Coega ‘taking off in a big way’

10 January 2006

Coega CEO Pepi Silinga told journalists at a year-end briefing in 2004 that the Industrial Development Zone (IDZ) near Port Elizabeth in the Eastern Cape would secure its first tenant in 2005.

In May 2005, Silinga made good on his promise, announcing that Belgian-owned Sander International Textiles was to become the development’s first tenant, in a deal worth R200-million.

Go to the Coega Development Corporation A high-end niche textile producer, Sander will invest the R200-million in building a sophisticated weaving mill, taking a 20-year lease on 10 of the 40 hectares allocated for the textile cluster of the IDZ.

Local empowerment company Ican Foundation will own 51% of the project, which is expected to turn a profit after two to three years.

Gathering momentum
Since then, Coega has picked up a second tenant, German industrial group MAN Ferrostaal. Business Day reported in October that Ferrostaal had approved a €80-million (R640-million) investment for the first phase of a stainless steel precision strip mill at Coega, with a further €120-million (R960-million) envisioned in a second phase.

A third tenant was announced in November. South African company Straits Chemicals will, with an Asian partner, build a chemical factory worth R1.1-billion at Coega.

In addition, Canadian firm Alcan’s long-awaited decision on building an aluminium smelter at Coega is expected in the first quarter of 2006.

“Coega has taken off in a big way,” Silinga told Engineering News.

“If you look at the total value of investments we have signed up since May, then you can say that we have been averaging an announcement of an investment of R500-million or more in the Coega IDZ each month,” he said.

SA’s largest infrastructure project
The Coega project, comprising an industrial development complex and deepwater port 20 kilometres east of the city of Port Elizabeth, is the single largest infrastructure development project in the country since 1994.

Located on the south-eastern coast of the country, in one of the poorest provinces in South Africa, the project is the first industrial development zone – and one of the largest – to be established in South Africa.

The project falls in line with South Africa’s vision to be a manufacturing centre for the world; President Thabo Mbeki has officially declared the Coega IDZ a lead project in South Africa.

The IDZ is already well serviced by transportation networks, a skilled labour force and utility services. It boasts world-class industrial infrastructure, including inter-modal transport linkages and cost-effective bulk services.

Located in the Nelson Mandela Metropolitan Municipality, Coega is being developed by the Coega Development Corporation (CDC) on 12 000 hectares of industrial land. Although the CDC is a private company, national and provincial government are the only shareholders.

The government has ploughed about R8-billion into the project, including R3.1-billion for the new port, R2-billion for infrastructure in the IDZ, and R2.1-billion by state electricity company Eskom for to upgrade the power supply. State rail company Spoornet has invested R500-million in upgrading rail facilities.

Tax break
Alex Liessens, the chief executive of Sander, told Business Report that because of the size of the investment, the South African government had given the project a tax break under its strategic investment programme, which offers incentives to capital investments worth over R50-million.

Construction of the Sander Textiles premises have been completed and should commence full production in the first few months of 2006. The project is expected to create over 500 permanent jobs.

Coega spokesperson Vuyelwa Qinga-Vika said that Sander would produce a specialised high-end niche product – fire retardant fabrics – for the automotive and transport industries, including ocean liners and aircraft, and for the hospitality industries.

The products are to be exported to North American markets, taking advantage of lower US import tariffs through the United States’ African Growth and Opportunity Act (Agoa), which favours African countries.

Strategically placed
On the MAN Ferrostaal deal, Qinga-Vika said the Coega Development Corporation was working in close collaboration with the government and MAN-Ferrostaal to bring the steel mill project to finalisation.

“We have the raw materials, a strategically placed location and the newest deepwater port for an easy logistics chain, and government is continually making the country one of the best locations in which to do business,” Qinga-Vika said.

“As a result more investors now have Coega on their radar screen when looking at locations for investments around the world.”

Construction is due to start on premises for MAN-Ferrostaal and Straits Chemicals later in 2006. reporter