Special Economic Zones Fieldwork 2019

Coega SEZ

In National (Dti led) development discourse, the Coega SEZ continues to be widely feted in South Africa and internationally as the SEZ poster child for South African and African SEZs. Yet, the Dti having reported that total state capital and infrastructural investment in ratio to job creation showing the huge discrepancy of expenditure relation to permanent appointments. In 2016/7 each permanent position came at total state investment cost of R1.2 million (Dti SEZ Report, 2016/7).

Investment in the SEZ has also been widely marketed to show success, but in general, even interviews at Coega with the Marketing CEO Ayanda Vilakasi confirm that the investment commitments in the SEZ frequently don’t materialize. Nicknamed the “Ghost on the Coast” due to the glacially slow build-up of investment, the following viusals of the SEZ show that it is far from a hub of industrial, manufacturing and shipping activity.

Agni Steel SA prior to expansion in July 2018

The photo of the Planned Expansion of the Steel recycling and processing plant, Agni Steel SA by Department of Economic Development, Environmental Affairs & Tourism (DEDEAT) shows investment in the Zone is still not on par with capital investment, with huge tracts of land still both unutilised and under-utilised.

In 2018, prior to the BRICS Summit in Johannesburg, the Beijing Automobile Industrial Corporation (BAIC) and South African Industrial Development Corporation (IDC) joint car manufacturing venture released the first semi-knocked up SUV. The manufacturing investment of R11 billion, represents the single largest FDI injection into an SEZ in South Africa in the years 2016-2018. In June 2018, Lin Songtian, Chinese Ambassador stated, “I’ve been to many developing countries and industrial development zones and the Coega SEZ is by far the best of them all.”

Launch of the first semi-knocked down BAIC X25 before the BRICS Summit 2018 in South Africa

Between 2018 and 2019, Coega Development Corporation has been struggling to keep the new veneer of success from wearing off altogether as the BAIC/IDC venture has run into problem after problem. Issues around SMME involvement, budget shortfalls for the start-up phase, and delays in production as a result have played havoc with the image projected of a functional SoE partnership. Another important factor impacting on the rhetoric of FDI and boosting local manufacturing capacity through up and down stream production is that although the partnership is built on increasing the local component of the vehicles, initially, like with Dube Trade Port Mahindra vehicles, all the components are imported, even though the vehicles are to be imported into Africa as made in South Africa.

Understanding development from global to local is well highlighted by investigating the SEZs. Issues around boosting local production and job creation require urgent and thorough investigation at grassroots level, in combination with systemic analysis of global developmental crises. In the case of the ‘successful’ Coega SEZ, SoE efforts towards job creation in the Zone have not correlated with the local economic downswing: NMBM is witnessing steadily rising unemployment.

Coega CDC retain a commitment to skills development, job creation and SMME development. Further research aims to establish current trends through interviews with key CDC, SMME and community stakeholders.

BAIC in February 2019

Musina-Makhado SEZ

Although Musina-Makhado is still in formative stages of development, it is undoubtedly one of the most important SEZs to track, as will be South Africa’s single largest infrastructural and investment from China. Its conceptualization and inception phases already contradict the need for community-based development, national sovereignty and environmental sustainability. In addition to the US $10 billion officially pledged in July 2018 prior to the BRICS Summit hosted in South Africa, on his return from the Beijing Summit of the Forum on China Africa cooperation (FOCAC), President Ramaphosa announced a further $1.1-billion (R16.5-billion) loan from the Bank of China to be targeted towards SEZs and industrial parks in South Africa, specifically citing Musina-Makhado SEZ. Timeslive reported, “Ramaphosa strikes deals in China to bring jobs‚ factories to Musina-Makhado corridor”. This commitment deepens existing financial support to Musina-Makhado made in 2016. According to the Dti, the project will also generate approximately R130 billion of value added investments through the agreement signed at the time between operator the newly formed SoE, Musina-Makhado SEZ state-owned company (SOC) and Shenzhen Hoimor Resources which will also be responsible to “develop, operate and manage” the cluster. 

According to the Dti,

“… the complex will include a power station as well as coking, ferrochrome, pig iron, steel, stainless steel and lime plants, and supporting facilities. The goods manufactured in the SEZ will be for domestic and export markets… only under exceptional circumstances where certain skills are not available in the country will Chinese expatriates be allowed to provide the scarce skills, training of locals and skills transfer,” the department said. “The Musina-Makhado SOC has been established to ensure that this is done in line with applicable legislation.”

