Readiness of ELIDZ to derive new East London

Readiness of ELIDZ to derive new East London IDZ impetus from SEZ policy regime Main Title: Presentation Sub title to: Parliamentary Select Committee on Trade and International Relations By: Joe Bloggs 23 2010 Kondlo, CEO: ELIDZ By: March Simphiwe 23 May 2012

Presentation Outline PROJECT PROGRESS UPDATE: ELIDZ Project implementation Progress Update and Key Milestones; FUNDING OVERVIEW: ELIDZ Project Funding Update; CONTEXT: Insights gained within IDZ Programme implementation to date; EXPECTATIONS: Positives & potentials anticipated from emergent SEZ Policy Regime; READINESS: Highlight of critical matters of projects readiness/policy enablement that require due consideration and resourcing.

East London IDZ Project Progress Update Main Title: Sub title By: Joe Bloggs 23 March 2010

ELIDZ Mandate The ELIDZ seeks to respond to local/regional/provincial economic development needs by: • Leveraging the economic value of existing -- and future planned -- local economic enabling infrastructures • Nurturing existing industrial strengths and skills potentials, through facilitated and supported industrial value chain development (local beneficiation); • Facilitating public/private investment into strategic industrial upgrading, via acquisition of globally competitive process and technology enhancements; • Initiating investigation of new industrial value chains within emergent sectors (where SA has inherent potential to develop a level of country competitiveness).

Project Overview and Vision ELIDZ VISION : World class Operator of a prestigious industrial complex where highly competitive organisations thrive on streamlined business benefits and stimulate sustainable regional economic growth. MISSION : To provide investor solutions and to attract and develop strategic industries that strengthen South Africa’s global competitiveness through the development and operation of a thriving, specialized industrial complex.

ELIDZ track record • Return on investment : Evident return on investment on government’s financial injection into the ELIDZ – Total infrastructure spend sinception is R 1. 6 billion and total investment attracted sinception – R 3. 7 billion. • Growing investor confidence : 30 investors approved by the board since 2005 with a total investment value of R 3. 7 billion. • Activity on the ground : 21 operational investors to date with a total of 1569 manufacturing and supporting services active jobs. • Front runner IDZ status : First operational IDZ in South Africa, first IDZ to have a CCA Enterprise pilot status.

Inward Investment and Employment stimulus Investment by sector 4000 35 3500 Pledged Investment Value (as at 31 March 2012) 30 25 20 2500 15 2000 10 3720 3000 1500 5 1030 1000 720 676 473 2 /2 01 1 /2 01 0 /2 01 /9 08 20 /8 07 11 20 10 20 09 Proposed Investment Value 20 06 /7 0 20 Agro processing Automotive Energy General Manufacturing ICT, Electronics & BPO Mare-culture and Aquaculture 20 /2 20 11 500 826 2 01 1 /1 10 20 0 /1 09 4 2 0 20 08 /9 0 20 07 20 /7 06 20 0 /8 0 0

East London IDZ Funding Overview Main Title: Sub title By: Joe Bloggs 23 March 2010

Funding overview – grant allocation per source

Funding overview – budget expenditure trends • .

Funding overview – own revenue trends 45 000 Own Revenue YE 2006/12 40 000 35 000 30 000 25 000 millions 20 000 15 000 10 000 5 000 2 11 /1 1 20 10 /1 0 20 09 /1 9 20 08 /0 8 20 07 /0 7 20 06 /0 20 05 /0 6 5 20 04 /0 20 20 03 /0 4 -

East London IDZ Operator Insight Main Title: Sub title By: Joe Bloggs 23 March 2010

Context: IDZ Programme Challenges • IDZ Programme was slow to gain traction with Public and Private stakeholders due to adverse perceptions over the robustness of its foundations (relative to international programmes operating with strong / clear government endorsement and support); • IDZ concept’s value proposition envisages complex implementation inter-activity across government spheres, but: • Precise roles and responsibilities of public organs not thoroughly conceptualised, properly canvassed or fully programmed (ad hoc); • No single duly empowered ‘lead architect’ in place to negotiate, procure and drive inter-governmental action (Executive Authority vacuum with multiple mandates/lines of institutional reporting and accountability); • Inadequate design and/or delivery of effective and legitimate enabling policy instruments to deliver real incentives plus assure capacitation of all government actors to deliver on a broad mandate.

