Special Economic Zones among the paucity of realistic interventions

The Musina-Makhado SEZ is well-positioned to play a regional integration role in SADC and to take up opportunities that are presented by the AfCFTA.

Artist impression of the MMSEZ. Image supplied by Limpopo Economic Development Agency (LEDA)

Since the beginning of 2020, humanity was thrown into a tinderbox of tension characterised by anxiety, fear, frustration, agony, pain, anger and hopelessness. Status and class are unable to provide a shield to protect the elite and privileged and the working class and the downtrodden masses are as hard-pressed as ever.

The game of numbers and statistics, globally and nationally, has lost effect as daily shocks have become an integral feature of the new normal. The invisible enemy has struck again indiscriminately across the globe, affecting all nationalities, races, gender and classes. The fear of an imminent apocalypse as a consequence of climate change and natural disasters has been superseded by the catastrophe of a novel pandemic.

This is a pandemic that has sent the globe to repairs as almost all major economic activities were grinded to a halt. The demand for the most sought after commodities and precious metals in the world such as oil, diamonds, gold, platinum, etc. has been replaced by personal protective equipment’s (PPEs) and ventilators. Production lines in factories have been retrofitted to produce these new precious commodities which remain high in demand across the globe.

Paradigm shift

Lehlogonolo Masoga, Chief Executive Officer, Musina-Makhado SEZ

We have observed, for the first time in decades, airplanes grounded at airports across the globe, boats and oil tankers stranded outside harbours, the finest hotels deserted, and yet hospitals are overflowing and body bags are used at an alarming rate.

The historical year 2020 will go down in annals of history as a year wherein different religions across the globe could not observe Holy Festivals in the traditional way over centuries. No philosopher, soothsayer nor magician could foretell that after the Spanish Flu of 1918, mankind would be confronted by yet another pandemic nearly a century later during the era of modern society and the Fourth Industrial Revolution.

Humanity has entered a new paradigm, a world of pre and post COVID-19 dichotomy has come of age. Life as we know it has drastically changed and a darkest hour before dawn has befallen the human race. The age of the new normal has extended morning greetings quicker than expected. It is now common cause that almost all facets of human life have been affected negatively by this invisible monster. Economic engines across global metropolises have taken an involuntary break and social distance separates families and prevents general human contact.

A need to re-interpret the world

One of the most quoted phrases by Karl Marx from his seminal work Thesis Eleven was the magisterial catchphrase “philosophers have hitherto only interpreted the world in various ways, the point is to change it”. Interpreted differently by various scholars and philosophers, these historic words are best described by Cornel West in the book The Ethical Dimension of Marx Thought who argued that Marx’s use of the phrase was an attempt to locate philosophical thinking about social problems “within history rather than outside it”. Perhaps the time has come for modern philosophers to re-interpret the world concomitant with the inevitable process of changing it.

In the year 2020, we have seen military and nuclear power taking the back bench with “white coat brigades” from different nations becoming an army of international solidarity to save lives. We have seen the East and the West extending a caring hand of friendship to each other and health workers from the Southern Hemisphere caring for the sick and the weak in the North metropoles.

Global economic meltdown

Some economic commentators have asserted that the impact of COVID-19 on the world economy may be worse than the 1929 Great Depression and the 2009 Global Financial Crisis. According to Golding and Muggah (2020), it is estimated that the COVID-19 crisis will lead to losses exceeding $9-trillion or 10% of global GDP.

The World Trade Organisation predicts that global trade will fall between 13% and 32% in 2020 (WTO, 2020). On the other hand, the International Labour Organization is of the view that over 200 million full-time workers will lose their jobs within a period of three months (ILO,2020).

As for the African continent, UNECA estimates that the continent’s growth is expected to drop from 3.2% to 1.8%. They also estimate a 48% decline in employment. The time for planning for a repackaged modern “Marshal Plan” for the new economic recovery plan is now during this period of unfolding uncertainty. Post the 2009 global economic meltdown, the South African economy contracted by 1.8%. Currently (May 2020), the South African Reserve Bank is projecting a potential real contraction of 6,1% of GDP during 2020. In view of these foregoing statistics, the worst is yet to come, so it seems.

