Since their inception in 2014, government has spent about R25 billion on SEZs; yet, only four of the 12 designated zones — Coega, East London, Dube TradePort and the Tshwane Automotive SEZ — have attracted meaningful investment. In total, just R31 billion has been invested and 27,000 jobs created. This is a poor return, given South Africa’s urgent need for faster growth and much more employment.

We need to try something new and bold.

The Centre for Development and Enterprise (CDE) proposes a radical shift: an experimental zone at Coega in which some regulations, particularly in the labour market, are modified to stimulate the growth of export-orientated firms that can compete in labour-intensive manufacturing sectors.

This approach aligns with that of some of the most effective SEZs in the world, some of which have transformed the global economy.

One of the most striking examples comes from China. In the late 1970s and early 1980s, the Chinese government, still firmly committed to a centrally planned economy, introduced SEZs that ran counter to some of the core policy commitments of the Chinese Communist Party, particularly in relation to foreign investment and profit-making. The approach was highly pragmatic: rather than overhauling the entire system, the government tested reforms in specific locations like Shenzhen, observed the results, and expanded what worked. SEZs became a vital tool for economic liberalisation without requiring immediate, system-wide political change. That would follow later, if and when the zones delivered, which they did.

South Africa should adopt a similar approach: experiment with reforms in one or two zones to test what works before rolling out changes nationally.

SEZs offer a chance to try different approaches to economic policy because they are, by definition, places where different rules apply.

The most successful SEZs in other countries focus on labour-intensive, export-orientated manufacturing. They attract foreign capital, skills and expertise — managerial, operational and entrepreneurial.

These are exactly the kinds of capabilities that South Africa lacks. But our SEZs are failing because of rigid labour rules, bureaucratic red tape, and an overly centralised model of ownership and governance. The state has tried to do too much and done most of it badly.

The result is that zones are not really “special” in any meaningful sense, and they don’t attract the scale or quality of investment needed.

CDE’s proposal is simple and pragmatic: create a genuinely ‘special’ zone at Coega, where economic activity is governed by a different set of rules. This pilot project would act as a laboratory for the rest of the country.

In this zone, all goods must be produced for export, and all firms must be engaged in new activities — preventing companies from simply relocating from elsewhere in South Africa to take advantage of favourable rules. Zone-based firms would be exempt from sectoral bargaining, so wages and working conditions should be negotiated at factory level, allowing for more flexibility and responsiveness to market conditions, particularly for smaller firms. Compliance with the national minimum wage and health and safety laws would still be required.

Imports to zone-based firms would be duty-free, eliminating the cumbersome rebate process and making South African exports more competitive. The zone should be open to skilled foreign managers and entrepreneurs, who bring the know-how and networks needed to access global markets, as much of the expertise required to build globally competitive firms in these industries is not available locally.

Finally, Coega SEZ should be operated by a private firm or entrepreneur, with a clear mandate to deliver results. Government can and should play an oversight role, but it should not be in the business of running industrial parks.

This is not a call for unsafe sweatshops. Nor are we advocating for wholesale reform of the labour laws. But if South Africa wants to test whether labour-intensive manufacturing is still possible, Coega is the place to start. The government of national unity says it wants faster economic growth. Here is a low-risk experiment that could help deliver just that.

To revitalise the national SEZ programme as a whole, CDE proposes several further reforms. The SEZ advisory board must be reconstituted to include mostly independent experts and entrepreneurs, with some government officials. We should open the door to a variety of privately run SEZs on public and private land, with clear incentives to attract export-orientated investments. Approval criteria should be simplified and focused solely on the zone’s potential to increase investment and employment.

SEZ operators should be allowed to generate their own renewable energy, source water independently, and contract with private logistics providers. The goal is simple: create functioning zones where investors can focus on production, not bureaucratic delays and service delivery failures.

Inside government, there is growing dissatisfaction with the results of the SEZ programme. Predictably, some are calling for more centralised control. But that is the wrong answer to a real problem. What is needed is not more government, but better government and a much greater role for the private sector.

South Africa’s greatest challenge is developing commercially sustainable employment for millions of unskilled, inexperienced people desperate for a chance. An experimental SEZ at Coega would be a kind of laboratory — a real-world test of what is possible. If it works, the lessons learned could be applied across the country. If it doesn’t, we will at least know why. Either way, we will be better off than we are today.

Ann Bernstein is executive director of the Centre for Development and Enterprise (CDE). This article is based on CDE’s new report, “ACTION NINE: Use the private sector to turbocharge the SEZ programme,” part of the AGENDA 2024 series.

This article was published on News24