Context: IDZ Programme Challenges • Strategic deployment of IDZs as country-level instruments of economic development hampered by a lack of a coherent and forcefully decisive strategic industrialisation plan (attuned to the IDZ concept/environment); • Weak central government-led programme-level research and knowledge leadership into strategic and emergent sector opportunities, compounded by comparable R&D weakness in individual IDZ Operator start-up operations; • Result: Individual IDZs left to formulate own insights and positions on which value chains (and which portions of value chains) to pursue in ‘sporadic’ investment marketing and promotional efforts; • Result: Potential investment opportunities often undermined by missing enabler elements (eg. parallel provision of adequate sector skills base, viable logistics solutions and reliable sector support mechanisms to assure delivery of production feedstock etc. )

East London IDZ Expectations from new SEZ policy Regime Main Title: Sub title By: Joe Bloggs 23 March 2010

Expectations: Enablement/resourcing concerns Careful balance is needed between desired outcomes/impacts versus applied programme support and value proposition enablement National Govt. Focus / Competency CORE PROGRAMME VISION (AND ZONES PROJECTS IMPACT) e&d se r y i c s i mem snt PDoel tgcroam amcet Poruo im e p l b e&na Prov. Govt. Focus /Competency d es & e sir om e D utc cts o pa im Po Pr lic en ogr y & ab am le m m e en t Complex long-term programme enablement needs (for Zones and for support of IDZ/SEZ Enterprises) are diffused throughout the spheres of Government; PDoel s i Poruot ciyre&d g einmap croamem balect se& ms e nt Metro Focus / Competency

Expectations: Attuning Performance & Impact SEZ Value Driver Value Element Illustrative Performance Indicator CO-ORDINATED ENABLEMENT § % infrastructure/services delivery; Timely release/packaging of land areas; Port, Strategic road, focusing/nurturing rail and communications of multifriendly destination: Programmelocation strategic direction, Optimised and Investment facilitation and Zones Metro / Provincial SEZ Value Programme Offering Investment Size of prospective investment pipeline; § Efficient authorisations/approvals; efficiency stakeholder levels expectations; &cost competitiveness; Supportive policies with deployment and enablement, infrastructure/services settlement solutions: Developers & Government Partners Champion (incl. and. Govt Rate ofaccess, investment decision conversion; § Market oriented public policies/services; Trade Effective and efficient instruments, orchestration support; of adequate planning, resourcing guaranteed via appropriate platform for inward attraction § Localised Financing, Regulatory; Competitiveness of value offerings; investment incentives; Skills joint Government and inward productivity collaborations; policy/support; Operators shareholders Ministries Regulatoryand active support of locus, visibility and stature of Number/Rate ofsocial Job solutions; creation; § Desirable local environment; Attractive Policy enhancement Financing to dismantle country of strategic transport & manufacturing logistics; trade; & SOE/agencies) Authority developmental initiatives SEZs as a unified, collective § Acquisition ofand competitive technology Strategic sector development technical& Appropriate level non-competitiveness market competitive factors; services industries labour/other resourcing State initiative Value Element SEZ Champion & Programme Authority SEZ Value Driver § rate of programme industrial upgrading; assistance and support socio-economic Global incentives ambassadorship. offerings LEVERAGED SEZ CO-ORDINATION, ENABLEMENT AND IMPACT Value Element READINESS SEZ Value Driver Local / Provincial Govt POSITIVE INVESTMENT CLIMATE & CUSTOMISED INCENTIVE OFFERINGS Shareholders SEZ Value Driver Value Element SEZ Market Offering Value Partners SEZ Value Driver INVESTMENT FACILITATION FACILITIES, BENEFITS AND OFFERINGS SEZ Zones Developers & Operators WORLD CLASS INDUSTRIAL LOCATION AND INVESTMENT DESTINATION Value Element SUSTAINED SEZ PERFORMANCE

Expectations: Potential Performance Landscape Massive job creation Technological Advancement Skills Dev. Knowledge economy Green industries De-Industrialisation job retention / recession rapid response Integrated Development Planning Economy diversification PATH H T W O R NEW G TION” A S I L A I R ST “RE-INDU EXPORT-LED INDUSTRIALISATION: SA Exporter industry development and competitiveness Strategic Sector Competitiveness Export volumes / Trade Balance Foreign Direct Investment IDZ viability / rate of tenancy PROVINCIAL GROWTH and LOCAL ECONOMIC DEVELOPMENT Rural Development Secondary City / Small Town economic stimulus Industrial node resuscitation Socio-economic transformation

