MEMORANDUM ON SEZ BILL, 2013 FOLLOWING …pmg-assets.s3-website-eu-west-1.amazonaws.com/130… · Web viewMEMORANDUM ON SEZ BILL, 2013 FOLLOWING PUBLIC CONSULTATIONS. Introduction.

MEMORANDUM ON SEZ BILL, 2013 FOLLOWING PUBLIC CONSULTATIONS

Introduction

1 The Special Economic Zones Bill [B3-2013] (“the Bill”) was gazetted on 1 March 2013 and introduced in Parliament on 5 March 2013.

2 The Parliamentary Portfolio Committee on Trade and Industry (“the Portfolio Committee”) invited written submissions from stakeholders. The following submissions were received:

2.1 Business Unity South Africa (BUSA) [SEZ 2013/10]

2.2 Centre for Development and Enterprise (CDE) [SEZ 2013/3]

2.3 Chemical and Allied Industries’ Association (CAIA) [SEZ 2013/9]

2.4 East London Industrial Development Zone (ELIDZ) [SEZ 2013/5]

2.5 Free Market Foundation (FMF) [SEZ 2013/8]

2.6 Minerals Processing and Beneficiation Industries Association of Southern Africa (MPBIASA) [SEZ 2013/4]

2.7 Paul Hjul [SEZ 2013/6]

2.8 Richards Bay Industrial Development Zone (RBIDZ) [SEZ 2013/2]

3 On 24 May 2013, the dti presented its response to the Portfolio Committee on the public submissions received. Thereafter, the office of the Parliamentary Law Adviser presented its response to the submissions received.

4 Following this process, the Portfolio Committee has identified the following issues related to the Bill that still require clarification:

4.1 Composition and nature of the special Economic Zones Advisory Board (the SEZ Advisory Board”), term of office of members and removal of SEZ Advisory Board;

4.2 Roles and functions of and the relationship between the various structures created in the Bill;

4.3 Details on how the one-stop-shop will operate in order to streamline approval processes and reduce red-tape;

4.4 Providing for a public consultation process prior to the Minister making certain decisions; and

4.5 Details on the transitional arrangements.

Memorandum on SEZ Bill, 2013 followingpublic consultations

4.6

A) COMPOSITION AND NATURE OF BOARD, TERM OF OFFICE AND REMOVAL OF SEZ ADVISORY BOARD

5 Nature of Board and Minister’s powers

5.1 Concerns were raised that the Board should be empowered to make decision and not just be advisory in nature. There was also some confusion about whether the SEZ Advisory Board is an executive board. .

5.2 the dti is of the view that it is important that the Minister remains as a final decision making body to ensure that the Special Economic Zones (“SEZ”) legislative framework achieves government’s industrial and economic development objectives. As a result the Board is an advisory Board.

6 Mandate of persons from various government departments and entities to be members of the SEZ Advisory Board

6.1 The government departments and entities represented on the SEZ Advisory Board have been included because they interact with and impact on SEZs.

6.2 the dti is of the view that the spread of representation across the public and private sector achieves the appropriate balance of skills required to perform the regulatory and advisory functions of the SEZ Advisory Board and to promote intergovernmental co-operation and co-ordination around SEZs.

6.3 the dti consulted with the various government departments and entities prior to including representatives from these departments and entities as members of the SEZ Advisory Board.

6.4 However, the dti agrees that clause 7 be amended to remove representation from DBSA and the Department of Economic Development and to increase the number of independent persons in clause 7(2)(f) from three to five.

7 Seniority of members may result in members being unable to attend meetings

7.1 the dti is of the view that in order to ensure its efficient and effective functioning, the SEZ Advisory Board must comprise senior members with the necessary knowledge, experience and expertise relevant for SEZs.

7.2 Furthermore, the following provisions in the Bill provide flexibility that should assist the Board to convene and conduct its meetings:

7.2.1 clause 7(7) provides that an alternate member can attend meeting on behalf of a member that is unable to attend a meeting;

7.2.2 clause 14(6) provides that a majority of members constitutes a quorum for meetings; and

7.2.3 clause 14(9)(a) permits members to participate in meetings via telephone or audio-visual technology.

