SEZ Bill

MATRIX REFLECTING POSITIONS BY GOVERNMENT, BUSINESS AND LABOUR ON THE SPECIAL ECONOMIC ZONES BILL
BILL

To provide forenable the designation, promotion, development, operation and management of Special Economic Zones; to provide enable for the establishment, appointment of members and functioning of Special Economic Zones Board; to provide enable for the establishment of, administration, management and criteria for distributions of money in, the Special Economic Zones Fund; to regulate the application, issuing, suspension or withdrawal and the transfer of Special Economic Zones operator permits; to provide forenable functionings of the Special Economic Zones operator; to provide forenable transitional arrangements relating to any designation of industrial development zones under the Industrial Development Zones Programme Regulations published under Government Notice R1224 in Government Gazette 21803 of 1 December 2000 and which are in force; and to provide for matters connected therewith.

PREAMBLE

WHEREAS South African policies for economic growth and development recognise that responding to challenging global and domestic economic conditions demand a focus on new sources of competitiveness that lie in innovation and productivity, with an entrenched base in skills, infrastructure and efficient, responsive state action;

AND RECOGNISING that measures must be implemented to enhance domestic and regional demand, increase foreign direct investment and extend export promotion strategically to rapidly growing economies, while at strategically to rapidly growing economies, while at the same time strengthening the South African industrial base and promoting a Labour-absorbing industrialisation path;

AND realising the impact of Special Economic Zones in driving industrial and economic growth, the Department of Trade and Industry has identified Special Economic Zones as a mechanism that will contribute towards the realisation of these economic growth and development goals and is committed to support and facilitate the designation, regulation and development of Special Economic Zones in South Africa;
THEREFORE Special Economic Zones shall be designated in geographically defined areas to promote targeted economic activities, supported through special arrangements and support systems including incentives, business support services, streamlined approval processes and infrastructure;

BE IT THEREFORE ENACTED by the Parliament of the Republic of South Africa, as follows:—

ARRANGEMENT OF SECTIONS
Sections
CHAPTER 1
1. Definitions
2. Objects of Act
3. Application of Act
CHAPTER 2
4. Purpose of Special Economic Zones
5. Special Economic Zones policy
6. Special Economic Zones strategy
CHAPTER 3
7. Establishment of Special Economic Zones Board
8. Terms of office of Board members
9. Disqualification from membership of Board
10. Vacation of office and filling of vacancies on the Board
11. Functions of Board
12. Fiduciary duties of Board members
13. Code of good conduct and disclosure of interests by Board members
14. Meetings of Board
15. Resolution of Board without meeting
16. Committees of Board
17. Remuneration and allowances paid to members of Board and committees
18. Secretariat of Board
CHAPTER 4
19. Special Economic Zones Fund
20. Incentives
CHAPTER 5
21. Designation of Special Economic Zones
22. Application for designation
23. Governance and management of Special Economic Zone
24. Strategic plan of Special Economic Zone

25. Business and financial plan of Special Economic Zone
26. Reporting and financial statements of Special Economic Zone
27. Taking over administration of Special Economic Zones
28. Suspension or withdrawal of designation
CHAPTER 6
29. Special Economic Zone operator
30. Application for Special Economic Zone operator permit
31. Requirements for application for Special Economic Zone operator permit
32. Special Economic Zone operator permit
33. Functions of Special Economic Zone operator
34. Suspension or withdrawal of Special Economic Zone operator permit
35. Transfer of Special Economic Zone operator permit
36. Application to locate in Special Economic Zone
CHAPTER 7
37. Transitional provisions and savings
38. Guidelines
39. Regulations
40. Short title and commencement

GOVERNMENT POSITION INPUT BY LABOUR INPUT BY BUSINESS RESPONSE FROM GOVN.
INTERPRETATION, OBJECTS AND APPLICATION

1. In this Act, unless the context indicates otherwise—
"Board" means the Special Economic Zones Advisory Board established by section 7 (reporting to the Minister);

“SEZ Board” means a Board of Directors of the individual SEZ Operators (accountable to / reporting to the Licensee).
There is also a board established by the licensee for each SEZ. Clarification Accepted.
Will provide definitions for the two different Boards.
"company" has the meaning ascribed to it in section 1 of the Companies Act, 2008 (Act No. 71 of 2008);

"Department" means the Department of Trade and Industry;

"Director-General" means the Director-General of the Department of Trade and Industry or his or her authorised representative;
The delegation of the powers of a Director-General in government departments are normally dealt with in terms of approved delegation of authority levels matrix policy. Furthermore the current definition of “Director-General” creates confusion in section 7(6) of the Bill. The latter section must be amended to make it clear that it is the position of a Director General as recognised and approved as such within any government department.

Accepted.

“free port” means an area adjacent to a port of entry where imported goods may be unloaded for immediate transshipmenttranshipment or stored, repacked or processed without being subject to customs import duties;

“free trade zone” means a fenced in duty free area offering warehousing, storage and distribution facilities for trade, transshipment, and re-export operations;

“industrial clustering” means conglomeration of industries of similar type or orientation in a common geographic location in order to achieve economies of scale and take advantage of shared / common facilities to achieve policy objectives;

"industrial development zone" means a purpose built industrial estate that leverages domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services and includes industrial development zones developed under the previous Manufacturing Development Act (No. 187 of 1993);
“industrial development zone” means a purpose built industrial estate that leverages domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services and includes industrial development zones developed under the previous IDZ Act.
Addition conditionally accepted.
The MDA will still remain in force and only the IDZ Regulations will be repealed by the SEZ Act.
"licensee" means the holder of a Special Economic Zone license issued in terms of section 22(6);

; "Minister" means the Minister of the Department of responsible for Ttrade and iIndustry in South Africa;

"Minister" means the Minister of the Department of [responsible for] trade and industry – Comment: There are several Ministers who deal with policy related to trade and industry this definition therefore needs to be more specific.
Accepted.
"municipal entity" has the meaning ascribed to it in section 1 of the Municipal Systems Act, 2000 (Act No. 32 of 2000);

"Municipal Finance Management Act"
means the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003);

"Municipal Systems Act" means the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000);

operator" means the holder of a Special Economic Zone operator permit issued in terms of section 30(3);

"person" includes a trust and foundation
Make changes to the text with reference to “person”, to (juristic person)
“prescribed” means prescribed in terms of this Act and the regulations and guidelines that will be issued thereto; regulation made in terms of section 39; "prescribed" means prescribed by regulation made in terms of section 39;
Comment: In the version of the Bill tabled on 14 August this is defined as ‘in terms of this Act’, this needs to be clarified. Secondly, the word ‘prescribed’ or ‘prescribe’ has been used throughout the Act and not necessarily in line with this definition. Use of prescribed in Bill must be aligned with this definition. Accepted.
Will provide a definition that is aligned with this Bill / Act.
"public entity" has the meaning ascribed to it in section 1, and listed in Schedules 2 and 3, of the Public Finance Management Act;

"Public Finance Management Act" means the Public Finance Management Act, 1999 (Act No. 1 of 1999);

"public-private partnership" means a public-private partnership contemplated in regulation 16 of the Treasury Regulations issued in terms of the Public Finance Management Act or section 120 of the Municipal Finance Management Act;

“regional integration” means linkages to, or integration with the “province’s”’s growth strategies, local economic development of the host municipality and other relevant cross-provincial economic initiatives;
"Special Economic Zone" means an area designated as a Special Economic Zone in terms of section 21;

