Post-Covid Development Dilemmas: Reconciling Sustainable Development, South Africa’s Spiralling Debt, and Big Hopes for Special Economic Zones ( Part 2)

Reviewing the state of the economy as the country eases out of lockdown reveals the urgency of public debate on government’s development policies and levels of accountability in its sustainable development strategies.

Starting with the ongoing evils of Eskom, load-shedding in August. News of the SOE’s deepening structural weaknesses, including aging infrastructure, poor maintenance and unsustainable level of debt, is no laughing matter, especially when government starts mentioning using state pension funds to disappear the problem.

To make matters more painful for the South African taxpayer, is how much of the money Eskom has borrowed over the last decade has been inappropriately managed. The World Bank’s 2010 loan of US 3.05 billion for what was advertised to be the largest coal fired power station in the world, Medupi, could be regarded as odious debt.

Medupi is still incomplete 10 years later, and the state of its infrastructure and maintenance is appalling, as Eskom’s Operating manager Jan Oberholzer, self-confesses.

In February 2020, ESKOM CEO Andre de Ruyter confirmed a rumoured critical design flaw in both Medupi and Kusile, the two power stations lauded to end South Africa’s electricity problems. De Ruyter revealed that the boilers had design flaws. Business Day reported on the return of Medupi and Kusile’s Chickens to their Boilers:

“…(d)esign is one aspect that underpins this negatively, affecting cost and time frames. Other failures — procurement, construction, commission and testing, and operations and maintenance — are evident. An Eskom board minute requiring all projects to be commissioned on a turnkey basis was overridden and ignored, and construction at Medupi and Kusile were embarked upon for all the wrong reasons, including the accommodation of graft in a scenario that had no plan”.

The sheer ignominy of this incompetence is compounded by the corruption scandal surrounding Chancellor House Holdings and …

Post-Covid Development Dilemmas: Debt and the Dream of a South African Developmental State (Part 1)

On the 8th of July 2020, the ANC’s 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.

Finance Minister Tito Mboweni’s revised budget released in late June, states the cruel reality, “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”.

There is not much new about this vision:

The ANCs New Inclusive Economy recycles infrastructural spending towards greater localisation of production linked to export led growth.

In 2018,  Cyril Ramaphosa announced his new economic stimulus package at the Union Buildings, “Infrastructure expansion and maintenance has the potential to create jobs on a large scale, attract investment and lay a foundation for sustainable economic expansion.”

Through the Forum for China- Africa Cooperation, infrastructural investment in Africa and 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 development conundrums.

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. In the past few months, trade linkages into Africa have been reinforced by the belated launch of South Africa’s Sustainable Infrastructure Programme.

Special Economic Zones are being promoted by the Department of Trade and Industry as the way of actualizing all of the above. The Zones, brought into …

Special Economic Zones an engine to stimulate growth

JOHANNESBURG – Covid-19 has become a pandemic that has reverberated across the globe. Its associated detrimental impact on economies has been felt far and wide, with serious disruptions in global value-chains and international trade being evidenced on a daily basis.

In the South African context, Covid-19 is threatening to exacerbate the already entrenched socio-economic challenges of poverty, unemployment and inequality that epitomised the country before the virus affected the world.

China’s Belt and Road Initiative and the COVID-19 crisis

Coronavirus represents both a demand and a supply shock to the global economy. The key question is which assets are exposed most to shock and to the associated volatility? The BRI focuses largely on physical infrastructure that is declining as a priority. The shock has produced a significant stimulus to digital versus physical connectivity. The need for physical infrastructure declines where digital connectivity can substitute for physical contact.

EarthCrimes – The dirty white elephant, Part Four: Caution, environmental hazard

By Sam Sole for amaBhungane

The development of a coal-burning, water-guzzling industrial zone is a potential threat to the roughly 18-million people in South Africa, Botswana, Zimbabwe and Mozambique who depend on the Limpopo river watershed.

An introduction carried on the website for the Chinese-led “Energy and Metallurgical Special Economic Zone” (EMSEZ) in Northern Limpopo lists the range of heavy industries planned.

They include a coal washing plant capable of processing 20 million tonnes per annum, a coal-fired power plant of 3,300MW, a coking coal plant, a ferrochrome plant, a ferromanganese plant, a stainless-steel plant, a lime plant and a titanium dioxide plant.

See Limpopo’s dirty great white elephantLimpopo’s dirty white elephant part 2: the dodgy designation and The dirty white elephant part 3: Limpopo – the weakest link, for more on the extraordinary genesis of this project.

The EMSEZ introduction helpfully notes, “Limpopo river is 30 kilometer away from the SEZ which is the important water source for the SEZ”.

But the reality is the river is already overstretched.

Earthcrimes: Limpopo’s dirty white elephant, Part Three: Limpopo – the weakest link

By Sam Sole for amaBhungane

Conflicted Limpopo agencies charged with policing a proposed Chinese-run industrial zone are not up to the task. Exhibit A: the wildly skewed operator agreement.

On 2 March 2017 an “operator agreement” was signed between the Musina-Makhado Special Economic Zone (SEZ) and a Chinese company called Shenzhen Hoimor Resources Holding Company.

The SEZ was represented by Tshepo Phetla, then acting chief executive of the Limpopo Economic Development Agency (LEDA), while Shenzhen Hoimor was represented by Hong Kong businessman Yat Hoi Ning.

Read Limpopo’s dirty great white elephant and Limpopo’s dirty white elephant part 2: the dodgy designation for more on Ning’s controversial background and the appointment of his company as the operator for a R40-billion coal-powered mineral processing zone.

The operator agreement is disturbing in the way in which it mortgages responsibility for this mega-project to an unknown foreign entity.

No registration number for Shenzhen Hoimor is included in the formal document and amaBhungane was unable to trace the company.

EarthCrimes – Limpopo’s dirty white elephant, Part Two: The dodgy designation

By Sam Sole for amaBhungane

How a Chinese company hijacked the Musina-Makhado Special Economic Zone.

Documents obtained via an access to information request show that shady Hong Kong businessman Yat Hoi Ning boarded the strategic economic zone (SEZ) train without a ticket.

An SEZ is a designated zone where there are special rules on tax, export incentives and other benefits to encourage investment and trade.

The documents were obtained from the department of trade and industry (DTI) by the Centre for Environmental Rights (CER), which is challenging environmental aspects of the planned R40-billion energy and minerals complex just south of the border town of Musina in Limpopo.

Earthcrimes: Limpopo’s dirty great white elephant (Part One)

By Sam Sole for amaBhungane

Government’s plan to develop a R40bn Chinese-controlled energy and metallurgical industrial complex at the Musina-Makhado Special Economic Zone in Limpopo is founded on quicksand.

Department of Trade and Industry (DTI) outsourced the development and management of a coal-burning, water-guzzling, capital-soaking, heavy industrial zone in Limpopo to an obscure Hong Kong-based businessman, Yat Hoi Ning, who was removed as chief executive of his previous company amid allegations of misconduct and fraud.

The DTI did this despite there being publicly available information on the allegations against Ning and his associates; despite no feasibility study being done on the project; and despite the environmental pre-feasibility study identifying critical environmental issues such as the project’s high water requirements in a water-scarce area.