In the President’s State of the Nation Speech, much was made of  the potential of the Musina-Makhado corridor: “…We should imagine a country where bullet trains pass through Johannesburg as they travel from here to Musina, and they stop in Buffalo City on their way from eThekwini back here…”

President Ramaphosa went even further, linking Musina-Makhado to futuristic visions of a 4IR City, with explicit reference to Chinese assistance:

“We want a South Africa with a hi-tech economy… that doesn’t simply export its raw materials, but has become a manufacturing hub for key components used in electronics, in automobiles and in computers… I dream of a South Africa where the first entirely new city built in the democratic era rises, with skyscrapers, schools, universities, hospitals and factories. This dream has been fuelled by my conversations with four people: Dr Nkosazana Dlamini-Zuma, Dr Naledi Pandor, Ms Jessie Duarte and President Xi Jinping, whose account of how China is building a new Beijing has helped to consolidate my dream… Has the time not arrived to build a new smart city founded on the technologies of the 4th Industrial Revolution?

The Musina-Makhado SEZ is driven predominantly by Chinese investment, this has raised mixed political reactions, with the Democratic Party leader, Mmusi Maimane, criticising the SEZ as a potential form of economic and environmental exploitation in a province already characterised by corruption scandals and poor economic governance.

Our fieldwork with Macua/Wamua and other activist organisations in the Limpopo Valley tracks the community impact of the Zone, in particular the national and provincial promises around employment creation.

According to newspaper reports, the South African Energy and Metallurgical Special Economic Zone (EMSEZ) is a bilateral industrial agreement with China, scheduled for development to the east and west of Musina, in the Limpopo province.

Surprisingly, the coal plant is not part of the Integrated Resource Plan (IRP). The 4 600 megawatt coal-fired power plant (to be the third largest after Medupi and Kusile), known as the “Power China International Energy Project,” will service:

  • A coal washing plant (with the capacity to process 12 million tonnes per year)
  • A coking plant (3 million tonnes)
  • An iron plant (3 million tonnes)
  • A stainless steel plant (3 million tonnes)
  • A Ferro manganese powder plant (1 million tonnes)
  • A ferrochrome plant (3 million)
  • A limestone plant (3 million)

The reliance of the Ports/Zones on carbon-intensive energy sources is at odds with South Africa’s commitments to the United Nations Framework Convention on Climate Change (UNFCCC), and to the National Planning Commission’s stated endorsement of a ‘Just Transition’ away from coal. The area’s coal quality is not ascertained. And the use of northern Limpopo’s very scarce water for washing coal is extremely dubious given periodic droughts and more appropriate allocations of water to meet basic needs and provide a higher level of food security.

Similar disputes about local and global environmental conditions exist in eThekwini. SDCEA has been campaigning local, provincial and national government on the impact of the air pollution from South Durban oil refineries and trucking industry on local communities. The heavy reliance on trucks at Dube Trade Port and Durban Port is largely as a result of the China South Rail/Transnet train infrastructure debacle. Thus far, between the two Zones there is little in the pipeline to relieve this environmental and socio-political problem. The socio-political dimension has flared up in 2019, due to a spate of xenophobic attacks by local truck drivers against immigrants (who work for lower salaries).

Dube Trade Port

Despite both multi-lateral, national and provincial ‘talking up’, interviews inside and outside the Zone and with community members in Durban show the impact of the Trade Port on the local economy thusfar has been minimal, especially in relation to employment creation and skills capacitation. Furthermore, the link-up between the two Ports in terms of transport and FDI strategizing currently does not match development promises.

For example, in August, in addition to promising 75 000 jobs as part of the Aerotropolis, MEC for Economic Development, Tourism and Environmental Affairs, Nomusa Dube-Ncube stated that the Dube SEZ,

“… calls for creative and innovative ways to reskill our people, bring more investments and build smart solutions. We believe our region and our province’s full investment potential has not been explored and exploited fully. KwaZulu-Natal provincial government is implementing the Aerotropolis initiative, whose vision is to develop a 21st-century city around King Shaka international airport. This will embrace the “Smart-Cities Concept”. The Aerotropolis is a new form of transit-oriented urban development where airports are the drivers of the 21st-century cities just like seaports in the 17th century, rivers and canals in the 18th century, railroads in the 19th century and highways in the 20th century …. … (t)he Durban Aerotropolis is envisaged to be a city built around King Shaka International Airport (KSIA) offering businesses speedy connectivity to suppliers, customers and enterprise partners nationally and worldwide. The Aerotropolis is premised on a globally connected international airport that links travellers, suppliers and buyers to international markets. It is against this backdrop, that the provincial government is currently working with provincial and national stakeholders to position King Shaka International airport as an alternative air and cargo hub for South Africa.”

Dube Trade Port Expansion 2019-2022

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