional needs; • Provides a clear predictable planning framework to support implementation of IPAP, NDP and NGP; • Clarify strengthened governance arrangements; • Expand range and quality of support measures; • Developing a predictable financing framework; • Developing a comprehensive programme to support the development of SEZ’s; • Addressing the weaknesses of the IDZ programme.

  6. SEZ Policy Objectives • Facilitate creation of industrial complexes having strategic competitive advantages for targeted investments and industries; • Promote beneficiation and value addition to minerals and natural resources; • Develop infrastructure required to support development of targeted industries; • Attract relevant foreign and domestic direct investment and increasing value added production; • Accelerate exports, economic growth and jobs; • Contribute to balanced industrial development;

  7. Key aspects of the SEZ Policy • Institutional framework (Minister, Advisory Board and the dti facilitation); • Governance arrangements in terms of ownership, operator, oversight and co-ordination; • Strategy to outline desired approach and guide to both existing and planned SEZs • Setting up a SEZ fund with mix of financing options in order to encourage sound zone development; • SEZ incentives for greenfield and brownfield investments; • Eligible activities in line with IPAP, NDP and NGP to comprise processing, assembly, mixing and fabrication as well as internationally traded services

  8. Key aspects of the SEZ Policy • Support systems that go beyond provisioning of world class physical infrastructure i.e. human resource development, business incubation, technology, R&D and others; • Planning of SEZs focussing on host region capabilities over the long-term and coordinated between the tiers of government; • Providing a one stop shop service and facility at each SEZ to offer globally competitive value added services to investors.

  9. SEZ Policy Implementation framework • Implementation protocols required between various agencies; • SEZ policy to be reviewed by the Minister and monitored by the National Advisory Board; • Legislative framework to be established through the SEZ Act, Regulations and Guidelines; • SEZ strategy to be developed and reviewed by SEZ Advisory Board; • National marketing strategy to guide national and international marketing efforts; • SEZ fund to be established; • Capacity and skills development programme and various other workstreams to be set up.

  10. SEZ Policy Monitoring and Evaluation • Measures put in place to track, evaluate and report on performance of the SEZs; done in terms of the Government wide Monitoring & Evaluation framework • Various elements monitored at different levels and reported to the Advisory Board and Licence holders; • Focus of monitoring and evaluation to ensure measurement of achievements to the strategic plan and SEZ master plans.

  11. SEZ Regulations SEZ Act: Chapter 7 Section 41 -The Minister may, after consultation with the Advisory Board, make regulations and publish a draft in the Gazette for written submissions over a period of 30 days Project Plan: End August 2014: Final Draft for Internal Consultation: dti/NT/SARS, existing IDZs, Provinces, NEDLAC End September 2014: Regulations ready for gazetting October 2014: Proposed Regulations gazetted, 30 days public comment, consideration and consultation with Advisory Board November 2014: Regulations Finalised and Gazetted Progress: April – June 2014: Preparation of draft Regulations – First draft July 2014: Initial discussions with main government stakeholders: SARS (Customs, VAT, Corporate Tax) and National Treasury. Narrowed areas requiring further consensus: SEZ Fund – its design, capitalisation and administration SEZ Incentives – how to reference in the Regulations, how to refer to governing legislation Definitions of SEZs – correct wording that corresponds to SARS Customs legislation

  12. SEZ Advisory Board SEZ Act: Chapter 3, Sections 7 -19. The Minister must appoint 15 persons as members of the Advisory Board, as prescribed by the Act Progress: April – June 2014: Preparation for appointment July 2014: Identification of ex officio members, design of appointment process (7.2, ss. h & i), preparation of advertisement August 2014: Advertisement in daily newspapers – 10 August 2014 Project Plan: • Interview process and appointment • Finalise Board remuneration • Terms of Reference • Board Charter • Induction Pack End August 2014: FinaliseBoard Remuneration End September 2014: FinaliseToR, Board Charter, Induction Pack, conduct interviews October 2014: Appoint Board

  13. SEZ Incentives SEZ Act: Chapter 4 Section 21. The Minister may, determine and implement support measures, including incentive schemes, for operators, and businesses operating within Special Economic Zones. 1. Lower Corporate Tax rate of 15% for qualifying companies locating in an SEZ 2. Employment Incentive: For employees earning lower salaries in the SEZ – no age limit. 3. Accelerated depreciation Allowance for Buildings in the SEZs: New building to be depreciated for 11 years at 20% in the first year and 8% thereafter. Improvements to buildings to be depreciated at 20% p.a. 4. Customs Controlled Area (CCA): VAT Exemption and duty free area 5. 12i Tax Allowance: Up to 100% tax allowance for green and brownfield projects in the SEZ (for preferred status) and up to 75% allowance for projects in the SEZ if they are qualifying status Project Plan: The Tax incentives’ effective date will coincide with that of the SEZ Act.

  14. Progress on SEZs In accordance with SEZ Act Chapter 7 Section 39 (3), (5), Consultations are under way with relevant IDZs and provinces to agree on a suitable approach to transition IDZs to SEZs within 3 years

  15. Progress on SEZs Feasibility Studies

  16. Progress on SEZs In the process of: • Appointing an SEZ Advisory Board • Establishing SEZ Secretariat • Finalising SEZ Regulations • Finalising the Feasibility Studies for proposed SEZs

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