8 Term of office of members from government departments and entities

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8.1 Clause 8(1) allows members to hold office for 2 terms of 5 years each. The Minister may extend the period of office of all members of the Board for a maximum period of 12 months. Therefore, a person may serve a maximum of 11 years as a member of the SEZ Advisory Board.

8.2 Concern was raised about whether a Director-General of a department will continue to serve as a member of the SEZ Advisory Board if she remains in the position as Director-General of that department for longer than 11 years and therefore exceeds the term of office of a member of the SEZ Advisory Board.

8.3 the dti is of the view that it is unlikely that a person appointed as a Director-General of a department will serve in that position for longer than 11 years.

8.4 However, the dti proposes that clause 7 be amended to provide that where a Director-General is still in the position of Director-General but has exceeded her term of office as a member of the SEZ Advisory Board, then the Deputy Director-General of that department must be appointed as the member of the SEZ Advisory Board.

9 Removing all members of the Board at the same time

9.1 It was proposed that the Minister be empowered to remove the entire Board at the same time, should the Board become dysfunctional.

9.2 the dti submits that clause 19 of the Bill, providing for the dissolution of the Board, enables the Minister to remove the entire Board at the same time, after consultation and on any reasonable ground. It is therefore not necessary to amend the Bill.

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B) ROLES, FUNCTIONS AND THE RELATIONSHIP BETWEEN THE STRUCTURES CREATED IN THE SEZ BILL

10 Currently, the Bill creates five structures or entities, each with its own functions. The Bill also makes provision for the issue of three types of approvals or permits as described in the table below:

ENTITY CLAUSE ESTB. ENTITY

FUNCTIONS APPROVAL / PERMIT

SEZ ADVISORY BOARD

Clause 7 Clause 11

Advise the Minister on policy and strategy in order to promote, develop, operate and manage SEZs;

Monitor the implementation of the SEZ policy and strategy and report to the Minister on an annual basis on the implementation thereof

Consider an application for designation as a SEZ and recommend to the Minister whether or not to approve the application and grant a Special Economic Zone licence to the applicant;

Consider an application for an operator permit and recommend to the Minister whether or not to approve the application;

Consider an application for the transfer of an operator permit and recommend to the Minister whether or not to approve such application with or without any condition;

Liaise with the Special Economic Zone Board and operators on the implementation of the Special Economic Zone strategic plans;

report to the Minister on progress relating to the development of Special Economic Zones;

Recommend to the Minister whether or not to approve the decision by an operator to locate a new investor in the SEZ;

Advise the Minister on initiatives to market SEZs; and

Assess and review the success of SEZs in achieving the purpose referred to in section 4

SEZ APPLICANT/LICENSEE

Clause 22 Clauses 24 (1) and (2)

Establish the SEZ as an entity, enterprise or company, depending on the nature of the licensee

Appoint a Special Economic Zone

SEZ licence issued by Minister ito clause 22 (6)

(b)

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Board of the SEZSEZ ENTITY /

ENTERPRISE / COMPANY & ITS

BOARD

Clauses 24(1) & 24(2)

Various clauses in Bill

Develop and implement the strategic plan for SEZ [clause 25 of Bill];

Compile and submit the SEZ’s business and financial plans to the Minister [clause 26 of Bill];

ensure that the SEZ complies with financial reporting requirements [clause 27 of Bill];

appoint an SEZ operator to perform the functions in clause 34 of the Bill on behalf of the SEZ, subject to approval by Minister [clause 30 of Bill];

conclude an agreement with the SEZ operator to develop, manage and operate the SEZ [clause 33(1) of Bill];

SEZ OPERATOR Clause 30 and 31 Clause 34

The operator must, on behalf of the Special Economic Zone Board: implement the strategic plan for

that SEZ make improvements to that SEZ

and its facilities according to the plans approved by the Minister and any other relevant authority;

provide or facilitate provision of infrastructure and other services required for that SEZ to achieve its strategic and operational goals;

provide adequate demarcation of the SEZ from any applicable customs territory

provide adequate security for all facilities in the Special Economic Zone;

adopt rules and regulations for businesses within the Special Economic Zone in order to promote their safe and efficient operation;

maintain adequate and proper accounts and other records in relation to its business and report in the manner prescribed or required on the activities, performance and development of the Special Economic Zone to the Minister and as required under any other legislation;

promote the Special Economic

SEZ operator permit issued in terms of

clause 31(4)

