Development Dilemmas of South Africa’s Special Economic Zone Industrialisation policy- the Case of Musina-Makhado Energy Metallurgical Special Economic Zone and its potential socio-economic impact.

Table of Contents

i.    Executive Summary

i.i.  Introduction

i.ii.  Special Economic Zone Legislation in South Africa

i.iii.  The Greenwash of the EIA

i.iv.  Tick-box Public Participation

1.    Introduction

2.    Repackaging South Africa’s Development Policy Past: From Industrial Development Zones to Special Economic Zones- Understanding the difference

3.    China’s Investment Aid to Africa and South Africa- infrastructural megaprojects

4.    Why Special Economic Zones are key to South African Development

5.    The Musina Makhado Special Economic Zone: Geostrategics and the Political Economy of the Global South

6.    The MMSEZ Greenwash: the September Environmental Impact Assessment

7.    Conclusion

8.    Reference list

i.        Executive Summary

i.i.  Introduction

The immediate objective of this policy paper is to critically analyse the lack of sustainable development public policy thinking to South Africa’s largest development mega-project of the Covid era: the Musina-Makhado Special Economic Zone (MMSEZ). Fieldwork undertaken in 2019 and 2020 has established that local municipalities and communities in Musina-Makhado have little, if any, knowledge of the SEZ.

This policy paper further explores how the MMSEZ is part of the Brazil Russia India China South Africa (BRICS) and Forum on China -Africa Cooperation (FOCAC) Global South development strategy led by the People’s Republic of China (PRC) to accelerate ‘inclusive’ development and to rewire trade and developmental aid globally. The MMSEZ mega-project is linked to China’s Global South development narrative, and links to China’s da Yuanzu, or “going out” as a global economic strategy to reconfigure the geographical epicentre of the world economy to China, rather than the Global North. Central to the strategy is the Belt and Road Initiative (BRI).

The policy paper focuses on infrastructure led industrialisation in the Global South through Special Economic Zones. Two main aspects are examined, namely the impact on the environment and on local communities, given that the Zones are purported to benefit communities through growth led development and concomitant local job creation.

i.ii.  Special Economic Zone Legislation in South Africa

In 2014, new Special Economic Zone legislation was promulgated, bringing SEZs into line with global FDI investment trends. SEZ legislation turned what were known as Industrial Development Zones (IDZs) into geographically distinct investment havens with the aim of creating production value chains in specific industrial and manufacturing sectors. Unlike IDZs that were established close to or with their own seaport, SEZs can be set up in any geographical area with available energy and water resources. Labor needs are met by unskilled and semi-skilled labour close to the zone. SEZs, following the Chinese model, are not known for providing long term employment for local populations due to the advanced labour skill set they require.  The 2014 legislation provides for raft of economic incentives including corporate tax pegged at 15% (as opposed to the 28% national regulation), PAYE and VAT concessions, customs and export concessions amongst others.

The Musina-Makhado SEZ will be run by the Chinese operator Schenzhen Hoi Mor and will supply its own carbon intensive energy requirements with a small top up from ESKOM. Issues around water scarcity have been raised since the Zone was first promoted by the Dtic. Yet, despite Eskom’s questionable ability to provide start-up energy and the water question, we discuss why there is a strong chance that the MMSEZ will get the go ahead to start clearing the 8000 hectare site early in 2021.

The promulgated SEZ metallurgical cluster will contain a coal washery, a coking plant, a thermal plant, a ferrochrome plant, a ferromanganese plant, stainless steel, high manganese steel, high vanadium steel, as well as lime and cement plants. The high carbon emission levels are arguably possible to offset, according to the first high level Environmental Impact Assessment (EIA) released in September 2020. While the EIA also alludes to environmental impact of the Zone, it also attempts to scientifically justify why each of the dirty industries carbon footprint can be mitigated. The EIA provisionally endorses the go ahead of the Zone subject to “mitigation” measures.

i.iii.  The Greenwash of the EIA

The first high-level EIA was completed by the Delta Built Environment Consultants (Delta BEC) and made public on 1 September 2020. While the EIA draws attention to the fact that the province is water scarce, the plans to alleviate water scarcity are superficially detailed and are implausible, even to the layperson. The EIA states the plan to use what LEDA call surplus water capacity, but water scarcity is endemic to the region, and a burgeoning of coal mining in the area, together with commercial farming, will not help to allay the situation.