The pandemic disrupted many industries, some beyond repair, yet creating a new window of opportunity for innovation and alternative strategies for economic growth and development.

Nobody knows when, but the inevitable reality is that in the months to come, COVID-19 will become a common feature of our lives. Subsequently, in a few years, we will start to talk about it in the past tense. Life has to return to normal, although the new normal of social distancing, bereft of warm and firm African handshakes, casual hugs and kisses. Countries needs to recharge and embark on a new trajectory of normalizing life and rebuilding their economies.

The pandemic disrupted many industries, some beyond repair, yet creating a new window of opportunity for innovation and alternative strategies for economic growth and development. Certainly, a country such as Saudi Arabia will undoubtedly begin to think about economic development beyond oil. Similarly, tourism based and hospitality driven economies will be forced to think outside the box.

Countries endowed with natural resources such as South Africa should consider strongly accelerating the pace of industrialization through the production of value added products for export. With the benefits of mineral resources, agricultural sector, marine economy, tourism sector, financial services and industrial hubs, the economy must be propelled on a growth pedestal to compensate for the losses suffered during the lockdown season.

Industrial activity through fiscal and regulatory incentives

Amongst a plethora of potential economic recovery strategies and a paucity of realistic interventions is the phenomenon of Special Economic Zones (SEZs). Special Economic Zones are geographically delimited areas wherein governments facilitate industrial activity through fiscal and regulatory incentives and infrastructure support.

SEZs can make important contributions to growth and development by attracting investment, creating jobs and boosting exports. Special Economic Zones can build forward and backward linkages within the broader economy and support global value chain (GVC) participation, industrial upgrading and diversification (UNCTAD, 2019). Globally, there is a booming wave of SEZs with over 5 400 operational in 147 countries and over 500 in the pipeline (UNCTAD), 2019).

According to Bernard Hoekman, Director International Trade Department World Bank (2011), China’s astonishing economic growth can be attributed to the use of Special Economic Zones. One of the striking examples is the transformation of Shenzhen, a former small fishing village in the 1970s, into today’s city of over 9 million people, which is an illustration of the effectiveness of the SEZ model within the Chinese context.

Amongst a plethora of potential economic recovery strategies and a paucity of realistic interventions is the phenomenon of Special Economic Zones (SEZs).

Hoekman asserts further that SEZs offer a potentially valuable tool to overcome some of the existing constraints to attracting investment and growing exports for many African countries that continue to struggle to compete in industrial sectors and to integrate into the global value chains that generate goods and services for global markets.

Accelerating the pace of industrialisation

The South African Industrial Policy Action Plan (IPAP) recognises the SEZ programme as one of the critical tools for accelerating industrialisation. As a result, eight Special Economic Zones were designated in six provinces as follows: Saldanha Bay (Western Cape), Dube Trade Port (KwaZulu-Natal), OR Tambo (Gauteng) Coega (Eastern Cape) East London (Eastern Cape), Richards Bay (KwaZulu-Natal), Musina-Makhado (Limpopo), and Maluti a Phofung (Free State).

By 2019, the number of operational investors in designated SEZs in the country increased from 72 to 85, with a total investment value of over R9-billion. The number of direct jobs created currently stands at 13,561; but this is expected to increase substantially as the new investments come on-stream (DTI, 2019).

Growing industrial capacity has become a priority for the South African government to grow the economy in the face of massive global competition, high unemployment, low investment rates, commodity market in the doldrums and a weak global growth outlook. Industrialisation in this case refers to the overall processes of increasing manufacturing output and expanding the manufacturing sector through targeted interventions across the value chain.

