Coega floods but woes continue

Jul 31, 2004
Author: P&S

July has been a month of ups and downs for the fledgling port of Ngqura and the associated Coega Industrial Development Zone.

First came the good news with the initial flooding of the tidal basin facing the container and dry bulk terminals. This was followed by the ceremonial ‘opening’ of the basin, with minister of public enterprises Alec Erwin adding the contents of a magnum of sparkling wine to the 5.75 million cubic metres of seawater in the impressive basin, accompanied by the cacophony of plastic horns more often associated with rowdy soccer games and the arrival of the first vessel to come alongside – the diminutive Durban tug Reier.

Hardly had the sounds of the horns dissipated along with the dignitaries than came the news that talks between the National Ports Authority and the consortium consisting of P&O Nedlloyd and TC Infrastructure (CODECO), the preferred bidders for the concession to operate the terminal, had collapsed.

CODECO was appointed preferred bidder status in October 2000, after P&O Nedlloyd had initiated the idea of developing a container hub terminal at the proposed port. Prior to that Ngqura was envisaged primarily for bulk cargo purposes and the consortium probably felt justified in assuming it would be a clear run to the day when the first P&O Nedlloyd container ship entered the port to discharge her boxes.

The terminal has been designed with an initial capacity for 500,000 TEUs and has the ability to handle 4500 TEU vessels, hardly an ambitious project. However the port facility retains ample space for further development including the handling of much larger vessels although this is not included in the current construction now nearing completion.

In 2001 the NPA was given a mandate by the South African government to manage negotiations pertaining to the development of the Coega container terminal. With the first vessel due to berth alongside by September 2005 (according to the NPA) time is running out for the appointment of a concessionaire and the ordering of related infrastructure.

Which adds to the shock of this week’s announcement that talks had been terminated. ‘Due to unresolved fundamental issues around the terms of the concession between CODECO and the NPA, these negotiations cannot continue,’ said minister Erwin. He made it clear that he supported the termination.

“After a tender process in 2000, the CDC (Coega Development Corporation) signed a Project Development Agreement (PDA) with CODECO. This PDA effectively gave CODECO preferential partner status in these negotiations,” he added.

Erwin explained that the unresolved issues fell outside the jurisdiction of both the NPA and CDC and would require policy intervention and possibly subsidies from government.

He pointed out that at present government is in the process of finalising terminal concessioning in the context of a national port strategy; policy issues pertaining to the ports and logistics system; and developmental support that will make a concession viable.

He remains optimistic about the Coega container terminal concession. “A tender will be advertised once the above process is complete and all interested parties, including CODECO, will be invited to bid.”

In an unrelated issue a South African newspaper reported this week that mining groups BHP Billiton, Anglo American and Companhia do Rio Doce of Brazil had denied they were interested in becoming involved with the Coega project.

The same newspaper had reported that the respective mining houses were considering the export of iron ore through the port of Ngqura as an alternative to Saldanha Bay.

This would require a massive refurbishment of the railway from Sishen in the Northern Cape, which currently carries manganese to Port Elizabeth but is not designed for the ultra heavy trains required for competitive conveyance of iron ore.

Trains on the Sishen-Saldanha line are among the heaviest in the world – the line having been designed for 200-wagon trains more than two kilometres in length and with a mass of 16,000 tonnes. The 82 bridges along the Saldanha railway are constructed for this enormous mass, with curvature designed not to impede the momentum of the train. As the line is fully dedicated, with very little other traffic using any section, operational procedures are made simpler.

None of the above applies to the existing railway between Sishen and Port Elizabeth. The majority of this line was built for a more conventional type of traffic and handles between one and two million tonnes of manganese ore annually in addition to other general traffic. There have been suggestions that road transport might be an option for iron ore exports to Coega/Ngqura, raising further questions concerning the cost of maintaining an adequate road system.

At what cost?

According to a fact sheet issued by the National Ports Authority a total of R3.2 Billion is being invested in the port of Ngqura. Electricity supply company Eskom signed an agreement (with aluminium producer Pechiney who now may not come to the Eastern Cape) to provide electricity for the aluminium smelter project at a cost of R2 Billion. According to the CDC the Eastern Cape government allocated close to R300 million at the end of 2002 for the infrastructure in the metallurgical sector where the smelter would be sited.

An entire town has been built to house the workers at the industrial development zone, which mostly stand empty today waiting for development and occupants. Extensive road and rail works are underway.

The cost of building the smelter has been estimated at R2.2 Billion, of which Pechiney would have provided between 35% and 45% of the investment, with the balance coming from other investors including the Industrial Development Corporation – another government parastatal.

At the ‘opening’ of the tidal basin Erwin stated there was no longer an emphasis on finding an anchor tenant for the port. He said a smelter would be built, with or without Alcan/Pechiney, but that less sophisticated AP35 technology would be used and not the AP50 as intended by Pechiney.

“There will be a smelter in the IDZ, of that we’re clear although we still have to clinch the matter. I’m confident there will be a smelter.”

Erwin added that government was coordinating the reconstruction of the railway line to handle iron ore and manganese and said his department would appoint someone to coordinate development between Coega and Port Elizabeth.

The former minister of public enterprises (and now the minister of transport) Jeff Radebe said last year at a briefing to a joint parliamentary committee that ‘the Coega project was a clear example of how all state-owned enterprises such as Transnet and its subsidiaries and Eskom were being required to align their programmes with government’s integrated development programmes.

Transnet, he stated, would not have built the port of Ngqura “if the government had not insisted on state-owned enterprises conforming to the agenda of government.”
’ – Coega News, December 2003.

The port of Ngqura is the biggest government-sponsored infrastructure development in South Africa. The project aims at boosting economic growth in the Eastern Cape and, with the proximity of the port to the industrial development zone, will put manufacturers located in the zone in a more competitive position, it is hoped.

Recently a number of executives of the Coega Development Corporation left the company with no explanation made public, among them the chief executive officer.

On 30 June 2004 the acting CEO of the CDC, Khwezi Tiya said it was important to realise that Coega is bigger than any single investor. “In the first phase we have over 6,000 ha of land ready for development. Global competition for the kind of investment we want is tough, but we believe that Coega has a number of unique strengths, including the deepwater port of Ngqura. Now, when we take potential investors out on site, we will show them a harbour rather than earth-works.”

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