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How Incentives and SEZs are Creating Jobs and Uplifting Poor Areas, according to Rob Davies

South African's Trade and Industry Minister, Rob Davies highlighted the job-creating potential of his department’s incentive programme, and the importance of special economic zones, when he addressed MPs on Tuesday. 

He said the R18.8bn allocation in the budget over the next three years for the Department of Trade and Industry’s incentive programmes would enable the government to continue to provide financial support to the private sector. 

The focus would be on labour-intensive sectors that could create jobs for youth. 

Davies briefed Parliament’s trade and industry portfolio committee on the implications of President Cyril Ramaphosa’s state of the nation address (Sona) and the budget for the mandate of his department. 

South African Minister of Trade & Industry, Rob Davies (Photo: Business day)
In providing an overview of the incentive programme, Davies said that on average the department processed four applications and five claims a day. 

In 2016-17 the department spent R12.8bn in grants, the tax allowance scheme and loans — which was expected to generate R39.4bn in projected investment, R7.1bn in export revenue, and to create 23,351 new jobs and retain 38,192 existing jobs. 

Updating MPs on the progress of the black industrialist programme, Davies said to date 79 projects had been approved, with total grants disbursed by the department amounting to R1.9bn. This had facilitated R6.9bn in investments. 

The main economic sectors benefiting from the black industrialist programme grant were plastics and pharmaceuticals (R567m); agro-processing (R316m); metals (R279m); the green sector (R149m); and manufacturing and logistics (R116m). 

With regard to the automotive investment scheme, 88 projects were approved in 2016-17 to receive grants totalling R3.6bn, related to a projected investment value of R12.4bn. 

A total investment allowance of R3.9bn had been approved for 25 projects in 2016-17 under the Section 12i tax allowance incentive scheme with an associated projected investment of R14.3bn. 

Davies said the department’s manufacturing investment programme was achieving its objective of job creation. About R400m had been disbursed under the programme and 26,030 jobs had been supported. 

Davies noted that as Ramaphosa had announced, the government would organise an investment conference in the next three months, targeting both domestic and international investors. 

"The investment conference will stress the need to encourage investors from the continent to locate in SA. In addition we will encourage multinational corporations to invest their R&D (research and development) facilities in SA as we seek to make SA a knowledge and innovation centre," Davies said. 

Davies said the R4.9bn allocated for industrial infrastructure projects over the next three years would be used in special economic zones (SEZs) and industrial hubs in order to expand economic opportunities in underdeveloped areas. 

"The SEZ programme is a critical instrument for accelerating industrialisation," he said. 

"More importantly, the SEZ programme is a critical tool for attracting foreign direct investment, creating decent jobs, establishing new industrial centres as well as developing and improving infrastructure." 

There are seven designated zones, namely in Saldanha Bay, Dube Trade Port, Coega, East London, Richards Bay, Maluti a Phofung in the Free State, and the recently added Musina in Limpopo.

In the coming year the department will finalise two more zones for designation, namely in Atlantis in the Western Cape and Nkomazi in Mpumalanga. 

Investments in SEZs benefit from a reduced corporate tax rate and the employment tax incentive. 
"The ‘package’ of support measures available to investors in SEZs is becoming comparable to that offered by our global competitors," Davies said. 

"SA still has work to do to improve the efficiency of regulatory decision making but the investment offering is improving significantly." 

Highlighting some of the achievements of the special economic zones, the minister noted that Chinese company Yangtze Optics Cable and its black economic empowerment partner, Mustek, was investing R150m in a modern optical fibre cable manufacturing plant at Dube Trade Port. 

Saldahna Bay had a pipeline of 34 investments worth R34bn and OR Tambo had attracted R260m in new investment covering horticulture and metal refining. 

 Culled from Business Day