Discuss in detail South Africa’s initiaties (endeavours) in regional development. Industrial policy refers to government efforts to shape the economy by targeting specific industries, firms, or economic activities. This is achieved through a range of tools such as subsidies, tax incentives, infrastructure development, protective regulations, and research and development support
Discuss in detail South Africa’s initiaties (endeavours) in regional development (Industrial Development Policies)
INTRODUCTION
South Africa’s overall objective of Industrial Development Policy is to ensure international competitiveness in its nine provinces.
OR
Regional development is aimed at increasing the economic livelihood of specific areas or regions.
OR
Regional development attempts to limit the negative effects of economic activities in only a few areas.
OR
It attempts to promote the advantages of a more even regional development by using labour and other natural resources and infrastructure in neglected areas.
[Accept any relevant introduction]
[Max 2]
BODY-MAIN PART
SPATIAL DEVELOPMENT INITIATIVES
- SDI Programme attracts infrastructure and business investments to underdeveloped areas to create employment. 🗸🗸
- Department of Trade and Industry is driving force behind industrial and spatial development. 🗸🗸
- DTI plans together with central, provincial and local government, IDC, parastatals and research institutions. 🗸🗸
- Industrial Development Policy Programme (Spatial Development) has 2 focus points spatial development initiative (SDI) and financial incentives. 🗸🗸
- SDI refers to government’s initiative and economic development potential of certain specific spatial locations in SA. 🗸🗸
Key Objectives:
- Stimulate economic activity in selected strategic locations. 🗸🗸
- Generate economic growth and foster sustainable industrial development. 🗸🗸
- Develop projects of infrastructure in certain areas and finance them through lending and private sector investment. 🗸🗸
- Establish private-public partnerships (PPP’s). 🗸🗸
In areas with high poverty and unemployment, SDI focuses on:
- High level support in areas where socio-economic conditions require concentrated government assistance. 🗸🗸
- Where inherent economic potential exists. 🗸🗸
- The approach is towards international competitiveness, regional cooperation and a more diversified ownership base. 🗸🗸
Some of the main focus points of the SDI Programme are:
- Lubombo Corridor (agro-tourism, education, craft, commercial and agricultural sectors); 🗸🗸
- KwaZulu-Natal (Ports of Durban and Richards Bay); 🗸🗸
- West Coast SDI (fishing and industrial ports); 🗸🗸
- Coast-2-Coast Corridor with agro-tourism. 🗸🗸
- It also makes it possible for private sector businesses to take advantage of the economic potential of underdeveloped areas in private-public partnerships (PPP’s) 🗸🗸
- In PPP a private business may provide the capital to build the factory and to buy raw materials and employ labour, while the government provides the capital for the infrastructure such as roads and water and electricity. 🗸🗸
- The business benefits from profits and the government benefits from taxes, levies and employment opportunities. 🗸🗸
There are TWO types of PPP’s which are compensated differently:
Unitary payments:
- Private sector builds and runs a project (it performs the function on behalf of the public sector); the payment provides an acceptable return on the total investment (building cost, maintenance, operational expenses). 🗸🗸
User-fees:
- Private sector constructs the project and then is given the right to change a toll fee (e.g. public road); 🗸🗸
- The toll covers costs of construction, maintenance, operation. 🗸🗸
- The above options can be combined: E.g. hospital (cost of building is an annual payment and a user fee is also charged). 🗸🗸
Corridors
- A track of land that forms a passageway allowing access from one area to another and particular advantages to mining, manufacturing and other businesses. 🗸🗸
Two Types:
- Domestic Corridor: e.g. Lubombo, West Coast, Fish River. 🗸🗸
- Corridors beyond the South African Borders (SADC) e.g. Maputo Development Corridor Mozambique. 🗸🗸
- Reasons in support of South Africa’s regional integration in Southern Africa: have political and stable neighbours have important export markets and a future source of water and energy supplies integration may be a precondition for support from foreign investors, donors and multilateral institutions. 🗸🗸
- A robust regional transport system and a solid infrastructure base hold the key to attracting investment into the SADC region – improving competitiveness and promoting trade. 🗸🗸
Advantages from Corridor development:
- Greater levels of economic efficiency and productivity compact urban form corridor urban form. 🗸🗸
- Corridor developments will often occur due to private investment. 🗸🗸
- Intergration of land use and transport planning will lead to generally efficient integration. 🗸🗸
- Efficient urbanisation leads to efficient use of land and promotion of an efficient transport system. 🗸🗸
INDUSTRIAL DEVELOPMENT ZONES (IDZ’s)
- Geographically designed, purpose-built industrial sites providing services tailored for export- orientated industries. 🗸🗸
- Physically enclosed and linked to an international port or airport. 🗸🗸
- Specifically designed to attract new investment in export-driven industries. 🗸🗸
- Falls outside domestic customs zones and able to import items free of customs and trade restrictions, add value and then export their goods. 🗸🗸
- Development and management done by private sector. 🗸🗸
- Government IDZ policy designed to boost exports and jobs. 🗸🗸
- IDZ’s aim to encourage economic growth –attract foreign investment in industrial development – facilitate international competitiveness regarding manufacturing. 🗸🗸
[Max 26]
ADDITIONAL PART FINANCIAL INCENTIVES
Small and Medium Enterprise Development Programme (SMEDP)
• This incentive has provided a tax-free cash grant for investment in industries in
- South Africa. 🗸🗸
- E.g. manufacturing, agricultural, processing, aquaculture and tourism. 🗸🗸
Critical Infrastructure Fund Programme (CIF)
- A tax-free cash grant incentive for projects has improved critical infrastructure in South Africa. 🗸🗸
- E.g. for installation, construction of infrastructure, payment of employees, materials directly consumed during installation. 🗸🗸
Duty Free Incentives (for businesses operating in the IDZ’s)
- This has encouraged export-orientated manufacturing to increase their competitiveness 🗸🗸
- And helped to promote foreign and local direct investment. 🗸🗸
Foreign Investment Grant (FIG)
- This has assisted foreign investors to invest in new manufacturing businesses in SA. 🗸🗸
- Benefited in terms of the cost of relocating new machinery and equipment from abroad. 🗸🗸
Strategic Investment Projects (SIP)
- This has attracted investment from local and foreign entrepreneurs in manufacturing, computer, research and engineering sectors. 🗸🗸
Skills Support Programme (SIP)
- This cash grant for skills development has encouraged greater investment 🗸🗸
- In training in general and stimulated the development of new advanced skills. 🗸🗸
Black Businesses Supplier Development Programme (BBSDP)
- This 80 % cash grant has provided black-owned enterprises with access to 🗸🗸
- Training which has improved management of their enterprises. 🗸🗸
Special Economic Zones (SEZ)
- It is an extention to the current financial incetives to further promoted regional development. 🗸🗸
- The major incentive is a tax reduction of 15 % for businesses settling in this area. 🗸🗸
- This does not mean that existing businesses in the IDZ can relocate to take advantage of this incentive. 🗸🗸
- If a current business in the IDZ wants to expand they are allowed. 🗸🗸
[Max 10]
CONCLUSION
From the above discussion it is clear that different initiatives form part of South Africa’s Regional Industrial Development Programme.
[Max 2]