Hostname: page-component-848d4c4894-x24gv Total loading time: 0 Render date: 2024-05-06T14:05:04.285Z Has data issue: false hasContentIssue false
  • English
  • Français

Evaluating South Africa's Special Economic Zones

Published online by Cambridge University Press:  29 May 2023

Mmiselo Freedom Qumba
Mmiselo Freedom Qumba*
Affiliation:
University of Pretoria, Pretoria, South Africa
*
E-mail: mmiselo.qumba@up.ac.za
Get access Rights & Permissions [Opens in a new window]

Abstract

Special economic zones (SEZs) can be described as “carved out jurisdictions within the overall jurisdiction of a state in order to introduce different laws and regulations that are usually more trade and investment friendly”. South Africa's SEZs are created under the Special Economic Zones Act 16 of 2014. This article analyses the country's legal framework for SEZs, which legal scholars have thus far only examined from a purely economic perspective. It provides a brief historical overview of industrial development zones, examines the 2014 act and suggests some reforms within the SEZ legislative framework. A comparative analysis is provided by drawing some lessons from BRICS member countries that have a successful record in operationalizing SEZs.

Keywords

special economic zonesindustrial development zonesSouth Africaone-stop shopsfree trade zonesforeign direct investment
Type
Research Article
Information
Journal of African Law , Volume 67 , Issue 2 , June 2023 , pp. 275 - 295
Check for updates
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of SOAS University of London

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

Lecturer, Mercantile Law Department, Faculty of Law, University of Pretoria; Attorney of the High Court of South Africa; PhD candidate, University of Pretoria. LLM (international trade and investment law in Africa) (University of Pretoria), LLB (Walter Sisulu University).

References

1 Even before COVID-19, South Africa's unemployment rate in 2019 was 29.1%: “Unemployment rises slightly in third quarter of 2019” Stats SA (29 October 2019), available at <https://www.statssa.gov.za/?p=12689> (last accessed 27 April 2023).

2 Countries such as China and India (discussed further below) are prime examples of how an appropriate SEZ legal framework can provide a conducive legal environment for foreign direct investment.

3 World Investment Report (2019, UN Publications), chap IV “Special economic zones”, available at: <https://unctad.org/system/files/official-document/WIR2019_CH4.pdf> (last accessed 5 March 2023).

4 Ibid.

5 “Policy on the development of special economic zones in South Africa” (2012, DTIC), available at: <http://www.thedtic.gov.za/wp-content/uploads/Policy_SEZ.pdf> (last accessed 5 March 2023).

6 Laryea, E, Ndonga, D and Nyamore, B “Kenya's experience with SEZs: Legal and policy imperatives” (2020) 28/2 African Journal of International and Comparative Law 171CrossRefGoogle Scholar at 172.

7 The minister, after considering the recommendation of the Advisory Board and after consultation with the minister of finance: may designate an area as an SEZ by notice in the Gazette with or without conditions; and must issue the applicant with an SEZ licence if the area is so designated.

8 “Policy on the development of SEZs”, above at note 5 at 13.

9 Moberg, L “The political economy of special economic zones: Lessons for the United States” (2018) 21 Chapman Law Review 407Google Scholar at 408.

10 SEZ Act, sec 24(5)(a).

11 Id, sec 24(5)(b).

12 Id, sec 24(5)(c).

13 Id, sec 24(5)(d).

14 Id, sec 24(2).

15 T Farole, C Baissac and J-P Gauthier “Special economic zones: A guidance framework for policymaking” (draft, June 2013), available at: <https://static1.squarespace.com/static/54d667e5e4b05b179814c788/t/5bc6f862a4222f9ca0735485/1539766376427/Farole-et-al-2013--SEZ+Policy+Framework-FinalDraft.pdf> (last accessed 5 March 2023).

16 Id at 17.

17 Id at 18.

18 W Nyakabawo “The geographic designation of special economic zones” (TIPS working paper, November 2014), available at: <https://www.tips.org.za/files/special_economic_zones_november_2014.pdf> (last accessed 5 March 2023).

19 “Policy on the development of SEZs”, above at note 5 at 13.

20 Ibid.

21 C Chinguno “South Africa's experience with special economic zones” (November 2011, Centre for Development and Enterprise), available at: <https://pmg.org.za/files/130522annexure_b2.doc> (last accessed 5 March 2023).

22 “Special economic zones and industrial parks outcomes in respect of investments, economic growth and job creation: Stakeholder engagement; with deputy minister” (National Council of Provinces Committee Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour meeting, 16 March 2021), available at: <https://pmg.org.za/committee-meeting/32576/> (last accessed 5 March 2023).

