Plans for South Africa's third deep-water bulk port to serve a 10 000 hectare industrial development zone have been given the green light by a battery of 47 studies costing over R9-m.
What is needed now is a commitment by central government to provide at least some financial backing and to commit itself to passing the necessary regulation - quickly.
A Ôyes' decision would turn Coega, with its geographical advantages, into the new gateway for international business to South Africa, says co-chairman of the Coega IDZ Initiative Company and deputy mayor of Port Elizabeth, Errol Heynes.
It would also improve the country's bulk-handling capacity and international competitiveness, be a catalyst for economic growth and unleash the potential of the Eastern Cape, bringing relief and employment to the region, he says.
The detailed report, which has taken 14 months to complete, concludes that the project is viable and recommends that it proceeds to the implementation phase. In addition to R4,5 billion of private sector investment in individual projects, the public sector will be required to facilitate the infrastructure for the project. What is needed for the region to gain the benefits of all this investment is a commitment to spend R1,5-bn on building the port and the first phase of the industrial zone.
The pressure is on government to provide at least some of the R1,5-bn because internationally it is accepted that governments are responsible for basic infrastructure. Although the IDZ would be targeted to recover its set up infrastructure costs over the first ten years, cargo handling charges, land rental and utility revenues expected to be generated by the core industries in Phase 1 will not make the IDZ and port financially attractive as a wholly private sector investment, says Heynes.
Warning to government This is seen as clear warning to government that the private sector will not be able to come up with all the funding needed for the Coega development. Interviewed after the cabinet briefing last week Dr Paul Jourdan, the special projects co-ordinator for Trade and Industry Minister Alec Erwin said: We need the interest of a consortium which says Ôyes, we are going to build the port'. He went on to say that speed was of the essence because the Gencor and Kynoch projects presented a window of opportunity which would probably not open again for another ten years. In contrast, the Coega IDZ company does not expect the private sector to fund the whole project. Public private partnerships will be a key element in the development of the IDZ, sharing financing, risk and rewards, says Heynes.
Money back within a few years His statement also draws attention to the fact that government is guaranteed to make its money back within a few years. The economic cost benefit analysis projects government revenues of R5,8 billion from personal and company tax, VAT and duties by 2005.
The same studies show that a private investor can expect no more than a 2% cent return if it were responsible for the whole project. The proposed harbour development is believed to be unique in Africa in that it has enough guaranteed business to allow it to make a small profit, even before building starts. However, Gencor, which is one of three anchor tenants, has warned that it wants an answer by the middle of the month if it is to go ahead with the building of a R2,5-bn zinc refinery at Coega.
If the Gencor refinery goes ahead Kynoch will build a R540-m fertiliser plant alongside to feed off the by-products of the zinc refinery. Plans have already been approved for a R500-m PPC cement factory in the area, but PPC is known to be waiting for a decision on Coega before finally committing itself. Feasibility studies A total of 47 government-funded feasibility studies have been done in record time and at a cost of R9-m to assess the viability of the Coega industrial zone and harbour.
The final report estimates that the 3 year construction period will generate 26 000 jobs, says Heynes. Thereafter, the anchor projects offer 1000 direct jobs and a multiplier effect which is expected to generate 13 000 permanent jobs throughout South Africa. The building of the deep water port is expected to take three years and cost about R1 billion while putting in basic IDZ infrastructure is estimated at R500 million - both 1997 prices. This sum would allow for R90million for environmental and social measures. Multi-user port The plan is to provide a port that is initially constructed to handle bulk ores but one that can ultimately be developed as a multi-user harbour to serve the needs of the Coega IDZ as development takes shape.
Apart from the R3,54 billion capital investment plans for Coega (Gencor R2,5 billion; PPC R500 million and Kynoch R540 million), additional potential candidates could add a further R4 billion through steel handling, industrial gases, non-ferrous industries, vehicle components and food processing etc.
For the three year construction phase of the port and IDZ, it is estimated that 26 000 jobs would be generated. The core industries offer 1 000 direct jobs and in total, the ripple effect of the initial projects are expected to generate 13 000 permanent jobs throughout South Africa. In addition, with the right conditions in the IDZ, additional industrial investment will lead to many more jobs.
