Investing in the Free State

The Free State is one of the world’s largest gold producers, with mining the major employer. Its other major economic activity is agriculture. It is also a leader in the chemicals industry, being home to the giant synthetic-fuels company Sasol.

Sasol petrochemicals plant in Sasolburg, Free State. (Image: Brand South Africa)
Sasol petrochemicals plant in Sasolburg, Free State. (Image: Brand South Africa)

By John Young

The Free State is South Africa’s most centrally located province. It has borders with most other provinces and has Lesotho as its eastern neighbour.

Important road and rail links traverse the province, including two of the busiest national highways, the N1 (Cape Town-Johannesburg) and the N3 (Durban- Johannesburg).

Plans are in place to leverage this advantage through the creation of development corridors (Gauteng-Free State-KwaZulu-Natal and N8 Corridor), the bolstering of train services (freight and passenger) and the promotion of warehousing and storage opportunities.

The Harrismith Logistics Hub (HLH) on the N3 is at the centre of these plans, and some success has already been achieved in persuading companies to locate their businesses there.

Mining

Mining and agriculture were for many decades the bedrock of the Free State economy. The north-western part of the province sits on top of a rich gold-bearing reef more than 400km long, known as the goldfields region. South Africa is the world’s largest gold producer, and the country’s largest gold-mining complex is Free State Consolidated Goldfields, with an area of 330km⊃2.

Agriculture

Large percentages of South Africa’s agricultural production, particularly grains, originate in the Free State. More than half the nation’s sorghum, nearly half the sunflower and more than 30% of all wheat, maize, potatoes and groundnuts come from the fertile plains of the western and northern Free State while the valleys of the east produce almost all of South Africa’s cherries and asparagus. Livestock and flowers are other important agricultural products.

Need for Manufacturing

Critical to re-engineering the Free State economy is the necessity of building manufacturing capacity. As Premier Ace Magashule put it in his 2012 State of the Province address, “Undoubtedly we require a comprehensive industrial development strategy for the Free State.”

The premier was talking in the context of provincial growth rates of between 2% and 3% for 2010 and 2011. In his 2013 State of the Province address, however, Magashule noted that the Free State’s contribution to the national economy declined by about 11% between 1996 and 2010, and is projected to decline by another 4% between 2010 and 2015.

With the primary sector (notably mining) declining in importance in the province from 50% of economic output to 13%, employment numbers have dropped.

Finance MEC Seiso Mohai addressed this problem directly in the Provincial Budget Speech in March 2013: “We must transform and develop the main industries in our province, namely, mining, agriculture, manufacturing, tourism and infrastructure (both physical infrastructure and ICT). We must create and sustain the value-adding production sectors in mining and agriculture through beneficiation and agri-processing. We must also expand the manufacturing sector beyond the dominance of petrochemicals to include textiles and food processing as large portions of the manufacturing sector.”

Opportunities for growth

The current state and shape of Free State’s economy clearly presents huge opportunities for investors in the manufacturing sector. The Free State Development Corporation (FDC) is actively searching for investors, and giving them a helping hand, as in the construction of factories in the Harrismith and Botshabelo areas.

The opening of a Makro store in Bloemfontein, and extensions being carried out on other retail malls, indicate that a recovery in the provincial economy is under way. Massive investments by companies in the oil and gas and petrochemical sector in Sasolburg have also boosted the economy.

In agriprocessing, a number of opportunities exist in the province. Some products that are being explored are cherries, asparagus, vegetables, wholesale meat, leather and increased seed production in the province’s eastern reaches.

Tourism is another sector that is being targeted as the province seeks to diversify its economy away from an over-dependence on agriculture and mining.

Planning

Economic planning for the province is attempting to integrate industrial development, rural development and the creation of sustainable small-, medium- and micro- enterprises.

New economic drivers being targeted include logistics, ICT, innovation and research, agri-processing and manufacturing in sectors such as pharmaceuticals.

The Sasolburg complex in the province’s northern section is a highly industrialised and efficient focus of high-level production. As the headquarters of Sasol, and the site of the company’s wax and chemical plants, the town is a major contributor to South Africa’s manufacturing sector. Several other chemical companies operate in the town. ChemCity is a business incubator downstream project promoting the sustainable use of byproducts from Sasol’s many plants.

Sasol has recently made a series of investments to increase its capacity, with the wax production project representing the single biggest investment in any one project in the province’s history. In 2012, Omnia opened its new nitric acid plant, a development that cost R1.4-billion.

Geography

The landscape is characterised by wide open spaces in the west and beautiful valleys in the foothills of the Maluti mountains in the east. The province is sparsely populated, with a population of less than three million people mostly living in the north and east of the province. Sotho is the most widely spoken language, followed by Afrikaans. The region receives its rainfall in summer but sometimes the west and south can experience drought.

The province is relatively well watered, with the Vaal and Orange rivers defining its northern and southern boundaries. In addition, a network of smaller rivers run through the area and run-off from hills and mountains ensure that the good soils of the area are well irrigated.

The Gariep and Vaal dams are major sources of water and venues for recreation, as are the Free State’s lesser dams such as Sterkfontein, Allemanskraal and Kalkfontein. Tourism and aquaculture are just two potential income generators related to these water bodies.