Other schemes mentioned in the EIA involve obtaining water from Zimbabwe, and building a dam on the Sand River, a perennial water source with variable, erratic, delivery capacity as a result. The SEZ will use in excess of 80 million cubic litres of water per year. The EIA in summary of the different options reflects a particularly troubling kind of validating environmental science.

i.iv.  Tick-box Public Participation

The analysis of the recent EIA process examines it from the principle endorsed by the United Nations Human Rights Council to expressly safeguard the rights of indigenous people, of “free, prior and informed consent” so that those affected engage from an informed base.

International norms on participatory development are expressly articulated in the public participation guidelines published by the Department of Environmental affairs (1998). It states “…ultimately, mechanisms may be used for engagement or even notification purposes must suitably allow for engagement of all I&APs that may be illiterate or disabled or who may have any other disadvantage”.

Due to poor public announcement of the EIA, a fact admitted to by Delta BEC at the Louis Trichardt meeting, the public participation meeting in Louis Trichardt was attended by exactly 15 people, even though the town is the closest to the proposed 8000 ha SEZ. 

In an effort to combat the criticism around the public participation process, Delta BEC hastily organized more meetings in early October. Again, many communities did not know of the meetings and they were organized at one week’s notice. While on paper the process now looks more robust, in reality most communities are still poorly informed. EIA Guidelines place this onus on government, but in the case of the MMSEZ this task has fallen to environmental NGOs, such as Earthlife and Save our Limpopo Valley (SOLVE).

Another governmental method of watering down public objection is to obtain initial consent to something less developmentally controversial. In this case, the current high-level EIA is a predominantly site clearing process of getting approval from LEDET. The carbon intensive aspects of the proposed projects within the Zone would all require separate EIAs. Each project will also have to apply for a water use licence.

One positive outcome of the efforts of organisations such as Earthlife, SOLVE and the Centre for Environmental Rights (CER) and others on climate impact and the lack of Public Participation and involvement is that LEDA has extended the window for public comment and critique to January 2021.

Is the process of objecting likely to stop the establishment of the MMSEZ?

There is are a few reasons why this is unlikely.

  1. The Zone is already legally designated
  2. Schenzhen Hoi Mor have an operator’s licence for the Zone as of 2017
  3.  Tenders for the Zone have been put out by provincial government in 2020
  4. The amount of FDI the Zone will attract will be argued by government to be essential for post-Covid growth.

In summary, the MMSEZ may be approved for the following reasons:

  • the MMSEZ is endorsed by government officials at national, provincial and local levels as the potential 4th industrial revolution high tech regional economic epicentre in Limpopo and the southern African region.
  • The High-Level EIA is only for site clearing and so may be approved on the basis of mitigation measures built into the Assessment, with other objections justified as pigeon-holed until a later date
  • The Zone links the region to China’s Belt and Road initiative and even if they are temporary, locals may support it on the basis of the tens of thousands of local jobs it will create.
  • Government will argue that the MMSEZ has added importance to the regions post Covid lagging development trajectory – together with the EIA arguments for environmental mitigation down the line for the various industries, this could validate its carbon intensive, extractivist and exploitative dimensions, despite South Africa’s Inclusive Development and Just Transition commitments.
  • In the same way that ESKOM justified the costs of the Kusile and Medupi coal energy stations, so too government argues that the MMSEZ is necessary.

The history of Chinese megaproject investments has shown, public pressure for the disclosure of the terms of Chinese investments and loans are critical, as are conditionalities about environmental degradation control monitoring and local job creation.

While government officials at national, provincial and local levels punt the high tech regional economic epicentre in Limpopo, the reality is the largest developmental mega-project in South Africa’s lagging development trajectory is the most carbon intensive, extractivist and exploitative, despite South Africa’s Inclusive Development and Just Transition commitments.

1.      Introduction

The policy discussion firstly aims sketch the global political economy background as to why Special Economic Zones have been singled out by international development bodies such as United Nations Conference on Trade And Development (UNCTAD), the United Nations Development Programme and the World Bank as a successful form of economic policy in the Global South.

We will briefly explore why SEZs are seen as so significant in Africa and in South Africa.

We then turn to the national policy debate as to why the Musina-Makhado dirty energy SEZ is being endorsed by both national and provincial government when is contradicts many of government’s sustainable development policy pronouncements. The second part of the presentation focuses on the Environmental Impact Assessment process as a form of public participation greenwashing and justification for the Zone.  

