Status of Dimbaza Industrial Park: dtic & Eastern Cape Development Corporation briefing, with Deputy Minister

NCOP Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour

08 November 2022
Chairperson: Mr M Rayi (ANC, Eastern Cape)
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Meeting Summary


The Committee met on a virtual platform for a briefing on the progress of Dimbaza Industrial Park. Members were briefed by the Department of Trade, Industry and Competition, members of the Eastern Cape provincial legislature and the Eastern Cape Development Corporation with the Deputy Minister of Trade, Industry and Competition in attendance.

The Department presented a relatively high-level account of the status of industrial parks, with a specific emphasis on the Dimbaza Industrial Park, situated some 20 kilometres from Qonce in the Eastern Cape. The demand for both commercial and industrial space remained low, mainly due to distance, security, lack of accommodation and outdated factory designs. The dominant sectors amongst the tenants were funeral services, churches and schools and furniture manufacturers. Challenges were numerous and included the lack of energy supply, services, water shortages and drought; the low level of skills in the community; lack of security and vandalism. However, several lessons had been learnt and the focus would shift to developing a township economy and focusing on the development of the district economy as an integrated industrial ecosystem. Private sector participation and ownership would be encouraged. The Eastern Cape Development Corporation made a very similar presentation.

The Chairperson expressed the Committee’s disappointment that the presentations had not focused on the specific details of the Dimbaza Industrial Park, right down to the names of the companies working in the Industrial Park. The Committee required a list containing full details of all companies in the Park, including their exact location.

The Deputy Minister said they needed a deeper discussion on a development strategy for the area with proper linkages. The dtic’s special industrial development framework was attempting to address that because, in the past, the dtic had tended to concentrate on enclaves for industrial development but had not looked at linkages between the industrial area and the supply chains needed to support it, in addition to the infrastructure, so that it would attract investment.

Members asked why so few women were employed during the construction phase. Did the Development Corporation not take the issue of gender parity seriously? Why had only two women-owned SMEs been involved in the construction phase? Were persons with a disability considered for employment? Where were the roads that the construction company had built? Were the roads inside or outside the Industrial Park?

Why were people who were not employed by the Development Corporation managing the Small Business Centre and renting out the facilities, and why was the rental monies collected not submitted to the Corporation? Members requested a clear breakdown of how the huge amounts of money allocated to the Industrial Park had been spent.

It was agreed that the Select Committee would conduct an oversight visit to the province. Members were encouraged to suggest industrial parks in their areas.

Meeting report

Opening Remarks
The Chairperson welcomed Members and noted that the Committee had received reports from the dtic about Special Economic Zones (SEZs) and Industrial Parks (IPs), but the reports had been at a high level.

The Chairperson explained that he was deployed in the Dimbaza area, and he had observed conditions in the Dimbaza IP and thought that it was better to deal with one IP at a time as the Committee could then dig deeper. He was happy for Members to suggest IPs, SEZs or any other projects that they would like to bring to the attention of the Committee, especially those in their constituencies.

He had invited all stakeholders to join the meeting. He had requested MEC Mvoko from the Eastern Cape legislature to brief the Committee very specifically and in a detailed manner on Dimbaza Industrial Park, Buffalo Park, Eastern Cape. He also noted there was a delegation from the Eastern Cape Development Corporation (ECDC). He appreciated the presence of the chairperson of the Portfolio Committee on Economic Development in the Eastern Cape.

Opening Remarks by the Deputy Minister of Trade, Industry and Competition
Deputy Minister Fikile Majola stated that the dtic presentation would be at quite a high level, but with details of the Dimbaza Industrial Park. He was quite impressed that the Committee would be looking at some of the key industrial parks, one at a time, which would involve the Committee with the different stakeholders in the provinces to ensure what needed to be done was taken forward. He could respond to issues and engage in a discussion after the presentation. He handed over to Mr Klassen to make the presentation.