“One Stop Shop” means a single point of contact for SEZ investors to lodge applications to various government authorities and agencies; Will use the terminology “One Stop Shop” throughout the text, instead of a Single Window Facility.
“strategic nvestments” means investments or businesses that are in line with the Industrial Policy Action Plan priority sectors and also satisfy the criteria that will be prescribed for location on different types of SEZs; Strategic investments deleted, because it is synonymous to “targeted”investments
“support measures” means any support that shall be provided by any sphere of government and/or agencies

“targeted investments” means investments in support of the IPAP priority sectors, NDP and NGP and any other government’s industrial development priority;,
"this Act" includes any regulation made in terms of section 39.
Objects of Act
2. The objects of this Act are to provide forenable:

(a) the determination of Special Economic Zones policy and strategy that is consistent with the provisions of this Act;
(b) the establishment of the Special Economic Zones Board;
(c) the establishment of the Special Economic Zones Fund to support the development of Special Economic Zones;
(d) the designation, development, promotion, operation and management of Special Economic Zones;
(e) regulatory measures and incentives for Special Economic Zones in order to attract domestic and foreign direct investment; and

(f) The establishment of a One Stop Shop simplified procedure s for the development and operation of Special Economic Zones and for setting up and conducting business in Special Economic Zones by providing a single window clearance facility that delivers the required gGovernment services to businesses operating in Special Economic Zones.
2. (f) Clarification needs to be made if the ‘single window’ refers to the ‘single window trade recoding system used in other countries or the one-stop shop administrative system for processing of business applications, etc. Suggest rewording to make this clearer.

Business welcomes the concept of providing a single window to access required government services. However Business does not believe that it should be necessary to operate in a SEZ to access coherent government services. The reference to “services” is also not clear. The scope of such services should be stated. The understanding of what is intended here is different from the apparent intention in ????

Application of Act

3. This Act applies to Special Economic Zones established in the Republic in terms of this Act, and including the Industrial Development Zones established in terms of the Manufacturing Development Act.(No. 187 of 1993);
Transitional arrangements include IDZ established prior to this Act. The Act therefore applies to them as well. Accepted.

CHAPTER 2- PURPOSE, POLICY AND STRATEGY OF SPECIAL ECONOMIC ZONES
Purpose of Special Economic Zones

4. (1) A Special Economic Zone is an economic development tool to promote rapid economic growth and exports by using support measures to attract targeted foreign and domestic investments and technology.
This subsection requires significant clarification. What does “rapid economic growth” mean?

What does “support measures” mean? Elsewhere the term “incentives” is used.

What does targeted mean? This term implies that government will identify specific investments yet Accepted.
Delete the word “rapid”;
Definitions for “support measures” and “targeted investments” are provide above.
(2) The purpose for establishing Special Economic Zones includes—
(a) facilitating the creation of an industrial complex having strategic economic advantagefor targeted investments and industries in the manufacturing sector and tradable services, as will be determined by a prescribed criteria;
4. (2) The purpose for establishing Special Economic Zones includes—
(a) facilitating the creation of an industrial complex having strategic economic advantage –
Concern that the focus is strictly on secondary industrial development and the manufacturing sector. Business proposes broadening this wording to include tertiary industries as well such as services.
Redefine the purpose in terms of the intention.
Delete the words “strategic economic advantage” and be specific in terms of what activities are envisaged in the “industrial complex” or what the complex will facilitate.
(b) developing a world-class infrastructure required to support the development of targeted industrial activities; (b) developing [a world-class] infrastructure required to support the development of targeted industrial activities –
What is the definition of world-class? Business suggests removing this description, however do recognise the importance of infrastructure in the functioning of the economy and growth.
“world-class” in this contexct means high-end infrastructure that can compete with world infrastructure standards for SEZ. The term is also used as marketing tool for SEZs. Due to this reason, we are not comfortable to remove the terminology.
(c) attracting foreign and domestic direct investment;

(d) providing the location for the establishment of strategic targeted investments; What is a strategic investment as opposed to an investment? Agreed to use the word “targeted investment” across the text, which has been defined above. The wording “strategic investment” will be removed.
(e) enabling the exploitation and beneficiation of mineral and other natural resources raw materials;
What raw materials are being referred to here.here? Government policy in respect of beneficiation normally refers to minerals. Accepted.
Reword the purpose.
(f) taking advantage of existing industrial and technological capacity, promoting integration with local industry and increasing value-added production;
Not clear later in the Bill how this will be achieved.
(g) promoting regional integration; and No reference to this in functions of operator Accepted.
Since it is embedded in (f), this clause has been deleted.

(hg) creation of decent ng employment and other economic and social benefits in the region in which it is located and promote skills and technological transfer.
No reference to skills transfer in functions of operator “Ensuring skills and technological transfer” will be added to the functions of the Operator.

Special Economic Zones policy

5. (1) The Minister must determine policy for the designation, promotion, development, operation and management of Special Economic Zones after considering the advice of the Board.
Is this a reference to the draft policy shared with us?

If so does this mean that the current policy will be presented to the Board for their advice before any progress is made? Reference was made to the existing SEZ Policy which has already been determined, and which informed the drafting of this Bill.

This sub-section must be deleted from the Bill.
(12) The Board must execute and monitor the implementation of the policy and report to the Minister on an annual basis. Who will be executing the policy oif the Board is only monitoring implementation? The policy will be reviewed as and when necessary.

(23) The Minister must may review the policy for the designation, promotion, development, operation and management of Special Economic Zones every five yearswhen necessary, in consultation with the Board and other relevant stakeholders.
See comment below on timing.

Business is of the view that the policy for designation etc should be contained in the Bill. We need to consider what in the policy that is required to ensure action is left out of the Bill and propose that it be inserted

Special Economic Zones strategy

6. (1) The Minister must determine (by notice in the government gazette) a Special Economic Zones strategy after considering the advice of the Board.
Difference between strategy and policy as drafted not clear. Based on the general definition of a policy and strategy,
Tthe Policy gives a statement or policy direction on what needs to be done and what the objectives are.
The Strategy articulates HOW that will be done, by WHEN and WHAT results are envisaged.
(2) The Special Economic Zones strategy must address the strategic designation of Special Economic Zones and industrial clustering that will best support industrialisation and economic growth strategies. What is the difference between “strategic designation” and designation as in 5(1)? Accepted.
Delete the word “strategic”.
Define “industrial clustering”

(3) The Board must implement and monitor the implementationexecution of the Special Economic Zones strategy and report to the Minister on an annual basis, in the manner that will be prescribed in the Regulations.
There is no link later on in the Bills which clarifies how this will be done by the Board. There is no reference to reporting to the Board in the functions of the operator
(4) The Minister must may review the Special Economic Zones strategy every four when necessaryyears; in consultation with the Board. (4) The Minister must review the Special Economic Zones strategy every four years.
Concern – In Section 5, above, the Minister is reviewing the SEZ policy every 5 years. Part (4) of Section 6 asks the Minister to review the strategy of SEZ’s every 4 years. While in line with the term of the Board as detailed in Section 8, these timeframes are not conducive to long-term strategy development and runs the risk of being revamped with each election cycle. Business would propose that any review of the policy go through a public consultation process. The Strategy will be reviewed when necessary.