Finally, we turn to the question of whether the SEZ mega-project likely to go ahead, despite its detrimental environmental and livelihoods impacts as well as the public participation process and inputs phase that is currently underway. We do not examine the contents of the EIA from the variety of perspectives that specialist environmental and climate change NGOs have tackled but rather we link our perspectives on participatory development to BRICS and FOCAC pronouncements on inclusive development and what this in fact translates into from a climate change and livelihoods point of view.

Fieldwork undertaken in 2019 and 2020 established that local municipalities and communities in Musina-Makhado have little, if any, knowledge of the SEZ. This policy paper seeks to analyse how the MMSEZ is part of a BRICS and FOCAC strategy led by the People’s Republic of China (PRC) to accelerate ‘inclusive’ development in the Global South. The paper examines how the MMSEZ mega-project fits into the broader Global South narrative of development in the pre and Covid 19 global political economy.

As will become clear through the analysis of China’s state and non-state investment in the Metallurgical Energy SEZ, the environmental/climate change aspects and community livelihoods threats are paramount. The energy component of the Zone centres on a 3300 megawatt coal coking plant with associated coal driven industrial/metallurgical production lines, nearly all of which are carbon intensive. The SEZ will release an estimated 1 billion tons of CO2 at full production per annum. Even while the first high level Environmental Impact Assessment (EIA) states these impacts can be offset, it is clear that the long-term environmental impacts of the Zone will decimate ecosystems and reduce carbon sequestration.

Aside from the 3300 megawatt coal coking plant, the zone comprises of a coal washing plant, a thermal plant, a ferrochrome plant, a ferromanganese plant, stainless steel, high manganese steel, high vanadium steel, as well as lime and cement plants. The high carbon emission levels are arguably possible to offset, according to the EIA released in September 2020. While the EIA also alludes to environmental impact of the zone, as will be explored in the paper, each of the dirty industries carbon footprint t can be mitigated.

The MMSEZ is a huge foreign direct investment of unprecedented scale in South Africa, consisting of both official bilateral assistance through FOCAC as well as private investment through Chinese companies. It is the largest South African and southern African development initiative during Covid 19 and into the future.

In 2014, the new Special Economic Zone legislation was promulgated, bringing SEZs into line with global FDI investment trends. SEZ legislation turned what were known as Industrial Development Zones (IDZs) into geographically distinct investment havens with the aim of creating production value chains in specific industrial and manufacturing sectors. SEZs, unlike IDZs that were established close to, or with their own, seaport, can be set up in any geographical area with available energy and water resources. The Zones tend to be set up away from urban centres to encourage economic deconcentration points and to ensure value chains are created in a diversified spatial manner. Labour needs are to be met by unskilled and semi-skilled labour close to the zone. SEZs are not known, as a model, for providing long term employment for local populations dues to the skill set they require.  The legislation provides for raft of economic incentives to lure both foreign and local investors to the Zones. Investments have to be start-up or Greenfield investments, allowing for corporate tax of 15% (as opposed to the 28% national regulation), PAYE and VAT concessions, customs and export concessions and in many cases infrastructural support for investment top structures. Companies also pay slashed rates for water and energy.

2.      Repackaging South Africa’s Development Policy Past: From Industrial Development Zones to Special Economic Zones- Understanding the Difference

Industrial Development Zones (IDZ) preceded SEZs as a growth strategy. The first, Coega was initiated in 1999. And before that, 1980s-era ‘deconcentration points’ were deliberately located outside of the main metropolitan areas, mostly on the border of former apartheid Bantustans, or homelands, where cheap unskilled labour would predominate. Part of the logic for locating the Zones in these geographically remote areas was to encourage low-cost, labour-intensive manufacturing that would help to slow unskilled labour urban migration. The deconcentration points relied on national subsidies, these were withdrawn during the 1990s. The subsidy withdrawals led to the collapse of the South African clothing, textiles, footwear, appliances, electronics and many other light industrial goods, and largely demolished local manufacturing as East Asian (predominantly Chinese) imports flooded the South African market.

In 1994 the new ANC led government outlined their policy vision of transforming the South African economy away from the gateway legacy of British colonialism as well as a protected market for other European and U.S. firms’ regional branch-plant operations. This economic history meant very little value was added to exports, despite South Africa being an industrial leader in Africa. Despite the ANCs policy spin, South Africa still remains largely a commodity export-driven economy with the exception of the auto industry.

