Coega gets its first tenant

May 24, 2005
Author: Terry Hutson

Amidst great jubilation in the Eastern Cape last week, the Coega Development Corporation (CDC) announced its first tenant – the Belgian textile manufacturer Sander International, who will erect a factory manufacturing high-quality fabric for the transport and hospitality industry.

In its final stage the plant will, we are told, employ up to 1200 people and import raw material for the first few years after which they will be made locally.

Celebration time’, ‘Coega dream becomes a reality’ and ‘Ecstatic welcome’ are some of the headlines that welcomed this timely bit of news, for it was only a few weeks earlier that the CDC was sharply criticised by the Eastern Cape Finance MEC for living on false hopes. MEC Billy Nel suggested that CDC should rethink its marketing policies.

So in case the euphoria following the happy announcement makes us lose sight of the bigger picture, perhaps we should take cognizance of Mr Nel’s warning made so close to home. A vast amount of money has gone into developing the Coega project, much of it derived directly from the tax-payer, with so far very little to show after eight or nine years of planning and building (apart from a very visible harbour and adjacent houses and office blocks – much of which is mainly unoccupied).

The new harbour, to be known as the port of Ngqura, is due to accept its first commercial ship in just a few months. The harbour alone has cost in excess of R3 billion so far – one suspects the figure is or will be much higher – and yet we still do not know who or what will be using the deepwater port.

Perhaps even the word deepwater should be qualified. The design parameters for Ngqura allow for a deadweight tonnage of 80,000DWT and a loaded draught of 14m on drybulk vessels. It is only the horizontal geometry of the port that permits 150,00DWT bulkers – Capesize vessels of the type that could provide the lifeblood of the entire project if only someone somewhere will listen carefully to what iron ore exporters are saying. But Capesizes won’t be able to load cargo!

Limitations on container vessels stipulate a deadweight tonnage of 70,000DWT, an overall length of 300m, beam of 40m and draught of 14m. The designers of the port believe this to represent a 4,500TEU vessel although they say that 6,500TEU cellular container ships will be able to manoeuvre within the port. The purpose of such manoeuvring is not stated.

As an aside, the name Ngqura means the same as Coega and why the National Ports Authority insists of adopting the different spelling, one that is totally unpronounceable to many of the people who might make use of the port, remains something of a mystery.

The CDC and other interested parties, including the Departments of Public Enterprises and of Trade and Industry remain confident that efforts of attracting an aluminium smelter to the project will be successful. They almost had French producer Pechiney in the bag – in fact electricity supply company Eskom is committed to spending billions of providing energy to the region on the basis that Pechiney would build their smelter in the Eastern Cape.

Unfortunately Canadian producer Alcan unexpectedly purchased Pechiney and then announced that it required a rethink of all future projects. Alcan is still thinking but Public Enterprises’ minister Alex Erwin says it doesn’t really matter – if not they then someone else will take up the offer (we now hear the name of Russia’s SUAL being mentioned).

“We will have a smelter at Coega,” Erwin has said on several occasions, or words to that effect. No doubt we will, and like the Belgian textile manufacturer it will be a welcome kick-start when it comes. Coega has been, so far, a costly and extravagant exercise in pandering to the greater political but lesser economic needs of the region.

It is repeatedly said that Coega should be justified on the same basis as the specialist bulk ports of Richards Bay and Saldanha – that they were built as tokens of faith in the future and intended for the upliftment of a specific region.

These claims are inaccurate and seem to forget that both Richards Bay and Saldanha Bay were developed for the export of coal and iron ore respectively in direct response to signed contracts for the export of viable quantities of coal and iron ore. To date, after nine years of planning, Coega lacks those signed contracts and has only one textile manufacturer with the potential for limited import or export volumes on its books.

This is not to say that future so-called ‘anchor tenants won’t be found. Obviously some will, given the political will behind the project, and without wanting to dampen the euphoria that will certainly accompany such news, it will be necessary to note that one smelter, like one textile factory does on its own justify the expense and cost of such a vast project – but will be a start.

More such tenants need to be found, and perhaps the minister and those in the CDC are correct in saying they are lining up. PORTS & SHIPS is aware of several mining investors who have a strong interest in committing to Coega for their exports, but are prevented from proceeding because of a lack of positive response from government parastatals.

To ensure that Coega becomes a viable option, the railway from the Northern Cape will have to be upgraded for heavier trains – more expense – and in addition to this Spoornet will have to invest in additional rolling stock and locomotives. Between one and two million tonnes of manganese ore is currently railed along this line annually from the Northern Cape to nearby Port Elizabeth, which in the most recent fiscal year (April 2004 – March 2005) exported 2.016 million tonnes of bulk cargo, including manganese.

Manganese ore is one of the commodities that is to transfer to the new port, the other being petroleum.

Another commodity that Port Elizabeth will more than likely lose to Coega is containers. SA Port Operations was recently appointed as the custodian of the new terminal at Coega (until such time as government can makes up its mind on private investors).

The reality of the situation is that South Africa has a new harbour at Coega nearing completion of phase 1. We have an adjacent industrial development zone complete with much of the necessary infrastructure, and we have road and railway networks into the zone and harbour area being readied for use. In a few months time we’ll witness the first ship ceremoniously entering the new port, amid the sirens and bunting and joy and happiness.

Hopefully all this will translate into what was intended – the alleviation of unemployment in a region of the country most desperate for such an injection. But only time is going to reveal if this was the best medicine.



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