Centre punts its export-zone jobs proposal

29 May 2016 - 02:00 By ASHA SPECKMAN

Accelerated growth in China has made some wonder what South Africa could do differently to spark growth and boost employment. One proposal is that the country designates export-processing zones that can absorb cheap labour. The proposal has been presented in recent weeks to the government, business, academics and labour by its proponent, the Centre for Development and Enterprise. The centre argues that high unemployment in the Nelson Mandela Bay area could be significantly dented if the government gave its blessing to the initiative.The centre is proposing policy amendments that allow cheap employment rates akin to those paid in economies such as China, Malaysia and Thailand in the past few decades, and more recently in Cambodia and Vietnam.An industrial development zone, of which there are five in South Africa , offers domestic and foreign investors subsidised infrastructure, tax incentives, rebates and a relief on customs duties. Export-processing zones would focus on export only.The Nelson Mandela Bay economy, which includes the cities of Port Elizabeth, Dispatch and Uitenhage, is boosted by the automotive industry, agriculture and agro-processing industries.story_article_left1But unemployment in the region stands at 33.2% according to the latest Quarterly Labour Survey released by Stats SA.The creation of jobs paying a rate similar to the R80 a day offered by the government's Expanded Public Works Programme is the solution, the centre argues."We think that unskilled workers would work for around R80 a day," David Kaplan, a co-author of the proposal, said last week."Other groupings with higher skills would get more, but that's the sort of base wage we'd talk about," he said.Prospective investors would have "very strong rights to hire and fire. The reason for that is that the export markets go up and down and you can't expect the employer to bear the cost of the fact that there is no longer a market demand."In China, Cambodia and Vietnam, entry-level wages were initially low but increased 15% annually."Let's not think about the wages as something static; think about them dynamically - then they don't look, in a sense, that low," said Kaplan, a professor in the School of Economics at the University of Cape Town and former chief economist of the Department of Trade and Industry.But the proposal may come under political scrutiny for falling short of the decent wage agenda.Trevor Harper, chief financial officer for the Nelson Mandela Bay metro, said: "I can't see any government supporting that, whether it's a DA government or an ANC government, because the people will just not vote for you the next time round."He called the proposal "pie in the sky", saying that R80 a day was "way below the cost of living".story_article_right2But he supported the idea of an export-only processing zone. "We definitely need to look at ways of creating jobs, but I don't think that's one of them."He said other incentives could be considered, such as a freeze on rates for up to three years, which is one of the methodologies the metro uses.Lionel October, director-general for the Department of Trade and Industry, said such zones "have never worked anywhere. Investors go in because of low wages but they hop from place to place."He said an example of this was the textile factories run by Taiwanese companies in Dimbaza in the Eastern Cape years ago. These now stood empty.October said that under the recently renewed Industrial Policy Action Plan, the government had concrete labour-intensive plans. He said the problem was that "people want to keep the [government's] failure narrative going".Kevin Hustler, CEO of the Nelson Mandela Bay Business Chamber, said priority sectors identified in the Nelson Mandela Bay industrial development strategy included tourism and hospitality, "as well as light manufacturing, which could benefit from this project". He said initiatives involving the "maritime economy and green/ sustainable resources" would also benefit from such an export zone.story_article_left3The centre's proposal for the zone links to a proposal by the South African Institute of Race Relations, which called in a recent report for greater policy-making autonomy for provinces.Frans Cronje, CEO of the institute, said the Centre for Development and Enterprise's concept "is a solid one", especially in terms of positioning provinces to compete against one another."A one-size-fits-all approach to policy in areas such as labour and taxation makes it almost impossible for the other six provinces to compete for investment [against the Western Cape, Gauteng and KwaZulu-Natal]. Why, for example, would you establish your business in the Eastern Cape when you could do so outside Cape Town?"The centre's proposal could also stem migratory flows to the Western Cape and Gauteng and ease pressure for resources on these provinces, he said.Kaplan said: "The downside is very limited and the upside potentially is very large. So for me this is a way the government can do something new directly for unskilled, semi-skilled people and for exports, the two things we most need in this environment."..

There’s never been a more important time to support independent media.

From World War 1 to present-day cosmopolitan South Africa and beyond, the Sunday Times has been a pillar in covering the stories that matter to you.

For just R80 you can become a premium member (digital access) and support a publication that has played an important political and social role in South Africa for over a century of Sundays. You can cancel anytime.

Already subscribed? Sign in below.



Questions or problems? Email helpdesk@timeslive.co.za or call 0860 52 52 00.