Members would see that the industrial parks employed quite a large number of people in the local areas and the absorption rate was quite large, which was something that required careful thinking when focusing on upscaling the IP as it had the potential to absorb more job seekers in the local area.

Presentation by the Department of Trade, Industry and Competition on Dimbaza IP
Mr Thami Klassen, Director: Regional Industrial Development, dtic, made the presentation. Industrial Parks offered significant employment opportunities in their respective regions mainly for small and medium enterprises, with an average occupancy of 75%. Currently industrial parks accounted for the employment of 46 490 people, with sectors such as agro-processing, light and medium manufacturing being the dominant employers of semi-to-skilled individuals. A recent survey conducted in industrial parks reported a cumulative investment of R6 billion, which was a R2 billion increase in investment since the 2020/21 FY.

Dimbaza Industrial Park was owned and operated by the ECDC and fully serviced by the Buffalo City Metro Municipality. Dimbaza IP was the biggest employer in the township with 703 people permanently in employment. The demand for both commercial and industrial space remained low, mainly due to distance, security, lack of accommodation and outdated factory designs. The dominant sectors amongst the tenants were funeral services, churches and schools and furniture manufacturers.

The presentation detailed the activities in phases one and two when infrastructure was developed with dtic funding.

Key lessons learnt during the implementation process included ownership/control and management of parks to include national, provincial and local government with proper governance and compliance management systems, municipal incentives and critical non-financial support services. Sound business and strategic plans as well as investment and marketing strategies were found to be critical. To have a good chance of success, the IP had to focus on the development of the district economy as an integrated industrial ecosystem. Private sector participation should be encouraged.

(See Presentation)

Mr Mlungisi Mvoko, EC MEC for Finance, Economic Development, Environmental Affairs and Tourism, said he had nothing to say following the dtic presentation. He had given funding to ECDC and not had a direct engagement in the IP. He proposed that ECDC briefed the Committee on its work concerning the Dimbaza IP.

Presentation by Eastern Cape Development Corporation (ECDC)
Mr Ayanda Wakaba, CEO, ECDC, made the presentation. The ECDC owned the Vulindlela Heights (Mthatha), Butterworth, Fort Jackson (BCMM) & Dimbaza (BCMM) industrial parks. Dimbaza IP extends over 156 hectares and is located in the middle of Dimbaza township, 20 kilometres from Qonce (King William’s Town), which meant that the demand for commercial and industrial space in Dimbaza was low and that vandalism and theft of structural steel, etc. was extensive.

The main challenges faced were the lack of energy supply, water shortages and drought. The low level of skills in the surrounding community, the poor state of the unoccupied buildings and surrounding infrastructure as well as a lack of digital infrastructure made the environment difficult for prospective tenants.
A lack of supporting industries, such as retail stores, and minimal business support services were not attractive to businesses. The fact that an effective social compact was not in place led to a sense of insecurity and the likelihood of further vandalism.

(See Presentation)

Mr T Apleni (EFF Eastern Cape) referred to slide 10. It indicated that the total employed during construction was 168 people: 157 were men; only nine were women. Why, out of 157 people, were only nine women employed? There were 168 people employed in construction work: 65 youth and 9 women. That was his concern.

Ms B Mathevula (EFF Limpopo) was concerned about the employment of women because it seemed as if the ECDC did not take the issue of gender parity seriously. What method was used to employ only nine women? She had been contacted on the issue of SMEs. Only two women-owned SMEs had been involved in the construction, and that was unacceptable.

Ms Lydia Moshodi (ANC, Free State) was concerned about women not being considered for employment. She noted that dtic had industrial parks in seven provinces. Could the dtic just mention those provinces? Members represented their provinces and could assist if they knew where the IPs were. She had noted that there was no mention of persons with disability amongst those employed in the construction work. Were persons with disability considered for employment?

