Incentive packages crucial to foster global competitiveness

Investment incentive packages need to be developed specifically for the Eastern Cape if it is to be globally competitive, says Les Holbrook, executive director of the Border Kei Chamber of Business. According to Eastern Cape economist Derek Zimmerman, the provincial economy grew by 3.15% in 2010 – below the national average of 3.48%. In Port Elizabeth and surrounding towns in the Nelson Mandela Bay Metro (NMB), there has been jobless growth over the first decade of the new millennium. Manufacturing output has dropped by 10% over the past decade, with the only real boost being in the construction sector thanks to the building of the Coega IDZ, the port of Ngqura and the Nelson Mandela Bay stadium. According to the Stats SA Labour Force survey for the second quarter of 2011, 16 000 jobs were lost in the Eastern Cape between the first and second quarters of this year. With factories continuing to close across the province, institutions such as the Border Kei Chamber and local government are looking at ways of attracting foreign and local investment. One of the main reasons that Coega – and the East London Industrial Development Zone to a lesser extent – have failed to deliver the promised jobs and economic boost is that South Africa is offering no meaningful incentives to foreign investors. Investment zones around the world court companies with tax holidays, cheap (or free) land, training support and often more relaxed labour laws within the zones. Neither the East London nor Coega IDZ is able to offer these because they are under the control of national government, and the South African Revenue Service has refused allow what it sees as a “dilution” of its tax base. However, earlier this year the provincial government announced the establishment of a R2-billion Eastern Cape Industrial Jobs Stimulus Programme (ECIJSP) aimed at creating jobs through incentives, and encouraging the diversification of the provincial economy. Eastern Cape finance MEC Phumulo Masualle said in his budget speech that the target was to create a minimum of 30 000 new jobs in the next three years. The programme targets companies in green industries, agro-processing and other non-automotive sectors indentified in the Provincial Industrial Development Strategy (PIDS). Little has been heard of the programme since its launch in March this year.