The East London Industrial Development Zone (ELIDZ) recently celebrated ten years since it was designated as one of the first IDZ’s in South Africa.  Reflecting on the ten year journey during a presentation to the Eastern Cape Portfolio Committee on Economic Affairs, ELIDZ CEO, Simphiwe Kondlo, said this journey had been both challenging and rewarding for the team behind the project. “We were one of the first IDZs to be designated in South Africa. Key to our mandate was the attraction of strategic investments that would not only leverage existing regional and industrial strengths, but would further upgrade the province’s industrial landscape,” he said.  Kondlo added that while there was still a lot to be achieved in this regard, the ELIDZ had made meaningful strides in this regard.

The ELIDZ has attracted R 3.7 billion worth of investment since it secured its first investor in 2005.  To date 30 investors have been secured with 21 of these already operational in the zone. Five other investors are either constructing or commissioning their plants in the zone. “The impact, however, is wider than just the zone.  To date we have awarded R928 million worth of contracts to BBBEE enterprises and R281 million worth to qualifying SMMEs.  We have transacted with more than 200 local companies since inception and for us this indicates the extent to which we have extended our reach as a government entity,” said Kondlo. The ELIDZ has also created various learnership opportunities and its eMonti Science and Technology Park initiative is currently incubating over 75 small businesses in various sectors.

“In the initial days, our biggest challenge was to diversify the local economy which was dominated by the automotive sector.  Today I am proud to say that – this too has been achieved.  We currently have a number of sector manufacturing activity including agro-processing, aquaculture, mineral beneficiation, ICT and BPO as well as Transport and Logistics,” said Kondlo. According to Kondlo, the journey has also had its few challenges.  Amongst these has been the inadequate design and delivery of effective and legitimate enabling policy instruments to deliver real incentives for the IDZ programme. There are currently no IDZ specific incentives and the only incentive which was linked to the IDZs was the Customs Controlled Area (CCA) benefit. Unfortunately this benefit, by last year, had still not been operationalised since inception due to a number of policy and operational issues between the various government stakeholders involved.

“The ELIDZ has played a pivotal role in the redesign and implementation of this incentive in partnership with SARS’s customs and excise unit and in 2011/12, we became the first IDZ to have a CCA pilot status and we are looking to consolidate this incentive and ensure maximum industry benefit from it,” he said. Kondlo said these challenges made the mandate of South African front-runner IDZs, almost impossible.   “There is a lot of criticism on the slow take off of the current IDZs and while the criticism is valid, it becomes important to note that very few IDZs globally have had to operate without incentives and enabling legislative framework,” he said.
According to Kondlo, since the conceptualisation of the South African IDZ programme, the ELIDZ has become somewhat of a pioneer, walking with government in shaping the policy environment based on the practical lessons that have been learnt from interacting with investors.

“This pioneering role, however, has its disadvantages as well, including the inability to observe others’ mistakes or taking note of their precedents for success,” he said. “We are hopeful that current discussions led by the Department of Trade and Industry, aimed at improving the legislative framework of Special Economic Zones within which the IDZs are categorized , will assist in increasing our competitiveness and as such accelerate our pace of attracting and bedding down investment for the zone,” he said. He added that the proposed SEZ Bill was the first attempt at establishing a legislative framework that goes beyond the tenuous association with the Manufacturing Development Act. The proposed legislation recognises the need for both export-oriented zones that, like the ELIDZ, are linked to a port, and also for inland zones, which are focused on niched outputs and domestic markets. “By creating the necessary policies, setting in place proper legislative parameters, defining the required resources and garnering the support of parastatals and delivery agencies, government will have established the undiluted legitimacy of IDZs that is required to make us competitive,” Kondlo concluded.