It is evident that in South Africa, out of the nine provinces, the top four, being Gauteng, KwaZulu-Natal, Western Cape and the Eastern Cape enjoy the highest rate of industrial activities while the others, Mpumalanga, Northern Cape, North West, Limpopo and Free State experience relatively low manufacturing capacity (Stats SA). This is in contrast with the latter category’s endowment with various primary resources such as minerals and agricultural produce, which are supposed to be the bedrock upon which industrialisation rests.

Limpopo’s Musina-Makhado Special Economic Zone

Limpopo province has a competitive advantage in mining, agriculture and tourism as the strategic pillars to grow its regional economy. Among its rich mineral deposits are platinum group metals (PGMs), iron ore, chrome, coal, diamonds, antimony, phosphate, copper, black granite, corundum, etc.

The bulk of these resources are extracted and exported to foreign markets as primary resources for further exploitation and beneficiation which deprives the province of an important opportunity to industrialize and develop. This is indeed a lost opportunity to build local industrial capacity, create much needed employment opportunities and grow the SMME sector.

Another lost opportunity has been within the agricultural sector. Limpopo is well endowed with agricultural resources, making it one of the key regions for the production of fruits, nuts, vegetables, cereals and tea. Statistics from the Agricultural Business Chamber South Africa indicate that Limpopo province accounts for approximately 19% of South Africa’s potato, 75% of mangoes, 65% of papayas, 36% of tea, 25% of citrus, 60% of litchis, 60% of avocados and 60% of its tomato production per annum.

This abundance of agricultural products provides a great opportunity for agro-processing and production of value added products for export markets.

The designation of the Musina Makhado Special Economic Zone (MMSEZ) in 2016, heralded a window of opportunity to turn the province’s fortunes around. The MMSEZ is located at the vicinity of the Beit Bridge Border Post, which is the second busiest port of entry in SA and an undisputable gateway to the South African Development Community (SADC) countries.

MMSEZ has the potential to become an inland intermodal terminal directly along the North-South Corridor, directly connected to the country’s major ports by both N1 road and the Johannesburg-Musina railway line for the trans-shipment of sea cargo and manufactured goods to inland destinations and the SADC markets.

Image Credit: China Energy Engineering Group Guangdong Electric Power Design Institute Co., Ltd. Supplied by Limpopo Economic Development Agency (LEDA).

The SADC Industrialisation Strategy (2015 – 2063) emphasises the pursuit of targeted and selected industrial policies to create conditions for higher rates of investment by the public and private sectors to enable crucial sectors to prosper, especially value-adding manufacturing to grow the economies of member states. The Strategy and Roadmap for implementation focuses on three potential growth paths for SADC economies namely, agro-processing, minerals beneficiation and down-stream processing; and enhanced and upgraded participation in regional and global value chains.

The recently signed Africa Continental Free Trade Agreement (AFCFTA), promises to redefine trade relations among African states and beyond. It is envisioned that it will create a single market for goods and services across 55 countries.

The Musina-Makhado SEZ is well-positioned to play a regional integration role in SADC and to take up opportunities that are presented by the AFCFTA.

A vision for a futuristic Smart City

The MMSEZ as an economic development tool aims to promote national economic growth and exports by using support measures in order to attract targeted foreign and domestic investments, research and development (R&D) and technology transfer.

With an anchor of investment pledges of about R150-billion, the Musina-Makhado SEZ will result in the establishment of an energy and metallurgical complex which will include among others the following plants:

Coal Power Plant, Coke Recovery Plant, Ferrochrome Plant, Ferromanganese Plant, Pig Iron Plant, Carbon Steel Plant, Stainless Steel Plant, Lime Plant, Silicon-Manganese Plant, Metal Silicon Plant and Calcium Carbide Plant.

The energy and metallurgical complex will be complemented by the logistics hub, agro-processing centre, light to medium manufacturing industries, SMME Incubation Centre, retail centers, hotels, residential and community facilities.

Image Credit: China Energy Engineering Group Guangdong Electric Power Design Institute Co., Ltd. Supplied by Limpopo Economic Development Agency (LEDA).

