Development zone Looking good on the West Coast.

December 21, 2009 by: admin

More than R10-billion worth of projects have been scrapped or temporarily shelved at the port development of Coega over concerns about Eskom’s proposed tariff increases and the global recession.

The projects, including a proposed R9.2-billion prawn-farming venture, have been canned just months after aluminium producer Rio Tinto Alcan ditched plans to build a R20-billion smelter.

The companies involved include Rainbow Nation Renewable Fuels, SeaArk, Straits Chemicals, Coega Chemicals, Maritime Motors, Mediterranean Shipping Company and SATI.

Rio Tinto Alcan, which had already spent about $130-million on the 720000-ton smelter from November 2006, announced its decision to jump ship in October.

It had initially announced that it would put the project on hold until about 2012, while reviewing South Africa’s electricity supply problems.

Coega, a 12-year-old deep-water port and industrial area 22km outside Port Elizabeth, became South Africa’s first industrial development zone. But electricity shortages and repeated blackouts, along with the global economic crisis, have made investors hesitant to plough more money into the site.

The dropping of the 1200ha prawn-farming project, which was expected to create 11000 jobs by 2014 and which was to have had the capacity to grow 20000 tons of prawns a year, has resulted in the retrenchment of almost all 50 employees.

The electricity-intensive prawn project was launched in 2005 by SeaArk, which is affiliated to the controversial Bosasa group of companies. The company has blamed the recession, a lack of bank funding and Eskom’s proposed tariff hikes for the decision.

Bosasa spokesman Papa Leshabane said the project had come to a halt as banks “were not keen to put money into such projects”, with Eskom’s hikes costing “a fortune in electricity bills”.

Straits Chemicals, which signed a R8.5-billion deal in April 2007 to produce a chlorine manufacturing and water desalination plant, has decided to downscale its plans.

The plant would have had the capacity to produce 600 tons of chlorine a day and supply both foreign and domestic markets. But Straits Chemicals, a subsidiary of Singapore’s Chemical Industries Far East, said the initiative would be “dramatically scaled back”.

Executive director Eric Lim said: “The project has been dramatically scaled back to producing only 250 tons of chlorine per year. This is a result of less demand for chlorine internationally.”

Lim is expected in South Africa next month to finalise the details of the revised plan.

Coega Chemicals, which manufactures several industrial chemical products, said this week that it would be relocating its proposed plant to Saldanha Bay in Western Cape.

Director Tim Victor said: “Our project is very much alive, but the location will be at Saldanha Bay. We were comfortable at Coega, but from a logistical point of view Saldanha Bay makes more business sense.”

Coega Chemicals conducted an environmental impact study in May 2007 for the proposed $1.5-billion plant to manufacture chloromethane, which is used in the silicone rubber industry; methylene chloride, used as a solvent and plasticiser; sodium hypochlorite, used in bleach, and calcium hypochlorite, used for pools and water treatment.

Initially it was reported that Coega Chemicals would source some of its chlorine from Straits Chemicals, but Victor said his company’s relationship with Straits ended 18 months ago.

Rainbow Nation Renewable Fuels, which announced plans for a R1.5-billion soybean processing facility last year, has temporarily shelved its construction.

Managing director Geoff Mordt said the project had been “deferred” because of a lack of funding.

But Mordt believed sufficient funding could be secured by June.

Maritime Motors, which planned a new heavy truck plant and commercial vehicle plant in the zone, withdrew last year, citing the economic downturn and the high cost of relocating to Coega.

Maritime Motors chief executive Arthur Mutlow, who declined to reveal the value of the shelved investment, said: “We made a decision to redevelop our own plant (in Port Elizabeth).”

A source said two proposed container depots, to be built by Mediterranean Shipping Company and SATI, have also been deferred because of economic difficulties.

Despite the setbacks, the Coega Development Corporation (CDC) has secured a handful of investments, three of which are foreign direct investments into the automotive sector – creating 7723 jobs, 181 internships and training for 5120 people, and generating revenue of R55.3-million.

Last month, the CDC announced that it had a growing pipeline of new projects worth R150-billion.

These included:

  • A R100-billion PetroSA crude oil refinery named Project Mthombo
  • A 100-seat Absa call centre – as part of a business process outsourcing centre scheduled for completion next year
  • The R178-million Nelson Mandela Bay Logistics Park, which has already secured four auto component manufacturing investors; and
  • General Motors SA’s logistics centre, which includes a 38000m² warehouse that will act as GM’s parts distribution centre for Africa and Israel.

Responding to a statement by COPE MP Smuts Ngonyama in the National Assembly last month, Trade and Industry Minister Rob Davies said the country could not expect large energy-absorbing projects in future.

He told MPs that Coega chief Pepe Silinga had said he was not fazed by the project cancellations.

“Long ago they had moved away from looking for an anchor tenant … in particular large energy-using, but not labour-creating, projects like aluminium smelters.”

Coega’s business development executive manager Khwezi Tiya said: “We continuously work with the relevant companies when they have to review their plans and we also pursue projects in other growth sectors that may not be as impacted by the current crisis.

“In the past year in particular it has become clear to us that some of the companies are not finding it easy to raise the necessary funding, and that is due to various factors.”

Tiya added: “A Belgian company confirmed their intent to invest approximately R1.2-billion.

“We will be making an announcement soon of another related investment with a European company, once all the necessary agreements are in place.

”We are also in the final stages of negotiations for a ferro-manganese project.

“It should be recalled that the current value of projects or potential investments that are at feasibility for location at Coega exceeds R120-billion.

“That level of investor interest could not exist if these investors doubted the viability of the location.”

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