The Chairperson stated that, as he had indicated earlier, he was deployed in the Dimbaza area. The constituency office for wards 134, 136 and 138 was located just under one kilometre from the Industrial Park. When he had a meeting with the community, he was given a list of issues that needed attention, including social development, crime, business development, education and health. The Dimbaza Industrial Park was also raised as a challenge by members of the community. He had written to the Minister of Trade, Industry and Competition, Minister Ebrahim Patel, to organise a meeting with government officials who briefed him and his colleagues on the industrial park as a concept and specifically Dimbaza Industrial Park and its status. The meeting took place in early 2020. Representatives of the ECDC, as well as the Mayor of Buffalo City, together with the then MMC responsible for Economic Development in the City, Mr Vipul, the Municipal Manager of Buffalo City Municipality, and the official responsible for industrial parks from the dtic. Phase one, phase two and phase three were explained. He agreed that there should be coordination between the three spheres of government, but he suspected that it was not happening because no progress was visible. A follow-up meeting was held, and Mr Klassen had made a presentation which was no different from the one that he had just presented.

The Chairperson stated that members of the Dimbaza community, particularly from the business community, had formed the Dimbaza Business Forum. They wanted to benefit from the investment as well. On visiting the IP with Mr Klassen, they had found that there was no security at the gate, the fencing was not complete and there was a school inside the park. The principal did not know anything about the IP.  The school was included in a list of occupants. None of the ECDC workers knew what was happening in the IP. Some members of the Business Forum were threatening to close down the park because they did not know what was happening in the park.

The Chairperson said that, because the presentations were at a high level, maybe the ECDC could provide a list of the companies in the park as that was a community concern. He also suggested the Committee required a list of SMEs in the park and their exact location. He had also visited the Small Business Development Centre in the IP where some of the buildings were no longer managed by the ECDC. Other people were managing them and renting facilities, but money charged was not handed to ECDC. Also, there was a problem with crime within the business centre. He asked for details of all the companies involved from the first phase to the current phase.

He expressed concern that the IP Steering Committee was another problem that was causing fights as the steering Committee membership was limited to members of the community from one municipal ward only, although the IP served three wards. That had resulted in only people who lived in that ward getting employment during the construction phase. The Steering Committee needed to include people from the other wards, as people from the other wards felt that they were being isolated and excluded from the development in the area.

Going forward, the Chairperson said that the Committee would continue to monitor the IP, especially concerning this issue of the township economy. About 90% of the people in the area were not working and so Mr Klassen had conceptualised the idea of a township economy. He wanted to see the concept being implemented. The Committee would monitor it as part of constituency work in the area. He requested cooperation between the Department at a national level, the department at a provincial level, Buffalo City Metro Municipality and ECDC and to address the communities around some of the areas of concern about Dimbaza Industrial Park.

Mr Apleni requested, referring to slide 13, a clear breakdown of how those huge amounts of money were spent. He requested a detailed statement. Where were the roads that they were referring to? Were they inside or outside the industrial park?

The Chairperson reiterated that the Committee required a breakdown of monies expended and a list of companies that had done the work.

Mr Wakaba had taken note of the request for a list of companies, and he would send that together with the breakdown of expenditure. On security arrangements around the centre, he agreed that security was not at the level at which it should not be. However, the manager responsible for IPs and SEZs would join ECDC on 1 December 2022 and would most definitely assist ECDC in attending to such matters. As indicated earlier on, from the first of December, ECDC would have a dedicated individual to look at managing the centres. Part of the intended intervention was to tighten up the security measures around the Small Business Centre, including the buzzer.

Mr Wakaba had no defence for the situation regarding the employment of women. The ECDC would pay better attention to the matter. He would work more closely with the contractors, as well as the subcontractors, to mainstream that issue.

The Chairperson asked whether Mr Wakaba could also arrange for the social facilitator to address the community; dealing with such issues was the role of the social facilitator.

Mr Wakaba agreed to do so. He informed the Committee that there had been some tensions in the past between the communities in those wards; the Buffalo City Metro Municipality had supported the ECDC to resolve the issues.

