ELIDZ's Readiness for New Impetus from SEZ Policy Regime

1. Readiness of ELIDZ to derive new impetus from SEZ policy regime Presentation to: Parliamentary Select Committee on Trade and International Relations By: Simphiwe Kondlo, CEO: ELIDZ 23 May 2012

2. Presentation Outline PROJECT PROGRESS UPDATE: ELIDZ Project implementation Progress Update and Key Milestones; FUNDING OVERVIEW: ELIDZ Project Funding Update; CONTEXT: Insights gained within IDZ Programme implementation to date; EXPECTATIONS: Positives & potentials anticipated from emergent SEZ Policy Regime; READINESS: Highlight of critical matters of projects readiness/policy enablement that require due consideration and resourcing.

3. Project Progress Update

4. ELIDZ Mandate The ELIDZ seeks to respond to local/regional/provincial economic development needs by: • Leveraging the economic value of existing -- and future planned -- local economic enabling infrastructures • Nurturing existing industrial strengths and skills potentials, through facilitated and supported industrial value chain development (local beneficiation); • Facilitating public/private investment into strategic industrial upgrading, via acquisition of globally competitive process and technology enhancements; • Initiating investigation of new industrial value chains within emergent sectors (where SA has inherent potential to develop a level of country competitiveness).

5. Project Overview and Vision ELIDZ VISION : World class Operator of a prestigious industrial complex where highly competitive organisations thrive on streamlined business benefits and stimulatesustainable regional economic growth. MISSION : To provide investorsolutions and to attract and develop strategicindustries that strengthen South Africa’s global competitiveness through the development and operation of a thriving, specializedindustrial complex.

6. ELIDZ track record • Return on investment : Evident return on investment on government’s financial injection into the ELIDZ – Total infrastructure spend since inception is R1.6 billion and total investment attracted since inception – R3.7 billion. • Growing investor confidence : 30 investors approved by the board since 2005 with a total investment value of R3.7 billion. • Activity on the ground : 21 operational investors to date with a total of 1569 manufacturing and supporting services active jobs. • Front runner IDZ status : First operational IDZ in South Africa, first IDZ to have a CCA Enterprise pilot status.

7. Inward Investment and Employment stimulus

8. Funding Overview

9. Funding overview – grant allocation per source

10. Funding overview – budget expenditure trends • .

11. Funding overview – own revenue trends

12. IDZ Operator Insight

13. Context: IDZ Programme Challenges • IDZ Programme was slow to gain traction with Public and Private stakeholders due to adverse perceptions over the robustness of its foundations (relative to international programmes operating with strong / clear government endorsement and support); • IDZ concept’s value proposition envisages complex implementation inter-activity across government spheres, but: • Preciseroles and responsibilities of public organs not thoroughly conceptualised, properly canvassed or fully programmed (ad hoc); • No single duly empowered ‘lead architect’ in place to negotiate, procure and drive inter-governmental action (Executive Authority vacuum with multiple mandates/lines of institutional reporting and accountability); • Inadequate design and/or delivery of effective and legitimate enabling policy instruments to deliver real incentives plus assure capacitation of all government actors to deliver on a broad mandate.

14. Context: IDZ Programme Challenges • Strategic deployment of IDZs as country-level instruments of economic development hampered by a lack of a coherent and forcefully decisive strategic industrialisation plan (attuned to the IDZ concept/environment); • Weak central government-led programme-level research and knowledge leadership into strategic and emergent sector opportunities, compounded by comparable R&D weakness in individual IDZ Operator start-up operations; • Result: Individual IDZs left to formulate own insights and positions on which value chains (and which portions of value chains) to pursue in ‘sporadic’ investment marketing and promotional efforts; • Result: Potential investment opportunities often undermined by missing enabler elements (eg. parallel provision of adequate sector skills base, viable logistics solutions and reliable sector support mechanisms to assure delivery of production feedstock etc.)

