Industrial development zones as a policy instrument in South Africa

Abstract

The objective of this study is to evaluate the potential of Industrial Development Zones, as a selective industrial policy measure, to improve the international competitiveness of South African manufacturing. Manufacturing is the single largest sector in the South African economy. It contributes 33 per cent to the country's Gross Domestic Product (GDP) and 17 per cent to total employment. It is thus a valid cause of concern that globalisation and trade liberalisation are increasingly putting significant pressures to bear on South Africa's manufacturing firms. Therefore it is argued in this study that South African manufacturing firms need to become more internationally competitive through increased exports and foreign direct investment (FOI). An evaluation has been done using a literature study into the international experience with Export Processing Zones (EPZ) as well as using a case study of the IDZ application of Mafikeng International Airport (MIA). Industrial Development Zones (IDZs) can be seen as a South African variant of an Export Processing Zone (EPZ). It was found that due to the criticisms expressed against the EPZ concept, South Africa will introduce IDZ instead to attract FOi and to increase manufacturing firms' competitiveness through providing a special package of incentives to investors. Mafikeng International Airport (MIA) could serve as an important trade hub serving Namibia and Botswana due to its close proximity and available infrastructure. It was argued that a lack of supportive industries and its location in relation to the rest of the North West province could cause matters of concern and the North West Provincial government should look into these issues.