The link between Special Economic Zones and Belt and Road driven Global South Development dominated high level delegations of African leaders and ministers at the 2018 Forum on China-Africa Cooperation (FOCAC). Through FOCAC and BRI, China is intensifying its role as Africa’s largest trade and investment partner. South Africa has over the last four years since 2016 borrowed heavily from both Chinese banks as well as taken private investment loans. Many of these are for State Owned Enterprises (SOEs) for example in 2016 the China Development Bank’s made two $5 billion loan commitments to Transnet and Eskom when the faltering enterprises were run by Brian Molefe, in 2013 and 2016 respectively. In 2018, Eskom loaned another R37 000 billion from the Chinese government, a year during which the embattled SOE struggled to additional sources of capital to sort out the power plant issues at Kusile and Medupi. The terms of this loan and a further R370 billion economic stimulus package loan taken in the same year, have been shrouded in secrecy.

China’s role in shaping the SEZ trajectory in South Africa is plain to see at all levels of government, and in the ways SEZ legislation has been transformed to entice Foreign Direct Investment (FDI) and local investors. Since FOCAC 2013, China has been providing SEZ training to government officials at all levels. Official exchange programmes with management has also taken place with SEZ State Owned Enterprises.

The MMSEZ in northern Limpopo Province brings the export of the SEZ economic development model to new heights. It also underlines a very crucial aspect of China’s investment trajectory in the Global South: the need for government transparency and accountability in accepting Chinese state and private investment, and with this the need for the broader South African public to engage and insist on full disclosure on Chinese funded development projects.

3.      China’s Investment Aid to Africa and South Africa:  infrastructural megaprojects.

In regard to China’s loans to Africa, although there has been little hard data to go on until very recently, the general public in Africa and globally are largely unaware of the extent of Chinese lending to Africa over the last decade. While critics argue this lack of transparency is intentional, it is fortunate that World Bank data has recently been released in tandem with the Covid 19 response of the G20 in April 2020 to bail out low-income countries through the suspension of debt servicing on official bilateral credits until the end of 2020. As part of this initiative, the World Bank has published specific debt statistics for 72 low-income countries, that uniquely, also cover Chinese official loans. Although this does not cover South African loans, as the country is rated as middle income, it does show the level of borrowing has escalated to the level that China is the primary lender to less developed states in Africa. Huang and Brautigam, on an analysing the 2020 data, state that, for 32 of the 40 African countries, China is the biggest bilateral official lender. In seven countries, Japan is the biggest bilateral lender; in six countries it is Saudi Arabia. The United States is a bigger official lender than China in only one country: Somalia”.

Part of the reason that China has become such a big lender is to offset the structural defects of the Chinese domestic economy. Even prior to the outbreak of Covid 19, Chinese growth slowed to 5.3% in 2019: a 40-year low. Infrastructural loans accompanying FDI help to alleviate China’s domestic over-capacity through what is known as the policy of Da Yuan Zu or ‘going out’. Economic expansion thus assists with over-capitalisation, over-capacity and displaces China’s shocking levels industrial pollution and related socio-economic risks.

The Belt and Road Initiative (BRI) is the keystone programme of China’s Da Yuan Zu initiative aimed at transforming world trade to direct it through Chinese-built ports, carrying goods on Chinese rail, road and bridge infrastructure, and in so doing remodelling economic hegemony in the global political economy. This benefits the Chinese ruling elite in numerous ways, for example China’s ruling classes now generate their most income from the SEZ export sectors.

Belt and Road, and the new Maritime Silk Route, lessens Chinese dependence upon the U.S. market. This economic interdependence is an obvious and well documented vulnerability in China’s expansionist economic strategy. Thus, economic dominance requires expansionism that (literally) rewires global infrastructural and investment trends at both state and non-state levels together with redirecting neo-colonial flows of trade and investment between North and South to what is now called the “Global South”.

China’s geographical rewiring of global finance, trade and political-economic diplomacy has gradually been established over the last decade and half through the BRICS and through FOCAC, China regularly promises win-win, mutually inclusive Global South development. Most of the investment directed through BRICS and FOCAC is for infrastructural investment which is touted as the lynchpin for economic growth. It is against this backdrop that South Africa’s sharp increase in Chinese investment and loans can be seen.

