Executive Summary

 South Africa has strategically employed Special Economic Zones (SEZs) as a key instrument for driving industrial development, attracting foreign direct investment (FDI), and boosting exports. Operating under unique economic regulations and offering targeted incentives, these designated areas aim to create a more competitive investment climate. This report provides a concise overview of the South African SEZ program, tracing its evolution from Industrial Development Zones (IDZs) to the current SEZ framework established by the Special Economic Zones Act (Act 16 of 2014). The analysis evaluates the program’s objectives, performance—using available data on investment and job creation—key challenges, and future potential. While data limitations exist, information from the Department of Trade, Industry and Competition (the dtic) and other sources provides a valuable overview of operational zones. Key findings reveal significant performance variations across SEZs, with some, like Coega, demonstrating substantial success in attracting investment and creating jobs, while others show a less direct correlation between investment and employment. The report concludes by emphasizing the importance of strategic alignment with national industrial policy, effective governance, robust infrastructure, targeted skills development, and strong domestic linkages to maximize the contribution of SEZs to South Africa’s sustainable and inclusive economic growth.

Introduction

Special Economic Zones (SEZs) have become a cornerstone of South Africa’s strategy to stimulate industrial development, attract foreign direct investment (FDI), boost exports, and promote regional economic growth. Operating under distinct economic regulations and offering targeted incentives, these designated areas aim to create a more competitive investment climate than prevailing national norms (Farole, 2011). This globally recognized approach, encompassing various models such as Free Trade Zones and Export Processing Zones, seeks to drive investment into specific sectors, thereby generating employment, fostering skills development, and enhancing export performance.

South Africa’s SEZ program has undergone a significant evolution. Originating with the Industrial Development Zone (IDZ) program in 2000 under the Manufacturing Development Act, the initial focus prioritized export activities near coastal ports to leverage logistical advantages. However, a 2010 review identified critical challenges related to investor engagement, planning, and inter-agency coordination. This prompted key policy reforms, culminating in the enactment of the Special Economic Zones Act (Act 16 of 2014). This landmark legislation broadened the program’s strategic scope, transitioning existing IDZs into the SEZ framework and establishing a robust legal foundation for new zones across the country, including inland locations. This shift reflected a move towards a more holistic and integrated approach, aligning SEZ development more closely with national priorities such as industrial diversification and balanced regional development.

This report provides a comprehensive analysis of the South African SEZ program, evaluating its objectives, performance, challenges, and future potential. Drawing on policy documents from the Department of Trade, Industry and Competition (the dtic), academic research, and available data, it offers a balanced assessment of the program’s contribution to the national economy. While comprehensive, publicly accessible data on all potential SEZs can be limited, information from the dtic and other relevant sources enables a detailed overview of established and operational zones. It is important to acknowledge that the status of proposed or potential zones may change; therefore, consulting the dtic website is recommended for the most current information. The following sections will examine the status of SEZs, analyze their performance indicators, and explore the key challenges and opportunities that lie ahead.

South Africa’s stated focus on inclusive growth and sustainable development presents significant potential economic and social benefits for Africa. The presidency can be strategically leveraged to attract increased Foreign Direct Investment (FDI), expand intra-African and global trade opportunities, address debt vulnerabilities faced by many African nations, and drive crucial infrastructure development. These potential economic gains can contribute directly to poverty reduction, job creation, improved access to essential services like healthcare and education, and enhanced social stability. For instance, actively promoting the African Continental Free Trade Area (AfCFTA) through the G20 could significantly boost intra-African trade, accelerate economic integration, and strengthen Africa’s position in global value chains. This could lead to increased market access for African businesses, stimulating growth and development.

Developments in the Literature

Existing literature on SEZs offers a diverse range of perspectives on their effectiveness and impact. Some studies highlight the positive contributions of SEZs to economic growth, export promotion, and job creation, particularly in developing economies (Aggarwal, 2011; Zeng, 2015). These studies often emphasize the role of targeted incentives, streamlined regulations, and strategic infrastructure development in attracting investment and fostering industrial clusters. Conversely, other research cautions against potential drawbacks, such as the displacement of local communities, environmental degradation, the exploitation of labor, and the risk of creating isolated economic enclaves with limited integration into the broader domestic economy (Warwick, 2016; UNCTAD, 2019). A key consensus emerging from recent research underscores the importance of effective governance structures, strong institutional frameworks, robust monitoring and evaluation mechanisms, and, crucially, strong integration with the broader domestic economy to ensure sustainable and inclusive SEZ development (Farole & Akinci, 2011).