SPECIAL ECONOMIC ZONES BOARD
Establishment of Special Economic Zones Board

7. (1) The Special Economic Zones Board is hereby shall be established by the Minister in terms of this Act. The Board is defined as “The Special Economic Zones Board”. It therefore does not need to be repeated every time it is mentioned. Noted and accepted
(2) The Minister must appoint no more than15 persons as members of the Board, consisting of—
(2) The Minister must appoint no more than15 persons as members of the Board, consisting of –
Comment – This clause suggests that there can be less than 15 members of the Board. The Bill should be more specific agree that there should be 15 board members, which is a high number. The list presented below adds up to 15.
Accepted.
The wording will be changed.
(a) one representatives of the Department;
(b) one representative of South African Revenue Services;
(c) one representative of the National Treasury;

(d) one representative of the Department responsible for Eeconomic Ddevelopment Department;
(d) one representative of the Department of the Economic Development Department [responsible for economic development];
Accepted.
(e) one representative of the Department responsible forof pPublic eEnterprises;
(e) one representative of the Department of Public Enterprises [responsible for public enterprises];
Comment: In the definitions of this Bill, ‘Department’ is defined as indicating the Department of trade and industry. Business’ proposed changes to (d) and (e) above specify that representatives must be from different departments, rather than individuals from the dti responsible for economic development and public enterprises respectively.
Accepted.
(f) one representative of Transnet SOC Limited;
(g) one representative of Eskom SOC Limited;

(h) one representative of the National Planning CommissionDevelopment Bank of Southern Africa;
The NPC is not an executive body so it is unclear why it would be included here. Accepted conditional to the Executives approval.

(i) one representative of a development finance institutionthe Industrial Development Corporation (IDC); and
(i) one representative of a development finance institution
Comment: There is more than one DFI in South Africa. How will the DTI decide which DFI is represented? Business suggests this should be the IDC.
Accepted.
NB. The DG and Minister will be consulted on this.
(j) (j) six independent persons individuals appointed on the basis of their knowledge, experience and expertise relevant to Special Economic Zones. including expertise and experience in business and in the fields of project finance, financial management, project and risk management, international trade and marketing, law and environmental management, property management and urban planning.
(j) six independent individuals [persons] appointed on the basis of their knowledge, experience and expertise relevant to Special Economic Zones…
Comment: ‘persons’ in (j) needs to be clarified in terms of the definition in the Bill. Business proposes that ‘persons’ be replaced with ‘individuals’ Accepted.
Details of the required expertise or experience will be specified when doing the Advert(s).

The Board is a judicial body that makes direct decisions affecting the development of the SEZs, and as such is not constituency based. and cannot have representatives from the constituencies.
(3) For purposes of appointing the persons individuals contemplated in subsection (2)(j), the Minister must by notice in the Gazette and in two newspapers published and circulating nationally invite nominations for membership of the Board.
(4) The notice contemplated in subsection (3) must specify a period of at least 30 days for nominations to be submitted to the Minister.
(5) The Minister must—
(a) appoint the persons contemplated in subsection (2)(j) as members of the Board from nominations submitted in response to the notice;
(b) strive to ensure that the composition of the Board is broadly representative, with due regard to race, gender and regional representation, experience and expertise; and
(c) publish the names of persons appointed as members of the Board and the dates of commencement of their terms of office in the newspapers contemplated in subsection (3).
(6) No person below the position of Director-General or an equivalent position may be appointed as a member of the Board, as contemplated in subsection (2) (a) to (i).
(7) Should a member appointed in subsection (2)(a) to (i) be unable to attend a meeting of the Board, an alternate representative may attend a Board meeting in place of that member. Such alternate representative may not be below the position of Deputy-Director General or an equivalent position.
(8) The Minister must appoint a chairperson of the Board from one of the members contemplated in subsection (2)(j).
(9) Every Board member will be required to undergo security vetting on their appointment in terms of section 2 of the National Strategic Intelligence Act, 1994 (Act 93 of 1994).
Accepted. The word “persons” shall be replaced by [individuals]

Security vetting is a corporate governance compliance requirement in line with King report. In the interest of good corporate governance, the requirement cannot be removed.

TERMS OF OFFICE OF BOARD MEMBERS

INPUT BY GOVERNMENT INPUT BY LABOUR INPUT BY BUSINESS
8. (1) The members of the Board—
(a) hold office for a period of five years from the date of their appointment by the Minister; and
(b) are eligible for reappointment on expiry of their term of office for only one additional term of office.
(2) Despite subsection (1), the Minister may by notice in the Gazette extend the period of office of all members of the Board for a maximum period of 12 months, for one term only.
See Business comments on Section 5 and 6. Extension refers to a period not exceeding 12 months.
Disqualification from membership of Board
9. A person may not be appointed as a member of the Board if that person—
(a) is an un-rehabilitated insolvent;
(b) has been declared by a High Court with jurisdiction to be mentally ill;
(c) has been convicted of an offence in the Republic or elsewhere, other than an offence committed prior to 27 April 1994 associated with a political objective, and sentenced to imprisonment without the option of a fine or, in the case of fraud or any other offence involving dishonesty, to a fine or imprisonment or both;
(d) has at any time been removed from an office of trust on account of breach of fiduciary duties; or
(e) is otherwise disqualified in terms of section 69 of the Companies Act, 2008 (Act No.71 of 2008).

Vacation of office and filling of vacancies on Board

10. (1) A member of the Board vacates office if the member—
(a) resigns in writing to the Minister;
(b) ceases to qualify for appointment to the Board in terms of section 9;
(c) is removed from office by the Minister—
(i) in the public interest and for just cause;
(ii) after consulting the Board; and
(iii) after a fair hearing.
(2) A vacancy arising from the death of a member or from circumstances referred to in subsection (1) must, within three months of the vacancy occurring, be filled for the unexpired portion of that member's term of office by a suitable person appointed by the Minister in terms of a procedure contemplated in section 7, with the necessary changes required by the context.

Functions of Board
11. (1) The Board must—

(a) advise the Minister on policy and strategy to promote, develop, operate and manage Special Economic Zones;
(b) monitor the implementation of the Special Economic Zones policy and strategy;;
Comment: Point of clarity – what is the difference between an operator, licensee and business operating within a special economic zone?
Definitions are provided under Section 1.
(c) consider an application for designation as a Special Economic Zone and recommend to the Minister whether or not to approve the application and grant a Special Economic Zone licence to the applicant; The administrative challenge for the Board of undertaking all these functions and only meeting four times a year needs discussion.

Section 22 provides for a prospective licensee to apply to the Minister not the Board. It would be administratively more efficient if the application was to the Board in the first place. The Board will appoint committees or sub-committees which will meet more often than the Board’s sitting of every quarter. Refer to sub-Section 17 (1).