23 “Policy on the development of SEZs”, above at note 5 at 14.

24 Chinguno “South Africa's experience”, above at note 21.

25 IDZs in South Africa were constituted under the MDA under the control and purview of the Department of Trade and Industry, which was in charge of the programme's regulation, promotion and review.

26 “Policy on the development of SEZs”, above at note 5 at 13.

27 Ibid.

28 Id at 12.

29 What if South Africa Had A Special Economic Zone That Was Actually Special? (Centre for Development and Enterprise, May 2021), available at: <https://www.cde.org.za/wp-content/uploads/2021/05/What-if-South-Africa-had-a-special-economic-zone-that-was-actually-special-1.pdf> (last accessed 27 April 2023).

30 “Policy on the development of SEZs”, above at note 5 at 12.

31 Ibid.

32 Id at 14.

33 SEZ Act, sec 39(3).

34 Id, sec 39(5).

35 Id, sec 39(6).

36 “Policy on the development of SEZs”, above at note 5 at 14.

37 SEZ Act, sec 4(a)–(g).

38 Id, sec 7.

39 SEZ Act 28 of 2005 (India) (Indian SEZ Act), sec 8(2)(a)–(h).

40 SEZ Act, sec 8(1)(a)–(b).

41 Id, sec 7(i).

42 Indian SEZ Act, sec 31(2).

43 SEZ Act 2015 (Kenya) (Kenyan SEZ Act), sec 10(1) and (2)(a)–(e).

44 SEZ Act, sec 11(a)–(j).

45 The SEZ programmes in the Dominican Republic, Kenya and Senegal, for example, report directly to the president. Similarly in Bangladesh, the programme reports to the prime minister.

46 SEZ Act, sec 11(i).

47 Id, sec 23(1).

48 Id, secs 11(c) and 23(4).

49 Id, sec 23(1).

50 Id, sec 23(3)(b).

51 Id, sec 23(3)(a).

52 M Phiri and S Manchishi “Special economic zones in South Africa: White elephants and latent drives of growth and employment? A case of Zambia and South Africa” (UN University WIDER working paper 160/2020), available at: <https://www.wider.unu.edu/publication/special-economic-zones-southern-africa-white-elephants-or-latent-drivers-growth-and> (last accessed 5 March 2023).

53 SEZ Act, sec 20(1).

54 Id, sec 20(2).

55 Farole, Baissac and Gauthier “Special economic zones”, above at note 15.

56 Bost, F “Special economic zones: Methodological issues and definitions” (2009) 26/2 Transnational Corporations 141Google Scholar, available at: <https://unctad.org/system/files/official-document/diaeia2019d2a7_en.pdf> (last accessed 5 March 2023).

57 Indian SEZ Act 2005, sec 35.

58 Id, sec 3(1).

59 Ibid.

60 Sampat, P “Special economic zones in India” (2008) 43 Economic and Political Weekly 28Google Scholar.

61 “Amendment of section 25 of the Constitution” (Parliament of the Republic of South Africa, Ad Hoc Committee on Amending Section 25 of the Constitution), available at: <https://www.parliament.gov.za/project-event-details/285> (last accessed 5 March 2023).

62 Doing Business 2020: Comparing Business Regulation in 190 Economies (World Bank Group, 2020), available at: <https://documents1.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf> (last accessed 5 March 2023).

63 Kenyan SEZ Act, sec 34.

64 L-A Bruce “Civil society challenges Musina-Mukhado Special Economic Zone” (joint release by the Centre for Applied Legal Studies, Living Limpopo and All Rise Attorneys for Climate and Environmental Justice, 10 January 2023), available at: <https://www.wits.ac.za/news/sources/cals-news/2023/civil-society-challenges-musina-makhado-special-economic-zone.html> (last accessed 5 March 2023).

65 Ibid.

66 Gopalakrishnan, S “Negative aspects of special economic zones in China” (2007) 47 Economic and Political Weekly 1491Google Scholar at 1493.

67 Ibid.

68 Basic Conditions of Employment Act 75 of 1997.

69 T Farole Special Economic Zones in Africa: Comparing Performance and Learning from Global Experience (2011, World Bank Group), available at: <https://openknowledge.worldbank.org/handle/10986/2268> (last accessed 5 March 2023).

70 “Policy on the development of SEZs”, above at note 5 at 14.

