Using special zones may help get people back to work

Getting the giant pool of people in South Africa who are desperately searching for work into gainful employment would take a miracle.

But Ann Bernstein of the Centre for Development and Enterprise (CDE) believes there is a solution, albeit embryonic — and that the Eastern Cape is where it should start.

She said the Coega special economic zone (SEZ) in Nelson Mandela Bay would be the ideal testing ground.

“It involves putting to work an SEZ  that focuses on labour-intensive exports.

“The infrastructure already exists; it is grossly underutilised, and it has easy access to a port.”

To attract companies, the zone would offer a modified labour market regime, and companies that operated from the zone would have to sell all their goods to overseas markets.

Bernstein, speaking at the launch of a CDE report on the power of SEZs said: “SEZs can play a critical role in helping to overcome political resistance to the reforms that are needed to stimulate growth. Because the reforms apply only in the SEZ, you can overcome some of the resistance that would be felt if you went for a big bang of changes for the whole country.”

The CDE report argues that though SA has the deepest unemployment crisis in the world, existing SEZs are not making a meaningful impact, because their offer is too similar to many other manufacturing areas.

They do not, she said, address any of the constraints on business, especially businesses that wish to produce the kinds of goods that create lots of low-skill jobs.

“Zones can be successful because they help put industrial development on an accelerated track,” said Bernstein.

Zones allow firms to become competitive quicker than is normally the case.

“Our unemployment crisis means we need to focus our reform energies on jobs.”

She said the minimum wage would still apply, as would general health and safety rules. But beyond that, factories could negotiate conditions of service at factory, not sectorial, level.

“Because goods produced in the zone would be exported, they could not compete against local firms in the domestic market,” explained Bernstein.

“This should reduce resistance from unions and business.”

An East London industrialist, who only agreed to be interviewed as long as his name was withheld, has worked in special zones.

“When Alec Erwin was a minister in the early 2000s he promised unions that the zones would not be used to drop wages. While the strategy has enormous merit on paper I fear that is where it will stay.”

He said if Coega got it right and unions didn’t cripple the projects, then East London should leap on the bandwagon.

“My concern is that if the idea flies, the owners would probably have a profit lead time of between five and seven years. Understandably, workers cannot wait that long for an increase, nor will the unions let them. When people are starving and out of work they will agree to any idea that provides jobs. But once they are settled, instant gratification takes over and strikes follow, irrespective of the agreement.”

He said success might be possible if the government subsidised wages for a period, giving investors a chance to build a profitable business, where labour has a healthy share of profits.

“Investors will have to play open cards with the staff.”

Another concern, he said, was the reaction of exporters, who were paying all the statutory fees, including minimum wages.

“As in the apartheid days, when businesses flooded into the old Transkei and Ciskei, they employed thousands of people, but when the subsidies dried up they shut down the factories.”

Lizelle Maurice, a recent chair of the Business Women’s Association of SA who has been acting CEO at the Border-Kei business chamber (BKCOB), will take the permanent position in July.

She said any strategy to get people working had to be applauded.

“The jobless situation is the country’s biggest headache and using the zones is a stepping stone to solving the problem.

“However, BKCOB would like to see a focus on skills development. Workers on minimum wages should at least have the chance to learn on the job, and make themselves highly employable when they leave.”