If the proposed Saldanha Bay industrial development zone (IDZ) is set up efficiently and care is taken to learn from the mistakes made in the establishment of other South African IDZs, it could greatly contribute to the Western Cape’s and the country’s gross domestic product, says Western Cape Investment and Trade Promotion Agency (Wesgro) CEO Nils Flaatten.

He points out that Wesgro recently received a mandate from the National Manufacturing Board to create a wholly owned subsidiary, the Saldanha Bay IDZ Licensing Company, which will be tasked with applying for a licence to establish an IDZ at Saldanha Bay.

The company will also undertake investment promotion activities for the potential IDZ.

“Our objective with setting up an IDZ is to create new economic activity in the region, which will lead to increased exports, particularly the export of value-added products,” notes Flaatten.

The proposed IDZ will be a customs- controlled area that will offer many tax incentives. “If companies are administered and set up correctly they can become zero value-added tax-rated,” he explains.

Meanwhile, Wesgro is paying close attention to the draft Special Economic Zones (SEZ) Bill and says it hopes this will include a new set of incentives for specific manufacturing activities.

The SEZ Bill, which was gazetted for comment by Trade and Industry Minister Rob Davies in January, is aimed at broadening the scope and composition of dedicated industrial areas and supporting industrial decentralisation.

Saldanha Bay is of great importance to the Western Cape and South Africa, as it hosts Africa’s deepest port, which exports products such as steel, Flaatten points out.

Wesgro’s business model for the IDZ considers the possibility of setting up a titanium or zinc smelter.

It is also considering the oil and gas supply base on the west and east coasts of Africa. Going forward, this could include the off- shore oil exploration base of Namibia.

Meanwhile, Flaatten points out that major challenges facing exports are the buying power of traditional markets, such as the US and the European Union, the poor economic growth experienced by these economies, as well as the less-than-opti- mistic growth levels projected for 2012.

“However, Wesgro is not planning to walk away from the European market, rather, we are going to consolidate, as there are still huge export opportunities available,” he says.

Nevertheless, the company realises the need to diversify and a number of outward missions into Africa, Asia and South America are taking place. The agency is actively looking into diversifying its export strategy, Flaatten points out.

“Other challenges we may face include competitiveness. Some other emerging economies might be better placed to compete with local manufacturers in terms of price, in some cases as a result of weaker exchange rates and lower input costs,” he adds.

However, this is also an opportunity to harness the competitive advantages the Western Cape may have, such as its geographical proximity, as well as its political and cultural linkages to Africa.

South African companies also have strong and growing trade relationships with importers across the globe and a reputation for delivering high-quality goods on time at a reasonable price, which has become an important advantage, Flaatten states.