71 Ibid.

72 “If Africa builds nests, will the birds come? Comparative study on special economic zones in Africa and China” (UNDP working paper series No 6/2015), available at: <https://www.undp.org/sites/g/files/zskgke326/files/migration/cn/UNDP-CH-Comparative-Study-on-SEZs-in-Africa-and-China---ENG.pdf> (last accessed 5 March 2023).

73 Crane, B, Albeecht, C and Duffin, KM “China's special economic zones: An analysis of policy to reduce regional disparities” (2018) 5 Regional Studies, Regional Science 98CrossRefGoogle Scholar at 102.

74 “If Africa builds nests”, above at note 72 at 12.

75 Chaisse, J and Dimitropoulous, G “Special economic zones international economic law: Towards unilateral economic law” (2021) 24 Journal of International Economic Law 234CrossRefGoogle Scholar.

76 DZ Zeng “China's special economic zones and industrial clusters: Success and challenges” (27 April 2011) World Bank Blogs, available at: <https://blogs.worldbank.org/developmenttalk/china-s-special-economic-zones-and-industrial-clusters-success-and-challenges> (last accessed 27 April 2023).

77 F Litvay “What changed with Brazil's export processing zones reform” (27 September 2021, Adrianople Group), available at: <https://www.adrianoplegroup.com/post/what-changed-with-brazils-export-processing-zones-reform> (last accessed 5 March 2023).

78 Regulation on Special Economic Zones in Guangdong Province 1980, art 1.

79 Farole, T and Moburg, L “Special economic zones in Africa: Political economy challenges and solutions” in Page, J and Tarp, F (eds) The Practice of Industrial Policy: Government-Business Coordination in Africa and East Asia (2017, Oxford University Press) 234Google Scholar, available at: <https://oxford.universitypressscholarship.com/view/10.1093/acprof:oso/9780198796954.001.0001/acprof-9780198796954-chapter-12> (last accessed 5 March 2023).

80 Kuznetsov, Z and Kuznetsova, O “The success and failure of the Russian SEZs: Some policy lessons” (2019) 26/2 Transnational Corporations 117CrossRefGoogle Scholar, available at: <https://unctad.org/system/files/official-document/diaeia2019d2a6_en.pdf> (last accessed 5 March 2023).

81 Indian SEZ Act, sec 3(1).

82 G Castilhos “Special economic zones in Brazil: The Manaus Free Trade Zones” (2016), available at: <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2801920> (last accessed 5 March 2023).

83 A Tarasova et al “Some aspect [sic] of legal regulation of special economic zones in Russia” (2019), available at: <https://www.shs-conferences.org/articles/shsconf/pdf/2019/12/shsconf_eurasia2019_04003.pdf> (last accessed 5 March 2023).

84 Federal Law No 116.

85 Sosnovskikh, S “Industrial clusters in Russia: The development of special economic zones and industrial parks” (2017) 3 Russian Journal of Economics 184CrossRefGoogle Scholar.

86 Law 11.508 (2007), art 9.

87 SEZ Act, art 23(1).

88 Id, sec 23(2).

89 Roux, N le and Schoeman, A “A comparative analysis of the special economic zones: The case of South Africa, Malaysia and Indonesia” (2016) 3 Journal of Economic and Financial Sciences 749Google Scholar at 761.

90 J-P Gauthier “Special economic zones in practice: The role of government and of the private sector in initiating, funding, delivering and managing SEZs” (2011, Centre for Development and Enterprise), available at: <https://pmg.org.za/files/130522cdeannexure_b3.doc> (last accessed 5 March 2023).

91 “Special economic zones in China (SEZs): Characteristics and benefits” (Intrepidsourcing), available at: <https://intrepidsourcing.com/trade-wiki/special-economic-zones-sezs-characteristics-benefits/#:~:text=The%20Benefits%20of%20Special%20Economic%20Zones%20in%20China,-There%20are%20various&text=Firstly%20and%20most%20famously%20are,not%20have%20to%20pay%20taxes> (last accessed 5 March 2023).

92 Ibid.

93 Ibid.

94 “Tandon Committee report on working capital: Norms and recommendations”, available at: <https://www.mbaknol.com/business-finance/tandon-committee-report-on-working-capital-norms-and-recommendations/> (last accessed 5 March 2023).

95 MM Manoharan “An evaluation of the working of the export processing zones in India: A case study with reference to the Cochin Export Processing Zone” (thesis submitted to Cochin University of Science and Technology, 1996), available at: <https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.861.7365&rep=rep1&type=pdf> (last accessed 5 March 2023).

