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Premier Ace Magashule said the Special Economic Zone would start operating sometime next year.
The partnership was signed by Magashule and Martin Gunther, the German minister of economics, labour and ports.
"The first phase of the project will be a vehicle distribution centre where motor vehicles from Durban Harbour and other areas would be transported by rail and road.
"From Harrismith these vehicles would then be distributed to other parts of the country," Magashule said.
"As the Free State government and our development partners, we believe this project will inject about R300-million annually into our economy.
"Apart from being a vehicle distribution centre, the area will also be a food processing park that will include potato crisp and cereal manufacturing plants. This is our way of fulfilling our promise of creating jobs for ou people."
Magashule said a feasibility study had already been completed and various manufactures had expressed interest in the food processing hub.
"We intend to create about 285,000 jobs in the next ten years. This will translate into creating an average 28,500 jobs per annum," he said.
MEC for economic development Mamiki Qabathe said they had entered into a partnership with a German company regarding the distribution of motor vehicles.
"We would be distributing German-made vehicles such as BMWs, Mercedes- Benzs as well as Mini Coopers and KIA brands.
"We are not only targeting people in Free State. The project will be geared to employ people from other provinces as well.
"We will diversify our strategy of creating jobs through economic empowerment and other initiatives," she said.
Qabathe said mining was no longer the biggest employer in the province. To counter this, she said, the provincial government had decided to invest heavily in agriculture.