An export-processing zone (EPZ) for labour-intensive manufacturing firms should be run as an experiment in the Nelson Mandela Bay metro. This area has two well-run ports with excess capacity in the Port Elizabeth harbour and the Coega port, which is already a special economic zone (SEZ).
An EPZ is a type of SEZ. Under CDE’s proposal, firms in the manufacturing firms in the EPZ would receive duty-free imports, rapid customs and export clearance formalities, and flexible labour regulations (subject to certain basic safeguards).
Production in an EPZ would be solely for export markets and only open to new firms. This constraint will help to prevent wages outside the EPZ from being driven down.
The major attraction for labour-intensive firms would be their ability to set wages lower than the national minimum wage. The Expanded Public Works Programme offers wages of R78 per day and attracts more workers than it can accommodate, suggesting that export-oriented firms would be able to attract labour at wages in the vicinity of R78 per day.
At this wage rate, textile manufacturers would be competitive globally, given the fact that South Africa enjoys better business environments, infrastructure and higher productivity levels than some low-income countries.