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SPECIAL ECONOMIC ZONES BILL, 2013. PRESENTATION TO SELECT COMMITTEE ON TRADE & INTERNATIONAL RELATIONS 16 OCTOBER 2013. DTI DELEGATION. Mr Tumelo Chipfupa : Deputy Director-General: Incentive Development and Administration Division (IDAD), the dti

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special economic zones bill 2013

SPECIAL ECONOMIC ZONES BILL, 2013

PRESENTATION TO SELECT COMMITTEE ON TRADE & INTERNATIONAL RELATIONS

16 OCTOBER 2013

dti delegation
DTI DELEGATION
  • MrTumeloChipfupa: Deputy Director-General: Incentive Development and Administration Division (IDAD), the dti
  • DrNoncebaMashalaba: Chief Director: Monitoring & Evaluation, IDAD, the dti
  • MrKayaNgqaka: Chief Director: Infrastructure and Investment Support (IIS), the dti
  • MrDumisaniSombinge: Director: Legal Services IDAD, the dti
  • Ms Janice Jonathan: Director: Special Economic Zones Stakeholder Management IDAD, the dti
introduction
INTRODUCTION
  • Background to Special Economic Zones Bill, 2013
  • Bodies consulted on Special Economic Zones Bill, 2013
  • Purpose of Special Economic Zones Bill, 2013
  • Discussion of Special Economic Zones Bill, 2013
  • Special Economic Zones Implementation Progress
background to sez bill 2013 1
BACKGROUND TO SEZ BILL, 2013 (1)
  • Industrial Development Zones Programme, 1999 -an incentive programme to establish IDZs
  • Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas
  • IDZ Programme has performed below expectation
  • Policy review process 2006 - to review the challenges experienced by the IDZ Programme
  • Industrial Development Zones Programme,1999 -an incentive programme to establish IDZs
  • Industrial Development Zone: a type of special economic zone providing special provisions to develop industrial growth in particular geographical areas
  • IDZ Programme did not perform as expected
  • Policy review process 2006 – sought to review the performance of the IDZs and address the challenges experienced by the IDZ Programme
background to sez bill 2013 2
BACKGROUND TO SEZ BILL, 2013 (2)
  • New Growth Path (“NGP”), National Development Plan (“NDP”) and National Industrial Policy Framework (“NIPF”):
    • Responding to challenging global and domestic economic conditions demands a sharper focus on new sources of competitiveness
    • Achieved through innovation and productivity, with an entrenched base in skills, infrastructure and efficient and responsive state action
background to sez bill 2013 3
BACKGROUND TO SEZ BILL, 2013 (3)
  • New Growth Path (“NGP”), National Development Plan (“NDP”) and National Industrial Policy Framework (“NIPF”): (continues)
  • Measures must be implemented to:
  • enhance domestic and regional demand
  • extend export promotion strategically
  • strengthen South African industrial base
  • promote labour-absorbing industrialisation path
background to sez bill 2013 4
BACKGROUND TO SEZ BILL, 2013 (4)
  • Draft Policy on Special Economic Zones - June 2011:
    • SEZs as a mechanism to contribute towards realisation of economic growth and development goals in NDP, NGP & NIPF
    • SEZ Bill an instrument to address shortcomings of IDZ Programme by creating formal a regulatory framework
process followed
PROCESS FOLLOWED
  • August 2011 MIN-MEC approved the draft SEZ Bill and Policy for submission before Cabinet
  • December 2011 Cabinet approved public consultation on the draft SEZ Bill;
  • January 2012 draft SEZ Bill published in Government Gazette for public comment;
  • March 2012 draft SEZ Bill presented before Economic and Employment cluster for comments and inputs;
  • July 2012 draft SEZ Bill discussed at Nedlac and process at Nedlac finalised on 31 October 2012
process followed1
PROCESS FOLLOWED
  • Draft SEZ Bill submitted to State Law Advisors in Nov 2012;
  • February 2013 draft SEZ Bill certified by State Law Advisors;
  • Special Economic Zones Bill, 2013 published in Government Gazette of 1 March 2013;
  • Special Economic Zones Bill (2013) was gazetted for public comment on 1 March 2013;
  • The Bill was introduced to Parliament on 5 March 2013;
  • The dti presented the Bill and a background to the Bill to the Portfolio Committee on Trade & Industry on 26 April 2013;
process followed2
PROCESS FOLLOWED
  • The Portfolio Committee on Trade and Industry received written submissions from various stakeholders and the public;
  • The SEZ Bill was adopted by the Portfolio Committee and by the National Assembly in August 2013; and
  • The SEZ Bill is now being presented to the Select Committee on Trade and International Relations for concurrence.
bodies consulted
BODIES CONSULTED
  • The Department has consulted with:
    • provincial departments responsible for economic development under the auspices of MIN-MEC;
    • various national government departments including National Treasury, SARS, Department of Home Affairs and the Economic Development Department;
    • existing Industrial Development Zones’ Operators;
    • municipalities represented by the South African Local Government Association (“SALGA”) at meetings of MIN-MEC; and
    • Eskom, National Planning Commission, DBSA and IDC
purpose of special economic zones bill 2013
PURPOSE OF SPECIAL ECONOMIC ZONES BILL, 2013
  • The Bill seeks to:
    • provide for the designation, promotion, development, operation and management of Special Economic Zones;
    • provide for the establishment of the Special Economic Zones Advisory Board;
    • empower the Minister to establish the Special Economic Zones Fund;
    • regulate the application, issuing, suspension, withdrawal and transfer of Special Economic Zones operator permits; and
    • provide for functions of Special Economic Zones operators.
definition of special economic zones
DEFINITION OF SPECIAL ECONOMIC ZONES
  • Section 1 – Definitions
  • Defines terms used in the Bill
  • Special Economic Zone:
    • is an economic development tool to promote economic growth and export
    • uses support measures to attract targeted domestic and foreign direct investment
objects of special economic zones bill
OBJECTS OF SPECIAL ECONOMIC ZONES BILL
  • Section 2 – Objects of Act
  • Determination of SEZ Policy and Strategy
  • Establishment of Advisory Board and SEZ Fund
  • Designation, promotion, development, operation and management of SEZs
  • Regulatory measures and incentives for SEZs to attract domestic and foreign direct investment
  • Establishment single point of contact or one-stop shop to deliver government services
application of the sez act
APPLICATION OF THE SEZ ACT
  • Section 3 – Application of Act
  • Applies to SEZ’s established in the Republic in terms of this SEZ Act.
purpose of special economic zones 1
PURPOSE OF SPECIAL ECONOMIC ZONES (1)
  • Section 4 – Purpose of SEZs
  • Purposes include
    • facilitating creation of an industrial complex with strategic national economic advantage for targeted investments and industries in manufacturing sector and tradeable services;
    • developing infrastructure to support development of targeted industrial activities;
    • attracting foreign and domestic direct investment;
    • providing location for establishment of targeted investment;
    • enabling beneficiation of mineral and natural resources
purpose of special economic zones 2
PURPOSE OF SPECIAL ECONOMIC ZONES (2)
  • Section 4 – Purpose of SEZs (continues)
  • Purposes include:
    • taking advantage of existing industrial and technological capacity, promoting integration with local industry and increasing value added production;
    • promoting regional development;
    • creating decent work and other economic and social benefits and promoting skills and technology transfer, including the broadening of economic participation by promoting small, micro and medium enterprises and co-operatives;
    • the generation of new and innovative economic activities.
special economic zones policy and strategy
SPECIAL ECONOMIC ZONES POLICY AND STRATEGY
  • Section 5 – Special Economic Zones policy
  • Minister may determine policy for designation, promotion, development, operation and management of SEZs, after consultation with Advisory Board
  • Minister may review policy when necessary
  • Section 6 – Special Economic Zones strategy
  • Minister must determine SEZ strategy, after consultation with Advisory Board
  • Minister may review policy when necessary
  • Strategy must address designation of SEZs that best support industrialisation and economic growth strategies
special economic zones advisory board 1
SPECIAL ECONOMIC ZONES ADVISORY BOARD (1)
  • Section 7: Establishment of SEZ Advisory Board
  • Establishes SEZ Advisory Board
  • SEZ Advisory Board consists of not more than 15 members representing:
    • government, Public Entities, organisedlabour, organised business, civil society and independent persons on the basis of their knowledge and expertise relevant to SEZs;
    • Stipulates the appointment process of the Advisory Board and seniority of members required.
special economic zones advisory board 2
SPECIAL ECONOMIC ZONES ADVISORY BOARD (2)
  • Section 11: Functions of Advisory Board include:
  • advising Minister on policy and strategy regarding SEZs
  • monitor implementation of SEZ Policy and Strategy
  • considering applications for designation as SEZ & recommending to Minister re issue of SEZ licence
