SPECIAL ECONOMIC ZONES BILL, 2013 PRESENTATION TO PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY 23 MAY 2013 1
INTRODUCTION • dti delegation • Background • Overview of SEZ Advisory Board and SEZ Framework in Bill • Issues raised during public submissions and response from dti 2
dti DELEGATION Representatives from dti • Mr Tumelo Chipfupa (Deputy Director-General) • Mr Kaya Ngqaka (Chief Director: Infrastructure Investment Support Unit) • Mr Dumisani Sombinge (Director: Legal Services) • Ms Janice Jonathan (Director: SEZ Stakeholder Management) • Mr Jabulani Sithole (Deputy Director: SEZ Monitoring and Evaluation) 3
BACKGROUND • Special Economic Zones Bill, 2013 was gazetted for public comment on 1 March 2013 • The Bill was introduced in Parliament on 5 March 2013 • dti presented the Bill and a background to the Bill before Parliament on 26 April 2013 • The Portfolio Committee on Trade and Industry received written submissions from various stakeholders • Public hearings before the Portfolio Committee took place on 21 and 22 May 2013 • The dti responds to the public comments on the Bill below 4
SEZ ADVISORY BOARD SEZ Advisory Board • 15 person advisory Board to be appointed by Minister [clause 7(2)]: • representatives of government (incl. public entities) [clause 7(2)(a) to (i)] • representatives of organised business, organised labour and civil society with knowledge and experience relevant to SEZs [clause 7(2)(j)] • three independent persons with knowledge, experience and expertise relevant to SEZ • Members may be appointed for 2 consecutive terms of 5 years 5
SEZ FRAMEWORK Applicants for designation [clause 22(1)] • National government • Provincial government • Municipality • Public entity or a municipal entity • PPP • Any of the above jointly 6
SEZ FRAMEWORK Application for designation • Applicant applies to Minister for designation [clause 22(1)] • Applicant must meet stipulated criteria [clause 22(2)] • Minister, on recommendation of Board: • may designate an area as an SEZ • must issue applicant with a licence [clause 22(6)] • Successful applicant becomes the licensee 7
SEZ FRAMEWORK Governance and management of SEZs • Upon designation of an area as an SEZ, the licensee must: • establish SEZ as an entity [clause 24(1)] • appoint an SEZ Board to govern and manage business affairs of SEZ [clause 24(2)] • “ Special Economic Zone Board ” means the board of directors of an individual special economic zone licensee appointed in terms of section 24(2) 8
SEZ FRAMEWORK Functions of SEZ Board • SEZ Board must: • develop and implement strategic plan for SEZ [clause 25] • submit business and financial plan for the SEZ to the Minister for approval [clause 26] • keep full and proper records of its financial affairs [clause 27] • appoint an operator to develop, operate and manage the SEZ following a procurement process [clause 30] 9
SEZ FRAMEWORK Taking over administration of SEZ and suspension or withdrawal of designation • If SEZ fails to comply with prescribed conditions or to perform its functions, Minister may appoint an administrator to take over administration or perform functions of SEZ [clause 28] • Minister may suspend or withdraw designation of area as an SEZ which does not further government’s industrial development objectives [clause 29(1)] • Minister may re-designate area as a SEZ where designation has been withdrawn [clause 29(2)] 10
SEZ FRAMEWORK SEZ operator • SEZ appoints the operator following a fair and transparent procurement process [clause 30] • Operator may only develop, operate and manage an SEZ if issued with SEZ operator permit [clause 31(1)] • Therefore, once appointed by SEZ ito clause 30 to operate SEZ, operator must apply to Minister for operator permit [clause 31(2)] • Operator must meet stipulated criteria [clause 32] 11
SEZ FRAMEWORK Businesses located in SEZ • Any person that intends to conduct business in a SEZ must apply to the Minister to locate the business in the SEZ [clause 37(1)] • When applying to locate in the SEZ the business must: • provide information to indicate that it conducts a business or renders a service prescribed by the Minister [clause 37(2)] • indicate the extent to which the business achieves the purpose of SEZs ito section 4 [clause 37(2)] • Minister may, on recommendation of Board, approve the location of the business in a SEZ [clause 37(3)] 12