In terms of this Bill, the Minister shall make the final approval on the recommendations of the Board.
(d) consider an application for an operator permit and recommend to the Minister whether or not to approve the application;
Subsection 23(4) provides for the licensee to procure the services of an operator through a procurement process. This sub-section is referring to the function of the Board and section 23(4) refers to the functions of the Licensee which is the owner of the SEZ. Yes it will be the licensee’s role to procure an operator through the transparent processes and the Minister to issue the permit. An SEZ is a programme of national interest. It is critical that the dti is involved in the appointment of operators (developers), as these are vital in the success of the SEZ and to ensure that the right people and organizations are appointed.
(e) consider an application for the transfer of an operator permit and recommend to the Minister whether or not to approve the application for transfer; It is assumed that the procurement process referred to in 23(4) must comply with the PFMA or the MFMA. Do these Acts allow transfer of a contractor (operator) under a successful bid to transfer a permit. In any case we need to consider whether we support it and under what conditions. This section is addressing the function of the Board and not the procurement process.
(f) must liaise with licensees and operators on the implementation of the Special Economic Zone strategic plans in line with Section 24; What does this mean in practice? Accountability for implementation of the strategy by each SEZ must be through the approved individual strategy and by the licensee. This part is talking about the individual SEZ Strategic Plan and not the overall SEZ Strategy in line with Section 6.
(g) report in the prescribed manner to the Minister on progress relating to the development of Special Economic Zones, both collectively and individually;
(g) report in the prescribed manner to the Minister on progress relating to the development of Special Economic Zones, both collectively and individually
Comment – Having the Board report both collectively and individually seems duplicative and overly burdensome administratively. Delete “both collectively and individually” as this is not how boards are supposed to work. Accepted.
The report should be to the Board in the first instance, who in turn report to the Minister.

(h) recommend to the Minister whether or not to approve ratify the decision by an operator to locate a new investor in the Special Economic Zone; and
This should not be a ministerial decision. Surely if the licensee appoints a board for the SEZ as contemplated in subsection 23(2), this decision should be made by the board of the specific SEZ in terms of the specific SEZ strategy. Noted, the clause meant the Minister should ratify the decision not approve. For the SEZs there’s a lot of incentives including tax incentives that will be granted, so it is important for the dti to ensure that investors locating in an SEZ are eligible ones. This is a normal practice in other countries where SEZs are implemented.
(i) advise the Minister on initiatives to market Special Economic Zones. Who is responsible for the marketing of the SEZ the dti or each SERZ as appears to be contemplated in 33(h)? The dti’s proposal is that there should be a proper marketing structure that will market the SEZs globally. Section 33 (h) refers to a zone level function of an SEZ Operator to operate its zone. These are different functional levels.
(2) The Board may—

(a) conduct investigations on any matter arising out of the application of this Act; and To what end will such investigations be undertaken. Important to note that the Board meets 4 times a year. Investigations related to the application for designation can be conducted until the finalization of the application put before the Board. It must be understood that the Board will be supported by a fully fledged secretariat and sub-committees that will run with investigations.
(b) perform such other functions consistent with the objectives of the Act as determined by the Minister. How will these functions be determined? Should be by Notice in the gazette and subject to public comment. Since the Board is established by the Minister, it will be his prerogative to determine other functions to be executed by the Board without further consultations.

Fiduciary duties of Board members
12. A member of the Board—
(a) must comply with the code of conduct and disclosure obligations contemplated in section 13;
(b) may not act in a way that is inconsistent with the functions of the Board in terms of this Act; and
(c) may not use the position or privileges of, or confidential information obtained as, a member of the Board for personal gain or to improperly benefit another person.

Code of good conduct and disclosure of interests by Board members
13. (1) The Minister must approve a code of conduct for the members of the Board.
(2) Members of the Board—
(a) must make full disclosure to the Board of any conflict of interest including any potential conflict of interest;
(b) may not vote, attend or participate in any proceedings of the Board in relation to any matter before the Board in respect of which they have a conflict or potential conflict of interest; and
(c) must comply with any decision of the Board as to whether or not they are entitled to participate in any particular proceedings of the Board.
(3) For the purposes of this section, a member has a conflict of interest if—
(a) the member, or a family member, partner or business associate of the member is applying for a license to develop, manage and operate a Special Economic Zone, Special Economic Zone operator permit, transfer of an operator permit or location of a new investor in the Special Economic Zone, or has a financial or other interest in an entity that is involved with a Special Economic Zone; or
(b) the member has any other interest that may preclude, or may reasonably be perceived as precluding, the member from performing the functions of a member of the Board in a fair, unbiased and proper manner.

(4) Any disclosure in terms of subsection (2)(a) and any decision of the Board in terms of subsection (2)(c) must be recorded in the minutes of the Board.
Meetings of Board

14. (1) The Board must hold at least four ordinary meetings each year (or as and when required) at times and places determined by the chairperson of the Board.
This means that applications could be delayed by as long as 7 months. Provision should be made for meetings to be convened in order to respond timeously to applications It is not foreseeable that the applications will be delayed, as theThe Board can have special meetings as and when required, and can also delegate some of their functions to the Board Committees or sub-Committees that will be established.
(2) The chairperson of the Board—
(a) may convene special meetings of the Board; and
(b) must convene a special meeting within 14 days of receiving a written request to do so, signed by a majority of Board members.
Subsection 2 and 6 refer to ‘a majority’ of Board members. What does this mean? More than half? Please see comments on number of board members in Section 7.if majority is not a term understood as more than half then it should be defined.
(3) The request referred to in subsection (2)(b) must clearly state the reason for the request and only those matters may be discussed at the special meeting.
(4) The Minister may request that a meeting of the Board be convened at any time, should the need arise.
(5) If the chairperson is not present at a meeting of the Board, the members present must appoint another member to preside at the meeting.

(6) At any meeting, a majority (8+) of the members of the Board constitutes a quorum.
Majority can be 8 members or at least 51% of the members.
(7) A decision of the majority of members present at any quorate meeting constitutes a decision of the Board and, in the event of an equality of votes, the chairperson of the meeting has a casting vote in addition to a deliberative vote.
(8) Minutes of the proceedings of every meeting of the Board must be—
(a) recorded and kept in a manner that cannot be altered or tampered with; and
(b) submitted to the next meeting of the Board for consideration and, if adopted, signed by the chairperson.
(9) The Board may—

(a) permit members to participate in a particular meeting by telephone or via audio-visual technology and any member who participates in this manner is regarded as being present at the meeting; and
(b) on agreement, invite any person to attend a meeting for the purpose of advising or informing the Board on any matter. Such an open ended approach is not supported. The board is already too large. Yes the Board is large, but it must be accepted that the Board does not have all the expertise under the sun. It is a common practice that an expert in a certain area can be invited to come an advise the Board at a point in time.
(10) The Board may by resolution make rules to further regulate its proceedings.
Resolution of Board without meeting

15. (1) The Board may adopt a resolution without a meeting if at least a majority of the members indicate their support for the resolution in a manner and in accordance with a procedure determined by the Board.
(2) Section 14(8) applies with the necessary changes required by the context in respect of subsection (1).

Committees of Board
16. (1) The Board may establish committees to assist the Board in the performance of its functions and may determine their composition, terms of reference, procedures and duration.
(2) The Board may appoint suitably qualified persons individuals to serve on a committee, including persons in the full-time employment of the State. (2) The Board may appoint suitably qualified individuals [persons] to serve on a committee, including persons in the full-time employment of the State. Comment: See comments on ‘persons’ for Section 7. (2) (j) The word “individuals” is accepted.
(3) Any committee established in terms of subsection (1) must be chaired by a member of the Board.
Do we support these committees? What are they going to do. Will members be remunerated? Any Board can have committees or sub-committees. See sub-Section 17(1) for new insertion. They will be remunerated if they are not employed by Government or its Agencies and only if their current Employers agree to that.
Remuneration and allowances paid to members of Board and committees
17. A member of the Board or a member of any committee of the Board, who is not in the full time employment of the State, may be paid such remuneration and allowances as determined by the Minister with the approval of the Minister of Finance.

