Listed at 1.87m tall and tipping the scales at 121kg, former Springbok and member of the 1995 Rugby World Cup-winning Bok squad Marius Hurter was always capable of living up to his name. Many an opposing prop surely felt the hurt when packing down against him. Now an attorney based in Somerset West, Hurter has lost none of that potency.
It just so happened that I enjoyed a spell of trail running with the still-muscular Hurter on Table Mountain on the very day I planned writing this piece. It occurred to me that, while Hurter is an exponent of nominative determinism — living up to your name — South Africa’s special economic zones (SEZs) are, in key ways, the opposite.
Our analysis suggests that it is precisely a lack of specialness that has let down these much-hyped zones.
The idea
Originally, South Africa’s industrial policy deployed industrial development zones — tightly defined areas near ports or airports designed to attract export-orientated manufacturing. These zones were limited in scope and often heavily reliant on state funding.
With the enactment of the Special Economic Zones Act in 2014, the country shifted to a broader SEZ regime. The new framework expanded the types of zones allowed (industrial, free trade, sectoral), simplified licensing and introduced a dedicated SEZ fund — all intended to give fresh life to industrial strategy and open new regions to development.
The plan was a good one. Targeted zones offering infrastructure, incentives and streamlined regulations would help unleash untapped potential, concentrate industrial activity, attract investment, boost exports and create jobs.
Reality
The SEZ programme, while conceptually sound, has in practice delivered uneven results. Out of scores of designated zones, only a handful have had a measurable impact. Many remain underused, underperforming, or stuck in transition.
Just four SEZs — Coega, Dube TradePort, East London and Tshwane Automotive — account for more than 74% of the roughly R30bn private investment the programme had attracted by 2024.
For inspiration, we might look to the opposite end of the continent
The overall national contribution has been modest: about 27,000 direct jobs created in a labour market of nearly 25-million people. This makes for a high public cost of about R925,926 in government investment per job. Further, many of the jobs created in underperforming zones are temporary construction roles, rather than the operational, sustainable employment policymakers had envisioned.
Investment per job
Core incentives intended to make SEZs attractive have seen surprisingly weak uptake. The flagship measure, a reduced 15% corporate income tax rate, has been approved for only about half of all SEZs.
Even more striking: of 216 investors in SEZs nationwide, only 30 have used the SEZ rebate over the past decade, meaning the vast majority of investors have not claimed the duty savings benefit.
It seems there is also a marketing and communication issue. Very few companies are making use of available SEZ incentives. Even among those that do, the use of SEZ rebate benefits is highly concentrated. A staggering 48% of SEZ rebates is claimed by just one company. This is based on publicly available (and anonymised) trade data from the South African Revenue Service.
The likely reasons are twofold: either many investors are unaware of the incentives, or the administrative burdens and regulatory complexity make claiming them unattractive. Whatever the cause, this low usage fundamentally undermines the claim that SEZs offer a meaningful advantage over non-SEZ business locations.
Some more special than others
The Gordon Institute of Business Science report outlines specific recommendations to help lagging SEZs catch up to the better-performing ones and uplift the entire system. These include regular reviews of incentives, a nationwide marketing push and deeper public-private collaboration.
However, the keystone diagnosis is “insufficient specialness”. SEZs must be deftly designed to take advantage of surrounding economic forces. Incentives must be designed to leverage competitive advantages and overcome weaknesses.
In a global new normal of supply chain disruptions, rising demand for green tech and digital manufacturing and new trade dynamics under frameworks such as the African Continental Free Trade Area, SEZs hold some of the keys to prosperity — if we can put the “special” back into “special economic zone”.
For inspiration, we might look to the opposite end of the continent. Tanger Med combines multiple strategically designed zones that take advantage of proximity to Europe. Now home to the world’s 19th-largest port, the vast complex has helped make Morocco Africa’s largest vehicle exporter. The tailored incentives, plug-and-play platform for establishing a business and strategic alignment with a national economic vision add up to something special worth learning from.
The Centre of African Management & Markets at Gibs conducts academic and practitioner research and provides strategic insight on African markets. Macleod is a founding member
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