All these investment opportunities will lay a solid foundation for the envisioned futuristic Smart City utilizing the internet of things (IoT) anchored on a comprehensive ICT infrastructure for the realisation of a smart economy, smart governance, smart environment, smart mobility, smart living and smart people principles.

According to the UNCTAD, the viability and attractiveness of SEZs to investors is enhanced by their location, synergies with local economic activities, the availability of raw materials, large potential markets, the availability of appropriate factory space and infrastructure (road and rail) and the potential to run vertically integrated operations.

These attributes are the inherent features of what constitute the MMSEZ. The location of this flagship programme has been carefully chosen to meet the basic requirements of a successful SEZ initiative.

Environmental sustainable development

The development of several heavy industries the planned coal power plant to produce about 3 000 MW base-load to energize the metallurgical complex and lower the electricity input costs has generated public concern.

This is a fair and legitimate concern, particularly in the light of South Africa’s commitment to address global warming under the the Paris Agreement. This agreement substantially limits greenhouse gas emissions to levels that would prevent global temperatures from increasing by more than 2 °C (3.6 °F) above the temperature benchmark set before the beginning of the Industrial Revolution.

The MMSEZ SOC respect the Paris Agreement and the country’s commitment to ecological sustainable development and will take all reasonable measures to mitigate environmental concerns such as global warming, pollution, bio-diversity loss, water scarcity and possible threat to food security in developing the MMSEZ. In an effort to limit and reduce the emissions of carbon dioxide and other greenhouse gases, substantial research is being conducted to deploy the best globally recognised carbon capture technology to mitigate the greenhouse gas emissions. Technology enhancement is recognised by the Paris Agreement as a strategic tool to mitigate climate change.

In adopting the Paris Agreement, the Conference of the Parties made a profound statement by –

“…acknowledging that climate change is a common concern of humankind, Parties should, when taking action to address climate change, respect, promote and consider their respective obligations on human rights, the right to health, the rights of indigenous peoples, local communities, migrants, children, persons with disabilities and people in vulnerable situations and the right to development, as well as gender equality, empowerment of women and intergenerational equity.”

These quintessential expressions were an appreciation that climate change and the corresponding efforts to mitigate greenhouse gasses are not taking place in a vacuum. As an integral part of environmental assessment, various specialist studies on climate change and pollutions have been conducted to mitigate potential negative impacts of the development on the environment.

On the vexing matter of water scarcity, efforts are being made to avoid tapping into the already stressed water resources by exploring various innovative engineering options including cross border water transfer schemes. These interventions will go a long way in providing new water sources not only for industrial use but also for the benefit of ordinary citizens, especially in rural areas and townships.


The envisaged job creation opportunities, skills development, technology transfer, SMME empowerment and the socio-economic infrastructure development triggered by the MMSEZ will make a significant impact on the improvement of the quality of lives of many people and contribute to the provincial and national GDP.

Despite the gloom and despondency occasioned on humanity by COVID-19, a glimpse of hope remains visible on the horizon, which must trigger courage and resilience to march forward. In the midst of this unprecedented global lockdown, we must afford ourselves an opportunity to re-imagine the future and wake up from the dream.

For anyone who has been part of the generation that witnessed a day of skies without planes, oceans without boats, empty streets of New York City, Mecca without worshippers, Paris without romance, champagne not flowing in France, Disney without the magic, oxygen being more valuable than power and wealth and a face mask more important than a barrel of oil, should be enough for survivors to prepare to tell a story of the world that was. As the sun rays begin to cast shadows on the last hour, the darkest hour before dawn, we must all wake up from the dream and embrace the new dawn with renewed vigour and determination so as not to repeat the same things and expect different results.

In the fullness of time, the morning after the night before shall be upon us and we dare not be found wanting. The time to concurrently re-interpret the world and change it has come and such a task can not be left to philosophers alone.

Article by Lehlogonolo Masoga, Chief Executive Officer of Musina-Makhado Special Economic Zone.