Secretariat of Board
18. The Director-General must—
(a) establish a dedicated secretariat in the Department to support and facilitate the functions of the Board; and
(b) provide the secretariat with the human resources and financial resources necessary for the effective performance of its functions.
FINANCING AND INCENTIVES
Special Economic Zones Fund

19. (1) The Minister must, with the approval consent of the Minister of Finance, establish a Special Economic Zones Fund to support the promotion and development of Special Economic Zones.

Comment: The Fund is dependent on funding from the fiscus. This was one of the problems with the IDZ model previously adopted. In a fiscally constrained environment, this may not be a sustainable method of financing. Alternative funding sources need to be defined.
The Fund is but one instrument envisaged for SEZ funding. For any industrial initiative it must be accepted that the government, just like the private sector, has a role to play and that role cannot be neglected. It is the role of the government to provide bulk infrastructure and that is what the SEZ Fund will do – not everything. There are other financing instruments, such as debt financing, equity, mezzanine etc. that can be used in terms of the new SEZ model that the dti is proposing.
(2) The Minister must, with the approval of the Minister of Finance, make regulations regarding the administration, management and criteria for distribution of money in the Fund.

Incentives
20. (1) The Minister may with the consent of the Minister of Finance determine and implement tax and non-tax incentives for operators and businesses operating within Special Economic Zones.
(2) The Minister may, with the approval consent of the Minister of any relevant government department, design and administer regulatory or other incentives or support programmes necessary to support the development and operations of different categories of Special Economic Zones.

(2) The Minister may, with the approval of the Minister of any relevant government department, design and administer regulatory or other incentives or support programmes necessary to support the development and operations of different categories of Special Economic Zones. Incentives may include, but is not limited to:
a) Tax incentives
b) Grants from the fiscus
c) Existing programmes to enhance competition
d) Existing assistance to industrial development zones
Etc.
Comment: Business proposes the bill list the types of incentives that may be given to operators or licensees in order to provide more clarity. Without this it is unclear what the benefit is of an SEZ vs operating within the rest of the economy.
Designation of Special Economic Zones
21. (1) The Minister may, after considering the recommendation of the Board, designate a geographically defined area suitable for the development of a Special Economic Zone, with or without conditions, by notice in the Gazette.

(2) The Minister may initiate an application process for the designation of an area suitable for development of a Special Economic Zone in pursuance of strategic national interests, following a notice in the government gazette and a public consultation process.
(2) The Minister may initiate an application process for the designation of an area suitable for development of a Special Economic Zone in pursuance of strategic national interests, following notice in the government gazette and a public consultation process.
It is accepted that all designations will be done through consultations and gazetting, as a normal procedure. Even the exiting IDZs are done that way.Accepted.
(3) The Minister may prescribe different categories of Special Economic Zones, which may include—

(a) a free port; Am worried about this and am seeking advice. Is it in in line with new SARS policy? SARS will make amendments to the new Bill they are developing called “Customs Control Bill”, which will replace the customs and Excise Act, and will also develop rules and procedures in line with the SEZ programme and understanding of the Free Port. It must be understood that SARS and dti have been working together to develop the Bill and there’s no problem on the side of SARS.
(b) a free trade zone;
As above See our comment above.
(c) an industrial development zone; and

(d) a sector development zone.
(4) The Minister may prescribe—
(a) criteria and guidelines for the designation of each category of Special Economic Zones; and
(b) conditions that may be imposed on designation of a Special Economic Zone.
(5) The Minister may, on recommendations of the Board, prescribe the type of service and business that may be located in a Special Economic Zone in order to achieve the purpose of Special Economic Zones set out in section 4.

(6) For the purposes of this section—
(a) "free port" means an area adjacent to a port entry where imported goods may be unloaded for immediate transhipment or stored, repacked or processed without being subject to customs import proceduresduties;
[(6) For the purposes of this section—
(a) "free port" means an area adjacent to a port entry where imported goods may be unloaded for immediate transhipment or stored, repacked or processed without being subject to customs import procedures; This implies no duty will be paid. Are we cool with this without any idea of the circumstances? Or the alignment to the SARS and SACU regulations.

Correction: replace “procedures” with “duties”.

The whole sub-Section 6 on the definitions of Free Port, Free Trade Zone and Sector Development Zone will be moved back to / under Section 1 of Definitions.

SARS is being consulted on the alignment.
(b) "free trade zone" means a fenced in duty free area offering warehousing, storage and distribution facilities for trade, transhipment and re-export operations; and
(b) "free trade zone" means a fenced in duty free area offering warehousing, storage and distribution facilities for trade, transhipment and re-export operations; and Yes but how did the goods get there in the first place. No duty?
Yes, Without any duty. As the definition has already implied that it’s a duty free area.
(c) "sector development zone" means a zone focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market.
(c) "sector development zone" means a zone focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market.]
Comment: Business proposes the deletion of subsection (6) and these be included in definitions in Section 1. I think that there are much bigger problems here. This cannot be implemented without the guidelines referred to in section 39 Agreed. This will be moved to a section on definitions.
Application for designation
22. (1) National government, a provincial government, a municipality, a public entity, a municipal entity or a public-private partnership, acting alone or jointly, may apply to the Minister (through the Board) in the form and manner prescribed for a specified area to be designated as a Special Economic Zone.
(1) National government, a provincial government, a municipality, a public entity, a municipal entity or a public-private partnership, or person or private company or entity, acting alone or jointly, may apply to the Minister in the form and manner prescribed for a specified area to be designated as a Special Economic Zone.
Comment: private companies and individuals should be able to apply for operation in SEZ’s, without participation in a PPP necessarily.
The Bill provides a space for JVs to apply, i.e. government and private sector combined. Further the private sector has a huge role to play, as zone developers (operators) and investors. It is government’s view that it won’t be necessary to have individuals and private companies as applicants, as they have been accommodated in the process.
The application here should be to the Board not the Minister. Should be to the Minister, through the Board. The SEZ Board is an advisory board and not an executive board. The Minister is an executive authority.
2) In its application, the applicant must demonstrate that the designation of the area as a Special Economic Zone will further government's industrial development objectives and must specify the extent to which the designation seeks toas follows:—
(a) facilitate the creation of an industrial complex having strategic economic advantage;
Where are government’s industrial development objectives stated?
(facilitate the creation of an industrial complex having strategic economic advantage
See comments on Section 4. (2)(a) regarding the extension of sectors to include both secondary and tertiary economic activities, including services. The objectives are as stated on sub-sections 2) (a) to (h).