15. Expectations from new SEZ policy Regime

16. Expectations: Enablement/resourcing concerns Complex long-term programme enablement needs (for Zones and for support of IDZ/SEZ Enterprises) are diffused throughout the spheres of Government; Careful balance is needed between desired outcomes/impacts versus applied programme support and value proposition enablement National Govt. Focus / Competency Desired outcomes & impacts Desired outcomes & impacts Desired outcomes & impacts CORE PROGRAMME VISION (AND ZONES PROJECTS IMPACT) Policy & Programme enablement Policy & Programme enablement Policy & Programme enablement Metro Focus / Competency Prov. Govt. Focus /Competency

17. Expectations: Attuning Performance & Impact CO-ORDINATED ENABLEMENT • % infrastructure/services delivery; • Size of prospective investment pipeline; • Rate of investment decision conversion; • Competitiveness of value offerings; • Number/Rate of Job creation; • Acquisition of competitive technology & rate of industrial upgrading; • Timely release/packaging of land areas; • Efficient authorisations/approvals; • Market oriented public policies/services; • Localised inward investment incentives; • Desirable local social environment; • Strategic sector development technical assistance and support • Port, road, rail and communications efficiency levels &cost competitiveness; • Trade access, instruments, support; • Skills and productivity policy/support; • Attractive Financing solutions; • Appropriate and market competitive socio-economic incentives offerings • Strategic focusing/nurturing of multi-stakeholder expectations; • Effective and efficient orchestration of joint Government collaborations; • Policy enhancement to dismantle country level non-competitiveness factors; • Global programme ambassadorship. SEZ Zones Developers & Operators Optimised location and infrastructure/services platform for inward attraction of strategic manufacturing & services industries Metro / Provincial Government shareholders Investment friendly destination: Supportive policies with adequate planning, resourcing and active support of developmental initiatives SEZ Value Offering Partners (incl. Govt Ministries and SOE/agencies) SEZ Programme Champion and Regulatory Authority Investment facilitation and settlement solutions: Financing, Regulatory; transport & logistics; trade; labour/other resourcing Programme strategic direction, deployment and enablement, guaranteed via appropriate locus, visibility and stature of SEZs as a unified, collective State initiative READINESS SUSTAINED SEZ PERFORMANCE

18. Expectations: Potential Performance Landscape Massive job creation Skills Dev. Technological Advancement NEW GROWTH PATH “RE-INDUSTRIALISATION” Strategic Sector Competitiveness Knowledge economy Export volumes / Trade Balance EXPORT-LED INDUSTRIALISATION: SA Exporter industry development and competitiveness Green industries De-Industrialisation job retention / recession rapid response Foreign Direct Investment IDZ viability / rate of tenancy Integrated Development Planning PROVINCIAL GROWTH and LOCAL ECONOMIC DEVELOPMENT Rural Development Industrial node resuscitation Secondary City / Small Town economic stimulus Economy diversification Socio-economic transformation

19. SEZ Readiness

20. SEZ Readiness: Practical issues and concerns • Clear mandating and full endorsement of broadened “inter-governmental vision” for SEZs is vital, supported by solid implementation and resourcing accords. These accords need to be suitably flexible and yet fully “do-able” (mandate-compatible) for all participant public entities/actors; • Full clarification still awaited of key institutional issues pertinent to the: • Definition of the Categories of SEZs to be accommodated/supported (with full determinations on matters such as their relative strategic merits, applicable establishment/designation processes/hurdles, the optimal levels (and forms) of public funding plus the key value proposition elements to be initiated/underpinned by government per SEZ category); • Protocols and procedures attendant to national/provincial executive oversight of the establishment/strategic deployment/funding of all Zones types (ideally encompassing streamlined accountability measures/reporting practices that are fully practicable and business-friendly for Zone Operators and Treasury authorities);