This report aims to provide a comprehensive analysis of the South African SEZ program. The specific objectives guiding this analysis are: to outline the key objectives and rationale underpinning the establishment of SEZs in South Africa;  to describe the current landscape of SEZs in the country, including their geographical distribution, sectoral focus, and key achievements; to analyse the performance of SEZs; and to identify key challenges and opportunities for future SEZ development in South Africa, offering policy recommendations for maximizing their contribution to sustainable and inclusive economic growth.

This report adopts a qualitative research methodology based on desk research and policy analysis. The analysis draws upon a range of sources, including academic articles published in peer-reviewed journals, policy documents released by the South African government, particularly the Department of Trade, Industry and Competition (the dtic), reports and publications from international organizations such as the World Bank, UNCTAD, and the African Development Bank, and relevant industry publications and reports. This approach allows for a comprehensive understanding of the SEZ program within the context of South Africa’s broader economic and development landscape.

 Table 1: Key South African SEZs and Their Focus Sectors

                                                                                                          Source: CRA Global Development, 2025

The Department of Trade, Industry and Competition (the dtic) is currently evaluating three new Special Economic Zone (SEZ) proposals: the Bojanala SEZ in North-West, the Fetakgomo-Tubatse SEZ in Limpopo, and the Vaal SEZ in Gauteng. These proposals represent varying stages of development within the SEZ designation process.

The Bojanala SEZ proposal is currently under formal consideration for designation, the application, resubmitted in the first quarter, is currently under departmental review. Simultaneously, the Investor Zone Project (IZP) is conducting investor due diligence. The application is also scheduled for a technical evaluation by the steering committee. Following these evaluations, the application will be prepared for the Minister’s consideration. Notably, the dtic has provided funding to the Gauteng Provincial Department of Economic Development to establish a Project Management Unit (PMU) specifically for the proposed Vaal SEZ, indicating inter-provincial collaboration and support. The final designation application for the Bojanala SEZ from the North-West province is expected in the third quarter (Q3), with additional support from the National SEZ PMU.

The Fetakgomo-Tubatse SEZ proposal is in the pre-designation phase. The Limpopo province has committed over R450 million to develop bulk infrastructure, and procurement for perimeter fencing and security features is in progress. The formal designation application has been submitted to the dtic and is currently undergoing ministerial review. Following ministerial approval, a mandatory 30-day public consultation period will commence.

A proposal to expand the existing Coega SEZ is also under consideration. This expansion aims to establish a specialized pharmaceutical and vaccine hub within the Coega SEZ. This initiative is also in the pre-designation phase, with a 30-day public consultation process scheduled for publication in Q3. This expansion requires the concurrence of the Minister of Finance before being presented to Cabinet for final designation approval.

The existing distribution of operational SEZs reveals a concentration within major metropolitan areas, including Nelson Mandela Bay, eThekwini, Ekurhuleni, Tshwane, and the City of Cape Town. This pattern likely reflects the advantages offered by established infrastructure, access to skilled labor pools, and proximity to key markets. However, the presence of SEZs in district municipalities such as King Cetshwayo and Thabo Mofutsanyana demonstrates a commitment to promoting regional economic development beyond these major urban centers.

Non-Operational SEZ Interventions

Several SEZs are currently in pre-operational or developmental phases, requiring specific interventions to progress towards full operational status. These interventions primarily focus on securing anchor investments, mobilizing external bulk infrastructure, facilitating township establishment, and raising capital for infrastructure development.

The Namakwa SEZ is focused on securing ownership of land under favorable terms, verifying a pipeline of potential investors, and obtaining a firm commitment from an anchor investor. The project has also appointed professional service providers for bulk infrastructure design and has submitted funding applications. Township establishment processes are currently underway.

The Musina-Makhado SEZ is utilizing the Industrial Zones Programme (IZP) to provide implementation agent services for bulk infrastructure. Efforts are concentrated on securing investment commitments of at least R1 billion, facilitating capital raising for bulk infrastructure, and finalizing township establishment. Professional service providers have been appointed for infrastructure design, and funding applications have been submitted.

