Answer to Question #240283 in Macroeconomics for Hope

Question

Briefly explain the weakness of the RSA's industrial Development Zones

Answer 1

Solution:

The RSA’s Industrial Development Zones were created by the South African government in order to reposition itself in the world economy. The main focus of SA’s IDZs was to attract Foreign Direct Investment and export of value-added commodities. The following are the weaknesses of RSA’s IDZs:

1.). The IDZs have been making huge losses in revenue and profits despite the various tax exemptions and incentives provided. This means their overall performance has deteriorated and they are no longer making profits which may lead to their collapse in the long run.

 

2.). The majority of income earned from IDZs is based on manufacturing activities, while other activities only taking a small share. This lack of balance is affecting IDZs overall performance.

 

3.). Most of the business people are more interested in SEZ so that they can obtain them at cheaper rates and develop a land bank for themselves.