Special Economic Zones (SEZ) Bill: Commentary by ELIDZ

1. Special Economic Zones (SEZ) Bill: Commentary by ELIDZ SEZ PUBLIC CONSULTATIVE PROCESS By: Thando Gwintsa, Executive Manager: Office of CEO 22 May 2013

2. Endorsement of SEZ Legislation: • Vitally important that South Africa finallyarm its Zones sector with robust sector legislation, policy and implementation strategy; • Bold expectations of the sector have been excited, since Economic Zones are seen as key developmentalinstrumentswithin prominent government planning frameworks – nationally and provincially; • Such aspirations are only ‘lightly embedded’ in the SEZ enabling legislation, which prioritises definition of only essential building blocks; much of the detail of legislative force and impact remains to be interpreted within SEZ Act subsidiary outputs (eg. SEZ Strategy and sector Regulations).

3. 1:Legislative Enablement and Impact Existing Zone Investments are Aided/Enhanced National Developmental Planning Instr. SEZ Enabling Legislation (Bill) Expansive Interpretation … principles … ? SEZ Sector Regulations ? Narrow/Rigid Interpretation … Interpretation … NDP, NGP, NIPF, IPAP Shareholder Value is compromised Draft SEZ Programme Strategy Gazetted SEZ Policy Statement

4. 1:Legislative Enablement and Impact • A key theme of national developmental planning is that public sector response to complex industrialisation challenges should become more integrated and holistic across the spheres of government; • SEZ Sector participants trust that advocated SEZ institutions and co-ordinating mechanisms will indeed : • Deliver the desired mobilisation and degree of inter-governmental collaboration, leading to concerted strategic industrialisation action by Government; • Assure timely activation of complete and robust subsidiary processes under the SEZ legislation to define and execute all required sector enablement, including appropriate levels of sector regulation and efficient administrative support procedures; • Assure that SEZ Programming and Support Measures are developed, configured and extended in such a manner that they accommodate the variable developmental imperatives of all Provinces.

5. 2:Accommodating Concurrency Interests • Effective execution of SA’s Zones Programme should anticipate and accommodate concurrent industrial (and broader) developmental strategic interestsof Government – fully and across all its spheres; • Desirable that industrial development be pursued in terms of a coherent planning framework that is able to elicit, synthesise and optimise local, provincial and national efforts and resources; • Current SEZ Bill strongly emphasises nationally-initiated processes and sector leadership; Act should provide for other inter-governmental structures to allow provinces to express their particular developmental aspirations; • SEZ processes design and implementation will need to be tested for their ability to embrace the concurrent regional industrial interests of provincial/municipal government.

6. Interpretive Issues 3:Zones Adaptability • A high level of scalability, flexibility and adaptability of Economic Zones should be assured legislatively and optimised in programme implementation – serving as one tool underpinning a broad thrust of government to deliver better-co-ordinated industrial development action; • Need for SEZ Bill to retain highest possible degree of flexibility in its Zones definitions/types, esp. allowing for all “Zone purposes” for SEZ creation (Bill Clause 4.2) to be fully responded to by applicant Licensees/Operators; • Legislation/regulations shouldavoid imposed limitations that preclude optimal developmental support and response by regions/Provinces;

7. Interpretive Issues 4:SEZ Delivery Model • IDZ history shows a comprehensively-defined and robustly-tested development and delivery model for SA zones projects must embody real and persuasive value proposition elements to effectively induce participation and value creation by all critical sector role-players – public as well as private investors; • Model should deal with the interplay and balance between Zones with a predominantly developmental orientation (driving structural and systemic industrial capability outcomes) versus short-term focused and essentially opportunistic, incentivised industrialisation; • SEZ Bill and its regulatory prescriptions should acknowledge that differing contexts may require commensurate adjustment or moderation of programme admission and performance criteria.

8. 5:Expanded IDZ Transitional Measures • ELIDZ urges Bill to provide for project-specific transitional arrangements that take account of each IDZ’s individual developmental path/status to best preserve/leverage the value of public investments made to date: • Refined and expanded transitional arrangements should encompass: • A transitional remedial intervention programme per IDZ (jointly negotiated between dti and the Zone Shareholder(s)) that identifies/agrees specific IDZ-legacy constraints that require addressing by the Programme and/or by the Zone to bring it to a level of SEZ performance; • Validation of the IDZ Operator Permitting at a future date, once the transitional intervention has been satisfactorily concluded (in the place of the Bill’s current proposed process of ‘conversion’ or institution of a re-application process after a fixed five-year term); • Transitional phase recognition of the existence of standing business/strategic commitments already contracted between the future intended Licensee and its Operator and/or between the Operator and its existing Industrial Tenants or other Zone contractors/partners;

9. Interpretive Issues 6:Resourcing • A national funding capability (SEZ Fund) is welcomed – butlack of clarity in legislation as to what industrialisation activity will be supported, or conditions that will attach to public funds disbursement remains; • ELIDZ and other sector players are anxious to see how new funding proposals will prove to resource and fund IDZ/SEZ Zones more flexibly and more dependably than the current, MTEF funding route; • Vital that versatile funding instruments are provided that are attuned to the type, scale and timeframes of both operational and capital financing projects, forming part of the complete development lifecycle of a Zone;

10. Interpretive Issues 7:Institutional • Exercise of the legislation’s decision-approval processes duplicates (and contests) areas of responsibility currently vested primarily with the Zones’ Boards; this could complicate oversight arrangements i.r.o: • Determination of approved investment projects matching site-specific strategic developmental imperatives or provincially-specific developmental priorities; • Imposition of additional bureaucracy / time delays associated with decision-making processes intended to be exercised at national level (or finalised via offices of additional parties, like SEZ Fund Administrator); • Further entrenching and extending duplicative performance monitoring and reporting obligations via additional levels of accountability for project performance already brought under the oversight of provincial government.

11. Thank You East London Industrial Development Zone