Musina Makhado Special Economic Zone

Musina Makhado Special Economic Zone (MMSEZ) is a flagship programme of the Limpopo Provincial Government (RSA) implemented through a newly established entity, Musina Makhado Special Economic Zone State Owned Company (SOC). The SOC is registered in terms of Schedule 3(d) of the Public Management Finance Act (PFMA), Companies Act and Special Economic Zones Act. It is currently wholly owned by the Limpopo Economic Development Agency (LEDA) and it has its own board of directors, which is representative of various stakeholders including the Department of Trade Industry and Competition. Its administration team is led by a Chief Executive Officer and a pool of competent executives with extensive skills and knowledge of the SEZ development space.

Limpopo enjoys an important advantage as a destination for inward FDI: it is part of South Africa, the most advanced economy in Sub Saharan Africa with the largest stock of inward FDI of any African country. Its economy is like that of a developed country in the sense that it has a large services sector and does not depend purely on the export of commodities. It is also has an automotive manufacturing sector, which largely exports vehicles to developed economies.

South Africa has a network of trade agreements (including through its membership of SACU and SADC, the EU SADC EPA and the US AGOA) open the way for exports to key markets such as SADC (market of 356 million people), the EU and EEA (350m+), the UK (65+ m people), US (330m consumers), China (1.4bn), The African Continental Free Trade Area (AfCFTA) (1.7bn) and Bilateral Investment Treaties (BITs) in force with (e.g.) Nigeria, Russian Federation. South Africa also operates double tax treaties (DTTs) with over 130 countries. This provides significant market opportunities for companies seeking to locate their operations in the SEZ.

LOCATION

Musina is the northern most town in South Africa and is in close proximity (18kms) of Beit Bridge, the main port of entry by road from and to SADC countries (Democratic Republic of Congo, Tanzania, Malawi, Botswana, Zambia, Zimbabwe, etc.). In terms of local government, the town of Musina falls under the Musina Local Municipality, which in turn fall under the Vhembe District Municipality, one of the five districts of the Limpopo Province. The Vhembe District Municipality consists of four local municipalities, namely Musina, Makhado, Thulamela and Collins Chabane.

The town of Musina was developed around copper mining many years ago and expanded to include diamond mining, cattle ranching and wildlife safaris. The town is 200kms and 522kms from Polokwane and Johannesburg, respectively. Makhado is a town on the foothills of the Soutspansberg mountain range in Limpopo Province. The N1 national route runs through the Makhado town. It is located 100kms from the border with Zimbabwe, Beit Bridge, and 437kms from Johannesburg. The Makhado area produces a wide range of fruits, nuts and vegetables due to its favourable soil and climatic conditions the whole year . The area also has a timber forest. Other important agricultural nodes in Limpopo include the Zebediela area, which produces citrus fruits and the Levubu Valley that produces potatoes, guavas, mangoes and macadamia nuts. The MMSEZ site is located approximately 40kms South of Musina and 50kms North of Makhado along the N1. Johannesburg and Polokwane are located 487kms and 150kms respectively south of the MMSEZ site. The main MMSEZ land is bound by the Johannesburg-Beit Bridge railway line to the West, and by the N1 to the East along the North-South Corridor and is linked to other Regional Transport Corridors.

SEZ sites and activities:

Antonvilla (3500 ha) – The northern site, located in Musina, approximately 15 km southeast of Beitbridge Border Post between South Africa and Zimbabwe. The site is planned for light and medium manufacturing industries, including logistics; and agro-processing.

Mopani (8000 ha) – The southern site, located in Makhado, is approximately 60 km north of Louis Trichardt and 40 km from the northern site. The site is planned for an energy and metallurgical cluster and other associated heavy industries.

GOVERNMENT INCENTIVES

The South African government is committed to, like all other countries in the world, the legal and administrative framework for the establishment of SEZs has been streamlined to attract FDI and expedite the process of operationalising SEZs. To this end, the South African Government enacted the SEZ Act No.16 of 2014 to provide a clear framework for the development, management and operations of SEZs. In addition, the Act offers a number of financial and regulatory incentives to businesses and operators located in an SEZ to ensure their growth, enhance revenue generation, job creation, attraction of FDIs and international competitiveness.