East London IDZ SEZ Readiness Main Title: Sub title By: Joe Bloggs 23 March 2010

SEZ Readiness: Practical issues and concerns • Clear mandating and full endorsement of broadened “inter-governmental vision” for SEZs is vital, supported by solid implementation and resourcing accords. These accords need to be suitably flexible and yet fully “do-able” (mandate-compatible) for all participant public entities/actors; • Full clarification still awaited of key institutional issues pertinent to the: • Definition of the Categories of SEZs to be accommodated/supported (with full determinations on matters such as their relative strategic merits, applicable establishment/designation processes/hurdles, the optimal levels (and forms) of public funding plus the key value proposition elements to be initiated/underpinned by government per SEZ category); • Protocols and procedures attendant to national/provincial executive oversight of the establishment/strategic deployment/funding of all Zones types (ideally encompassing streamlined accountability measures/reporting practices that are fully practicable and business-friendly for Zone Operators and Treasury authorities);

SEZ Readiness : Practical issues and concerns • Concerns have been expressed that a dilution of sound Policy intents in what appears to be a weaker draft Bill will provide insufficient legislative force and assurance of the necessary ‘co-opting’ of required participation levels for accomplishing the full policy aspirations; • Legislation would be stronger with the formal recognition and inclusion of a more thoroughly conceptualised ‘SEZ Programme’ to operate as a unique and specialised, inter-governmental initiative; • More formal linkages between SEZ activity and national level planning structures and processes (eg. NPC, EDD) would assist, and are needed to align Zones deployment in the national strategic interest; • Recognition of the provincial economic portfolio as Zones’ Executive Authority has been recommended for simplified monitoring, evaluation and reporting (but this is not yet been expressly or adequately legislated);

SEZ Readiness : Practical issues and concerns • Questions persist, pending full clarification of policy framework and business models to be applicable to ‘single’ / ‘multi-type’ future Zones: – Continuing applicability of spatial limitations for some/all future Zone categories – Freedom of Zones to pursue/access/combine a mix of core and alternative sources of funding for project development and/or Zone operations – Long-term level of State funding commitment to assure completion of all stages of Zones delivery project lifecycle (including Zone commercialisation phase); – State intentions around provision of new packages of enhanced incentive offerings (as a means towards investment attraction alongside -- or in place of? -current Zones’ incentivisation practices on property/services discount offerings. – Principles informing public sector sentiment/obligations concerning progress towards revenue and financial self-sustainability (by Operators) versus the instrumentality and long-term developmental impact (of Zones)?

SEZ Readiness : Practical issues and concerns • Mechanisms to preserve/assure sufficient policy and operational flexibility for IDZ/Zone Operators to respond to national economic development aspirations (NGP, IPAP outcomes), • Structuring and capacity of SEZ Programme and centralised Fund to secure and sustain high-impact mega-projects • Effectiveness of Government action in eliminating red tape and related hidden costs of doing business, as part of the emergent SA Zones’ value proposition; • Timing and roll-out programme of future Zones implementation projects in a manner that utilises available resources best and that recognises and leverages the investments-to-date in Zone projects by IDZ-active provinces.

SEZ Readiness : Practical issues and concerns Persuasive ‘lead architect’ still needed to drive a definitive and well-orchestrated programme response by government to: – Resolve outstanding policy and State co-ordination issues still hindering optimal local and provincial action on the pursuit of NGP and IPAP intents; – Champion a mechanism enabling the rapid establishment of concrete agency or other similar institutional co-operative mechanisms (as necessary for optimal provincial engagement with, and access to, financing programmes, incentives etc); – Map out a programme of inter-governmental action that expedites the resolution of matters related to new and emergent sector development potentials (eg Electric Vehicles (EV), renewable energy (RE) and other green economy sectors); – Promote dialogue and information exchange that permit SA developmental organs to fast-track the strategic adaptation of State developmental programmes/activities, in line with the dynamics of both emergent market opportunities and challenges.

ELIDZ Readiness to embrace SEZ programming • East London IDZ is well advanced in preparations to engage with and derive value from the new SA Special Economic Zones initiative. The ELIDZ has: – Contemplated IDZ multi-phase expansions within its 20 -year master-planning and business development model that is co-dependent on linkages to industrialisation potentials situated beyond the currently designated IDZ’s land footprint; – Assessed Provincial industrial policy to distil a clear picture of SEZ-related economic opportunities (potential target sector opportunities, extra-IDZ spatial development node priorities and related infrastructure/logistics capabilities/requirements); – Pro-actively spearheaded provincial interests in the delivery of a master-plan and business planning for establishment of a pilot Science & Technology Park (STP); – Championed the activation of the IDZ programme Customs Controlled Area (CCA) facilities and attendant business processes in conjunction with dti/SARS; – Originated negotiated localised investor incentive offerings in conjunction with the Buffalo City Metropolitan Municipality (to supplement the currently limited IDZ Programme value proposition elements).

Thank you Simphiwe Kondlo Chief Executive Officer 043 702 8200 simphiwe@elidz. co. za Business Streamlined