  • considering applications for SEZ operator permits and transfers and recommending to Minister
  • advise Minister on initiatives to market SEZ’s
  • liaising with SEZ licensees and operators on implementation of SEZ strategic plans
special economic zones advisory board 3
SPECIAL ECONOMIC ZONES ADVISORY BOARD (3)
  • Section 11: Functions of Advisory Board include: (continues)
  • Report to the Minister in a prescribed manner on progress relating to the development of SEZs;
  • Advise the Minister on minimum norms & standards required in establishing a one stop shop in the SEZs;
  • conducting investigations on any matter arising from application of Act; and
  • performing other functions consistent with the Act as Minister may determine
special economic zones advisory board 4
SPECIAL ECONOMIC ZONES ADVISORY BOARD (4)
  • Section 17: Secretariat of Board
  • Director-General must:
    • establish dedicated secretariat in Department to support and facilitate functions of the Advisory Board
    • provide required human resources, financial and other resources
financing support measures
FINANCING & SUPPORT MEASURES
  • Section 20 - SEZ Fund
  • Minister with concurrence of Minister of Finance, from money voted by Parliament, may establish SEZ Fund to support the promotion and development of SEZs;
  • Minister with concurrence of Minister of Finance may make regulations regarding additional source of money for the fund, and the administration and criteria for distribution of money from the Fund.
financing support measures1
FINANCING & SUPPORT MEASURES
  • Section 21: Support measures
  • Minister may determine and implement support measures, including incentive schemes for operators and businesses operating in SEZs;
  • Minister may, in concurrence with relevant government departments design and administer support measures or other support programmes to support development and operation of SEZs;
  • Act doesn’t preclude a municipality, provincial government, or public entity from designing their own support measures and incentive schemes to support the development and operation of SEZ’s.
sez implementation protocol
SEZ IMPLEMENTATION PROTOCOL
  • Section 22 - Implementation Protocol
  • Minister may enter into implementation protocol with any organ of state deemed appropriate in terms of the Intergovernmental Relations Framework Act (Act no. 13 of 2005);
  • Implementation protocol deal with the implementation and operation of a one stop shop, or any other matters requiring the co-ordination of the functions of the state that may be required for the proper regulation and development of the SEZs;
  • Minister must report annually in terms of the PFMA on the conclusion of the implementation protocols.
designation of sezs 1
DESIGNATION OF SEZs (1)
  • Section 23 - Application for designation
  • National, provincial government, municipality, public entity, municipal entity or public-private partnership, acting alone or jointly, may apply for designation of a specified area as an SEZ;
  • Applicant must demonstrate that the designation will further government’s industrial development objectives;
  • Application must be in prescribed form and manner
designation of sezs 2
DESIGNATION OF SEZs (2)
  • Section 23 - Application for designation (continues)
  • Applicant must:
    • have sufficient access to financial resources and expertise
    • submit comprehensive feasibility study
    • indicate extent of ownership or control of area
    • If PPP – indicate ownership structure
    • Advisory Board may request further information, and must consider application and recommend to Minister whether or not the area is suited to be designated as an SEZ.
designation of sezs 21
DESIGNATION OF SEZs (2)
  • Section 23 - Application for designation (continues)
    • After considering the recommendation of the Advisory Board, and after consultation with the Minister of Finance, the Minister may designate the SEZ by notice in the Gazette, with or without conditions;
    • Minister issues the applicant with an SEZ Licence if the area is designated;
    • Before designation, the Minister must publish intention to designate and allow for a 30 day public comment period.
designation of sezs 3
DESIGNATION OF SEZs (3)
  • Section 24 - Designation of SEZs
  • Minister may designate an area as an SEZ in pursuance of strategic national interests;
  • Minister may prescribe different categories of SEZs including:
    • a free port;
    • a free trade zone;
    • an industrial development zone; or
    • a sector development zone.
designation of sezs 4
DESIGNATION OF SEZs (4)
  • Section 24 - Designation of SEZs (continues)
