Drive to improve Coega’s attractiveness to investors

Mark Allix

IN THE ZONE: The Coega industrial development zone, next to the port of Ngqura, could be proclaimed a special economic zone, which will offer better economic incentives for investors
IN THE ZONE: The Coega industrial development zone, next to the port of Ngqura, could be proclaimed a special economic zone, which will offer better economic incentives for investors

COEGA Development Corporation (CDC) executive manager of business development Christopher Ma- shigo is banking on the government’s proposed Special Economic Zones (SEZ) Bill to “make it into the statutes book before the middle of this year”.

This, he said, would be first prize for the Coega industrial development zone.

The zone is intended to be proclaimed an SEZ from an IDZ and will benefit from economic incentives including a tax rate of 15% for investors.

Mashigo said certainty about incentives that had not been available to IDZs “is key to making Coega’s case stronger in its efforts to secure new investments amid serious competition”.

“It will be a challenge if this bill is not among the prioritised pieces of legislation before the electoral term of government ends on April 22‚” he said.

The government’s National Industrial Policy Framework in 2007 aimed to help South Africa halve poverty and unemployment by this year‚ by stimulating the development of labour-intensive industrial endeavours.

But the stark reality is that whatever plans for jobs and industrial development the government has subsequently come up with have long gone cold.

This is borne out by Wednesday’s statement by the Manufacturing Circle‚ which said its fourth-quarter survey showed confidence in the sector was “fragile”.

Weak demand‚ stiff competition and labour instability were some of the factors affecting manufacturers. Most companies surveyed expect further industrial action‚ sociopolitical instability and a rise in input costs as a result of the weak rand.

An Adcorp survey this week said retrenchments were at a 10-year high – mostly in manufacturing and construction. That makes President Jacob Zuma’s election pledge to create six million jobs in the next five years a little hollow.

The Coega IDZ, which is part of a value chain for a large part of South Africa’s critical automotive industry, has recently drawn about R2-billion in new investment. JSE-listed gases and welding company Afrox is building a R300-million plant at Coega to service increasing demand for industrial gases in the Eastern Cape.

Afrox MD Brett Kimber said of the CDC: “Their assistance has seen a culmination of business coming together with industry.”

Rival company Air Products will start producing nitrogen and oxygen in the fourth quarter from its own R300-million factory in the zone.

China truck maker FAW has invested R600- million in a truck production line in Coega that will begin operations in July. It will be supplied by Air Products.

Afrox will also service Agni Steels SA‚ a R400-million mini mill set to soon start production of mild steel billets for export. It will also provide industrial gases to DCD Wind Towers in the IDZ‚ a R300-million investment in the renewable energy programme by heavy engineering group DCD which starts production this week.

But while development of the zone and the adjacent Transnet-run Ngqura port has been going on for about 14 years‚ they still show a substantial financial deficit.

Coega never managed to find an anchor tenant after then aluminium giant Alcan pulled out of the IDZ some years ago due to fears over power supply. The Department of Trade and Industry has acknowledged the IDZ programme of 1999 did not “perform as expected”.

But reports from the recent Mining Indaba say the African Development Bank plans to make a large investment in South Africa’s automotive sector along with the Industrial Development Corporation. This follows a R200- million investment in Kalagadi Manganese‚ which plans to rail its manganese ore from Hotazel in the Northern Cape to Coega for smelting at a multibillion rand smelter it has not yet built.

The Public Investment Corporation‚ meanwhile‚ is spending R3.9-billion to buy ArcelorMittal’s 50% stake in Kalagadi on behalf of CEO Daphne Mashile-Nkosi and a consortium‚ including communities and employees.

 

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