21. SEZ Readiness : Practical issues and concerns • Concerns have been expressed that a dilution of sound Policy intents in what appears to be a weaker draft Bill will provide insufficient legislative force and assurance of the necessary ‘co-opting’ of required participation levels for accomplishing the full policy aspirations; • Legislation would be stronger with the formal recognition and inclusion of a more thoroughly conceptualised ‘SEZProgramme’ to operate as a unique and specialised, inter-governmental initiative; • More formal linkages between SEZ activity and national level planning structures and processes (eg. NPC, EDD) would assist, and are needed to align Zones deployment in the national strategic interest; • Recognition of the provincial economic portfolio as Zones’ Executive Authority has beenrecommended for simplified monitoring, evaluation and reporting (but this is not yet been expressly or adequately legislated);

22. SEZ Readiness : Practical issues and concerns • Questions persist, pending full clarification of policy framework and business models to be applicable to ‘single’ / ‘multi-type’ future Zones: • Continuing applicability of spatial limitations for some/all future Zone categories • Freedom of Zones to pursue/access/combine a mix of core and alternative sources of funding for project development and/or Zone operations • Long-term level of State funding commitment to assure completion of all stages of Zones delivery project lifecycle (including Zone commercialisation phase); • State intentions around provision of new packages of enhanced incentive offerings (as a means towards investment attraction alongside -- or in place of? -- current Zones’ incentivisation practices on property/services discount offerings. • Principles informing public sector sentiment/obligations concerning progress towards revenue and financial self-sustainability (by Operators) versus the instrumentality and long-term developmental impact (of Zones)?

23. SEZ Readiness : Practical issues and concerns • Mechanisms to preserve/assure sufficient policy and operational flexibility for IDZ/Zone Operators to respond to national economic development aspirations (NGP, IPAP outcomes), • Structuring and capacity of SEZ Programme and centralised Fund to secure and sustain high-impact mega-projects • Effectiveness of Government action in eliminating red tape and related hidden costs of doing business, as part of the emergent SA Zones’ value proposition; • Timing and roll-out programme of future Zones implementation projects in a manner that utilises available resources best and that recognises andleverages the investments-to-date in Zone projects by IDZ-active provinces.

24. SEZ Readiness : Practical issues and concerns Persuasive ‘lead architect’ still needed to drive a definitive and well-orchestrated programme response by government to: • Resolve outstanding policy and State co-ordination issues still hindering optimal local and provincial action on the pursuit of NGP and IPAP intents; • Champion a mechanism enabling the rapid establishment of concrete agency or other similar institutional co-operative mechanisms (as necessary for optimal provincial engagement with, and access to, financing programmes, incentives etc); • Map out a programme of inter-governmental action that expedites the resolution of matters related to new and emergent sector development potentials (eg Electric Vehicles (EV), renewable energy (RE) and other green economy sectors); • Promote dialogue and information exchange that permit SA developmental organs to fast-track the strategic adaptation of State developmental programmes/activities, in line with the dynamics of both emergent market opportunities and challenges.

25. ELIDZ Readiness to embrace SEZ programming • East London IDZ is well advanced in preparations to engage with and derive value from the new SA Special Economic Zones initiative. The ELIDZ has: • Contemplated IDZ multi-phase expansions within its 20-year master-planning and business development model that is co-dependent on linkages to industrialisation potentials situated beyond the currently designated IDZ’s land footprint; • Assessed Provincial industrial policy to distil a clear picture of SEZ-related economic opportunities (potential target sector opportunities, extra-IDZ spatial development node priorities and related infrastructure/logistics capabilities/requirements); • Pro-actively spearheaded provincial interests in the delivery of a master-plan and business planning for establishment of a pilot Science & Technology Park (STP); • Championed the activation of the IDZ programme Customs Controlled Area (CCA) facilities and attendant business processes in conjunction with dti/SARS; • Originated negotiated localised investor incentive offerings in conjunction with the Buffalo City Metropolitan Municipality (to supplement the currently limited IDZ Programme value proposition elements).

26. Thank youSimphiwe KondloChief Executive Officer043 702 8200simphiwe@elidz.co.zaBusiness Streamlined