  • Minister may prescribe guidelines for each category of SEZ and conditions that may be imposed on SEZs;
  • Minister may, after consultation with Minister of Finance, prescribe types of service and business located in SEZs.
governance and management of sez 1
GOVERNANCE AND MANAGEMENT OF SEZ (1)
  • Section 25: Governance & management
  • Upon designation, SEZ Licensee must establish an entity to manage the SEZ, and provide the entity with the resources and means to operate the SEZ.
  • For National or provincial government or public entity licensee: establish SEZ as a national government business enterprise or a provincial government business enterprise in terms of s(1) of PFMA
  • Municipality or municipal entity licensee: establish SEZ as municipal entity in terms of the Municipal Systems Act
governance and management of sez 11
GOVERNANCE AND MANAGEMENT OF SEZ (1)
  • Section 25: Governance & management (continued)
  • PPP: establish SEZ as a company
  • Licensee must appoint SEZ Board which is responsible for efficient governance and management of business of the SEZ Entity
  • SEZ Board must & comply with PFMA, MFMA or Treasury Regulations, whichever is applicable
governance and management of sez 3
GOVERNANCE AND MANAGEMENT OF SEZ (3)
  • . Section 26: Strategic plan of SEZ
  • Each SEZ Board to develop and implement strategic plan within SEZ Strategy framework to achieve mandate, perform functions & comply with conditions prescribed
  • Plan reviewed annually and submitted to Minister at least 3 months before the end of the financial year or at a later date determined by Minister
  • The SEZ Board must provide Minister with such information and documentation as the Minister may reasonably require in connection with the affairs of that SEZ entity
governance and management of sez 31
GOVERNANCE AND MANAGEMENT OF SEZ (3)
    • Section 27 : Business & financial plan
  • SEZ Board must submit business and financial plan to Minister annually for approval
  • Business and financial plan
    • contains projection of revenue & expenditure for following year
    • covers projected affairs of SEZ for 3 years
taking over administration of sez
TAKING OVER ADMINISTRATION OF SEZ
  • Section 29: Taking over administration of SEZs
  • Minister may, after consultation with the SEZ Advisory Board, the SEZ Board & the Licensee concerned, appoint administrator to take over administration or perform function of SEZ if:
    • SEZ Board fails to comply with conditions prescribed by Minister;
    • SEZ Board fails or is unable to perform its functions; or
    • there is mismanagement of SEZ entity’s finances.
  • Minister must publish notice in Gazette appointing Administrator;
  • The Minister may act on the above without consultation of Advisory Board under certain circumstances.
suspension or withdrawal of designation 1
SUSPENSION OR WITHDRAWAL OF DESIGNATION (1)
  • Section 30: Withdrawal of designation
  • Minister may, on recommendation of Advisory Board, withdraw designation of area as SEZ which does not further government industrial development objectives and will:
    • Inform the affected licensee, operator and businesses of this intention; and
    • Give the affected licensee, SEZ Board, Operator and businesses 30 days to submit comments.
  • Minister may re-designate an area whose designation has been withdrawn;
suspension or withdrawal of designation 2
SUSPENSION OR WITHDRAWAL OF DESIGNATION (2)
    • Section 30: Withdrawal of designation (continues)
  • Lawful activities of any business located in SEZ is not affected by suspension / withdrawal provided the business :
    • has entered into agreement with SEZ operator.
sez operator 1
SEZ OPERATOR (1)
  • Section 31: SEZ operator
  • SEZ Board must appoint an operator to develop, operate and/or manage the SEZ on its behalf
  • When appointing an operator, licensee must follow a fair, equitable, transparent, competitive and cost-efficient procurement process
sez operator 2
SEZ OPERATOR (2)
  • Section 31: Application for SEZ operator permit
  • Only holder of SEZ operator permit may operate, develop and/or manage SEZ
  • Minister, on considering recommendation of Advisory Board may issue permit
  • Only an SEZ entity established by a PPP licensee may also develop, operate and manage the SEZ concerned.
sez operator permit 1
SEZ OPERATOR PERMIT (1)
  • Section 33: Requirements for application for SEZ operator permit
  • Applicant for operator permit must:
    • be appointed by SEZ Board to develop, operate and/or manage SEZ;
    • be company registered in RSA;
    • have sufficient financial resources and expertise to develop, operate and manage SEZ; and
    • comply with other criteria and requirements that Minister may be prescribe.