96 Laryea, Ndonga and Nyamore “Kenya's experience with SEZs”, above at note 6 at 177.

97 Sampat “Special economic zones in India” above at note 60 at 29.

98 Ibid.

99 “Leveraging a new generation of industrial parks and zones for inclusive and sustainable development: Strategic framework” (2018, UN Industrial Development Organization), available at: <https://hub.unido.org/sites/default/files/publications/UNIDO_Strategic%20Framework_WEB.pdf> (last accessed 27 April 2023).

100 V Komleva, OI Belyaeva and E Tsepilova “Tax incentives in special economic zones: Russian and foreign experience” (paper for 34th IBIMA Conference, Madrid, Spain, 2019), available at: <https://www.researchgate.net/publication/342304304_TAX_INCENTIVES_IN_SPECIAL_ECONOMIC_ZONES_RUSSIAN_AND_FOREIGN_EXPERIENCE> (last accessed 5 March 2023).

101 Income Tax Act 58 (1962), sec 12R(2).

102 A greenfield investment refers to a type of FDI where a company establishes operations in a foreign country.

103 Brownfield investment is a type of FDI where a company invests in an existing facility to start its operations in a foreign country.

104 “Policy on the development of SEZs”, above at note 5 at 21.

105 Regulation on SEZs in Guangdong, art 24.

106 Ibid.

107 Indian SEZ Act, sec 3(8).

108 Regulation on SEZs in Guangdong, arts 7–11.

109 “Leveraging a new generation”, above at note 99 at 27.

110 See website of Association of Clusters, Technology Parks and SEZ of Russia, available at: <https://akitrf.ru/en/> (last accessed 27 April 2023).

111 SEZ Act, sec 23(4)(b) and (5).

112 Zeng, DZ “The past, present, and future of special economic zones and their impact” (2021) 24 Journal of International Economic Law 259CrossRefGoogle Scholar at 264.

113 A Aggarwal “Export processing zones in India: Analysis of the export performance” (Indian Council for Research on International Economic Relations working paper No 148, November 2004), available at: <https://icrier.org/pdf/wp148.pdf> (last accessed 5 March 2023).

114 Laryea, Ndonga and Nyamore “Kenya's experience with SEZs”, above at note 6 at 182.

115 Ibid.

116 Raheem, A “Impact of special economic zone on human development and poverty reduction: An Indian experience” (2011) 7 International Journal of Multidisciplinary Research 199Google Scholar at 215.

117 Indian SEZ Act, sec 8.

118 Id, sec 3.

119 Sampat “Special economic zones in India” above at note 60 at 29.

120 Ibid.

121 “Brazil sets up chain of one-stop ‘timesaver’ shops for government” (11 April 2017) Apolitical, available at: <https://apolitical.co/solution-articles/en/brazil-sets-chain-one-stop-timesaver-shops-government” (last accessed 5 March 2023).

122 Russian Special Economic Zones: Business Navigator 2019 (Association for the Development of Clusters and Technology Parks of Russia, 2020), available at: <https://akitrf.ru/upload/Russian_Special_Economic_Zones._Business_Navigator_2019_eng.pdf> (last accessed 5 March 2023).

123 “InvestSA one stop shop re-launched” (KPMG tax alert, April 2018), available at: <https://home.kpmg/content/dam/kpmg/xx/pdf/2018/04/tnf-south-africa2-apr24-2018.pdf> (last accessed 5 March 2023).

124 “Invest SA one-stop shop: Briefing by the Department of Trade, Industry and Competition” (April 2016), available at: <https://pmg.org.za/committee-meeting/22411/> (last accessed 5 March 2023).

125 C Dube, W Matsika and G Chiwunze “Special economic zones in southern Africa: Is success influenced by design attributes” (UN University WIDER working paper 2020/61), available at: <https://www.econstor.eu/bitstream/10419/229285/1/wp2020-061.pdf> (last accessed 5 March 2023).

126 Zeng “The past, present, and future”, above at note 112 at 264.

127 Ibid.

128 Ibid.

129 Ibid.

130 Ibid.

131 Ibid.

132 Indian SEZ Act, sec 17.

133 R Shashi Kumar “SEZs in India: Concept, objectives and strategies” (paper presented at the national seminar on SEZs organized by Sri Adichunchanagiri College of Arts, Commerce and Science, Karnataka, 12 September 2008), available at: <https://www.gtap.agecon.purdue.edu/resources/download/4103.pdf> (last accessed 5 March 2023).

134 Litvay “What changed”, above at note 77.

135 Kuznetsov and Kuznetsova “The success and failure”, above at note 80 at 134.

136 Id at 133.

137 “Policy on the development of SEZs”, above at note 5 at 23.