“Coega is no white elephant”

Recently Finweek journalist James Styan challenged the idea that that the proposed Mthombo refinery would be suitable for the Coega Industrial Development Zone (IDZ). He described it as the Eastern Cape's "White Elephant" with a loose pun on the idea that it would be constructed close to the Addo Elephant National Park.

Ayanda Vilakazi, Head of Marketing and Communication for the Coega Development Corporation (CDC) challenged the article arguing that Coega has been a success story. While he doesn't address the issues raised by Styan in his letter, the feedback from Vilakazi does suggest that government is getting some things right here from an economic perspective. We are not sure what to make of the invite to the Mail & Guardian team, but we have none the less forwarded the invite on to our colleagues.

The letter is published in full below:

Dear James

The Coega Development Corporation note’s with interest your article on October 25 titled: “E Cape’s Massive White Elephant” in FinWeek.
The CDC has long tried to shirk the image of being a white elephant, something it has successfully achieved with sustained and growing investor commitment over the past three years in particular.  Therefore to have the phrase ‘white elephant’ attached to us again, albeit in relation to Mthombo, sets us back unnecessarily, especially coupled with a very old image of the Port of Ngqura. We appreciate your commitment to analysing the feasibility of Mthombo, but at the same time would like to provide a balanced perspective.

There have been three major investments at the CDC since April 2012:

  •     The first is a R634-million investment by AfriSam Pty Ltd to establish a greenfield cementitious mixing and blending plant in Zone 5 of the Coega IDZ. The investment will see the creation of 400 jobs in construction phase and 90 jobs in operation phase.  
  •     Secondly a partnership between Famous Brands with the Coega Dairy will see Coega Dairy Company expanding its operations to supply cheese products to the group (which supplies inter alia Steers and Debonairs). A joint valued investment of R45-million will pour into the Coega IDZ as a result. To date the Coega Dairy has created 40 permanent jobs.
  •     The third major investment comes from APM Terminals which has invested R25-million in first phase and R50-million in total for a full-service depot to meet the needs of shipping lines and cargo owners. Twenty full-time jobs will be created and space for approximately 15 seasonal workers on short-term contracts. There would also be a series of opportunities open for local service providers, and SMEs in particular, to benefit from the investment through various contracts.

During the 2011/12 financial year seven new investors committed to the Coega IDZ and the Nelson Mandela Bay Logistics Park (NMBLP) – a figure greater than the targeted number of investors.

They are:

  •     GDF Suez (Energy) R2.7 billion
  •     EAB (Renewable energy) R270 million
  •     FAW (Automotive) R600 million
  •     DCD Dorbyl (Energy – Component Manufacturer) R100 million
  •     Tyre Energy Extraction (Logistics) R30 million
  •     OSHO Cement (Metals) R380 million
  •     Newco Cheese Factory (Agro-processing) R30 million

While the latest job creation figures for the 2012/2013 financial year will only be available at the end of March a total of 8 898 jobs were created in the course of the 2011/2012 financial year. Small, micro and medium enterprises benefited from a 31% overall share of procurement, meaning that SMMEs developed both from practical experience and financially as a result of the CDC. The CDC trained 10 826 people as part of its Human Capital Development programme in the financial year adding to people’s abilities to leverage work opportunities based on better skills.

In total the CDC has created 6875 construction jobs, 3484 permanent Coega IDZ jobs and 44 786 indirect jobs since inception. It has also trained 25586 people as part of its skills development programme.

The Coega IDZ is home to 22 operational investors with a total investment portfolio of R140-billion. Operational investors amount to R1.2-billion in investment. A further R7.5-billion in investment is in implementation stage. Projects in negotiation stage are valued at R8.1-billion and those under feasibility account for R116.3-billion. The noteworthy number of investments secured in the last 13 years is a testament to implementation and delivery. They also represent the appearance of a highly competitive offering at the Coega IDZ.

A series of investments are at various stages in the pipeline. There are also a number of major investments situated in the Coega IDZ.

The AgniSteels investment of R400-million is in the first phase of construction of its steel melting plant in Zone 6 of the Coega IDZ. The construction phase is in advanced stages and the plant should come online in the first quarter of next year with the steel billets produced being exported to India and other African countries during the first phase of the project.

Leading Chinese vehicle manufacturer First Automobile Works (FAW) will invest R600-million in the Coega IDZ, through joint funding provided by FAW and China-Africa Fund. The truck plant, the first phase of FAW’s  development in the Coega IDZ,  will be built on 400 000 square meters of land in Zone 2 and is expected to produce 5 000 trucks annually, as well as light commercial vehicles and passenger cars in the second phase.  The truck assembling facility is expected to create over 1000 jobs, with further job creation opportunities evolving when FAW starts production of an additional 30 000 passenger vehicles annually during the second phase of the development. Construction will start mid-November when WBHO Construction, FAW’s appointed construction company, moves onto site.

Business Process Outsourcing (BPO) is also growing as a result of Discovery Health situating its operating in the BPO Park in the Coega IDZ. The opening of the service centre, in November 2011, has created sustained employment opportunities and development within the city.  Employment figures show a sustained rise from a staff complement of 60 when it opened to 336 currently. This figure is expected to grow to 400 at the end of 2012.

Please see a full list of investors in the Coega IDZ on the website: www.coega.co.za; http://www.coega.co.za/Content2.aspx?objID=93; http://www.coega.co.za/Content2.aspx?objID=209

Coega continues to draw international interest and remains South Africa’s most successful IDZ. In 13 years the Coega IDZ has grown to become one of the biggest drivers of the Eastern Cape economy and job creation in the region thanks to both local and foreign direct investment. Currently, the Coega IDZ contributes an estimated 5.9% to the provincial gross domestic product (GDP) and 0.5% to the national GDP, a figure the CDC would like to enhance as investment prospects arise.

We would like to use this opportunity to invite the Mail and Guardian to visit the Coega IDZ and see our success, progress and plans.

We request that you publish the information provided.  Should you need to contact the CDC at all for comment or input, please feel to call me.

Kind Regards,

Mr. Ayanda Vilakazi

Coega Development Corporation: Head of Marketing and Communication

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