  • Minister can make regulations regarding additional criteria for applications for Operator Permits.
sez operator permit 2
SEZ OPERATOR PERMIT (2)
  • Section 34: SEZ operator permit
  • Before issuing permit, on recommendation from Advisory Board, Minister must be satisfied that agreement between SEZ Board and operator adequately provides for duties, terms and conditions for development, operation and management of SEZ; and
  • Minister must determine duration of permit.
functions of sez operator 1
FUNCTIONS OF SEZ OPERATOR (1)
  • Section 35: Functions of SEZ operator
  • implement strategic plan for SEZ
  • make improvements to the SEZ and its facilities according to the written agreement between SEZ Board and Operator, and other relevant authorities.
  • provide or facilitate provision of infrastructure and other services required for SEZ 
  • provide adequate demarcation of SEZ from any applicable customs territory and suitable provision for movement of conveyances, vessels and goods entering or leaving an SEZ
  • provide adequate security for all facilities of SEZ
functions of sez operator 2
FUNCTIONS OF SEZ OPERATOR (2)
  • Section 35: Functions of SEZ operator (continues)
  • adopt rules and regulations for businesses within SEZ to promote safe and efficient operation
  • maintain adequate and proper accounts and other records in relation to its business and report to Minister and other relevant authorities
  • promote the SEZ as a foreign and domestic direct investment destination, in consultation with the Advisory Board
  • ensure that business in SEZ are approved in terms of section 38 and achieves purpose of SEZ
functions of sez operator 3
FUNCTIONS OF SEZ OPERATOR (3)
  • Section 35: Functions of SEZ operator (continues)
  • apply to Minister for finance and support measures;
  • facilitate a single point of contact or one stop shop that delivers the required government services to businesses operating in SEZ in order to provide simplified procedures for the development, and operation of the Special Economic Zone and for setting up and conducting business in the SEZ.
suspension or withdrawal of permit 1
SUSPENSION OR WITHDRAWAL OF PERMIT (1)
  • Section 36: Suspension of withdrawal of SEZ operator permit
  • Minister may suspend or withdraw permit if operator:
    • fails to comply with terms & conditions of permit;
    • contravenes Act or any law of the Republic;
    • contravenes or fails to comply with customs & excise rules and procedures; or
    • on request from operator.
suspension or withdrawal of permit 2
SUSPENSION OR WITHDRAWAL OF PERMIT (2)
  • Section 36: Suspension of withdrawal of SEZ permit (continues)
  • Before suspending or withdrawing permit Minister must:
    • inform operator of intention to suspend or withdraw permit and the reasons for the intended withdrawal or suspension; and
    • allow operator to make written comments within 30 days.
  • Minister may make regulations on procedure to suspend or withdraw
transer of sez operator permit
TRANSER OF SEZ OPERATOR PERMIT
  • Section 37: Transfer of SEZ operator permit
  • Operator may transfer permit to another person if person:
    • applies to Minister; and
    • satisfies requirements for operator permit
  • Transferee must in application stipulate any changes to the original development, business and operating plan;
  • New operator must comply with all the obligations in terms of Act and has all the rights and obligations in terms of operator permit.
application to locate in sez
APPLICATION TO LOCATE IN SEZ
  • Section 38: Application to locate in SEZ
  • Applicant who wishes to conduct business in an SEZ must apply to the SEZ Board
  • Application must provide information on the business or service rendered, and indicate the extent to which the business achieves the purpose of the SEZ.
  • SEZ Board may consider the recommendations of the operator, and approve the business application with or without conditions.
general provisions 1
GENERAL PROVISIONS (1)
  • Section 39: Transitional provisions and Savings
  • IDZ designation remains in force and regarded as SEZ designation
  • IDZ operator permit remains in force and must thereafter be converted to SEZ operator permit
  • Applications in terms of IDZ Regulations to be dealt with in terms of SEZ Act
  • Section 40: Guidelines
  • Minister to issue guidelines after consultation with Advisory Board
general provisions 2
GENERAL PROVISIONS (2)
  • Section 41: Regulations
  • Minister may make regulations after consultation with Advisory Board
  • Minister must publish regulations in Gazette and grant 30 days written comments for consideration.
slide52