In many senses 2018 was a pivotal year for China’s export of not only the BRI vision to Africa through the BRICS Summit held in Sandton, Johannesburg but also through the September Summit of the Forum for China- Africa Cooperation in Beijing. At both meetings, Xi Jing Ping and key ministers pledged US $ 60 billion to Africa. This package of financial assistance in various forms is for infrastructural investment in Africa, the expansion of Belt and Road, together with the development of Special Economic Zones, lauded by the World Bank as a key developmental tool of the People’s Republic of China, has been granted centre stage in escaping South Africa’s, and indeed Africa’s, development conundrums.

China’s FOCAC pledges and the support of the 48 state African delegation to Beijing give some indication of the economic power that China already had in Africa prior to Covid 19. At the FOCAC Summit in 2012 China pledged $20 billion to Africa. The stakes rose sharply to $60 billion in 2015. While the global political economy was in worse shape in 2018, the hype leading up the September FOCAC meeting made it quite clear that Xi Jing Ping was going to haul out all the stops, especially as international criticism had mounted significantly since 2015 about what has come to be referred to as China’s debt trap diplomacy. The nefarious $60-billion which most analysts agree is virtually impossible to track in terms of disbursements, is broken down as follows: $10-billion for ‘investments in the next three years’ (through Chinese private companies); $15-billion in “grants, interest-free loans and concessional loans”; $20-billion in “credit lines”; $10-billion for a “special fund for development financing” and $5-billion for a “special fund for financing imports from Africa”.

This is the context within which to place Cyril Ramaphosa’s “new” economic stimulus packages that have been announced since 2018. At the Union buildings that year, the South African President stated “Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion.

4.      Why Special Economic Zones dominate the South African Development Landscape.

Between 2018 and 2020, the President and the Dtic have unveiled several similar (but packaged as new) iterations of the plan to boost South Africa’s flagging growth trajectory through infrastructure-led investment. These pronouncements are undoubtedly linked the BRICS and FOCAC 2018 investment and loan pledges made by China. In fact it was after the BRICS Summit that the President that the Dti revealed that a deal and been struck with National Development and Reform Commission of the Peoples Republic of China for the construction of the MMSEZ. In addition, the Bank of China entered into an agreement with the Dti to pump R15 billion into SEZs in South Africa.

China’s phenomenal growth over the last 3 decades is seen as largely due to SEZs such as the Schenzhen Zone that kickstarted China’s trade diversification from 1980 into the early 2000s.

The main reason, then, the United Nations Development Programme and the United Nations Conference on Trade and Industry endorse Special Economic Zones is because the Zones are seen as a fairly failsafe way of attracting large scale foreign and local investment to countries who need to diversify their economic bases, from being primarily commodity driven, or primary product based. Greater trade value can be added to natural resources through industrialisation and manufacturing diversification- what is called creation of value chains.

A Typical Agricultural Value Chain

The Zones often host mega-projects, which combine the processing of resources such as steel, ferrochrome, copper vanadium and other minerals with the creation of production value chains.

In Africa the central cooperation platform for Chinese led development initiatives is FOCAC.

Some fast facts on Chinese investment in Africa 20 years down the line illustrate the massive developmental influence China has had on the continent over the last 20 years.

  • In 2019, trade between China and Africa hit US$208.7 billion, and total Chinese FDI in Africa reached US$49.1 billion;
  • This is a 20-fold and 100-fold growth trajectory respectively compared with 20 years ago.
  • Dozens of economic and trade cooperation zones and industrial parks are up and running across Africa.
  • China has built for Africa over 6,000 kilometers of railways and the same mileage of roads, nearly 20 ports and over 80 large-scale power plants, and more than 130 medical facilities, 45 stadiums and 170 or so schools.
  • The African Union (AU) Conference Center, the Mombasa-Nairobi railway, and the Maputo-Katembe Bridge are key projects in Africa’s drive to achieve the “Century Dream”, are “monumental symbols of the shared development of China and Africa”.

This Global South reconfiguration has at its developmental epicentre the Belt and Road Initiative (BRI). The MMSEZ is a critical link, ties South Africa into the expansion of this rail, road and maritime trade route rerouting global trade flows to China rather than the US and Europe.

Musina-Makhado will link resource extraction and beneficiation in South Africa to China’s efforts to link the continent to Belt and Road. Trade flows are likely to redirected through Zimbabwe to Kenya and from there to China’s African maritime silk route. The Zone is thus of massive geostrategic significance to China-South Africa relations.

Finance Minister Tito Mboweni’s revised budget released in late June 2020, began the South African public’s rude awakening to skyrocketing lending in the new Covid 19 economic terrain. Mboweni stated at the time that, “the main budget deficit, estimated at 6.8 per cent of GDP in the 2020 Budget, is now projected to reach 14.6 per cent of GDP”.