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Zone as a foreign and domestic direct investment destination, in consultation with the Board;

ensure that any business located within the Special Economic Zone is approved in terms of section 37 and achieves the purpose of the Special Economic Zones contemplated in section 4;

apply to the Minister for finance and support measures contemplated in section 21 in the form and manner prescribed;

facilitate a single point of contact or one stop shop that delivers the required government services to businesses operating in the Special Economic Zone in order to provide simplified procedures for the development and operation of that Special Economic Zone and for setting up and conducting business in that Special Economic Zone; and

undertake any other activity within the scope of this Act to promote the effective functioning of the Special Economic Zone

SEZ BUSINESS / INVESTOR

Clause 37 Conducts a business in a Special Economic Zone

Approval from Minister to locate in SEZ ito

clause 37(3)

11 The SEZ framework contemplated by the dti is as follows:

11.1 An applicant (government or a PPP) applies to the Minister to designate an area as a Special Economic Zone.

11.2 The Minister may designate the area an SEZ and issue the applicant with a licence. Once the Minister has issued the applicant with a licence the applicant becomes the licensee.

11.3 The licensee must establish an entity to manage the SEZ. The licensee is the shareholder of the SEZ entity so established and must appoint a Special Economic Zone Board to govern and manage the SEZ entity.

11.4 The Special Economic Zone Board appoints an operator to develop, manage and operate the zone, on behalf of the SEZ entity.

11.5 The operator can only perform the functions of an operator if it obtains an operator permit issued by the Minister.

11.6 The operator decides whether or not to locate a business in the SEZ. The operator’s decision to locate a business in the SEZ is subject to approval by the Minister.

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12 We discuss SEZ framework and process in detail below and the amendments proposed by the dti following public consultation process.

13 Designation of SEZ

13.1 The Minister may, on application or on his own accord, designate a specified area as a special economic zone [clauses 22 and 23 of Bill].

13.2 Following recent consultations with National Treasury on public submissions, the dti proposes that the Minister of Trade and Industry makes the decision to designate an area as an SEZ after consultation with the Minister of Finance.

14 Application for designation and SEZ licensee

14.1 Only the following entities, acting alone or jointly, may apply to the Minister to designate an area as a Special Economic Zone:

14.1.1 national government,

14.1.2 a provincial government,

14.1.3 a municipality, a public entity,

14.1.4 a municipal entity or

14.1.5 a public-private partnership [clause 22(1) of the Bill].

14.2 An applicant applying for designation of a specified area as a Special Economic Zone must meet criteria specified in clauses 22(2) and 22(3) of Bill.

14.3 If the application is successful, the Minister must, after considering the recommendation of the SEZ Advisory Board, designate the specified area as an SEZ and issue the applicant with a licence for the SEZ [clause 22(6)].

14.4 The applicant is now the licensee of the SEZ and owns the SEZ licence.

15 SEZ entity and Special Economic Zone Board

15.1 Upon designation of an area as an SEZ, the licensee must establish an entity to manage the SEZ (“the SEZ entity”). The SEZ entity is a separate legal entity from the licensee. The SEZ entity can be a company or an entity established by legislation (a statutory body).

15.2 The licensee must ensure that the SEZ entity is established as a national or provincial business enterprise or a municipal entity, depending on the nature of the licensee [clause 24(1) of the Bill].

15.3 the dti agrees that the licensee must apply to National Treasury or a Provincial Treasury in order to establish the SEZ entity as a national government business enterprise or a provincial government business enterprise.

15.4 the dti is of the view that clause 24 contemplates that the licensee will comply with the necessary procedures, including obtaining Treasury approval when establishing a business enterprise as contemplated in the Public Finance Management Act, 1999. Therefore, it is not necessary to stipulate this in the Bill.

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15.5 The Bill also requires the licensee to appoint a Special Economic Zone Board of the SEZ entity. The Special Economic Zone Board is responsible for the efficient governance and management of the business affairs of the SEZ entity [clause 24(2) of Bill].