LOGISTICS

Musina Makhado SEZ is ideally positioned to serve as a logistics hub. The north site is adjacent to the border with Zimbabwe and close to South Africa’s busiest border crossing at Beitbridge. MMSEZ is astride the north-south transport corridor. The N1 road links Cape Town to Musina via Johannesburg and Polokwane, the Limpopo provincial capital. There are rail links to the Port of Maputo, Johannesburg and Durban. South Africa enjoys duty and quota-free access to 15 SADC countries. The African Continental Free Trade Area potentially opens up preferential trading opportunities with another 38. Musina is the gateway to SADC and the wider markets beyond.

Inbound/outbound logistics: MMSEZ could provide a platform for both types of activity.

Logistic services: MMSEZ could host a range of services such as freight forwarding, loading/unloading, inspection, storage, sorting, consolidating/bulk breaking, stuffing/destuffing, customs handling/clearance, documentation.

Warehousing: MMSEZ is a convenient location for warehousing for the storage of goods, whether incoming or outgoing. Bonded warehouses would allow goods to be cleaned, sorted or repacked under customs supervision.

Cold storage: South Africa is a major exporter of fresh fruit and vegetables. Their perishable nature demands reliable cold storage facilities and these could be located at MMSEZ’s north site.

Container yard/truck park/bonded yard for vehicle exportsThe North site could also house a container yard, a truck park for transport vehicles and a bonded yard for vehicles awaiting export.

 Fresh produce handling: the proximity to Limpopo’s agricultural area makes MMSEZ an excellent location to handle fresh produce for export or local consumption in South Africa.

Growth in eCommerce: Increasing use of e-commerce opens opportunities for the parcel and courier industry, while there are also opportunities in the removals industry and for companies that provide flexible and customised services to meet specific needs

LIGHT MANUFACTURING

  • Basic assembly/electromechanical manufacturing and assembly
  • Electrical and mechanical components
  • Fertilisers & agro-processing
  • chemicals
  • Mechanisation, including tooling and manufacturing equipment
  • Timber beneficiation
  • Construction materials

GOVERNMENT INCENTIVES FOR COMPANIES LOCATING INSIDE THE SEZ

  • Preferential 15% Corporate Tax: Businesses (prescribed in section 24(4) of the SEZ Act) that are located in a SEZ may be eligible for tax relief, including the reduced rate of corporate income taxation. In addition to satisfying the requirements of the SEZ Act, further criteria for some of the available tax incentives are stipulated in the Income Tax Act, 1962 (Act No. 58 of 1962.)
  • Building Allowance:Businesses and operators (prescribed in section 1of the SEZ Act) operating within a SEZ may be eligible for tax relief, including the building allowance, subject to requirements contained in the Income Tax Act.
  • Employment Incentive: Businesses and operators operating within an SEZ may be eligible for tax relief, including the employment tax incentive subject to requirements contained in the Employment Tax Incentive Act, 2013 (Act No. 26 of 2013).
  • Customs Controlled Area: Businesses and operators located within a customs controlled area of a Special Economic Zone will be eligible for tax relief as per the Value-Added Tax Act, 1991 (Act No. 89 of 1991), the Customs and Excise Act, 1964 (Act No. 91 of 1964), the Customs Duty Act 2014 (Act No. 30 of 2014) and the Customs Control Act, 2014 (Act No.31 of 2014).
  • 12I Tax Allowance: The 12I Tax Incentive is designed to support greenfield investments (i.e. new industrial projects that utilise only new and unused manufacturing assets), as well as brownfield investments (i.e. expansions or upgrades of existing industrial projects). The new incentive offers support for both capital investment and training.
  • Agro-Processing Support Scheme (APSS): the DTIC offers a 20-30% grant to support investments in the agro-processing sector for eligible businesses.