SEZ FRAMEWORK Applicant (shareholder) applies to Minister for designation (clause 22) Minister designates and issues licence (clause 22) Licensee establishes SEZ business entity/enterprise/company with SEZ Board (clause 24) Appointment of an operator Minister issues operator permit (clauses 30 & 31) 13
DEFINITIONS (CLAUSE 1) Issues raised • The definition of “port of entry” in terms of the Immigration Act, 2002 (CAIA) Page 4 Line 33 • Does the fact that the Bill not define IDZ in clause 23 mean that IDZs are not part of SEZ framework (CAIA) Page 4 Line 18 - Page 11 Line 13 dti’s response • dti agrees that definition of “port of entry” be amended as agreed to at NEDLAC • IDZs are part of SEZ framework and defined in clause 1 – Definitions 14
SEZ ADVISORY BOARD (CLAUSE 7) Issues raised • Board should not be advisory only but should be empowered to make decisions (ELIDZ) Page 6 Line 4 • Board appears to be executive in nature (CAIA, ELIDZ) Pg 6 Line 4 • Constituency based representation not advisable (CAIA,BUSA) Page 6 Line 16 • Members of Board should consist of more persons from private sector (FMF) Page 6 Line 19 • Board comprises senior members, concern is that Board members will be unable to attend meetings due to their other work commitments (RBIDZ) Page 6 Line 5 15
SEZ ADVISORY BOARD (CLAUSE 7) dti’s response • It is important that the Minister is the final decision maker to ensure that the SEZ legislative framework achieves government’s industrial and economic development objectives • Board is not an executive board • Bill provides for constituency based representation but requires that members from constituencies have knowledge and experience of SEZs [clause 7(2)(j)] Page 6 Line 16 16
SEZ ADVISORY BOARD (CLAUSE 7) dti’s response (contd … ) • Board’s functions are regulatory in nature and spread of representation across both public and private sector: • achieves appropriate balance ito skill set required • promotes intergovernmental co-operation and co-ordination around SEZs • Board must comprise senior members to ensure necessary knowledge, experience and expertise relevant for SEZs • Furthermore, quorum for meetings is 50% plus 1[clause 14(6)] Pg 8 Ln 46; Bill allows for alternate representative [clause 7(7)(a)] Pg 6 Line 37; members can participate via electronic means [clause 14(9)] Page 8 Ln 55 17
PRIVATE SECTOR PARTICIPATION Issues raised • It is proposed that the Bill provide for private sector owned SEZs (FMF & BUSA) dti’s response • dti submits that the Bill provides for private sector participation in SEZs as follows: • private sector can apply for designation as SEZ as part of a PPP arrangement (clause 22) Page 10 Line 12 • operators may be appointed from private sector (clause 31) Page 13 Line 17 • businesses located in SEZs (clause 37) Page 15 Line 34 18
PPP ARRANGEMENTS Issues raised • Treasury Regulations on PPPs prohibit unsolicited bids (BUSA, RBIDZ & CAIA) dti’s response • dti supports Treasury Regulations on PPPs • Regulations comply with the constitutional obligation to ensure fair, equitable, transparent competitive and cost effective procurement system (section 217 of Constitution) 19
RELATIONSHIP BETWEEN LICENSEE AND SEZ BOARD Issues raised • Concern was raised that the Bill confuses an asset (geographic area) and the entity (juristic person) that controls the asset [Clause 24] (RBIDZ) Page 11 Line 25 • It was submitted that it does not make sense why the shareholder of the zone rather than the zone itself is the licensee (RBIDZ) • Duties that normally fall on legal entity fall on shareholder (RBIDZ) Page 11 Line 51 20
RELATIONSHIP BETWEEN LICENSEE AND SEZ BOARD dti's response • Clause 24 provides that upon designation as an SEZ, the licensee must establish an entity Page 11 Line 25 • The licensee is the shareholder and must appoint a board to manage the business affairs of the SEZ – the SEZ Board [see Definitions and Clause 24 (2)] Page 11 Line 35 • Clauses 25, 26, 27, 28, 30, 31, 32, and 33 refer to the “licensee” • The dti agrees that these clauses should refer to the SEZ Board and not to the licensee Page 11 Line 51; Page 12 Lines 1, 5, 13, 38, 40, 41, 42, 48; Page 13 Lines 13, 15, 20, 40; Page 14 Line 4, 21 21
DESIGNATION OF SEZs (CLAUSE 22) Issues raised • Existing sites should be considered for designation (CAIA) Page 10 Line 12 • Minister should publish his intention to designate an SEZ for public comment (CAIA) • The Bill does not provide for the amendment of designation should the boundaries of the SEZ change (RBIDZ) 22
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