Mr Klassen addressed the question about the industrial parks in the seven provinces. He assumed the question related to women empowerment as he had lost the signal for a few moments. He could not provide details, but he could speak to that on an overall basis. Women were accounted for in every presentation and submission made by or to the dtic. Based on the performance of those factors, incentives sought to address the issue and statistics for the dtic and companies under it. There were other elements too, such as attending to the issues of people with disabilities. Those figures were fairly dismal in terms of dtic reporting, but going forward, the dtic would be planning the different work packages together with the community development centres or skill centres. That would also form part of the funding model to sustain the construction, and also post-construction of the parks and industrial enclaves. When investors and government money was put into the parks, the dtic would segregate the jobs for women, youth and the disabled and set clear targets. Generally, the dtic found that far less than 5% of employees in industrial businesses were women; occasionally a company employed 10% women, but that was still an indictment. Ostensibly, the dtic should be talking about 50%.
Mr Klassen noted that policies had to be intentional and that when a business case was presented, it had to illustrate how it was going to address the three areas of women, youth and people with disabilities to assist the government to meet those targets. The other thing that the dtic was also emphasising was the distance between the dtic and a funder or a financier. The reformed approach was that the dtic, the province, and municipalities, would work together and, as best as they could, to engage private companies to be involved as clusters, as private investors and as associations to take interest in those matters.
Mr Klassen noted that the Chairperson had touched on the issue of social facilitation, which the dtic had raised. Some of the community concerns were based on the experiences raised earlier in the meeting. A social facilitator would definitely assist because that person would be responsive to the community. However, the dtic could also be proactive, working on web pages, skills packages, and other packages, and then spreading the information to the community. The dtic would need to put a programme together that built the capacity of social facilitators across the country because it was better to get people from the same community involved who were well-versed in issues in local concerns.
He said that two things were critical: planning and being proactive in the maintenance of security. Social facilitators were key as they were the eyes and ears of the overall community but also worked to identify potential areas of development and challenges. The government had enough lessons, especially in the Eastern Cape. The bridge in the Eastern Cape, which could not be completed despite the huge because there had not been a buy-in by the community was a classic example. He was strongly emphasising the matter because it was a key element when constructing a business case. It was important to check investment packages in terms of work packages, skills development and an audit of skills to be able to get money from government.
Mr Mawethu Marata MMC, Buffalo City Metropolitan Municipality apologised for the absence of the Executive Mayor of Buffalo City who had experienced technical problems. He confessed to delays in Dimbaza due to Covid-19 but thanked the ECDC for making a difference. The area had been a mess, but one could see progress. The big problem was the distance of Dimbaza from King Williamstown, or Qonce; that was the main problem. Dimbaza had been an area of employment, but people were now unemployed. The City was working to address that challenge by improving its partnership with ECDC and, while there were challenges, he assured the Committee that the two organisations were getting there.
Mr Marata addressed the question of women in employment. Unfortunately, the work had already been done. It was a male-dominated work, but the question of women would be addressed in future work. The Council could not undermine the women. There were challenges, but together they were getting there.
[Mr Mlungisi Mvoko, Eastern Cape Provincial Legislature MEC for Finance, Economic Development, Environmental Affairs and Tourism was disconnected from the virtual platform]