With little reference to these grim facts, on the 8th of July 2020, the ANC released their Economic Transformation Committee released a discussion document entitled  Reconstruction, Growth And Transformation: Building a New, Inclusive Economy”. The document, described by the head of the committee, Enoch Godongwana, as the basis for a social compact, argues for the South African government to play a larger role in steering the tattered South African economy into the post-Covid global economic terrain. The document states “(t)he ANCs New Inclusive Economy recycles infrastructural spending towards greater localisation of production linked to export led growth.

Local job creation promises are linked to the ANC’s disconcertingly vague vision of large-scale infrastructural investments are promoted as part of public-private partnerships and foreign direct investment initiatives. It is almost certain that the finance for infrastructurally driven investment is now certain to come from China.

Even prior to Covid 19, Finance Minister Tito Mboweni was doing a poor job of instilling financial and investor confidence as he referred to “closing the mouth of the Hippo” in his February Budget address to Parliament, referring the alarming increase in the gap between public borrowing and GDP.

By October 2020, Mboweni was forced to reveal that the debt ratio would rise to 95.3% of gross domestic product by 2025. And that debt service costs are “the fastest-growing item of spending”, as the Medium-Term Budget Policy Statement (MTBPS) put it; in 2021 South Africa will spend more on servicing debt than on health – R271.8-billion on debt service costs against R235.3-billion on health. 

Another compelling reason why the MMSEZ may well go ahead is the appalling state of ESKOMs finances and operator functionality. In trouble before lockdown to the tune of a debt burden of R450 billion, this has climbed to R480 billion in a matter of months., not to mention the R2.5 billion loss caused by lockdown. Worse still, R350 billion of Eskom’s debt is guaranteed by government.

The energy crisis and government debt are converging a development perfect storm. In June and July the South African government tackled the Covid 19 crisis of lockdown with yet more loans by a spate of borrowing from the IMF, New Development Bank and African Development Bank to the tune of R91.5 billion, bringing South Africa’s level of public debt to 87% of GDP for 2021-2022 as of June. By the 28th of October, Tito Mboweni’s MTBPS underlined the situation will only get worse over the next few years, with an official predicted high of 95.3% of GDP in the next four years. This means the South African government’s largest expense over the next few decades will be to service this enormous debt burden.

The economic reality of a bankrupt ESKOM underwritten by the government loan guarantees, a bankrupt national air-carrier SOE South Africa Airways (SAA), that has been bailed (again) in the MTBPS (to the tune of R10,5 billion, as part of another economic resource package), together with the weakness of Transnet (also in debt and bailed out by Chinese loans) raises the question of how the South African economy will chart the Covid and post-Covid economic years.  To reconcile Mboweni’s rhetoric with the ANCs inclusive development strategy as laid out recently by the Economic Transformation Committee calls for a distinctly Utopian mindset.

If the South African government’s 2018 borrowing from China (under extremely opaque terms and conditions) is added to this latest Covid 19 run, that is the R370 billion for an economic stimulus package, and a further 37 billion loaned to Eskom to resolve Kusile’s poor construction, it is very clear that South Africa’s debt to GDP ratio is the highest it has ever been. 

The 2018 R411 billion loans from China raise serious government accountability issues for the future. Foreign Direct Investment and further loans packaged as “gifts” with “no strings attached” as both Cyril Ramaphosa and Tito Mboweni have explained Chinese loans to Parliamentary Committees such as the Standing Committee on Finance, do not bode well for South Africa’s development future as amongst other things the loans terms and repayment agreements are not available for public scrutiny (Coterill, 2019).

Against this dismal economic backdrop, despite proposed carbon intensive line up of industries planned for the Zone, it is reasonable to assume that the MMSEZ will definitely go ahead. Even prior to Covid 19, Ramaphosa had endorsed the Zone on numerous occasions despite the fact it flies in the face of South Africa’s Just Transition commitments to move away from coal as a source of energy for development.

In fact, the SEZs near certain status is traceable even further back to 2017. In April of 2020, the investigative online platform the Daily Maverick published an article based on documents obtained by the Centre for Environmental Rights based in Cape Town, who are contesting the legality of the MMSEZ in the light of South Africa’s 2018 Integrated Resource Plan (IRP) commitments. The article reveals that the Zone was designated in 2016 and that the operator, Schenzhen Hoi Mor, was appointed in 2017. In the same year, the Chairperson, of the company, Ning Yat Hoi, had a warrant for his arrest issued by the Government of Zimbabwe for alleged international company fraud.

