South Africa has several special economic zones to support its automotive industry. But are they working optimally?
South Africa has several special economic zones to support its automotive industry. But are they working optimally?
The State of Automotive SEZs
South Africa has generated R14,8 billion in revenue and created more than 30,000 jobs from its Special Economic Zone( SEZ) developments. But how are they benefiting the automotive industry and downstream suppliers?
A World Bank study surveyed businesses across all 13 of South Africa ' s SEZs. It also compared the local SEZ environment with those in India, China, Poland, the United Arab Emirates and Jordan.
What makes this World Bank data analysis and benchmarking so relevant for businesses in the South African automotive industry is that India, China, and Poland are among the most powerful emerging automotive economies globally. This makes the data set particularly relevant and the World Bank team ' s recommendations authoritative.
According to the World Bank research team, South African SEZs should apply the 15 % corporate tax rate to all SEZs. Other recommendations include creating more private-sector industrial parks within SEZs, rather than relying on government development for core infrastructure. This argument flows into the other significant recommendation, which prioritises buildto-let mixed-use complexes to attract SME tenants, who are proven to be among the best employers and technology adopters.
The tax issue
Capital costs in tooling and automation upgrades are a major cost for companies in the automotive supply chain. Especially tier 1 suppliers, which need the scale and technical expertise to fulfil the needs of
local OEMs, building vehicles for some of the world ' s most demanding global markets, like the EU and North America.
Six of South Africa ' s official SEZs have a qualified 15 % tax rate. The likelihood of the tax benefit extending to other SEZs is very low, as the National Treasury is determined to end the existing 15 % corporate tax rate for SEZs by 2031.
At a time when suppliers in the automotive industry are required to invest more in tooling and equipment for future new energy vehicle production, margins are under pressure. That makes the 15 % corporate tax rate a valuable operational safety net. If it is due to end in a few years, it materially changes the risk profile for high-tech suppliers wishing to invest in South African SEZs.
Concentration risk
The Eastern Cape hosts South Africa ' s pioneering SEZ, which is also Africa ' s largest. The Coega SEZ, which serves the greater Gqeberha and Kariega automotive industry, should theoretically be empowering major OEMs such as Volkswagen, Isuzu and Ford, which all have dedicated automotive and powertrain assembly in the area.
Coega recently won the award for South Africa ' s best SEZ, but to many, it still has not reached peak utilisation. As the biggest SEZ on the continent, Coega has 57 tenant companies, but 36 of those are non-manufacturing enterprises, which seems odd considering the adjacency of the automotive industry, which should be the primary customers for the Coega SEZ. There are questions about underutilisation at Coega, too. Chinese OEM BAIC established a Coega assembly facility in 2018, but it has since produced only a trickle of vehicles annually.
Further up the coast curve, the East London IDZ is heavily reliant on Mercedes-Benz ' s Buffalo River assembly plant, which is currently operating at low capacity. The national government has undertaken a notable port berthing upgrade at the East London IDZ, allowing two large car carrier vessels to berth simultaneously.
WORDS IN ACTION 14 JULY | AUGUST 2026