15.6 In ensuring that the SEZ entity is efficiently governed and managed, the Special Economic Zone Board must perform the following functions:

15.6.1 develop and implement the strategic plan for the SEZ entity [clause 25 of Bill];

15.6.2 compile and submit the SEZ entity’s business and financial plans to the Minister [clause 26 of Bill];

15.6.3 ensure that the SEZ entity complies with financial reporting requirements [clause 27 of Bill];

15.6.4 appoint an SEZ operator to perform the functions in clause 34 of the Bill on behalf of the SEZ entity, subject to approval by Minister [clause 30 of Bill];

15.6.5 conclude an agreement with an SEZ operator appointed to develop, manage and operate the SEZ entity [clause 33(1) of Bill].

16 SEZ operator

16.1 It is intended that the Special Economic Zone Board (and not the licensee as incorrectly recorded in clause 30 of the Bill) appoints the operator of the SEZ.

16.2 Clause 30 obliges the Special Economic Zone Board to follow a fair, equitable, transparent, competitive and cost-effective procurement process when appointing the SEZ operator.

16.3 Clause 32 stipulates that an SEZ may only be developed, operated and managed by a person who holds a Special Economic Zone operator permit.

16.4 Therefore, even when an SEZ operator is appointed by Special Economic Zone Board, the operator may only perform the functions of an SEZ operator once it has been issued with an SEZ operator permit.

16.5 Currently the Bill does not preclude an SEZ entity from also developing, managing and operating its own SEZ, provided that it obtains an operator permit in terms of clause 31.

16.6 However, the dti proposes that the Bill be amended to provide that only an SEZ entity established by a PPP licensee can develop, manage and operate its own SEZ provided that it obtains an operator permit in terms of clause 31.

16.7 The person appointed by the Special Economic Zone Board as an SEZ operator must apply to the Minister in order to obtain an SEZ operator permit. Clause 32(1) of the Bill stipulates the criteria that the SEZ operator must meet in order to obtain an SEZ operator permit:

16.7.1 be a person appointed by Special Economic Zone Board in terms of section 30 to develop, operate and manage that Special Economic Zone;

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16.7.2 be a person registered as a company in the Republic;

16.7.3 have sufficient capital and expertise to develop, operate and manage a Special Economic Zone; and

16.7.4 comply with such other criteria and requirements as may be prescribed.

16.8 The Special Economic Zone Board must conclude an agreement with the operator which agreement regulates matters like:

16.8.1 the requirements and timetable for the planning, construction, supply of infrastructure and utilities within that Special Economic Zone;

16.8.2 the security measures that the operator must take and maintain in or around a customs controlled area defined in section 21A(1) of the Customs and Excise Act, 1964 (Act No. 91 of 1964);

16.8.3 the facilities that the operator must provide in order to enable the Board or a Special Economic Zone Board, as the case may be, to exercise its functions within that Special Economic Zone; and

16.8.4 the construction timetable and milestone schedule for that Special Economic Zone [clause 33(1) of Bill].

16.9 This agreement must be submitted to the Minister when applying for an operator permit and the Minister must be satisfied that the agreement adequately provides for duties and terms and conditions for the development, operation and management of SEZ.

16.10 The operator performs the functions listed in clause 34 of the Bill, on behalf of SEZ entity / enterprise / company and the Special Economic Zone Board.

16.11 One of the functions of the SEZ operator is to ensure that any business located within the Special Economic Zone is approved by the Minister in terms of clause 37 and achieves the purpose of the Special Economic Zones contemplated in clause 4 [clause 34(i)].

16.12 Following the submissions made during the public consultation process, the dti is of the view that the Bill must be amended to provide that:

The Special Economic Zone Board, on recommendation of the SEZ operator, decides whether a business can locate in an SEZ. In deciding whether a business can locate in an SEZ, the SEZ operator and the Special Economic Zone Board must apply the criteria contemplated in clause 23(5) and 37(2)(c).

A business seeking to locate in an SEZ is therefore no longer required to obtain approval from the Minister (as currently required in clause 37 of the Bill).

