Chapter 9 Evaluating Special Economic Zones in South Africa: History, Performance and Challenges
Yang Chongsheng, Wang Yong, Anthony Black and Chen Meiying
*Yang Chongsheng is currently a PhD candidate at Tsinghua University, Beijing. His research focuses on South Africa, and his general interests include special economic zones, economic history, management theory and practice, and linguistics.
*Wang Yong is Associate Professor at the Institute of Economy, School of Social Sciences, Tsinghua University, Beijing. He holds a PhD from Tsinghua University. His research interests include game theory, information economics, asset securitization, industrial economics, industry theory, multi-side market theory, and special economic zones (SEZs).
*Anthony Black is Professor of the School of Economics, University of Cape Town. He holds degrees from the University of Cape Town, University of Sussex, and University of Natal. His main fields of expertise are development economics, trade and industrial policy, and, in particular, the automotive industry. He has acted as an advisor to the Department of Trade and Industry (South Africa) and played a key role in the establishment and implementation of the Motor Industry Development Programme.
*Chen Meiying is currently a lecturer in entrepreneurship studies at the College of Business Administration, Capital University of Economics and Business, China. She holds a PhD in Management from the University of Exeter. Her research focuses on entrepreneurship, and her general interests include SEZ studies, ethnic entrepreneurship, and business ecosystems.
South Africa’s history of colonialism and apartheid led to major regional disparities in its level of development. Since 1994, the new democratic government has sought to address the apartheid legacy of high levels of poverty and unemployment, as well as spatial inequality via new economic interventions and spatial re-planning strategies. Rural development and job creation are important components of national growth strategies, such as the New Growth Path and the National Development Plan. In addition, spatial development policies such as the promotion of Industrial Development Zones (IDZs), and more recently, Special Economic Zones (SEZs), have been pursued. Following the lacklustre experience with IDZs over the past decade, the SEZ programme is now expected to meet the goals of not only promoting economic growth and job creation, but also helping to tackle South Africa’s challenge of unbalanced regional development. Additionally, learning from SEZ experiences overseas could not only help South Africa explore ways to reactivate its economy, but also be beneficial to the underdeveloped areas or countries of the global south.
South Africa has a long history of spatial interventions in its pattern of economic development. Colonialism and apartheid produced huge disparities in the level of development among its regions and specifically led to the underdevelopment of designated black “reserves”. In its efforts to establish these zones as self-governing regions under the policy of “separate development”, the apartheid government sought to provide them with a semblance of economic sustainability by embarking on a significant programme of industrial decentralisation. The objective was to create an industrial base and employment in and around these designated reserves or Bantustans.
After democratization in 1994, the post-apartheid government had to contend with a number of severe problems, including spatial inequalities and uneven regional development. Nel and Rogerson state that “the post-apartheid government, understandably, was reluctant to continue a policy of spatial and regional development interventions which, de facto, may have been seen as supporting ‘separate development’ on racial grounds.” Nevertheless, it embarked on certain initiatives which to some degree incorporated regional objectives. The Special Economic Zone programme is one of the more recent such plans. Further examples include the Industrial Development Zone programme, Spatial Development Initiatives (SDIs), the National Spatial Development Perspective (NSDP), and the National Infrastructure Plan (NIP).
The South African government launched the Special Economic Zone programme in 2012 and passed the Special Economic Zone Act in 2014 in order to use SEZs as “a tool [which] will be useful to support the implementation of the Industrial Policy Action Plan (IPAP) and the promotion of beneficiation and industrial development.” This was implemented due to the IDZ programme not meeting governmental expectations, and the new SEZ plan is expected to stimulate regional economic development and promote industrialisation by attracting domestic and foreign direct investment (FDI). The start of the SEZ project is not only a spatial intervention, but also a result of the historical legacy of structural disadvantages and social inequalities, as well as the current and historically high unemployment rate. However, it must be noted that SEZs are not exclusive to one country, but rather are widely utilized across nations. This means that SEZs in SA face global competition with those of all other countries, including the giant in SEZ development — China.
The purpose of this chapter is to elaborate on the history and review the performance of SEZs in South Africa since 2000, identify challenges faced by South Africa, and provide practical solutions to help the South African government, SEZ operators, and would-be zone enterprises develop a strategic system for SEZs’ sustainable development. These suggestions are not only based on the reality in South Africa but also draw on some lessons from other countries that have accumulated considerable experience, such as China. Further, these lessons may also be helpful for other sub-Saharan African countries.
This chapter contains four sections. At first, we briefly introduce the methodology we use in the paper. Then we review spatial inequalities in South Africa, discuss and compare some spatial intervention policies and how they work, and evaluate current SEZ operations. The third section considers challenges that may hinder the development of SEZs in South Africa. The final section makes some suggestions regarding the lessons—both positive and negative—that can be learned from international experience and how to adapt them to the current reality of SA.
This chapter is an analytical study with a focus on the history, current situation, and future development of SEZs in South Africa; therefore, methodological triangulation is used, which involves using several methods simultaneously to study the topic.. Such methodology inherently includes quantitative and qualitative analysis, case study, and empirical analysis.
Additionally, data and information were collected from fieldwork, case studies, cross-disciplinary studies, and surveys to support further research and accumulate more first-hand materials for future research.
Some interviewees with key positions in Coega’s SEZ administration and relevant government departments helped provide some valuable information about SEZs in South Africa.