These anomalies notwithstanding, in 2020 the MMSEZ is touted at national, provincial and local levels as the development mega-project that will pull both southern Africa and South Africa out of the economic doldrums, align them with Global South Development trends, and which will cement South Africa (literally) into China’s Belt and Road Initiative.

5.      The Musina Makhado Special Economic Zone: relocating Southern Africa in the New Political Economy of the Global South.  

The MMSEZs negative environmental and climate change aspects of the Zone are being downplayed as the regional and local growth and jobs impact are amplified. Global Africa Network has rather pre-emptively declared the MMSEZ is Sub-`Saharan Africa’s “Developmental Hope”.

Many of China’s BRI projects heighten the African dilemma of extraction of natural resources that also raise carbon pollution levels. The MMSEZ is a perfect case in point. The SEZ will be the first in South Africa to be operated by a foreign (Chinese) company, Shenzhen Hoi Mor. The company has committed to investing $3.8 billion dollars to the operational success of the SEZ.

This will mean an unprecedented level of foreign control. To make matters worse, of the proposed industries in the metallurgical cluster, nearly all of them are carbon intensive, environmentally destructive and a threat to the livelihoods of communities in the medium term, as even the EIA confesses they are environmentally red flag carbon dioxide emitters.

The proposed list of industries includes a coal washery, a coking plant, a thermal plant, a ferrochrome plant, a ferromanganese plant, stainless steel, high manganese steel and high vanadium steel pants as well as lime and cement plants. The total pollution effect on the ecologically sensitive Vhembe district is devastating, with knock on effects for the entire province and even neighbouring Zimbabwe.

ENVIRONMENTAL IMPACT ASSESSMENT REPORT

Aside from job creation, government has bragged that that the MMSEZ has attracted R150 billion in FDI all of it Chinese private investment. In March 2020, Mathabatha announced that a further R36.3-billion had been invested in mining over the last year. In anticipation of the SEZ, MC Mines (previously Coal of Africa) has secured a R40 million IDC Loan to expand its mining operations in Musina-Makhado.

Rob Tooley, Chairperson of the MMSEZ Board stated in March 2020, ““The basic appeal of MMSEZ is the underdevelopment of Africa, and as a 4IR logistical hub we are a conduit to development in SADC. The challenge will be to ensure investments also create jobs – it can’t be one without the other. The quid pro quo of an SEZ is that although you lose on corporate tax, with jobs being created you gain on PAYE and VAT as the economy grows”

6.      “Public Participation Greenwashing”: the MMSEZ High Level EIA Process

Given the environmentally controversial nature of the MMSEZ, although not unexpected, yet still alarming, is

  1. the lack of local community information prior to the public participation process
  2. the lack of inclusion of communities in the PP process in meaningful, or indeed any way.

As Earthlife South Africa often reminds us, all large-scale developmental initiatives, especially those with huge community impacts, should abide by the principle endorsed by the United Nations Human Rights Council to safeguard the rights of indigenous people.

Development projects go ahead thus should be on the basis of “free, prior and informed consent” so that those communities affected engage from an informed base.

Meaningful participation defined in policy terms is participation that can make a difference to the policy process outcomes. Otherwise it is not participation but merely consultation.

In Limpopo the public participation meetings were announced in just 2 newspapers

The Environmental Impact Assessment (EIA) of The high-level EIA, as it is called, was completed by the Delta Built Environment Consultants (Delta BEC) and made public on 1 September 2020. While admitting the environmentally harmful nature of the SEZ, the document is self-justificatory. The EIA assessment glosses over the endemic water scarcity issues in the Limpopo Valley stating “… (i)f insufficient water is available in the catchment, and the social and economic opportunities offered by the SEZ operation are sufficiently attractive, additional water may be brought in from a neighbouring catchment”.

While the EIA draws attention to the fact that the province is water scarce, the plans to alleviate water scarcity, as outlined in the EIA are woefully inadequate. The EIA states the plan to use what LEDA call surplus water capacity, but water scarcity is endemic to the region, and a burgeoning of coal mining in the area, together with commercial farming, will not help to allay the situation.

