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Thought Leadership - published 6 Sep 2018

LOGISTICS SECTOR A CRITICAL COMPONENT OF AN SEZ: Meike Wetsch, the Programme Manager of Coea Human Capital Solutions outlines the importance of the logistics sector within an SEZ

Thought Leadership Logistics Sector a critical component of an SEZ

 “It is important that we continue to believe in and promote and support, economic integration and co-operation, with a strong conviction that open economies, connected economies, inter-dependent economies, ultimately provide better jobs and better income for our people”, the Singapore Minister for Trade and Industry, Chan Chun Sing highlighted during his keynote address at the biennial Africa Singapore business forum.

 When drawing relevance from this statement, it is essential to consider the rapid economic climate changes as well as countries realising the implications of globalisation, which include; the world gradually turning into a smaller village with an increase in competitiveness. It is then expected of customers to seek products and services, which speak to their specific needs, compelling companies to make an effort to create competitive advantages to keep their profit and market share. Such trends drive firms and countries to focus on supply chain and integrated logistics.

What the Coega SEZ quickly translated this to, was understanding that, the Special Economic Zones (SEZs) have become the policy instrument of choice for developing countries seeking the land of higher economic growth through industrialization led by foreign direct investments. After the South African government adopted SEZs as policy instrument forming part of the Industrial Policy Action Plan (IPAP), it was only then that we witnessed some successes in the first three SEZ`s, with 42 operational investments worth R 4 billion and approximately over 5,000 direct jobs and 43,000 construction jobs created. Currently, the Coega SEZ has 43 operational investors, 25 are local and the remaining 18 are international investors. Together, they have invested a total of R7 billion.

 Meike Wetsch, the Programme Manager of Coega Human Capital Solutions highlights the key ingredients of successful SEZs. These include putting in place fiscal incentives for initial investments and ensuring an adequate supply of good quality labour, strategic locations, transport connectivity, and dependable judicial systems and institutions, such as independent governing authorities and enabling legal frameworks. For SEZs to become a major driver of development, they need to be integral to a government’s national development strategy and industrial policy. Specifically, SEZs need to be located within an enabling business environment that achieves two outcomes:

 (a)        The integration of value chains, with initial capital intensive foreign investment becoming the source of offtake for goods produced in the domestic value chain, thus offsetting the costs of incentivizing the foreign capital investment with the increased earnings that will accrue to domestic producers as they supply into the global value chain, and;

 (b)       Encouraging domestic firms to move up the industrial value chain and to explore growing opportunities in logistics, information and communications technology, and other areas of high technology, knowledge and innovation.

 “These are more than SEZ success criteria; they are structural reforms needed in the broader economy,” she concludes.

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