Mineral beneficiation

The province is historically and presently known for its mineral resources. A recent study by the Department of Minerals and Energy has compiled a list of minerals found in Limpopo Province i.e.  chrome, coal (coking and thermal), copper, dimension stone, fluorspar, graphite, iron ore, limestone, manganese, PGMS, precious stones (diamond and corundum), REEs, semi-precious stones, silica, titanium, tungsten, uranium, vanadium and vermiculite.  MMSEZ seeks to provide a platform within which some of these minerals can be beneficiated. MMSEZ has attracted a conglomerate of investors who seek to establish an iron and steel plant. Some of the operations envisioned are listed below:

  • Coking coal plant
  • Ferrochrome plant
  • Chrome plating plant
  • Lime, phosphate & chemicals

Agro processing

MMSEZ offers several agro-processing opportunities at a primary and secondary level. Drawing from its strength of a subtropical climate, the Limpopo Province produces about 75% of South Africa’s mangoes, 65% of its papayas, 36% of its tea, 25% of its citrus, bananas, and litchis, 60% of its avocados, 60% of its tomatoes, 285 000 tons of potatoes and 35% of its oranges. Some of the agro-processing opportunities are listed below:

  • Fresh packaging
  • Juices
  • Infant food (puree)
  • Dried fruit
  • Mixed fruit cuts
  • Diced/slices fruit
  • Oil (avocado, citrus etc.)
  • Jellies and jams
  • Puree and pulp
  • Bottling/ Canning
  • Alcoholic beverages
  • High-value additives extraction and nutraceuticals production.
  • Medicinal products including cannabis
  • Fibres including cotton & hemp

Rail infrastructure

The freight rail system of Limpopo is of strategic and economic value with significance in transporting freight not only to the interior of South Africa, but also beyond its borders. Three main railway lines are of importance:  Pyramid South (Pretoria) to Beit Bridge line – connecting with the Zimbabwean system and Dar es Salaam; Branch from Pyramid South to Lephalale: serving coal, iron ore and chrome mines; and  Arterial line from Goudplaas on the Beit Bridge line: running south-eastwards to the Maputo line at Kaapmuiden and serving the Tzaneen, Letsitele agricultural area in the north, and the mining area on the Phalaborwa branch in the south.

Water and sanitation

The Musina Dam has been conceptualized as part of the sustainable water policy to meet the long term water demands of the MMSEZ. The project pre-feasibility phase has been approved and currently at the initial stages of project preparation. The Musina Dam concept is centred around a main water storage, to be constructed in the Sand River. The Sand River’s own 38 million m3 denaturalised annual runoff is augmented by harvesting approximately 200 to 400 million m3 per annum from the surface water overflowing from the Limpopo Rivers’ 1858 million m3 denaturalised annual runoff. Water is harvested from the Limpopo River through one or more methods, which are either pumped, or gravity fed through a combination of weirs, wells, sumps, channels and extraction structures. Water will then be distributed from the main water storage (Musina Dam) to a series of other reservoirs some of which may be located closer to points consumption such as the MMSEZ South site, Tshipise agricultural hub, the town of Musina, mining industries, etc.

Airport infrastructure

Polokwane International Airport is approximately 200km away from the town of Musina

Maritime facilities

The Maputo terminal is approximately 670km away from the MMSEZ. It is Southern Africa’s nearest port to the rapidly developing mega-markets of Asia and is the closest deep-water port from Gauteng, Mpumalanga, and Limpopo. The port has 16 linear berths, totalling 4000m, with rail and road connection to the SEZ.

 The port of Durban is situated on the east coast of South Africa. The port of Durban operates 24 hours a day and 365 days a year. The port facilities range from a container terminal, car terminal, dry-bulk, multi-purpose terminal, etc.

The Richards Bay Multi-purpose Terminal has the capacity to handle a variety of cargo types such as break bulk, neo bulk and containers. It currently operates 24 hours a day and 363 days a year.