The Nkomazi SEZ is undergoing an establishment phase led by MEGA under a Service Level Agreement (SLA) with the Department of Economic Development and Tourism. The dtic has tasked the IZP, located at the IDC, with providing implementation support. Key challenges include finalizing the Right of Way Servitude for the main entrance, which requires detailed engineering designs and negotiations with stakeholders. Interventions are also focused on securing funding from the Department of Transport (SANRAL) for road interchange construction, increasing investment, securing a Water Use License, facilitating infrastructure development, providing advisory governance support, and implementing integrated security infrastructure.

 Table 2: SEZs Performance Highlights

Source: DTIC, 2023

Significant Variation in Performance

Analysis of South Africa’s Special Economic Zone (SEZ) program reveals a diverse performance landscape. A significant variation exists across zones, with Coega SEZ demonstrating exceptional results in both investment value (R11.5 billion) and job creation (10,527), establishing it as a leading example. In contrast, while RBSEZ and MAPSEZ have each attracted investments exceeding R1 billion, their respective job creation figures (147 and 172) are substantially lower. Similarly, SBIDZ, with an investment of R268 million, has generated only 107 jobs. This disparity suggests differing investment strategies, industry focus, and varying levels of operational maturity across the zones.

Investment Does Not Directly Correlate with Job Creation

Critically, a direct correlation between investment and job creation is not consistently observed. While Coega exhibits a strong positive relationship, other zones present contrasting patterns. For instance, TASEZ, despite securing R5.57 billion in investment, has generated fewer jobs (3,334) than ELIDZ, which attracted a slightly lower investment of R5.82 billion. This underscores the importance of considering the nature of investment and the labor intensity of targeted industries. Capital-intensive sectors, such as certain manufacturing processes, may require substantial capital outlay but generate comparatively fewer employment opportunities per unit of investment than labor-intensive sectors.

Overall, the South African SEZ program presents a complex picture. While some zones have achieved positive outcomes in attracting investment and boosting exports, others continue to grapple with significant challenges. Several key factors appear crucial for success. Alignment of SEZ strategies with broader national industrial development policies and regional economic strengths is paramount. Effective governance, characterized by transparency, accountability, and efficient administration, is equally essential. Robust infrastructure, encompassing reliable transport networks, energy supply, and communication technologies, is also a prerequisite for attracting and retaining investment. Furthermore, skills development programs tailored to the specific needs of resident industries are vital for enhancing productivity and competitiveness. Finally, strong linkages between SEZs and the domestic economy, achieved through local sourcing and the development of domestic supply chains, are crucial for maximizing spillover effects and contributing to inclusive economic growth.

Conclusion

In conclusion, SEZs offer significant potential to contribute to South Africa’s economic development by attracting investment, promoting exports, and generating employment. However, realizing this potential requires a concerted and strategic approach. Continuous monitoring, evaluation, and adaptive management of the SEZ program are essential for ensuring its long-term effectiveness and contribution to sustainable and inclusive economic growth. This entails addressing existing challenges related to infrastructure, governance, skills development, and domestic linkages, while simultaneously capitalizing on emerging opportunities in key sectors. A holistic, evidence-based approach is therefore necessary for South Africa to effectively leverage its SEZ program to achieve its industrial development objectives and foster a more prosperous and equitable economy.

References:

Aggarwal, A. (2011). Special economic zones: A review of the literature. Indian Council for Research on International Economic Relations.

Farole, T. (2011). Special economic zones in Africa: Comparing performance and learning from global experience. World Bank Publications.

Farole, T., & Akinci, G. (2011). Special economic zones: Progress, emerging challenges, and future directions. World Bank Publications.

The Special Economic Zones Act (Act 16 of 2014).

UNCTAD. (2019). World investment report 2019: Special economic zones. United Nations Conference on Trade and Development.

UNIDO. (2021). Industrial development report 2021: Industrializing in the digital age. United Nations Industrial Development Organization.

Warwick, N. (2016). Special economic zones: A critical reassessment. Routledge.

World Bank. (2008). Special Economic Zones. Retrieved from 

https://documents1.worldbank.org/curated/en/343901468330977533/pdf/458690WP0Box331s0April200801PUBLIC1.pdf