What are industrial development zones?

Industrial development zones (IDZs) are part of an initiative by the Department of Trade and Industry to boost exports and jobs. IDZs aim to encourage economic growth by attracting foreign investment in industrial development.

IDZs are geographically designed, purpose-built industrial sites that are linked to a port or airport, and are specifically designed to attract new investment in export-driven industries. The intention is to support these industries with world-class infrastructure, services and logistics networks. IDZs will have:

• A customs-secured area with its own South African Revenue Services personnel to provide support on customs and excise requirements. This will be a delimited area with entrance and exit points controlled by customs officials.
• An industrial and services area, for service and supply industries supporting large manufacturers in the custom-secured area, with top-notch industrial and office park environments.
• A one-stop centre to facilitate regulatory procedures and requirements.

The Department of Trade and Industry says the IDZ programme is designed to facilitate the international competitiveness of South African-based manufacturing. The implementation of the programme involves the government providing demand-driven infrastructure. The objective of this provision, says the department, is to attract investment as well as to make the locations ideal for exporting, while permitting private operators the right to develop and operate a zone.

Where are they?

By April 2003, the Coega and East London IDZs had received their operator's permits; and the Johannesburg International Airport and Richards Bay IDZs had been designated. Other sites earmarked for IDZs include Durban, Saldanha and Richmond.

By April 2003, East London was South Africa's first operational IDZ and it had already attracted investments. Construction work had begun on site works for Wesiengold, the German brewery, and the German condom maker, condomi-africa. Together, these investments had a value of more than R400-million. Seven to eight other projects were currently under negotiation, worth about R4,5-billion.

The East London IDZ offers prime sites in industrial areas close to the port. The East London Development Zone Corporation has been given a licence by the government to operate on the west bank of the Buffalo River in the Buffalo City metropole.

According to the East London Development Zone Corporation, there are 1 500 hectares of prime land available for the initiative. The land is located next to the port, the N2 and the airport. The land is generally unoccupied and 570 hectares are already owned by Buffalo City Municipality.

By March 2003, 20 hectares were already being serviced and two manufacturers had committed to development. The customs-secured area, which will be paid for by R100-million in local government funding, is due to open in mid-2004.

The figures behind ELIDZ

The income generated by the zone is expected to be in excess of R1,834-billion by 2010. The ELIDZ is expected to generate about 38 000 jobs in the next 10 years. The multiplier effect is eight indirect jobs created for each direct job.

Why invest?

IDZs offer direct cost savings (eg tax breaks, assistance with establishment of businesses) and operational efficiency benefits.

While all companies that invest in an IDZ will be subject to South Africa's environmental and labour laws, investors will benefit from duty-free imports of capital goods and inputs, plus VAT suspension for supplies procured in South Africa.

Apart from national investment incentives, local governments can grant special incentives (eg subsidised water or land). See the Department of Labour's site for a full list of benefits.

Infrastructure

The East London IDZ Corporation has awarded a R80-million deal for the construction of external infrastructure.

• About 10km of arterial roads will be built.
• Bulk electricity will be supplied (by April 2004).
• Potable and industrial water will be available.

Rail infrastructure

The East London-Gauteng rail link still demands that freight trains switch between diesel and electrified locomotion four times in one trip. However, the government has said it will be upgrading rail links and this will probably include electrifying the Gauteng-East London link.

Port

The Port of East London has been undergoing developments and Public Enterprises Minister Jeff Radebe recently announced that R12,4-million would be spent on dredging and deepening the west quay of the East London port.

Click here for the National Ports Authority site