17 Business locating in SEZs

17.1 As a consequence of the proposed amendments discussed in paragraphs 16.11 and 16.12 above, clause 37 of the Bill must be amended to require a business seeking to locate in an SEZ to apply to the Special Economic Zone Board (as opposed the Minister) for approval to locate in the SEZ.

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17.2 When applying to the Special Economic Zone Board for approval, the business must—

17.2.1 provide information to show that it conducts a business or renders a service prescribed by the Minister in terms of clause 23(5);

17.2.2 indicate the extent to which the applicant’s business achieves the purpose of Special Economic Zones set out in clause 4; and

17.2.3 comply with any other criteria that the Minister may prescribe.

17.3 Clause 23(5) requires the Minister to prescribe the type of service and business that may be located in a SEZ in order to achieve the purpose of SEZs stipulated in the Bill.

17.4 the dti proposes that the Bill be amended to provide that in prescribing the type of service and business that may be located in a SEZ in terms of clause 23(5) and prescribing the criteria in terms of clause 37(2)(c), the Minister must do so in consultation with the Minister of Finance.

17.5 This proposal is made because the tax incentives that businesses located in an SEZ may qualify for will be provided for in tax legislation, which is the responsibility of the Minister of Finance.

18 Conclusion

18.1 the dti agrees that it is necessary to clarify the roles of and relationship between the structures in the Bill, as a result of the use of the word “licensee” instead of “Special Economic Zone Board”.

18.2 the dti therefore proposes that clauses 11, 25, 26, 27, 28, 30, 31, 32, 33 and 34 be amended in order to replace the word “licensee” with the term “Special Economic Zone Board”. the dti submits that this amendment will clarify the roles and relationship between the structures in the Bill.

18.3 the dti also proposes that the Bill be amended to require a business seeking to locate in an SEZ to apply to the Special Economic Zone Board (as opposed the Minister) for approval to locate in the SEZ.

18.4 Below is a flow diagram reflecting the SEZ framework and processes contemplated by the dti to be regulated in the Bill.

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SEZ FRAMEWORK AND PROCESS

DESIGNATION OF SEZ, APPLICATION & SEZ LICENSEE (CLAUSE 22)

ONLY GOVERNMENT OR PPPs APPLY TO MINISTER(must meet stipulated criteria)

MINISTER DESIGNATES SEZ & ISSUES SEZ LICENCE(on recommendation of SEZ Advisory Board and after consulting with Minister of Finance)

SUCCESSFUL APPLICANT (government or PPP) becomes SEZ LICENSEE

SEZ ENTITY & SEZ BOARD (CLAUSE 24)

SEZ LICENSEE

ESTABLISHES SEZ ENTITY ESTABLISHES SPECIAL ECONOMIC ZONE BOARD OF SEZ ENTITY

separate legal entity to licensee establish as national or provincial business

enterprise or municipal entity

governs and manages the SEZ entity by:o developing & implementing strategic plano compiling & submitting SEZ business and

financial plans to Ministero complying with financial reporting

requirements appoints SEZ operator, subject to approval by

Minister concludes agreement with operator to develop,

manage and operate SEZ approves businesses seeking to locate in an

SEZ [subject to clauses 23(5) & 37(2)(c)]

SEZ OPERATOR (CLAUSES 30 – 34)

SPECIAL ECONOMIC ZONE BOARD APPOINTS SEZ OPERATOR

SEZ Board must follow fair, equitable, transparent, competitive and cost-effective procurement process to appoint operator

SEZ operator appointed to develop, manage and operate the SEZ

SEZ operator performs functions on behalf of SEZ Board

SEZ operator can only perform functions if it obtains an SEZ operator permit issued by Minister

SEZ operator must recommend to Special Economic Zone Board whether or not to approve a business to locate in the SEZ [subject to clauses 23(5) & 37(2)(c)]

BUSINESS LOCATING IN SEZ (CLAUSE 37)

BUSINESS APPLYING TO LOCATE IN SEZ MUST CONDUCT A PRESCRIBED BUSINESS OR RENDER A PRESCRIBED SERVICE & MUST MEET PRESCRIBED CRITERIA

SPECIAL ECONOMIC ZONE BOARD, ON RECOMMENDATION OF SEZ OPERATOR DECIDES WHETHER

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BUSINESS CAN LOCATE IN SEZ [with conditions & subject to clauses 23(5) & 37(2)(c)]

C) OPERATION OF A ONE-STOP-SHOP TO STREAMLINE APPROVAL PROCESSES AND REDUCE RED-TAPE

19 Concern was raised that the Bill does not detail the one stop shop model that will apply in order to streamline approval processes and reduce red-tape for businesses seeking to locate in an SEZ.