The main industrial development objectives are value adding and employment enhancing manufacturing. These will added to the text.
What does strategic economic advantage mean? Definition provided.
(b) provide the location for the establishment of strategic investments;
(b) provide the location for the establishment of strategic investments;
Comment: What is meant by ‘strategic’ investments? The term has been replaced with [targeted] that has already been defined above.
(c) enable the exploitation and beneficiation of raw materials mineral and other natural resources;
See comments under 4. The question also arises why this section does not refer to 4 rather than duplicate the text. Accepted.
Sub-section re-worded.
(d) take advantage of existing industrial and technological capacity, promote integration with local industry and increase value-added production;
(e) promote regional integration;
(f) create decent employment and other economic and social benefits in the region in which the Special Economic Zone is to be located and promote skills transfer;
(g) be consistent with any applicable national policies and laws; and
(h) comply with any other prescribed criteria in terms of this act.;
(3) The applicant must —
(a) have sufficient access to financial resources and expertise for the development, management, administration and operation of a Special Economic Zone;

(b) submit to the Minister (through the Board) a comprehensive feasibility study; As commented above, the application should be to the Board. In most cases the applicant is going to be the state. What does it then mean to require access to financial resources? As the policy notes there is a greater chance of success with the concept of the SEZ if the private sector is involved. The requirement of a comprehensive feasibility study as a condition of the application makes the application very expensive. We need to consider a better way of working here. As stated above, the Board is an advisory board and the Minister is an executive authority. So the Minister makes a final decision. Yes the feasibility study is expensive, but a necessary expense compared with spending billions of rands of tax payers’ money on an initiative that might end up not being feasible. Usually before a comprehensive study is done, there is a pre-feasibility, which is much cheaper.
(c) indicate the extent to which it owns and controls the area to be considered for designation as a Special Economic Zone; and

(d) in the case of a public-private partnership, indicate its ownership structure through the submission of a shareholders’ agreement, indicating shareholding, percentages of shareholding, requirements for transfer of shares and requirements for the distribution of assets upon liquidation or deregistration.
(4) The Board must—
(a) consider the application; and
(b) recommend to the Minister whether or not the area is suited to be designated as a Special Economic Zone. See comment on application going to the Board in the first instance. There does not seem to be a possibility to extend the boundaries of existing SEZs. We may wish to introduce that possibility.

The criteria for suitability should be gazetted.
The eligibility criteria, as a matter of practice, is part of regulations and guidelines. The SEZ programme will not be different.
(5) The Board may request further information and documents from the applicant for the purposes of considering the application. This type of open ended provision is always problematic as experience has shown that it is used to delay decision making. The Board should not have this power. All information required should be clear from the outset and should be prescribed. In any application of this nature, there can always be “further clarity or information” that may be required. Experience also shows that no matter how clear requirements can be, applicants always take chances and submit half cooked applications. So does the Business propose that applications from the business that do not meet all the requirements should be automatically disqualified?
(6) The Minister, after considering the recommendation of the Board—
(a) may designate an area as a Special Economic Zone by notice in the Gazette with or without conditions; and By notice in the Gazette, I thought this assumes that the public will be consulted before designation is granted.
(b) must issue the applicant with a Special Economic Zone licence if the area is so designated Are we happy that a municipality can take on the responsibility of a licensee? They cannot undertake their current mandate properly.
The strategic direction taken by the government does not assume a static case where Municipalities will be remain inefficient forever. Some municipalities are functioning quite well. Does the business imply that all municipalities are the same and therefore should be excluded? On the contrary, the DTI is working on developing various support measures such as skills development strategies and Capacity Building Programme that will also be targeted at the potential Licensees (including municipalities), among the targeted groups.
Governance and management of Special Economic Zone

23. (1) Upon designation as a Special Economic Zone, the licensee must—
(a) in the case of national or provincial government or a public entity, establish that Special Economic Zone as a national government business enterprise or a provincial government business enterprise contemplated in section 1 of the Public Finance Management Act;
Do we support such proliferation of SOCs? To establish an SEZ as a business enterprise mean giving it borrowing powers as a business entity to operate. It doesn’t mean proliferation of SOCs. The business will agree that an entity without borrowing powers does not have many financing options and that tends to be troublesome in the long term.
(b) in the case of a municipality or municipal entity, establish that Special Economic Zone as a municipal entity; or
Are we happy that a municipality can take on the responsibility of a licensee? They cannot undertake their current mandate properly. Please see our response above.
(c) in the case of a public-private partnership, establish that Special Economic Zone as a company.
(2) A licensee must appoint an SEZ Bboard which must be responsible for the efficient governance and management of the business and affairs of that Special Economic Zone. There is no detail provided for the appointment, composition, functions etc of this board. Business would support a board but it must have representatives of the businesses in the zone. The relationship between the Board, the licensee and the operator is completely opaque. Composition of and functions of these individual SEZ Board of Directors will be spelt out in the Regulations Agree, it must be established in terms of the New Companies Act / Regulations and King 111 Report but will be incorporated in the SEZ Regulations
(3) The board of a licensee must manage that Special Economic Zone—
(a) in accordance with the Public Finance Management Act and the Companies Act, if the licensee is national or provincial government or a public entity;
This Board is essentially the board of a company and thus has the responsibilities imposed on directors by the Companies Act Agreed
(b) in accordance with the Municipal Systems Act and the Municipal Finance Management Act, if the licensee is a municipal entity; or
(3) (b) in accordance with the Municipal Systems Act and the Municipal Finance Management Act, if the licensee is a municipal entity; or

(c) if the licensee is a public-private (
(c) if the licensee is a public-private partnership [(]
Agreed. Input accepted
i) at national or provincial government level, in accordance with regulation 16 of the National Treasury Regulations issued under the Public Finance Management Act and the Companies Act; or
(ii) at municipal level, in accordance with the provisions of section 120 of the Municipal Finance Management Act.

(4) Subject to sections 29 and 30, a licensee must, following a fair, equitable, transparent, competitive and cost-effective procurement process, appointrecommend the appointment an operator to develop, manage and operate that Special Economic Zone on behalf of the licensee;

(5) The licensee should forward the name(s) of the recommended Operator(s) to the Board for assessment and validation, and the Board will further recommend to the Minister for approval and issuing of an Operator Permit.

Is there not a case to be made for the licensee also to be the operator?

Surely if this an SOC procurement is in terms of the PFMA or MFMA The Operator can also be the Licensee.

The Licensee, after appointing the Operator, should notify the Board for ratification and the Minister to issuing a Permit, without any further assessment or evaluation.
Strategic plan of Special Economic Zone

24. (1) Each licensee must develop and implement a strategic plan within the framework of the Special Economic Zones strategy contemplated on section 6 in order to achieve the mandate, perform the functions and comply with the conditions for that Special Economic Zone. What is the role of the Board in this regard? Here we are talking about the role of the licensee. Of course the Board’s role will be to monitor the SEZs
(2) The strategic plan contemplated in subsection (1) must be reviewed on an annual basis and submitted to the Minister at least three months before the end of each financial year or at a later date determined by the Minister. What is the role of the SEZ Board in respect of these strategic plans? To look at whether an individual SEZ strategy is aligned with the broader national SEZ strategy and advise the Minister accordingly
(3) The licensee must provide the Minister with such information and documentation as the Minister may reasonably require in connection with the affairs thatof the Special Economic Zone. This open ended provision is not supported.

There is some wording missing. This applies to a special case where specific information, outside the prescribed one, may be required.

Business and financial plan of Special Economic Zone
25. A licensee must, at least three months before the end of each financial year or at a later date determined by the Minister, submit to the Minister for approval a business and financial plan—
(a) containing a projection of the revenue and expenditure of that Special Economic Zone in respect of the ensuing financial year; and

(b) covering the affairs of that Special Economic Zone for each of the three immediately following financial years. (b) covering the affairs of that Special Economic Zone for each of the four [three] immediately following financial years.
Comment: The duration of the business and financial plan should be commensurate with the duration of the strategy for SEZ’s as contemplated in Section 6.
For a business plan, a 1 year to 3 year planning cycle should be sufficient and this will be stemming from the Strategic Plans that are envisaged to be done on a year 5-year period.
Reporting and financial statements of Special Economic Zone
26. (1) A licensee must—
(a) keep full and proper records of its financial affairs;
(b) prepare financial statements for each financial year in accordance with generally accepted accounting practice;
(c) submit those financial statements within three months after the end of the financial year to the Auditor-General for auditing;

(d) submit within five months of the end of the financial year to the Minister—
(i) an annual report on the activities of that Special Economic Zone during that financial year;

(ii) audited financial statements of that Special Economic Zone for that financial year; and (1) (d) (ii) Audited financial statements of that Special Economic Zone for [that] the previous financial year; and Comment: Audited reports are only available about 3-4 months following the close of the financial year. To expect the entity to submit audited financial statements 5 months into the financial year is unrealistic. Its 5 months after the end of the financial year and that is very realistic, if according to your claim, the audited statements are normally done 3-4 months following the close of financial year.
(iii) the report of the Auditor-General on those statements.

