Category: Industry

#177- Align special economic zones with intermodal freight facilities

With an extended area zoned for the OR Tambo special economic zone, the Department of Trade and Industry is under pressure to set priorities straight. But, they don’t know that yet. What matters is delving deeper into the SEZ implementation framework and getting the inputs right: industry, logistics and human settlements all depend on the transportation networks and their inherent costs-benefits along the value chain.

Consider the rapid rate of freight logistics growth in India, as a case study. Here is a country with not only the population but also the willingness to develop skills and infrastructure in a deeply aligned manner. From their cargo airports, to universities, and transit decisions (high speed rail and bus rapid transit)– they’re not perfect but there’s something they’re getting right. Especially when it comes to

Whether it is their industrial corridors or their freight airport models, there’s much to learn from our fellow BRICS partner. In view of the People’s Republic of China’s rapid and coordinated growth, the development foundations are underpinned by national policy priorities that people put to action in public and private sectors. Furthermore, it’s quite a considerable development to see the Indian economy focus on a structural form oriented toward building and entire network of industries along a single corridor. This not only changes the landscape of urban and rural areas there, but it unlocks the potential for real economic development.

Service offering is key

“Rail needs to market itself as a one stop shop through formal arrangements with road transporters, ICD operators, and logistics companies. To deliver this, the location, planning, financing, development and operation of intermodal freight terminals should be conducted jointly by private sector logistics companies and the rail operator.”

—Duncan Pieterse and colleagues.

At one of the Transport Special Interest Group meetings, Transnet Ports and Terminals (TPT) revealed that they were leaning toward a single point of contact for freight transport. Practically speaking a web portal which would enable seamless and complete communication, consolidation and cooperation within and across various stakeholders in their respective logistics environments. Transnet Ltd, released an app platform during Mr Siyabonga Gama’s days, Spotlight, which aimed largely to serve as a single point of contact for freight shipment booking and tracking. However, word-of-mouth remains quite the talking point about Transnet Ltd’s service offering and quality. With the freight market growing for Transnet Ltd, in terms of volume and a nearly constant market share it is important to consider the factors which influence improved logistics performance at a national and regional level. 

What happened in China did not stay in China

The People’s Republic of China (PRC) is always an interesting example largely due to its size, economics and rapid nature of reforms. While at a macro-level it is reasonable to note its growth in industry, through cheap manufacturing which later evolved to high-end manufacturing complemented by higher education, increasing incomes and leaning towards a service economy. This was not automatic. An OECD report reveals that China’s competitive footing comes from a number of reforms in state-owned companies’ corporatisation; induced education access; a culture of saving; and a bulging private sector all contributed to the PRC we see today. In one of the most comprehensive accounts on the economy of the PRC is Winner Take All by Dambisa Moyo, she argues that: 

“China’s fleet has also mirrored its growing importance in shipping, increasing from 1 367 to 3 127 vessels in the decade between 2001 and 2011. Today, around 50 percent of China’s fleet is built in China by state-owned Chinise companies like Cisco. Of China’s fleet, bulk carriers represent the majority of its commercial sea craft, reflecting its voracious appetite for commodities.” 

CHINA & INDIA million ton kilometres inland based on OECD data

The logistics and supply chain networks which underpin the Chinese economy’s development contributed to the need to accommodate industry for both domestic activities and exports with million-ton-kilometres growing from 1.1 million ton-km in 2007 to a souring 6.6 million-ton-km by 2018—little over a decade later. The OECD data reveals the dramatic benefits of the underlying industrial and supply side investments in logistics and supply chain infrastructure which accommodate a six-fold rise in service demand. It is not a question what comes first. However, recent discussions about the future of Africa-China relations reveal arguments that Africa will need to gear up to accommodate the rising industrial needs globally as the shift toward India and eventually Africa. The shift from lower-end manufacturing is driven by how economies which lean into industry tend to use manufacturing as a springboard for service industries and more higher-end technologies. Thus a declining inclination, on average, to build similar lower-end industries. From “Made In China” being associated with cheap or fake products, to major brands investing heavily in China as an assembly or complete production destination. Now the same trend is emerging with other countries. 

India’s focus on township industrialisation

In the same chart, India follows suite, less dramatically by gradually increasing its million-ton-km from 1 million to nearly 3 million ton-km by 2017. Both countries have an important framework on logistics corridors and zoning— India’s story is a little more pronounced. The Delhi Mumbai Industrial Corridor (DMIC) is a project deeply rooted in balancing the framework of special economic zoning with regional development planning for socio-economic gains. In brief, the DMIC reveals a massive undertaking which develops SEZ in key cities and industrialising townships in addition to providing a freight corridor which connects these SEZ in a coordinated manner. According to the DMIC, “the programme will provide a major impetus to planned urbanization in India with manufacturing as the key driver. In addition to new Industrial Cities, the programme envisages development of infrastructure linkages like power plants, assured water supply, high capacity transportation and logistics facilities as well as softer interventions like skill development programme for employment of the local populace.” This is consistent with the current dynamics of the urban economy which without increased efficiencies may miss the opportunity to scale the skills, industrial and service related developments. However, it is more than just a regional project connecting infrastructure, services and industries—it also connects people to new types of work, quality of life and urban planning. 

Along this vein, I found an interesting policy brief by Chandrima Mukhopadhyay in which she poses an interesting line of argument: 

“…the DMIC is introducing a new scale and kind of urban settlement in India and that, based on its key characteristics, this represents the emergence of a strategic approach to mega region development in India. Since delivering and managing such large scale urban settlement is new in an Indian context, demanding new kinds of skill and specialisation, I will suggest that the else provided by wider debates on mega regions can assist policy makers in evaluating the DMIC, and other proposed economic and industrial corridors that are likely to change the physical, economic and political landscape of India over the coming years.”

Transport and industrialisation in SA

Customer service offerings matter for anyone attempting to have access to a consignment, commodity or services. This is the starting point for all logistics and supply chain solutions. China shows that at a national level, translating these service offerings into an actual, competitive, valuable and attractive offer significant reforms are required at an institutional level and at a capital level. India’s direction reveals that there is much more to industrial development than simply designating land: what ever industrial activity is emphasised it needs to lean into how the community affected by the new developments interact with them today and into the future. This is not a transport planning, or a private business or a policy issue. Rather, it is a human issue which should be the core incentive for industrialisation through special economic zoning. Hence the Department of Trade and Industry’s framework for SEZ is quite key. They reveal quite clearly and in detail that developing the future of industry requires residential, commercial and logistics spaces which will harness information technology to improve the service offering. On national level, National Treasury’s economic policy proposal also highlights similar themes, but it focuses aggressively on the structural issues SA is confronted with. This in addition to the skills needs, small business development and incentives for investment are part of the narrative for improved competitiveness. However, none of these are possible without a network of industries supported by the right kind of transportation infrastructure.