20 Clause 2(f) of the Bill stipulates that it is an objective of the legislation to provide for the establishment of a single point of contact or one stop shop that delivers the required government services to businesses operating in Special Economic Zones in order to lodge applications to various government authorities and agencies and to receive information on regulatory requirements from such authorities and agencies.

21 Clause 34(k) of the Bill obliges the operator to facilitate a single point of contact or one stop shop that delivers the required government services to businesses operating in the Special Economic Zone in order to provide simplified procedures for the development and operation of that Special Economic Zone and for setting up and conducting business in that Special Economic Zone.

22 the dti is of the view that approach in the Bill, which is to create a framework to establish a one stop shop and to oblige the SEZ operator to facilitate the one stop shop function, is the appropriate approach to follow.

23 the dti is in the process of reviewing various one stop shop models applied in various countries. A discussion document on one stop shops is attached hereto as Annexure “A”. It is evident from the review of the various models that the circumstances in a country and the resources available at a given point in time will impact on the way in which the one stop shop operates.

24 If the model to be applied is stipulated in the Bill this takes away the flexibility of the dti to adapt its approach as circumstances and access to resources change, unless it embarks on a legislative amendment process.

25 the dti confirms its commitment to ensuring that the success of SEZs is not hindered by bureaucratic, dysfunctional approvals processes. In order to address some of the concerns raised during the public consultation process the dti proposes that two clauses be inserted in the Bill to provide as follows:

25.1 to require the Minister to enter into a implementation protocols in terms of the Intergovernmental Relations Framework Act, 2005 with Departments interacting with SEZs e.g. Environmental Affairs, Home Affairs, Labour and with municipalities and SARS in order to streamline approvals processes for SEZs. The details of the kind of co-operation and support that will be provided by each department will be provided for in the agreements e.g. requiring departments to allocate employees dedicated to processing SEZ applications or shorter turnaround periods to process applications; and

25.2 to require the Minister to table a report before Parliament annually on the manner in which the one stop shop function is being implemented and how the one stop shop contributes to the ease of doing business in SEZs and attracts investors to SEZs.

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D) CONSULTATION BY MINISTER

26 Concern was raised that the Bill does not sufficiently provide for consultation processes, prior to the Minister making certain decisions. This relates to the Minister’s decision to:

26.1 designate an area as an SEZ in terms of clauses 22 and 23;

26.2 take over the administration of an SEZ in terms of clause 28;

26.3 suspend or withdraw designation in terms of clause 29.

27 Designating an area as an SEZ

27.1 the dti is of the view that the Bill currently does not prohibit the Minister from publishing his intention to designate an SEZ for public comment.

27.2 However, the dti agrees that the Bill can be amended to specifically provide that the Minister must publish his intention to designate an area as an SEZ for public comment.

28 Taking over the administration of an SEZ

28.1 Clause 28 empowers the Minister to appoint an administrator to take over the administration or perform the functions of a Special Economic Zone Board1 in specified circumstances.

28.2 The Minister makes the decision after consultation with the SEZ Advisory Board and the Special Economic Zone Board and publishes the notice appointing the administrator in the Gazette.

28.3 The Minister may appoint the administrator without consulting the SEZ Advisory Board and the Special Economic Zone Board if there is financial mismanagement of that Special Economic Zone and the delay caused by the consultation would be detrimental to the functioning of that Special Economic Zone.

28.4 It is proposed that clause 28 be amended to oblige the Minister to consult with the SEZ licensee, the Special Economic Zone Board and the SEZ operator before making a decision.