(2) The annual report and financial statements referred to in subsection (1) must—
(a) fairly present the state of affairs of that Special Economic Zone and its performance against predetermined objectives for the financial year concerned;
(1) (a) fairly present the state of affairs of that Special Economic Zone and its performance against predetermined objectives for the financial year concerned, in accordance with the strategic plan as per Section 24 (1).
(2)

(b) include particulars of—
(i) any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the financial year;
(ii) any criminal or disciplinary steps taken as a consequence of such losses or irregular expenditure or fruitless and wasteful expenditure;
(iii) any losses recovered or written off; or
(iv) any other matter that may be prescribed.

(2) (d) (ii) audited financial statements of that Special Economic Zone for [that] the previous financial year; and
Comment: Audited reports are only available about 3 -4 months following the close of the financial year. To expect the entity to submit audited financial statements 5 months in to the financial year is unrealistic.

Taking over administration of Special Economic Zone

27. (1) The Minister may, after consultation with the SEZ Board and the licensee concerned, as well as the Advisory Board, appoint an administrator to take over the administration or to perform the functions of a licensee if—
(a) the licensee has failed to comply with any condition prescribed by the Minister in terms of section 21(4);
(b) the licensee fails or is unable to perform its functions; or
(c) there is mismanagement of the finances of that Special Economic Zone.
(2) The Minister must publish a notice in the Gazette appointing an administrator and in that notice the Minister must determine the powers and duties of the administrator.
(3) The Minister may act in terms of subsection (1) without consulting the Board and the licensee concerned 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.
It is not clear which Board is being referred to here but if the action relates to a specific SEZ then surely the board of that SEZ must be consulted? Both Boards (the SEZ Board and the SEZ Advisory Board)
Suspension or withdrawal of designation

28. (1) Notwithstanding the provisions of section 27, the Minister may, after considering a recommendation of the Board and by notice in the Gazette, 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.
(2) Nothing contained in this Act prevents the Minister from re-designating an area whose designation as a Special Economic Zone has been withdrawn.
(3) 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 in terms of this section, if the business—
(a) has entered into a written agreement with the operator; or

(b) 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).

CHAPTER 6
SPECIAL ECONOMIC ZONE OPERATOR
Special Economic Zone operator

29. A Special Economic Zone may only be—
(a) developed and managed;
(b) operated; or
(c) developed, managed and operated,
by a person who holds an operator permit issued in terms of section 30.

Application for Special Economic Zone operator permit

30. (1) Any person appointed by a licensee to develop, manage and operate a Special Economic Zone in terms of section 23(4) must apply to the Minister for a operator permit in the form and manner that will be prescribed in the Regulations.
(1) Any person appointed by a licensee to develop, manage and operate a Special Economic Zone in terms of section 23(4) must apply to the Minister for a operator permit in the form and manner prescribed.
Comment: What is the process for appointment of the person mentioned in this clause?

As indicated before the application should be to the SEZ board and not to the Minister and if the operator has been procured through a prescribed process, that process must surely incorporate the permit? Please see our comments above on the role of the Board and the Minister
(2) Upon receipt of the application for an operator permit, the Board may—
(a) require an applicant to supply additional information necessary to consider the application;

(b) request an applicant to appear before it for the purposes of making oral enquiry at the applicant's expense; and
(c) require any interested party, including an organ of state, affected by such application to comment on the application in writing.
(3) The Minister may, after considering the recommendation of the Special Economic Zones Board, issue a person with an operator permit, with or without conditions.
(4) The Minister may make regulations regarding—
(a) the procedure and time periods applicable to applications for operator permits; and
(b) the information that must be provided in any application for an operator permit.

Requirements for application for Special Economic Zone operator permit

31. (1) An applicant for a Special Economic Zone operator permit must—
(a) be a person appointed by a licensee to develop, manage and operate that Special Economic Zone in terms of section 23(4);
It would be ridiculous for a licensee to appoint a person as an operator without a license. We need to think of a better plan here. Yes the Minister will issue the permit on licensee’s recommendations.
(b) be a company registered or incorporated in South Africa;
(1) (b) be a company registered in South Africa
Comment: How does this relate to Section 4(2)(c) – attracting foreign and domestic direct investment? By saying registered or incorporated in SA, it does not mean that the company cannot be a foreign co. It is expedient that a company choosing to be an SEZ operator be registered under SA laws, even if it’s a foreign company. That makes it easier to subject that company to the SA Companies Act and other regulations.
(c) have sufficient capital and expertise to develop, manage and operate a Special Economic Zone; and
(d) comply with such other criteria and requirements as may be prescribed.
(2) The Minister may make prescribe regulations regarding— The Minister may prescribe
(a) additional criteria for applications for operator permits; and All criteria should be prescribed not only additional criteria
(b) any condition that may be imposed on operator permits, including conditions criteria relating to businesses that may operate in the Special Economic Zone; This is of concern as it implies that additional conditions may be imposed on firms operating in a SEZ. Need to understand implications.

(c) any measure to promote the effective monitoring of the conditions contained in operator permits; and
(d) any other matter necessary to facilitate the issuing of an operator permit.

Special Economic Zone operator permit conditions

32. (1) Before issuing an operator permit in terms of section 30(3), the Minister must, on the recommendation of the Board, be satisfied that the agreement between the licensee and the operator adequately provides for the duties, terms and conditions for the development, management and operation of that Special Economic Zone by the operator, including—
(a) the requirements and timetable for the planning, construction, supply of infrastructure and utilities within that Special Economic Zone;
(b) the security measures that the operator must take and maintain in or around a customs controlled area as defined in section 21A(1) of the Customs and Excise Act, 1964 (Act No. 91 of 1964);
What is a “customs controlled area” in relation to the free port and free trade areas referred to above? It is a duty free and VAT exempt area of an SEZ
(c) the facilities that the operator must provide to enable the Board to exercise its functions within that Special Economic Zone; and What does this mean? Clarification as to which board is meant is also required. An SEZ Board of Directors
(d) the construction timetable and milestone schedule for that Special Economic Zone.
(2) The Minister must determine the duration of the operator permit.
(3) The Minister may prescribe any other requirement or condition in respect of an operator permit. On advice from SEZ board? accepted

Functions of Special Economic Zone operator

33. The operator must, on behalf of the licensee—
(a) implement the strategic plan for that Special Economic Zone within the framework of the Special Economic Zones strategy;
This is the first reference to a “strategic plan” What is meant? It’s not the first time, please check section 24 (1).
(b) make improvements to that Special Economic Zone and its facilities according to the plans approved by the Minister and any other relevant authority;

