A bridge too far? The arms deal, the Coega IDZ, and economic development in the Eastern Cape

Abstract

Offsets or industrial participation have become an increasingly important part of arms procurement, with the promise of economic benefits often being an important justification for spending large amounts of public money. However, the limited but growing research on the subject casts doubt on the net value of defence offsets to national economies. An important aspect af any offset agreement is its impact at the regional and local levels. This paper contributes to the continuing debate on the topic, by undertaking a case study of the South African experience, focusing on the Coega Industrial Development Zone, which is situated on the coast some 22 kilometres north-east of Port Elizabeth. The endurance of the Coega IDZ (Industrial Development Zone) project in the face of considerable national criticism from business, other provinces, and civil society, can be explained in part by its identification as the flagship of the NIP (National Industrial Participation) programme, and its reciprocal role in helping the private and public justification of the Strategic Defence Programme (SDP). The study finds that industrial participation schemes do attract and focus investment, but that they also deform efforts at more integrated development at sub-national levels, and further fragment the terrain for industrial policy conceptualisation. It suggests that the offsets targeted for the Eastern Cape do relatively little to address backlogs in development in the region.