District municipalities

Mangaung Metropolitan Municipality
Towns: Bloemfontein, Botshabelo and Thaba Nchu

Bloemfontein is the main economic driver of the province, contributing about 25% of the gross regional domestic product. The Supreme Court of Appeal is located in Bloemfontein, which also has excellent schools and hosts the Central University of Technology, the University of the Free State and the Mangaung Nursing College of the Free State.

Botshabelo is about 65km from Bloemfontein and has 140 factories located in it, many of them making textiles and clothing. Thaba Nchu lies still further to the east of the provincial capital and is popular with tourists.

The infrastructure of the Mangaung Metropolitan Municipality is well developed and would be able to absorb much more development.

Motheo District Municipality
Towns: Ladybrand, Wepener

The final stop-off point in South Africa for any traveller going to Lesotho is the busy town of Ladybrand in the Mantsopa Local Municipality. Tweespruit is a major sunflower seed production centre. In the Naledi Local Municipality, tourists are catered for on the Highlands of the Maluti Route. The steel bridge over the Caledon River at Wepener is a national monument.

Xhariep District Municipality
Towns: Trompsberg, Koffiefontein, Zastron, Philipollis, Edenburg, Fauresmith, Smithfield

The southernmost region of the Free State is a largely dry area with open grasslands predominating, although it is also home to the Gariep Dam, South Africa’s largest. Crops are produced in the northern parts of the district whereas sheep farming predominates in the south. Trompsberg has the second-biggest sheep-shearing barn in the country.

Diamonds, gravel and clay are mined at Koffiefontein. Jagersfontein is one of the first places where diamonds were found, and it has its own version of the Big Hole to prove it. The town of Bethulie is a good stopping-over place for tourists wanting to experience the water sports available on the Gariep Dam.

The dam is also the site of aquaculture projects which are intended to create employment and tackle food security. The nearby Tussen die Riviere Nature Reserve and the Mynhardt Game Reserve have a variety of wildlife in spectacular settings. Jacobsdal’s Landzicht winery has proved itself as a worthy producer of wine. San rock paintings and Anglo-Boer War sites are plentiful.

Fauresmith hosts an annual horse endurance race and Smithfield is the venue for a ‘Chill’ festival every winter, the ‘Bibber Fees’.

Lejweleputswa District Municipality
Towns: Welkom, Virginia, Boshof, Christiana, Bultfontein, Bothaville

Mining is the most important economic activity in this area, also known as the Free State Goldfields, but it is also the most important maize-growing area in South Africa. Bothaville is the self-proclaimed Mielie Capital of South Africa but it is a name that is well-earned. It hosts an annual maize industry festival and conferences, and it is where Grain SA has its headquarters.

Mining town Welkom is the major urban centre in the district. The town of Virginia is the site of a jewellery school and it is intended that this will form the nucleus of a jewellery beneficiation hub and an IT hub.

The area has tourist assets such as a holiday resort on the Allemanskraal Dam, the Goldfields Wine Cellar in Theunissen and the Willem Pretorious Game Reserve, but there is potential for growth in the heritage sector.

Fezile Dabi District Municipality
Towns: Sasolburg, Parys, Kroonstad, Frankfort, Heilbron, Viljoenskroon

The chemical complex at Sasolburg is the economic driver in the district, which shares a border with Gauteng Province along the Vaal River. The town of Heilbron is another important industrial centre and Frankfort does important agri-processing work. Kroonstad is the subject of a separate article.

A new kraft paper factory has been opened in Frankfort.

A good proportion of South Africa’s grain crop is sourced from this district and when the vast fields of sunflowers and cosmos flowers are in bloom, a marvellous vista is created. The Vaal River presents opportunities for yachting, rafting and resort-based enterprises. Parys is a charming town and Vredefort is home to a World Heritage site – the Vredefort Dome where a meteor crashed to earth.

Thabo Mofutsanyana District Municipality
Towns: Phuthaditjhaba, Bethlehem, Clarens, Harrismith, Vrede, Ficksburg

Tourism and fruit farming are the two principal economic activities of this area which is characterised by beautiful landscapes: the Maluti and the Drakensberg mountain ranges, wetlands in the north, well-watered river valleys and the plains of the north and west. The most famous asset is the Golden Gate National Park.

Industrial activity is undertaken at Harrismith and Phuthaditjhaba, where the Free State Development Corporation is promoting investment. Harrismith is the focus of efforts to create a multimodal transport and logistics hub.

The commercial centre of the district is Bethlehem while Clarens and Ficksburg have become famous for their artists and cherries respectively. Ficksburg has two asparagus factories and, with nearby Marquard, produces 90% of South Africa’s cherries. The north of the district has many sunflower-seed farms.

The Basotho cultural village in QwaQwa offers beautifully made crafts, and rock paintings can be seen as illustrations of the artistic skills of much earlier inhabitants of the area.

This is an edited version of an article published by Frontier Market Network

Republished here with kind permission.

Copyright © Frontier Market Intelligence Ltd. All rights reserved

Reviewed: September 2013