28.5 Clause 28 requires the Minster to consult with the SEZ Advisory Board and the Special Economic Zone Board. The dti is of the view that consultation with these parties is appropriate as:

28.5.1 The SEZ Advisory Board reports to the Minister on progress relating to the development of Special Economic Zones and assesses and reviews the success of Special Economic Zones in achieving the purpose referred to in section 4 [clauses 11(g) and (j)].

28.5.2 The Special Economic Zone Board is responsible for the efficient governance and management of the business affairs of the SEZ.

1 Currently clause 28 refers to “licensee”. As discussed above, the clause should refer to the “Special Economic Zone Board.”

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28.6 The administrator takes over the administration or performs the functions of a Special Economic Zone Board when the Board has:

28.6.1 failed to comply with any condition prescribed by the Minister in terms of section 23(4)(b);

28.6.2 the licensee fails or is unable to perform its functions; or

28.6.3 there is mismanagement of the finances of that Special Economic Zone..

28.7 The administrator steps into the role of the Special Economic Zone Board in order to perform the functions of the Special Economic Zone Board and to attempt to remedy the situation.

28.8 The relationships between the Special Economic Zone Board, the SEZ operator and businesses located in the SEZ are not necessarily affected during administration.

28.9 Therefore, the dti is of the view that it is not necessary to amend the Bill to oblige the Minister to consult with the SEZ operator and the businesses located in the SEZ before making a decision to appoint an administrator.

29 Suspend or withdraw designation

29.1 Clause 29 enables the Minister to suspend or withdraw any designation of an area as a Special Economic Zone which does not further government’s industrial development objectives, on such terms and conditions as the Minister may determine.

29.2 The Minister makes this decision to suspend or withdraw any designation after considering a recommendation of the SEZ Advisory Board and by notice in the Gazette.

29.3 Clause 29(3) provides that the lawful activities of any business located within a Special Economic Zone is not affected by the suspension or withdrawal of the designation of that Special Economic Zone, if the business—

29.3.1 has entered into a written agreement with the operator; or

29.3.2 is situated in the custom controlled area of that Special Economic Zone and has been authorised by any registration or licence issued in terms of the Customs and Excise Act, 1964 (Act No. 91 of 1964).

29.4 It is proposed that clauses 29 be amended to oblige the Minister to consult with the SEZ licensee, the Special Economic Zone Board, the SEZ operator and the business located in the SEZ, before making a decision to suspend or withdraw designation.

29.5 The dti agrees that clause 29 can be amended, in line with clause 35(6), by giving the Special Economic Zone Board, the SEZ operator and the businesses located in the SEZ, an opportunity to make representations to the Minister before he decides whether to suspend or withdraw any designation.

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E) TRANSITIONAL ARRANGEMENTS

30 Concern was raised that the Bill does not sufficiently address the impact of the new SEZ legislation on existing IDZs.

31 It was proposed that the transitional arrangements be amended to specify how current IDZ operators and businesses located in IDZs will be treated and how funding arraignments for IDZs will be affected.

32 the dti agrees that the transitional arrangements should be amended to clarify arrangements relating to IDZ operator permits and businesses located in IDZs.

33 the dti agrees that clause 38(3) of the Bill be amended to provide that any IDZ operator permit issued under the IDZ Regulations which is in force at the commencement of the Act, remains in force and must be regarded as a special economic zone operator permit issued under the Act.

34 the dti also agrees that the Bill be amended to insert a new clause 38(4) to provide that any IDZ enterprise approved to locate in an IDZ under the IDZ Regulations at the commencement of the SEZ Bill, must be regarded as a business located in terms of clause of 37 of the Bill. However, such a business will not automatically qualify for SEZ incentives unless it meets the prescribed criteria for such incentives.

3 JUNE 2013

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ANNEXURE “A”DISCUSSION ON ONE-STOP SHOPS

35 Government bureaucracy is frequently cited as an obstacle to the ease of doing business. A one stop shop is aimed at reducing information search and transaction costs for investors and processing time by government. The aim of a one stop shop is to:

35.1 facilitate access by investors to all required permits, authorisations and licences required for operation, in a timely manner;

35.2 eliminate steps in the administration and approval processes, allowing for parallel rather than sequential approvals;

35.3 provide after-care to existing investors.

