Special economic zones as an instrument to stimulate export production and economic growth within South Africa

Abstract

The opening up of export markets and the consequent shift towards export‐oriented economic growth, in contrast to the previous focus on import substitution and protectionist policies, raise the question of the most appropriate strategy to be followed to attain this objective. In view of the protracted and extensive protection of local industry in the past. It could be expected that the manufacturing sector will not immediately be able to compete in international markets. This premise therefore excludes the introduction of an economy‐wide reduction in the level of protection in an effort to increase economic efficiency in general to enable South Africa to compete in foreign markets. This article then explores a second‐best option, namely the introduction of special economic zones (SEZs) as a mechanism whereby demarcated areas or individual firms are exempted from customs duties, import taxes and controls without exposing the entire protected domestic economy to the possible disruption of free international trade. The article specifically elaborates on what type of SEZs are the most appropriate for South Africa's circumstances, comparing the advantages and disadvantages of export processing zones (EPZs) with export processing units (EPUs).

Notes

Bureau for Market Research, Unisa, Pretoria.

Centre for Policy and Strategy Analysis, Development Bank of Southern Africa.