Special Economic Zones

Letter published in Financial Mail

Of all the analyses of the fate of Industrial Development Zones (IDZs) in SA, Claire Bisseker’s in FM 3 Feb 2012 contains the most common sense. Let’s apply that same common sense to the state of IDZs in South Africa. While our government remains enamoured of the Chinese State Capitalism model, for reasons of self interest as much as any economic development rationale, it ignores the uncomfortable bits of the Chinese model. This includes how China’s Special Economic Zones (SEZs), established under the leadership of the pro growth Deng Xiao Ping, really work. A peasant by origin, Deng had a clear mind that preferred common sense to ideology. Even Mao’s genocidal regime would not keep a lid on the basic economic needs of one billion impoverished Chinese forever, so the rapid and single minded pursuit of economic growth was, and remains, the core purpose of Chinese economic policy. This is a tiger the ruling class can never get off, because if they do it will devour them immediately. That focuses the mind.




The SEZs are sometimes named after Shenzen, the first SEZ, that produced growth rates averaging 25% a year for twenty five consecutive years. It did so through encouraging foreign investors to come to China and live in an incentivised bubble that had only one clear objective: export led economic growth. To attract people to invest where they would not normally invest requires incentives. Chief amongst those as far as SEZs are concerned are tax incentives, labour regulation relaxation , law and order, policy predictability, and quick decisions and assistance from trained –professional bureaucrats- not deployed cadres accountable to nobody. The first two options are ruled out by many observers in SA, and by key elements in government, because they seem “unfair” to existing businesses and may not attract proper new investors ( whatever those are). The second is out of the question given the ANC Alliance’s reliance on the narrow interests of COSATU, at the expense of the less mobilised, but much needier, unemployed majority. The last three , although relatively easily and cheap to do, require a competent state with strong leadership and a clear , single minded focus on what you want to achieve. A rugby or soccer coach wants to win. What does the ANC want?



The answer is that nobody knows for certain. When it comes to IDZs, our litany of failure has apparently taught us nothing. Coega shows that, unlike sports fields, building it is not sufficient. Because what’s on offer at Coega to a in investor bent on profit is little more than a nice sea view. Until we get serious about economic growth, we are wasting our time on discussing the intricacies and the ideological shibboleths of IDZs. Get real, or go home. It’s as simple (or apparently as difficult) as that.