Today saw this interesting article on The Engineering News' website: the DTI is considering the establishment of a special economic zone (SEZ) for platinum linked to the production of fuel cells.
"DTI director-general Lionel October tells Engineering News Online that a DTI team is working with the participants to determine the economic viability of establishing a central platinum hub with satellites to allow for locational flexibility.
“Some of the provinces and our local companies have been working on moving into the commercialisation of fuel-cell technology, so definitely this could be one area that we designate an SEZ,” says October.
The South African government is hoping its new SEZs Bill and policy will create the framework for the development of new industrial nodes outside of the traditional industrial heartlands".
As with these sorts of plans and the articles about them, much is made of South Africa's supply of platinum and the global demand for fuel cells. I do not know enough about the industry to evaluate the size or value of this opportunity, but the last part of the quote has me worried - the traditional heartlands are agglomerations because they work.
The article goes on to say:
"October makes the point that South Africa’s SEZs must be designed to offer quality infrastructure, and that the incentives that go with them must be seen as "top-ups" rather than their central purpose".
"A prime location is being sought for the creation of a kind of ‘Platinum Valley’ that emulates the great Silicon Valley success of the US".
The geographical economics literature clearly shows that enduring agglomerations are build on both internal and external economies of scale. Surely, the North West province has the internal economies in the mining of platinum, but it is not clear that this is the case in the production of fuel cells. Is there a market failure here that requires a "big push" of infrastructure development or top-up incentives? I am not sure. This may be an academic's concern but I would like to see a hard-hitting study of the fuel cell product space. Would the SEZ have the thick (high-skilled) labour market, specialised suppliers of intermediate inputs and knowledge spillovers to sustain a real agglomeration?