Industrial financing programmes and the role they play in activating industrial parks across all provinces

Meeting report

The Chairperson welcomed Members and officials from the Department of Trade, Industry and Competition (DTIC).

Presentation on Incentive Support for Industrial Infrastructure Projects

Mr Shabeer Khan, CFO, dtic, said it was important that there is representation from the key branches of the Department. The Acting Deputy Director-General: Incentive Development and Administration Division, would be giving the presentation. The Incentive Development Unit is responsible for the management and administration of all incentives deployed by the Department, such as grants, loans and tax incentives, as well as various other support measures. This includes the infrastructure support which will be outlined during the presentation.

There are three broad incentive instruments which the Department deploys in order to support infrastructure development. They allow the Department to have a spatial footprint in the provinces and districts. The first is the Special Economic Zone (SEZ) programme, largely governed by the SEZ Act as well as the SEZ Fund which administers the incentive support. The second is the Industrial Parks Revitalisation Programme (IPRP) which supports infrastructure development, predominately in state-owned industrial parks. Lastly, the Critical Infrastructure Programme (CIP) aims to promote investment by supporting infrastructure across the country.

Presentation

Ms Reika Jeewan, Acting Deputy Director-General: Incentive Development and Administration Division, dtic, took the Committee through the presentation on incentive support for industrial infrastructure projects.  

SEZs are geographically designated areas reserved for targeted economic activities in order to promote trade, economic growth and industrialisation. To date, there are 11 designated SEZs operating across seven provinces and others are proposed or being planned in North West, Free State, and the Northern Cape. Across all SEZs, a total of R10.4 billion has been approved. R9 billion has been claimed and R21.4 billion has been invested. 18 690 jobs have been created.

The Critical Infrastructure Programme (CIP) aims to leverage investment by supporting infrastructure that is deemed to be critical, thus lowering the cost of doing business. As of 31 March 2022, there have been approvals to the value of R739 million. Investments have been valued at R21 billion and 26 000 jobs have been created through the programme. Through this programme, the DTIC supports infrastructure development in state-owned industrial parks as part of the state-owned Industrial Parks Revitalisation Programme (IPRP). Since its inception, R840 million has been approved for industrial parks (IPs) in various provinces. 

In 2021/22, support of R660.1 million was approved for industrial infrastructure projects that will collectively invest R13 billion into the economy. This investment includes R11.8 billion in largely rural districts and townships such as:

• OR Tambo in the Eastern Cape
•  Amajuba, iLembe and King Cetshwayo in KwaZulu-Natal
• Vhembe in Limpopo
• Ehlanzeni in Mpumalanga
• ZF Mgcawu in the Northern Cape
• Townships of Ga-Rankuwa and Soshanguve in the City of Tshwane in Gauteng
• KwaMashu, Phoenix and Verulam in the eThekwini Metropolitan Municipality in KwaZulu-Natal.

Industrial Infrastructure projects are expected to create 14 000 direct jobs and 35 000 construction jobs.

(See presentation for more details)

Discussion

Mr M Mmoiemang (ANC, Northern Cape) brought the presenter’s attention to the fourth slide of the presentation. Under the MAP IDZ, the approval amount was R534.4 million, the claim amount R226 million and the investment amount R1 billion- this was confusing. This SEZ has been lauded as one that is beginning to flourish, but the investment amount does not compare well to the rest of the SEZs. Could the Department give an indication of the progress of this SEZ thus far?  Could the team also indicate what the progress is so far with the Namaqua IDZ? During the provincial week, the presentation brought to Members’ attention the assessment has been done and there is approval from the DTIC. Between March and to date, has there been any progress?  

He wanted to know about what had happened to the industrial park proposal in the Northern Cape. Can the Department inform the Committee on what business proposals could be made in order to create a new industrial park? What would the process be? Kathu is bordered by the Kalahari Corridor and it hosts one of the country’s mining houses and the Kalahari manganese basin. It has raised opportunities with Original Equipment Manufacturers (OEM), and it is an area that can help improve the structural constraints of the economy and could transform the challenges related to job creation. Kathu is not the only area in the Northern Cape that hosts a lot of big iron and manganese mines. These areas were once sustainable but now there is a lot of poverty in those districts.

Mr M Dangor (ANC, Gauteng) asked the Department if they had ever considered using different margins when they are funding different SEZs in different areas. This would attract entrepreneurs to move into areas that are not heavily populated or are not part of the Western Cape, Gauteng or KwaZulu-Natal.

Mr J Londt (DA, Western Cape) said that he had raised this issue in previous Committee meetings and that it is something that the Committee needs to do more. Every time the Committee invites a department or entity, they must ask them what they are doing to address the growing unemployment rate in the country. The country is in a rut with an unemployment rate that is increasing. Every department and entity has wonderful scenarios and plans on how to address this, yet the rate keeps on increasing. The Committee needs to find out what was being done in the SEZs to make sure there are more job opportunities being created. The money being spent by the DTIC is quite high but the job opportunities created as a result of this funding are not aligned. In the Western Cape, there were massive textile factories that over the years have been scaling down. That is a high-intensity industry that can create a lot of jobs. What is being done in each of the SEZs to make sure that job opportunities are increased, and how is that filtering down to the communities?