Closing Remarks by the Deputy Minister
Deputy Minister Majola was encouraged by the words of MMC Marata. Firstly, he was encouraged by how they intended to make progress in that industrial park. He had been to Dimbaza when phase one had started but the whole project was affected by COVID-19 and, as a result, the project had not made sufficient progress. The ministry had some discussions with the team in the province. A strategy had to be determined that would align the IP with economic development in the province and the economy, generally. That strategy would have to be clearer in the conversation, because when he went there for the first phase, the officials informed him that to complete the authorisation of the entire park, including the design of the factories, repairing those that could be repaired, and all the infrastructure, etc., it would cost R1 billion. What had been done in Phase one and Phase two had cost around 150 million. If one assumed the original estimate of R1 billion was correct, one could see just how far there was to go in getting the whole of the industrial park properly revitalised.
The Deputy Minister said that the Department required a conversation with the municipality, and with the province concerning the approach to that specific industrial park as part of an economic strategy of the province, and Buffalo City. There were issues there. For instance, certain things could be done, and they had been touched on in the meeting. Sufficient investment in the industrial park was critical, but to attract investors, the infrastructure had to be in order. Would that help to attract a sufficient number of investors to come into the industrial park? What industries were they going to be involved in? What were they going to do about an investment pipeline for the revitalised industrial park?
Deputy Minister Majola suggested that the second point was whether the surrounding environment was conducive to protecting investment in that industrial park. If it was not, investors would not invest. What role could the development zone play beyond the confines of the industrial zone? They needed a deeper discussion on a development strategy for the area with proper linkages. The dtic’s special industrial development framework was attempting to address that because, in the past, the dtic had tended to concentrate on enclaves for industrial development but had not looked at linkages between the industrial area and the supply chains needed to support it, in addition to the infrastructure, so that it would attract investment. When he and the dtic came back to the province, they would have a proper conversation on that matter: the economy in general, the industrial park’s strategy, and that IP in particular, because it was quite a large industrial park. What was ECDC’s role in respect of a development strategy and an industrial strategy that looked at linkages between the IP, suppliers and investors?
He added that, on a practical level, in addition to the information that the Members requested, that had to be made available to all in the meeting, it was time that the dtic fulfilled its commitment to have another visit to the Eastern Cape, specifically to have a discussion on the Dimbaza Industrial Park. The dtic needed to see, firstly, what progress had been made, what had to be done about the next phases, what the cost implications were, and then for all spheres of government, and other entities, to commit to the project. The meeting had to be coordinated so that all role players, including Members of the Select Committee, could obtain proper feedback concerning what could be done and what the challenges were. At that meeting, the dtic could provide information on what happened in phase one, how many companies were involved, where they came from and maybe the challenges experienced. Likewise concerning phase two: what had happened, who had been appointed, were the people local, and so on and so forth. The political question would also arise. It had to be determined at what point the revitalisation of the IP would be finalised; at what cost; what were the timeframes; and how was it to be linked to the regional economy as a whole. That was the conversation needed on his return to the province.
Mr Pumelele Ndamase, Chairperson of the Oversight Committee in the provincial legislature, stated he was pleased to be part of the meeting as his committee was concerned about development in the province. The committee had a duty from the oversight point of view to be able to interact with what was happening on the ground. He was happy that the Deputy Minister was arguing a point that his committee always argued about the need for industrial development in the province. The committee would like to see a situation whereby what was happening in the industrial park was integrated into the broader industrial strategy of the province.

The Chairperson said that the Select Committee was looking forward to the oversight visit to the province. But also, as he had indicated, the Members were the ones on the ground and they could make suggestions about the industrial parks in their areas. He added that was under pressure from the Chief Whip in the National Council of Provinces (NCOP) to visit the Botshabelo Industrial Park in the Free State as that was the area that he came from and there were some challenges with the industrial park there.

Mr M Dangor (ANC, Gauteng) suggested visiting the Ekandustria Industrial Park outside Tshwane as there was a dispute about which province was responsible for the IP.

Mr T Brauteseth (DA, KwaZulu-Natal) commented that after listening to all the presentations, one thing the Committee needed to consider, and also the political heads, was that those industrial parks were built after 1994 but had been allowed to fall apart and become derelict. The honest question to ask, and it was not a political question, was where was the accountability? Who were the people that were tasked with keeping those industrial zones up and running? One of the speakers spoke about R1 billion to get one of them up and running, or R150 million. Whatever it was, it was a huge amount of money when viewed by ordinary South Africans. Why had the industrial parks been allowed to fall apart? Who was accountable? If there were people still working in government who were accountable, the Committee needed to act. Most importantly, they all needed to learn the lessons going forward to make sure that when they all moved on from Parliament, there was not another cohort of MPs, 15 years on, who had to discuss how the parks were allowed to fall apart, be rebuilt and had then been allowed to fall apart again. What were they doing wrong in terms of not getting this right, at least the second time around?