(c) provide or facilitate provision of infrastructure and other services required for that Special Economic Zone to achieve its strategic and operational goals;
(d) provide adequate enclosures to segregate the Special Economic Zone from any applicable customs territory for the protection of revenue together with suitable provision for the movement of persons, conveyances, vessels and goods entering or leaving that Special Economic Zone;
“applicable customs territory” is a new term and presumably relates to one of the other terms used earlier in the Bill.
(e) provide adequate security for all facilities of the Special Economic Zone;

(f) adopt rules and regulations for businesses within the Special Economic Zone in order to promote its safe and efficient operation;
An operator cannot “adopt regulations” . it is in any case understood that all laws are applicable inside the SEZ . it is not clear why there should be additional regulations. What does “safe” mean in this context?
(g) 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, South African Revenue Services, the South African Reserve Bank, Statistics South Africa or any other relevant authority;
The operator is a company. This is surely self evident? Yes, but we cannot assume that everyone out there has the same understanding.
(h) promote the Special Economic Zone as a foreign and domestic direct investment destination; See comment above
(i) ensure that any business located within the Special Economic Zone is authorised in terms of section 36 and achieves the purpose of Special Economic Zones contemplated in section4.
See comment on s 36
(j) apply to the Minister for incentives contemplated in section 20 in the form and manner prescribed;
It is not clear how this will work. It is understood that all applicable incentives will be available. All of these are not under the jurisdiction of the Minister of Trade and Industry as appears to be implied here. The firm must apply for the incentive. The operator must facilitate the application not do it. Administratively, it’s always easier to apply in one place. Practically many incentives are administered by the dti and even those done with Treasury and SARS, such as 12i are still done through the dti. So this is an attempt to make things easier for the Business.
(k) facilitate a single window clearance facility 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

(k) facilitate a single window clearance facility 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
Comment: Clarity on meaning of the ‘single window’ as per Section 2 (f).Clarity also required on what is meant by ‘simplified procedures’.
Clarity provided under definitions. The word used is Öne-Stop shop”
(l) undertake any other activity within the scope of this Act to promote the effective functioning of the Special Economic Zone;

Suspension or withdrawal of Special Economic Zone operator permit

34. (1) The Minister may withdraw or suspend an operator permit if the operator—
(a) fails to comply with the terms and conditions of the operator permit;
(b) contravenes any provision of this Act or any law of the Republic;
(c) contravenes or fails to comply with the customs and excise rules and procedures that are applicable to that operator and the Commissioner of the South African Revenue Services notifies the Minister accordingly; or
(d) requests the Minister to withdraw the operator permit.
(2) Before suspending or withdrawing an operator permit in terms of subsection (1)(a), (b) or (c), the Minister must—
(a) inform the affected operator of the intention to withdraw or suspend the operator permit and the reasons for the intended withdrawal or suspension; and
(b) give the affected operator 30 days to make representations to the Minister.
(3) The Minister may make regulations regarding—
(a) the procedure to suspend or withdraw an operator permit; and
(b) any other matter necessary in order to ensure the effective suspension or withdrawal of the operator permit.

Transfer of Special Economic Zone operator permit

35. (1) An operator may transfer its operator permit to another company, if such other company—
(a) applies to the Minister for a transfer in terms of the provisions of this section; and
(b) satisfies the requirements for an operator permit in terms of this Chapter.
(2) The transferee must in its application clearly stipulate any changes to the original development, business and operating plan of the Special Economic Zone in question.
Do we support this? Yes it can happen that one operator through its business decision move out of the zone and cede its permit to another operator to continue with the operations.
(3) The Minister may, after considering the recommendations of the Board in respect of the transferral, transfer the operator permit from one operator to another. (3) The Minister may, after considering the recommendations of the Board in respect of the [transferal], transfer the operator permit from one operator to another. Insertion accepted
(4) Upon the transfer of the operator permit, the new operator must comply with all the obligations placed on an operator in terms of this Act, and it will has all the rights and obligations conferred or imposed on a operator in terms of this Act and the operator permit in question.

(5) The Minister may make regulations regarding—
(a) the procedure to transfer a operator permit; and
(b) any other matter necessary in order to ensure the effective transfer of an operator permit.

Application to locate in Special Economic Zone

36. (1) Any person that intends to conduct business within a Special Economic Zone must apply to the Minister, in the manner and form prescribed, to locate its business in the Special Economic Zone.
(2) In the application the applicant must—
(a) provide information to show that the applicant conducts a business or render a service prescribed by the Minister in terms of section 21(5); Why should this application be to the Minister? Surely the board of the specific SEZ should do this? The Minister will only ratify the decision, as already explained above.
(b) indicate the extent to which the applicant’s business achieves the purpose of Special Economic Zones set out in section 4; and
(c) comply with any other criterion that the Minister may prescribe.
(3) The Minister may, after considering the recommendations of the Board in respect of the location application, approve the decision of the operator to locate to the applicant’s business within that Special Economic Zone, with or without conditions.

CHAPTER 7 GENERAL PROVISIONS
Transitional provisions and savings

37. (1) In this section, "IDZ Regulations" means the Industrial Development Zone Programme Regulations published under Government Notice R1224 in Government Gazette 21803 of 1 December 2000 as amended.
(2) Any designation of an industrial development zone under the IDZ Regulations which is in force immediately before this Act comes into operation, remains in force and must be regarded as a designation of a Special Economic Zone under this Act.
(3) Any IDZ operator permit issued under the IDZ Regulations which is in force immediately before this Act comes into operation, remains in force and must be regarded as an operator permit issued in terms section 30(3).
(4) Any application for the designation of an industrial development zone or for the issuing of an operator permit made under the IDZ Regulations which is not finalised immediately before this Act comes into operation, must be dealt with as an application for designation as a Special Economic Zone or an application for an operator permit, as the case may be, in terms this Act.
Guidelines

38. (1) The Minister may, after consultation with the Board, issue guidelines regarding any matter in respect of which the Minister deems it necessary or expedient in order to achieve the objects of this Act.
(
(2) The guidelines—
(a) may not be inconsistent with the provisions of this Act;
2) The guidelines—
(a) may not be inconsistent with the provisions of this Act;

(b) must be published in the Gazette; and
(b) (2) Before publishing any guideline contemplated in subsection (1), the Minister must—
(a) publish the draft guidelines in the Gazette;
(b) grant the public a period of at least 30 days to make written representations to the Minister on the proposed guidelines; and
(c) consider any written representation received.
This is an obvious process for all the government legislative processes. The government publishes draft regulations or guidelines on the gazette to allow for public comments.
(c) are not binding on the Minister. (c) are [not] binding on the Minister. It’s the regulations that are more binding to the Minister. Yes the guidelines are binding But the Minister will not be obliged to account for same since the Minister has delegated certain powers to Officials (Board and committees). It’s been the case in all guidelines.
Regulations

39. (1) The Minister may, after consultation with the Board, make regulations regarding—
(a) any matter which in terms of this Act is required or permitted to be prescribed;
(b) any ancillary or incidental administrative or procedural matter that is necessary to prescribe for the proper implementation or administration of this Act.
(2) Before making any regulation contemplated in subsection (1), the Minister must—
(a) publish the draft regulations in the Gazette;
(b) grant the public a period of at least 30 days to make written representations to the Minister on the proposed regulations; and
(c) consider any written representation received.
Short title and commencement

40. This Act is called the Special Economic Zones Act, 2012, and comes into operation on a date determined by the President by proclamation in the Gazette.

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