36 The types of approvals required and registration processes include:

planning permissions, particularly land needs assessment, site selection, logistic solutions and office fit out;

registration of companies;

registration for tax;

visa and work permit approvals;

registration for employment benefits like UIF, Workmen’s Compensation;

registration for supply of utilities including connections and maintenance

processing financing applications, particularly setting up and expansion loans;

obtaining environmental approvals like Environmental Impact Assessment approvals, waste management and monitoring of waste.

37 There are many key stakeholders who are necessary for the successful implementation of a one stop shop in South Africa. Key stakeholders include:

Department of Trade and Industry

Department of Home Affairs

Department of Public Enterprises

National Treasury

Department of Economic Development

Department of Labour

National Intelligence Agency

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Department of Environmental Affairs

National Planning Commission (in the Presidency)

South African Revenue Services

Eskom

Transnet

Provincial and Municipal Governments

Development Finance Institutions

Industry Associations

Industry experts and academics

38 The activities of a one top shop can be categorized into five broad functions:

FUNCTIONS OF ONE STOP SHOP

39 the dtiis in the process of reviewing various one stop shop models to assess the viability and appropriateness of these models for the South African SEZ context.

40 the dtihas considered five one stop shop models implemented for SEZs in various countries. The one stop shop models, their advantages and disadvantages are summarised in the table below:

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ONE STOP SHOP MODELSNO. OSS MODEL ADVANTAGES DISADVANTAGES

1. ONE DOOR SHOPAll approvals bodies located at the SEZ site

Locates representatives of different government agencies in one place to receive applications from investors

Does not normally require changes in legislation or ministerial responsibilities

Requires co-operation between the various departments and agencies, which can prove challenging

The authority of the government representative situated at the SEZ must be stipulated i.e. is the representative performing the function (which may require delegation of powers) or is the representative merely collecting applications for approval by the relevant department

2. ONLINE APPROVAL SYSTEMRequired authorisations completed, submitted and approved on-line

Easily accessible investors can access the facility from different locations in the world

May also provide a totally integrated facility which makes the application process easier and faster

Studies have shown that OSS with online registration function get the best results and the time frames for completion of the application process are greatly reduced

It is expensive to implement particularly for developing economies as it requires technology which might not be easily available in these countries

3. ONE WINDOW SHOPCommercial body appointed to liase between SEZ investors and government departments to streamline approvals processes

The official employed in this facility is authorized to accept applications for all departments and agencies

Allows investors to submit applications in hard copy and electronically

Reduces the number of departments and agencies that the investor must deal with

Official must be authorized and trained to receive documents for other agencies

Legislative amendment may be required as each department or agency will need to modify its procedures in order to ensure an effective flow of documents or information. Legislative amendments can prove challenging

4. INTEGRATED REGISTRATION FUNCTIONSingle form to lodge all applications for approvals

Reduces work done by the official at a OSS as the relevant departments and agencies usually

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NO. OSS MODEL ADVANTAGES DISADVANTAGES

have an integrated or common database

As single form is used to lodge applications, paperwork is reduced

Fee structure is often simple, transparent and fees paid to banks rather than to government officials

Use of intermediaries eg lawyers is eliminated

Time required to process applications is significantly reduced

5. SEZ AND GOVERNMENT DEPARTMENT ACCOUNT MANAGERSEach SEZ as well as various government departments and agencies relevant to SEZs appoint accounts managers dedicated to streamlining approvals processes

Investor only deals with a single organization therefore reducing time spent submitting applications to multiple department and agencies

Relationships between accounts managers in SEZ and at department and agencies contributes to expediting process

Easier to implement in the initial stages – it is cost effective in terms of allocation of resources

41 the dtiis of the view that the model providing for dedicated accounts managers for SEZs (model 5) is the most appropriate for South Africa at this stage of development of SEZs, given the number and relatively small size of SEZs and the number of investors that will need to be serviced.

42 The one stop shop model will operate as follows:

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MEMORANDUM ON SEZ BILL, 2013 FOLLOWING …pmg-assets.s3-website-eu-west-1.amazonaws.com/130… · Web viewMEMORANDUM ON SEZ BILL, 2013 FOLLOWING PUBLIC CONSULTATIONS. Introduction.

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