Mr Dangor stated that IPs were built pre-1994.

The Chairperson stated that it was the dtic programme after 1994. The challenge was that they had been heavily subsidised before 1994 and without subsidies after 1994, they fell apart. Agencies of ECDC and, even before that, development corporations from the Ciskei and Transkei, for example, had merged after 1994 and no one had taken charge when those original corporations ceased to exist. The factories were badly vandalised. Security had not been provided. The small business centre in Dimbaza had no security and so had become a centre for criminal activities. Security was a challenge as a lack of security invited vandalism.

Mr Brauteseth said that everyone had to learn: never again!

The Chairperson thanked everyone.

The minutes of 18 October 2022 were considered and adopted unanimously without amendments. The minutes of 25 October 2022 were adopted unanimously following an amendment to the attendance of Ms Moshodi.

The Committee Secretary stated that there would be no meeting the following week as Members would be engaged in Taking Parliament to the People in KwaZulu-Natal.

Committee Business: Study Tour in January 2023
Mr Brauteseth requested an update on the study tour scheduled for January 2023. He suggested that the item should be flagged.

The Chairperson stated that there had been delays with the Department of International Relations and Cooperation (DIRCO) and he had asked Ambassador Dangor to assist the Committee Secretary to talk to DIRCO. Another challenge was that the Committee had identified three countries: China, Singapore and Indonesia. He had been informed by DIRCO that China still had COVID-19 restrictions. The Committee would have to first quarantine for ten days, which was a waste of 10 days on quarantine at Parliament’s expense, and then when the delegation was tested, if one person were found to be infected, the whole delegation would be sent packing. Looking for another country, the Committee Secretary had suggested South Korea, in addition to Singapore and Indonesia, but he was informed that two Committees from Parliament were going to South Korea at that time. Ultimately, it was decided to visit only two countries: Singapore and Indonesia.

Ms H Boshoff (DA, Mpumalanga) suggested including Vietnam where some good work was being done.

The Chairperson explained that there was no longer time for adding a new country as the processes took too much time for them to be completed by the year's end.

Mr Brauteseth suggested moving the study tour to later in 2023 as there was a big event in France in September 2023, and the World Cup was being hosted at that time. He added that he was joking about the World Cup but seriously suggested moving the timeframe.

The Chairperson informed Mr Brauteseth that the reason the Committee had chosen January of 2023 was that, in the year before an election, Parliament did not approve study tours. He suggested that the Committee continue to try to arrange a visit to the two countries indicated. In the following year, the Committee could propose a study tour to France in September and hope that it would be approved.

The Committee Secretary stated that it would take two days to travel to Asia. The delegation would leave on Thursday 5 January 2023 and arrive in Indonesia on 7 January. On 8 January, the delegation would be briefed by the SA Mission and work from Monday 9 January until 13 January when the delegation would move on to Singapore, conducting business there from 16 to 20 January. The delegation would fly back to South Africa on Saturday 21 January 2023. However, she suggested that the visit to each country could be extended by three days to compensate for not going to a third country.

Ms Moshodi agreed that it was a good idea to add extra days to the Indonesia and Singapore visits.

The Chairperson agreed to include the item as a standing agenda item to keep the Committee up to date.

The Secretary requested that Members handed in their official passports one week before leaving Parliament at the end of the year. Members would meet in Johannesburg where their passports would be handed over to them.

Mr Brauteseth needed to renew his passport.

The Chairperson suggested that Members who needed assistance discuss their requirements with him in person in the House the following day.

The meeting was adjourned.

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