COEGA IDZ Incentives raise hope
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