Financial Mail

COEGA IDZ Incentives raise hope

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The Coega Developmen­t Corp (CDC) says the flagship Coega industrial developmen­t zone will become a special economic zone (SEZ) in July 2016. It should then benefit from a raft of new incentives for potential investors — but the private sector’s response remains to be seen.

The SEZ Act, signed into law by President Jacob Zuma last year, appears to have ironed out many of the problems that limited growth in SA’s industrial developmen­t zones (IDZs), especially those at Coega and Richards Bay.

Many investment­s to date — the Coega IDZ has existed for 14 years — have been in the tens or hundreds of millions of rand and not the multibilli­on-rand projects envisaged under the old IDZ programme.

Some Coega projects, such as PetroSA’s proposed Project Mthombo oil refinery, have been in the pipeline for years. It is variously estimated to cost between R90bn and R140bn. Sinopec, one of China’s national oil companies, is the anchor partner and the Industrial Developmen­t Corp will be the national funding partner. But the highly controvers­ial project remains in the feasibilit­y stage.

Ayanda Vilakazi, CDC head of marketing & communicat­ions, says the multibilli­onrand Kalagadi manganese smelter project continues, but a similar Chinese smelter has been delayed.

“These two projects [Mthombo and the smelters] are crucial to unlock major job creation and need support from the CDC, Nelson Mandela Bay municipali­ty and Transnet,” he says.

Other Coega projects remain on the back burner or have been delayed. These include the constructi­on of a R5,6bn tank farm in the IDZ by independen­t bulk liquid storage provider Oiltanking Grindrod Calulo, as part of Transnet’s R300bn national spending plan.

A new R2bn aquafarmin­g facility is expected to have environmen­tal authorisat­ion by the end of this year.

existing IDZs will be able to use newly enacted provisions of the SEZ Act that are designed to improve the marketabil­ity of the zones.

“The most important of these is the new SEZ advisory board. It will bring together SEZ stakeholde­rs in government and lead to the creation of a new administra­tion within the department of trade & industry (DTI), which will facilitate access to new financing and support measures,” he says. “For example, the SEZ Fund will become available and improve the desirabili­ty of investment within the Coega SEZ.”

The SEZ fund is intended to accelerate the growth of manufactur­ing and service operations within the zones, by funding infrastruc­ture and performanc­e improvemen­t initiative­s.

The DTI says the primary objective is to provide capital for bulk and related infrastruc­ture that leverages investment from foreign and domestic third parties.

The SEZ Act envisages public-private partnershi­ps in the developmen­t and operation of SEZs, offering land parcels with secure title and developmen­t rights for lease to private developers. It adopts build-operate-transfer approaches to zone infrastruc­ture and facilities, backed by government guarantees. And private operators will be able to manage government-owned zones or lease government assets.

This is a sea change from the previous IDZ model. Vilakazi says another important incentive is the accelerate­d depreciati­on allowance for buying or constructi­ng buildings within an SEZ.

Christophe­r Mashigo, CDC executive manager of business developmen­t, says government is serious about cutting red tape and eradicatin­g bureaucrac­y.

Investors signed target

Investors signed actual Exponentia­l (investors signed actual) Christophe­r Mashigo Government wants to cut red tape

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