The A-Z of IDZs
Industrial Development Zones (IDZ) are designed to encourage international competitiveness in South Africa's manufacturing sector. Experts say IDZs will be "islands of free zone efficiency in a sea of red tape" - but what exactly has got the industry so excited?
Industrial Development Zones (IDZs) are considered amongst the most dynamic and effective tools South Africa has to attract foreign investment.
IDZs are in essence an adaptation of the export processing zone (EPZ) concept.
EPZs are industry sectors or geographical areas that fall under a different set of development policies designed to encourage export-orientated value-adding industries.
There are more than 600 EPZs spread around the world.
EPZs are located where there is appropriate infrastructure and policies. They are located wherever the movement of goods can be most easily ensured, usually close to ports or airports. Most of South
Africa's existing or planned IDZs are near ports and airports to facilitate trade and reverse inefficient manufacturing environments.
In IDZs production is segregated in different stages. Each stage can be carried out by a different enterprise in a different country to benefit from the comparative advantages offered, and to keep costs to a minimum. Industry experts call this “production sharing”.
The key is the zones' efficiency in their freedom to access the global market through global production and added value inside their territories.
Through the zones, countries offer packages of incentives to compensate investors for the high costs of doing business in underdeveloped locations.
An IDZ contains a controlled Customs Secured Area (CSA). A CSA is exempt from duties, VAT and import duty on machinery and assets.
Each zone is designed to:
- Provide a location for the establishment of
strategic investments.
- Promote and develop links between domestic and zone-based industries to optimise use of existing infrastructure, generate employment and create technology transfers.
- Enable exploitation of resource-intensive industries.
Each IDZ offers:
- Direct links to an international port or airport.
- World-class infrastructure, specially designed to attract tenants.
- Suitability for export-oriented production.
- Dedicated customs support services to expedite excise inspection and clearing.
- Duty-free importation of production-related raw materials and inputs.
- A zero rate of VAT on supplies procured from South African sources.
- Import status for finished goods which are sold into South Africa.
- Government incentive schemes.
- Reduced taxation and exemption for some activities/products.
- Access to the latest information technology for global
communications.
Sources: Adapted from an article written by Mark Lentin, IDZ specialist at Absa Group and published in the Business Day and the Department of Trade and Industry.
