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Kalagadi smelter anchors Coega
Kalagadi smelter anchors Coega

Kalagadi smelter anchors Coega


Business Day - Oct 24th 2011, 08:52

Some 10 years in the making, the Coega Industrial Development Zone is starting to come of age. It takes at least that amount of time for such zones to begin to mature, and even longer from inception. 

Investment in the zone has now translated into 2789 operational jobs, 3235 construction jobs, and nearly 26000 indirect and induced jobs mainly in the agro-processing sector. And according to Christopher Mashigo, acting executive manager of business development for the Coega Development Corporation, the value of delayed projects has fallen to R3,2bn in August from nearly R10bn in the same period last year.

But, most importantly, he says a decision by the Department of Trade and Industry to be implemented at the end of next month will allow qualified investors in the zone to deduct 100% of investments exceeding R200m.

Until now, the zone has relied solely on world-class infrastructure to draw investment, apart from a range of incentives given to the region’s key automotive manufacturers. First conceived in 1997, development has been of a stop-start nature. The zone was also designed for mega-projects, but there has been some reflection about this.

About 20km northeast of Port Elizabeth, the zone includes the port of Ngqura, which is run by Transnet. Built in 2002, the port began commercial operations for container traffic in late 2009.

But so far, the zone has attracted less investments than money spent, and the global recession, allied to SA’s power crisis in 2008, has caused the cancellation, or delay, of numerous big projects.

Erstwhile Canadian aluminium giant Alcan pulled out of a proposed $2,7bn smelter over concerns about electricity supply and the R9bn SeaArk prawn farming project was stillborn for lack of money and environmental reasons.

Now, though, Kalagadi Resources’ R4,2bn, 320 000 ton a year manganese smelter will become the first real industrial anchor, albeit not as big as was first hoped for. But Coega’s existing 400MW electricity substation is more than large enough to power the toughly 170MW plant, and Eskom has guaranteed the needs of tenants.

On Friday, Transnet CEO Brian Molefe told the Nelson Mandela Bay Business Chamber that R3bn would be spent on the ports of Port Elizabeth and Ngqura — more than doubling the latter’s container capacity. Mr Molefe also confirmed that the Kalagadi manganese smelter would be built at Coega, and the rail link between the development zone and the Northern Cape would be upgraded to ship 16-million tons of manganese a year, mostly for export.

This manganese project is just one facet of an R11bn mine, sinter plant and smelter project stretching between Hotazel in the Northern Cape and the Nelson Mandela Bay metro area.

"The term sheets have been received from about seven banks on the debt portion of the money we are raising. Now we are negotiating the legal agreements," says Daphne Mashile-Nkosi, chairwoman of Kalagadi Manganese, a company 80% held by Kalahari Resources, and 20% by the Industrial Development Corporation. She says the group hopes to sign off by the end of next month , and conduct the ground-breaking for the smelter in Coega shortly thereafter.

Manganese is a primary ingredient of the steel industry, and has numerous other uses including in metal alloys, agrochemical processing and pharmaceuticals.

Most recently, FAW, one of China’s largest vehicle makers, confirmed plans to manufacture a range of commercial and passenger vehicles in the zone.

Numerous smaller projects have also gone ahead in the 2010-11 financial year, including foreign- invested automotive projects run by the Coega Development Corporation in the Nelson Mandela Bay Logistics Park in the nearby Despatch-Uitenhage area.

Operating investments in the zone itself in the period, and those near financial and regulatory closure, include two business process outsourcing ventures, a general logistics service provider, an automotive logistics business, and a dairy products processing plant.

In addition, the construction of a 330MW peak-load power station project led by GDF Suez of France is soon to commence, and regulatory processes pertaining to a wind energy project are under way. But much bigger projects, such as a R30bn combined-cycle gas turbine, face considerable delays over funding and environmental concerns.

And the real giant of the piece, PetroSA’s plan to build an about R80bn refinery by 2018-19 at Coega, is likely to be scaled back, even as SA’s demand for transport fuels already exceeds refining capacity. "We are not even at the environmental impact assessment stage yet," Thabo Mabaso, PetroSA communications manager, says. 

Read more about: logistics | economic | services

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