Other implausible schemes mentioned in the EIA involve obtaining water from Zimbabwe, and building a dam on the Sand River, a perennial water source with variable, erratic, delivery capacity as a result. Given that the SEZ will use in excess of 80 million cubic litres of water per year, the EIA in summary of the different issues reflects justificatory environmental science at its worst.

The Zone will undoubtedly cause a radical decrease in carbon sequestration in and around the zone. Th EIA proposes to uproot and transplant some 100 000 mature trees growing in arid terrain. This plan is absurd even to the layperson, but from an environmental science point of view it is scientifically ridiculous. The flora and fauna of the area will be destroyed and the ecological balance of the Limpopo Valley changed forever.

MMSEZ Water Demand

Aside from the issue of water are the energy demands of the Zone. According the EIA, ESKOM will provide energy to the MMSEZ in its start-up phase (anything between 3 to 5 years). Given ESKOMs dismal performance at keeping the lights on during lockdown, never mind the Medupi boiler fiasco, it is hard to imagine how the pledges made to the MMSEZ in the EIA in terms of energy are feasible.

Energy needs of the MMSEZ

In October 2019 and in September 2020, straight after the PP process, ACCEDE researchers undertook rapid appraisal vox pop surveys in Louis Trichardt, Musina and with local communities as well as focus group meetings with communities near the MMSEZ confirming that most of the local populations across gender, ethnic and class lines, were not aware of the SEZ public participation process, nor even knew of the proposed SEZ plan. Most do not k know what an SEZ is.

The Mudimele community focus group meetings in September 2020 revealed their almost total lack of knowledge of the PP process, even though they are closest to the zone and adjacent Coal of Africa, now renamed MC Mining new expanded coal mine. The Vhembe mine is back on track, temporarily stopped by a 2019 court order, financially assisted by a recent renewed loan from the Industrial development Corporation. Other mining deals are on the cards, mostly with Chinese companies gearing up to supply high tech labour to the SEZ.

Due to poor public announcement of the EIA, a fact admitted to by Delta BEC at the Louis Trichardt meeting, the public participation meeting in Louis Trichardt was attended by exactly 15 people, even though the town is the closest to the proposed 8000 ha SEZ. 

Of the 4 other meetings held, one was “virtual” (held in Pretoria via webinar, so restricted to academics and business) and the other three poorly attended aside from the one held in Mulambwane (near Musina) where a youth contingent was bussed in, complete with printed t-shirts and placards, supporting the SEZ on the basis of job creation. The LEDA official at the meeting promised “jobs by Christmas”.

At the Louis Trichardt meeting the consulting company for the EIA, Delta BEC presenter Ronaldo Retief, admitted that most of the 37 000 jobs the MMSEZ is purported to generate will be temporary, semi-skilled positions. Although government has put in place training programmes for locals, including engineering courses at TVET colleges in Musina and Polokwane, the length of time to upskill the local labour force will extend beyond the medium-term lifespan of the project, as Rob Tooley indicated in September 2019 (Interview, 11 September, Polokwane LEDA Office). The SEZ Board are well aware, therefore, that the SEZ will employ a predominantly skilled Chinese labour-force and management. The Board’s Chair, Leghonolo Masoga, indicated in 2019 that the operating company, Hoi Mor Shenzhen, were impatient to apply their SEZ model of development to South Africa 

In an effort to combat the criticism around the public participation process, Delta BEC hastily organized another 5 meetings last week. Again, many communities did not know of the meetings and they were organized at one week’s notice. While on paper the process now looks more robust, in reality most communities are still poorly informed. EIA Guidelines place this onus on government, but in the case of the MMSEZ this task has fallen to environmental NGOs, such as Earthlife and Save our Limpopo Valley (SOLVE).

Another governmental method of watering down public objection is to obtain initial consent to something less developmentally controversial. In this case, the current high-level EIA is a predominantly site clearing process of getting approval from LEDET. The carbon intensive aspects of the proposed projects within the Zone would all require separate EIAs. Each project will also have to apply for a water use licence.

Put all the public participation events here

So, while government officials punt the high tech regional economic epicentre in Limpopo, the reality is that the Post-Covid Development landscape in South Africa is about to get even dirtier, more extractivist and exploitative of the very poor communities that have the most to lose in terms of livelihood precarity, despite South Africa’s Just Transition commitments.

The lack of clear oversight, accountability and transparency around the Zone also draws the role of activist organisations and researchers to the fore so as to monitor the MMSEZ towards Public Engagement for accountable and sustainable development.

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