Coega poised for an even better 2016

FEBRUARY 3, 2016

Following up on a successful year in 2015, the Coega Development Corporation (CDC) is poised to reach its performance targets for the FY2015/16.

“Last year can best be described as the year CDC showed its true character. We faced some steep challenges but through it all managed to come out tops,” said Dr Ayanda Vilakazi, CDC Head of Marketing & Communications.

The year 2015 saw CDC recording yet another successful milestone by making history and signing 19 investors during the 2014/15 FY, the most ever in a financial year spelling a new era in a number of projects attributed to an IDZ in South Africa in one FY. In addition the CDC had 31 operational investors with a combined investment value of R6.44-billion as at 31 March 2015.

“The above feat was achieved against a backdrop of a weak global economy. According to the UN Conference on Trade & Development Foreign Direct Investment (FDI) into South Africa in 2015 dropped by 74%,“ added Dr Vilakazi.

“The CDC has brought much needed relief to the economy of the Eastern Cape and country as a whole. These investments understood correctly translate to families moving a step closer out of poverty by acquiring employment through projects in the IDZ.”

What’s in store in 2016?

On top of its economic agenda the CDC seeks to maintain its trajectory as the preferred FDI destination of choice. Core to its alma manta is consistency in ensuring that projects brought about in the IDZ translate to tangible jobs and skills development.

This year has seen the operational commencement of the Coega Dairy project worth R25 million in zone 3 of the Coega Industrial Development Zone (IDZ) having created over 650 jobs. The project consists of the expansion of the Coega cheese product line and installation of a ware house and office block.

“We particularly proud of this project cause of its impact on Small Micro Medium Enterprises (SMME), our focus on SMME’s has produced a significant increase in the number of youth owned SMME companies. Two of the three SMME companies who took part in the project were youth and women shareholders. To us at CDC, it is encouraging to see an increase in youth owned businesses,” said Andile Ntloko, CDC SMME unit head. 

In addition, another project which recently became operational was WNS – call centre situated at the Business Process Outsourcing (BPO) in the Coega IDZ, which afforded over 600 youths jobs.

“As CDC we cognisant to the country’s high youth unemployment rate of 63.1% and the broad triple challenge of inequality, poverty and unemployment and as such make it a point that whatever project is envisioned encompasses the categories of youth and women to benefit from those projects,” adds Dr Vilakazi.

One of CDC’s flagship projects the Dedisa Power Peaking Plant (PPP) a 3.5 billion investment situated in zone 13 of the Coega IDZ currently celebrated four months of commercial operation since it came on line in September 2015 and created over 1490 jobs during its construction phase. 

Projects currently under construction

The R86-million multi-user facility situated in zone 3 of the Coega IDZ has already seen over 103 people employed as part of its construction. The 7 800m2 facility is built over seven hectares of land. Once completed it will comprise of smaller units ranging between 350m2 and 1 500m2 under one roof with shared communal infrastructure.

“The construction of the facility is progressing well and has seen several investors showing interest in forming part of the facility. River Edge, a sugar processing plant has already made its intention clear by putting pan to paper with an investment value worth R10 million,” said Dr Keith Du Plessis, CDC business development manager (Agro processing).

Another project currently under construction is Spiral Wrap with an investment value of R19.8 million. The plant falls under the chemicals sector and focuses on Polymer products for industrial use.

“Spiral Wrap started construction last year November and will be situated in zone 7 of the IDZ. The project has translated to over 150 jobs thus far during its construction phase,” said Duane Mouton, CDC business development manager (chemicals). 

In addition, Lension with an estimated investment value of R16.5 million from Malaysia will in the next couple of months start with the construction of its facility. The investor is currently in the process of acquiring services in preparation for the plant’s construction.

Investment targets

The CDC is well on its way to reach its investment targets. “The CDC prides itself in giving it’s all and might in ensuring socio economic dividends are realised where ever it operates,” added Dr Vilakazi.

The organisations Key Performance Indicators (KPI’s) are the driving force behind CDC’s renounced success. The CDC is working overtime to reach or exceed its investment target of R2 billion overall investment signing value for the FY 2015/16.

“As an illustration of investor confidence in the IDZ the CDC’s project pipeline is looking healthier than ever. We’ve certainly made good progress in ensuring that the timeframes from when an investor was signed to when they become operational is shortened,” said Christopher Mashigo, CDC executive manager business development. 

“In our pipeline, we are currently sitting with over nine projects at an estimated total value of over R150 million that we are confident will be converted before the end of the current FY. Some of the projects oscillate from a number of sectors including aqua-culture, chemicals, BPO & automotive sector,” adds Mashigo.

“We plan on having a big announcement very soon touted to be a game changer for the Eastern Cape (EC) and entire country as a whole.”

Flagship Projects

The CDC certainly is proud of its flagships projects one of those already mentioned is the Dedisa PPP which plays a critical role in establishing a consistent supply of energy.  The plant has a maximum capacity of 342 MW Open Cycle Gas Turbine and is capable of converting to Gas.

Another project which was recently endorsed by the National General Council of the governing party is the Coega Oil Refinery, called Project Mthombo. The project entails the construction of a new crude oil refinery based in the Coega IDZ.

Important to note about the project is the impact that it will bring to fruition in the EC economy and its surrounding areas. Some of the key noticeable features of the project include:

  • The plant has been specified to process 300,000 barrels of crude oil per day.
  • The refinery will produce diesel, petrol and jet fuel.
  • Strategically located in the Coega IDZ, it will be at the heart of trade flows and meet a growing demand for petroleum products.

Economic Factors for consideration:

  • $10 b to be spent during construction;
  • R94,6b  per annum operational costs (including feedstock);
  • 83% of economic impact will accrue to the Eastern Cape;
  • Household income in the Eastern Cape could rise R1.8b per annum;
  • 5.5% p.a possible economic growth for the Eastern Cape province.
  • Spin-offs from the localisation initiative amounting to about R20bn could come to the province.

Job creation:

  • Construction phase: Up to 23,000 at peak; 5,000 to 10,000 highly skilled artisans.
  • Operation phase: Approx. 1,000 permanent refinery jobs; 11,000 indirect jobs; and training facility planned.

The following the Oil Refinery production flow chart and products:

“The Oil Refinery will contribute to the secure supply of liquid fuels. Feasibility studies have been completed and construction is estimated to take between three to four years. It is envisaged that the project will start operations in 2022, though an earlier date for the implementation of the project would be ideal,” Vilakazi said.

“In addition, fuel production capacity cannot meet demand. Refineries have been upgraded as far as is practical and by 2018 South Africa may have to import 20% of its fuel to meet consumption demand.”

“The employment generation potential of the Oil Refinery projects aligns with the economic development intentions of the state.” The project is also strongly aligned to the Eastern Cape’s provincial industrial development strategy. The Coega IDZ plays a pivotal role as a provincial asset, together with the Port of Ngqura, which is the trans-shipment hub for sub-Saharan Africa.

“The Oil refinery presents significant up- and down-stream opportunities to contribute substantially to economic growth in both urban and rural areas through the development of a petrochemicals cluster. The development offers opportunities in: industrial diversification; agriculture, agro-processing and rural development; sustainable job creation, and purchasing impact and supplier development.

“It is anticipated that about 1 000 permanent refinery jobs and about 11 000 indirect jobs would be created on the project. The spin-offs from the localisation initiative could amount to R20-billion that could come to the Eastern Cape Province.

“We estimate that household income in the Eastern Cape could rise to R1.8-billion per annum, and there could be a 5.5% per annum economic growth for the province.”