Author: Karl van der Merwe
What are Special Economic Zones?
Special Economic Zones (SEZs) are designated areas within a country where business and trade laws differ from the rest of the country. These areas are created to attract foreign direct investment (FDI), stimulate economic growth and create jobs by offering a favourable business environment. SEZs typically provide advantages such as improved infrastructure, streamlined administrative processes and various economic incentives.
SEZs in South Africa
South Africa has implemented SEZs as part of its strategy to promote industrial development and economic growth. The SEZ Programme aims to enhance investment, boost industrialisation and foster regional development. These zones support various sectors, including manufacturing, logistics and technology, by providing a conducive environment for businesses to thrive.
The second area of the SEZ adjacent to King Shaka International Airport
A second area of the SEZ adjacent to King Shaka International Airport in Durban has been opened. This SEZ is strategically positioned to attract investments in logistics and the automotive industry, leveraging its proximity to the airport for efficient transportation and supply chain management.
Employment Tax Incentive (ETI)
One of the key incentives available to businesses operating within South African SEZs, including the Durban SEZ, is the Employment Tax Incentive (ETI). The ETI aims to tackle youth unemployment by making it more affordable for employers to hire young workers aged between 18 and 29 years. By offering a reduction in the PAYE liability for qualifying employees, the ETI reduces the financial burden on employers, thereby encouraging them to create more job opportunities. For each qualifying employee, employers can receive a tax rebate (PAYE deduction) for a period of 24 months.
The employees for whom the ETI is claimed must be:
- Between the ages of 18 and 29 (doesn’t apply in an SEZ)
- In possession of a valid South African ID or asylum seeker permit
- Earning a monthly salary of between R2,000 and R6,500
NB – There is no age restriction qualifying criteria for ETI benefits applicable to employees working in SEZs. This makes it more attractive for employers to operate and deploy employees to work (mainly) in these zones.
SEZs in South Africa are crucial to the country’s economic strategy, aiming to attract investment, drive industrial development and create employment. The Employment Tax Incentive (ETI) and the advantages afforded to employers in a SEZ plays a significant role in this strategy by reducing the cost of hiring workers, thereby encouraging businesses to expand their workforce.
If you would like to find out more on this topic, check your company’s eligibility or ascertain whether you fall into a SEZ, please contact [email protected].