The Chairperson said that some of the industrial parks have been dropped. Dimbaza Park in the Eastern Cape claimed R50 million, yet when the presentation outlined industrial infrastructure in the province, Dimbaza was not featured. His attention was drawn to this because Dimbaza is part of his constituency. He was there often and has been checking its progress. He uses it as a benchmark for the issue of industrial parks. What was the R50 million used for? He asked why it was not included in the presentation.

The presentation discussed protected investment but did not list current investments that are operational. What investments have been put into these protected investments? Are there any foreign or domestic companies that are operating in those industrial parks? He requested a list of all of them, across the provinces and municipalities.

Mr Khan said that the presentation provided an overview of past performance and how the DTIC has employed financial instruments to support companies and industrial parks. When the team managing the incentives deploy any incentive support, there is a process that tracks the investment happening on the ground. Slide four of the presentation is the investment at this point in time. Tshwane has been one of the most successful SEZs and this is because the Department has utilised a new framework where all three sectors of government are involved. The investment value for Tshwane is around R20 billion. There is a $1 billion investment, around R16 billion, from the OEM, and then there is R4.5 billion from the various suppliers to that OEM. That is a significant sum. The investment amount reflected on the slide is what the team tracks as operational investments. With regards to Tshwane, there are currently three operational investments; another eight would come on board by October 2022. This would bring the value to 11 operational investments in the course of this year. The application for Namaqua has been submitted and the team have been working on it. The team was also working closely with the province to ensure that there is a solid investment. They got a clear directive from Cabinet that before any SEZs are designated, there needs to be a clear and sound investment pipeline. The team has been working closely with the province to drive this forward.

In the DTIC’s annual performance plan, the Department wanted to ensure that the impact of their support goes beyond just the three broad provinces of Western Cape, Gauteng and KZN. One of their new APP targets is a bi-spatial framework. This is to see how best they can support companies located in districts as part of the new District Development Model. The Department also works quite closely with municipalities and districts to ensure that the support goes beyond what they normally see. The new spatial strategy will be embarked on this year. The Department wanted to ensure that the assistance is felt in all 52 districts. The Minister was adamant that a new spatial strategy was needed. The APP has three core objectives: 1. industrialisation, 2. transformation (specifically in the areas of ownership, structure of the economy, and spatial transformation) and 3. a capable state. The last objective is in place to ensure that the DTIC has the necessary foundation to drive the first two objectives forward.

On unemployment, there were a number of parliamentary questions that recently came to the Department and the Minister had eloquently responded to them. The DTIC’s support is conditional on a number of key elements. One of these is that there must be local development and stimulation of the South African economy. There must also be transformation and job creation. Any support given is conditional on these areas. The new reimagined industrial strategy, which forms the core of the DTIC’s work, has job creation at its centre. There have been a number of successes in this area; an example being the sugar master plan. In the social compact, which had been agreed upon by both business and labour, there is a sugar transformation fund of R1 billion. This fund is provided by the sugar companies and currently, R400 billion has been approved and disbursed to support black farmers as part of the supply chain. All of the DTIC’s work is concerned with the very important issue of job creation.

Dimbaza was still a part of the DTIC’s plans. The slide on the Eastern Cape highlights some case studies so that Members get some sense of the work that is being done in those areas.

Ms Stieneke Jensma, Chief Operations Officer, Industrial Delivery Zones Programme, dtic, said extensive work had been done with industrial parks such as Dimbaza. The Department had completed the first phase of revitalisation on Dimbaza and this is positive because the province has now come on board and invested in revitalising the industrial park. The province has committed R103 million and bringing in phase two. In addition, the DTIC has put a team together that looks at how to support the industrial parks in the Eastern Cape, specifically focusing on Dimbaza because of the demand there. There are funders from the IDC and they are also talking to the Small Enterprise Finance Agency, and this will be combined with the DTIC’s critical infrastructure fund. The Department was going to look not only at how it could support them financially, but also how it can build their business clients and make sure the projects are feasible. The aim in Dimbaza is to grow an agro-processing component combined with aquaculture. The Minister has tasked the team at DTIC with this.

The Chairperson thanked the DTIC for the presentation and responses. The Committee will continue to monitor the progress of the SEZs and the IPs, as well as the issue of job creation. Initially, when the SEZs were created, they were linked to airports and seaports, but now they can be found all over. They needed to check that when inland SEZs are approved, roads or railway infrastructure does reach those areas.

Mr Khan said that the points raised by the Chairperson were very important and the DTIC could come back and map the broad strategy that they will be embarking on. Once the Department puts together this new spatial strategy, which is closely linked to the District Development Model, they would like to come back and present this to the Committee for their feedback. This will change how the DTIC’s support works across the country. The Department wants to make sure that its support is felt across the country.

The meeting was adjourned.