PROGRESS REPORT ON NEW SEZ’S PROPOSED (2)

  • Feasibility Studies
    • Pre-Feasibility studies underway for Solar Corridor in Upington and Platinum hub in Limpopo
    • Feasibility studies being finalized for the ICT hub in Gauteng
    • Five (5) additional service providers appointed to be on the pool of service providers to undertake feasibility studies on SEZ, this is in addition to four (4) companies that were previously appointed.
    • RFPs have been issued for the seven (7) remaining proposed SEZ (closing date: 04/10/13), and BAC is planned for the 8th to 10th of October.
slide53

PROGRESS REPORT ON NEW SEZ’S PROPOSED AND THE WAY FORWARD

  • Project Management
    • Project steering committees and oversight committees established in all provinces
    • Efforts to strengthen the provincial capacity to manage the SEZ work underway
  • Capacity Building
    • 30 Government officials currently in China for SEZ training
    • Plans for the annual SEZ training workshop underway.
    • Work is underway to develop a localized SEZ training with local institutions
slide54

PROGRESS REPORT ON NEW SEZ’S PROPOSED AND THE WAY FORWARD

  • Funding
    • Approved SEZ Fund Guidelines are available
    • R500m available this current financial year to finance feasibility studies for the 10 planned SEZs and to finance investment projects in the existing IDZs.
  • SEZ Incentives
    • The following tax incentives have been approved:
      • 15% corporate tax incentives for investors in SEZs
      • Bulding Tax Allowance
      • Accelerated 12i Tax Allowance
      • Employment Tax Incentive
      • VAT exemption and Duty Free
conclusion
CONCLUSION
  • Next steps on legislative path
    • Bill serve before the National Assembly and the Select Committee on Trade & International Relations in terms of section 76 of the Constitution
  • Further amendments and finalising SEZ Bill following Parliamentary process
  • Drafting SEZ Regulations and Guidelines
recommendation
RECOMMENDATION
  • It is recommended that the Select Committee on Trade and Industry supports the provisions of the SEZ Bill.
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