Coega shows the IDZ way

Coega shows the IDZ way

AS the recently launched Saldanha Industrial Development Zone (IDZ) looks for traction, there might be a few lessons to learn from the Coega IDZ just outside Port Elizabeth.

Perhaps the biggest lessons are the value of patience and determination, because the best laid plans canoften take longer than expected to unravel and do not eventually materialise without an extraordinary effort by the IDZ prime movers.

There are already high hopes for the Saldanha IDZ, with Trade and Industry Minister Rob Davies last year reminding that the feasibility study had shown that the Saldanha Bay IDZ could potentially contribute 86% to the gross geographic product of the Western Cape and create in the region of 12,000 new jobs. What’s more the IDZ is punted as capable of wooing foreign direct investment of around R9,3bn over a quarter of a century.

For those that need reminding, the Saldanha IDZ is also premised on the fact that Saldanha Bay is strategically located to serve as a service, maintenance, fabrication and supply hub for the burgeoning African oil and gas sector. Late last year German company Oiltanking GmbH committed to a joint venture with a number of local enterprises to set up a commercial crude oil storage and blending terminal at Saldanha. When Coega was first mooted in the late nineties, there were grandiose plans for mining giant BHP Billiton to build R20bn aluminium smelter–which would anchor the IDZ. These key plans have not quite panned out as envisaged.

But amazingly Coega managed to press on and is now showing signs that this much maligned project might actually form a rather vibrant economic hub. Almost 12 years after the initial construction at the port began, and seven years after the first investor started operating in the IDZ, Coega announced it had signed 10 clients at an investment value of just overR1,8bninthe2013/14 financial year. Christopher Mashigo, Coega Development Corporation (CDC)Business Development Executive Manager, said Coega had broken through the psychologically significant double digit barrier for new investments. He said that by working with a “strong and dedicated multi-disciplinary team,” Coega had clinched investors across diverse sectors –including the manufacturing, logistics, chemicals, renewable energy and automotive industries.

Mashigo said the CDC had sent business development managers upstream so they would better know the value chain. This meant getting to know where the financial decisions lie to get projects “unstuck” and the pipeline converted into signed investors. “At the start of the financial year, the CDC CEO Pepi Silinga, mentioned a target that became a call to action, a magic number. The response was interesting. Some said it was suicide in a performance arena that condemns failure to achieve. Pepi Silinga wanted us to dream an impossible dream in a changeable economic climate – a dream that would turn everyone into a salesman.” Mashigo said in the first quarter of the year no investor had been secured. “By the time the second quarter rolled on through, only 10% of the target had been reached, but the Board said it was too late to change the targets and the challenge became entrenched.”

Mashigo said the challenge required creative innovation indeal-closing that was not standard. He said the entire commercial and business development teams - including executive management, the chief executive and board - were also put on perpetual standby to bring home conversions. “To go from 10%of an impossibledreamto111% makes it very special. I can proudly say we have signed 10 new investors in what was arguably the most difficult year in a long time.” The 10 investors were SAMRT for R400m, Qtech Moulding R23m (both automotive,) Digistics SA R20m, ID Logistics R35m (both logistics,) Afrox SAR300m for a new air separation unit, No. 1 Corporation R40m (for agro-processing,) ITPASAR30m for a manufacturing plant, Ulba Tantalum Africa R200m (chemicals,) Powerway/ Sungrow JV – Inverters R127mandPowerway/JA Solar JV R666m (both renewable energy.)

Mashigo said about 60%of these investments would be commencing or commissioning within this calendar year. “This means we are establishing a trend in the IDZ that new investors signed in one year and on the ground in the next … there is evidence of momentum after a dearth of activity.” Mashigo stressed the diverse investments played into Coega’s strategy of attracting a wide range of catalytic and turnkey investments that would enable future growth within the IDZ. He also said agro-processing had shown “a fantastic coming of age” in the IDZ, and the integration with the port, as well as back-of-port logistics, was solidifying the Port-IDZ-rural hinterland connection.

“Coega has carved a niche as a platform for the cold chain, linked particularly to perishables, while the port has the necessary infrastructure for their distribution with 1682 refrigeration plug in points – a convenience not found elsewhere in the country.” Today the CDC’s effort at the Coega IDZ have created over 50,000 jobs since inception, have 23 operational investors and boasts an investment portfolio in excess ofR140bn. Let’s hope the Saldanha IDZ can follow suite…just bigger, better and more quickly.


By Jenni McCann

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