Trade Zones: Recommendations for South Africa
"South Africa introduced industrial development zones (IDZs) on 1 December 2000 through the Manufacturing Development Act. IDZs assist in the creation of industrial complexes that have strategic economic advantage. The South African government offers investors in IDZs various incentives. In addition to the traditional free zone benefits of customs duties and VAT, most trade zones offer local and national tax relief, appropriately skilled labour, inverted tariffs (ie duty is assessed on the product manufactured in the special trade zones as opposed to levying duties on the imported inputs) and no exchange control. The paper reviews the provisions and benefits provided by South African IDZs, and explores the special trade zones in the EU, the US, Mercosur countries, India and China. It outlines the guidelines provided by the Organisation for Economic Co-operation and Development on different incentives for a country to attract foreign direct investment. In light of South Africa’s struggle to attract the necessary foreign investment in IDZs, despite already offering a number of incentives, the paper concludes with suggestions for further incentives for the government to consider providing to IDZ investors."