Coega Development Corporation: briefing

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
26 September 2001
COEGA DEVELOPMENT CORPORATION: BRIEFING
 

Chairperson: Dr R H Davies

Documents Handed Out:
Coega Project Powerpoint Presentation
The Coega Project Brochure
[The information contained in this document can be found at the

Coega Development Corporation website]

 

SUMMARY
The Coega project is a generic, colloquial name for a new Industrial Development Zone and deepwater port located 20 km from Port Elizabeth in Nelson Mandela Metropolitan Municipality. Following its proposed development as a new site for handling exports and imports, several concerns were raised and these include environmental concerns, economic viability, and legality of its actions, legality of the Coega Development Corporation itself and corporate governance issues. This briefing covers these issues in some detail.

MINUTES
The CEO of the CDC Mr. Pepi Silinga started off by introducing his team, which included himself, Mr. Graham Price, Mr. Khwezi Tiya and Mr. Raymond Harte.
Mr. Khwezi Tiya informed the committee that the presentation would cover the broad overview of what the project as a whole is focused on. He pointed out that Coega is a generic name used to describe two new development projects, the offshore development site (Industrial Development Zone) and a deepwater port (Ngqurha).
Mr. Tiya informed the committee that the cost of the port alone is estimated at around R2.4 billion plus a further R800 million for the container terminal. These are to be funded, respectively, by the National Port Authority and a consortium of foreign shipping companies P&O Lines, Nedlloyd and TCI.

Key programmes include technical (engineering) and architecture (planning) work to create both the industrial development zone and the port. He went on to add that the Coega project is about economic development so it is important to address the economic and social problems in the communities in and around the area. Mr. Tiya pointed out that programmes around skills development are necessary to make sure that a skilled workforce is readily available for investors. He went on to add that in the short term, the skills would mostly be needed in the construction of buildings roads and bridges. Stakeholder management is another key programme that is central to the project. He noted that it is important that this project works hand in hand with all the stakeholders involved in the process like trade unions, the communities, governmental and other business interests. Land acquisition is also a key programme of the project and it was pointed out that the CDC controls about 55% of the land earmarked for the IDZ.

Mr. Graham Price spoke in his capacity as the head of the Business development programme and pointed out that he sees the IDZ as an ideal opportunity to establish the Ngqurha port as a significant contributor to the country's wealth. : In creating momentum for this project, CDC is targeting sectors for sustainable development and in particular the automotive industry, metallurgical industries, the textile industry and on industrial development zone logistics.

Numerous public concerns have been expressed on the legalities of the Coega project. There are also concerns that the project is not environmentally sustainable, economically viable, technically feasible and of its socio-economic impact. Mr. Tiya continued his presentation by focusing on the environmental management programme where he pointed out that a key element here is the issue of environmental friendliness that the project as a whole has to take care of. He noted that in this regard, the legislative framework on environmental issues in the country forms the guidelines for the project in terms of developing and maintaining the appropriate standards.

Mr. Tiya added that in 1998 when the environmental concerns were raised, the Minister of Environmental Affairs and Tourism set up a Ngqurha Committee which was a watch-dog structure ensuring that environmental friendly practices in the project are the norm. He made the point that the Coega project as a whole was at this stage not yet operational and it was therefore necessary to undertake a study regarding the project's environmental impact.
It was apparent that the project is being structured in a way that ensures that there is a careful balance between the buildings proposed and the surrounding environment. Mr Tiya also added that the project team had completed all the environmental impact assessment applications and had forwarded a report to the Ministry of Environmental Affairs and Tourism.

He pointed out that in March, the Minister for Trade and Industry, Mr. Alec Erwin indicated his desire for the area to become an IDZ and also informed the committee that the project had made application for such recognition at least in legal terms. Mr. Tiya stated that it would be fair to note that various concerns had been raised about the environmental, corporate governance and viability dimensions of the project and that he would address these concerns with the help of his team.

Regarding the viability of the project, the project team believes that this situation is largely due to lack of communication to the public and proper communication structures were being put in place to bridge the gap.

Mr. Tiya went on to add that environmentally, this project has been one of the most studied, and around 138 reports have been completed on various dimensions of the environmental issues. Coega has therefore been heavily studied. Nor does Coega close out the Addo Elephant Park and other tourism prospects.

The project team believes that the project can be sustained environmentally and given all the studies conducted; weak points raised by the reports are being addressed. Especially concerns over the proximity of the development to residential areas and the dangers of pollution.

Regarding the technical viability, he noted that the team has been in continuous consultation with various technical experts and an economic report has shown that not only is this project economically viable, but it is also necessary for economic development in the long run. He went on to add that one of the tools used to attract investors as noted before, is the IDZ and information on the Coega Project is also available on the internet or through direct contact with the CDC itself.

On the issue of corporate governance, structures to deal with issues of corruption and the likes have been put in place, as there have been allegations of corruption labeled against certain CDC members. He went on to add that the CDC is comfortable that they have developed systems which are able to deal with risks of this nature and able to communicate procedures to potential investors.

Discussion
Mr. S Ripinga (ANC) commented that the trend since 1994 has been that there is little progress in terms of both foreign direct investment and local investment. Local companies are choosing invest overseas. What is the strategy the CDC hopes to use to attract investment and secondly, how are local people going to benefit given the fact that the nature of the industries targeted seem to be very much capital intensive?

The Chair, Dr Davies also asked for the reason for the delay in the construction of the breakwaters project.

Mr. Pepi Silinga responded to the issue of local and foreign investors by noting that the IDZ is close to the thriving automobile and catalyst converter industries in Port Elizabeth, so they intend to use this opportunity to establish close co-operation with the companies there and also to lobby other foreign investors through these networks.

On the issue of community involvement, Mr. Silinga pointed out that the training of locals on issues of sub-tendering and other related practices are fully supported by the Department of Labour and funding and accreditation for these projects is already in place. He went on to add that the CDC had requested the P.E Technikon to evaluate the impact of their procurement arrangements in consideration of historically disadvantaged groups and SMME's. With regards to the breakwater project, the National Ports Authority is dealing with the marine side of things whilst there has also been a reconfiguration of planned sites eg the container terminal. The redesigning of the plan has been the major delaying factor in the process.

Mrs. B Ntuli (ANC) asked about the issue of acquiring land and how legal it is trying to acquire and use agricultural land for industrial development. She also asked how long would the project take to complete.

Mr. C Frolick (UDM) asked if the CDC have encountered difficulties along the way in trying to make the project a reality. From the governmental side how co-operative were the Departments of Trade and Industry and Public Enterprises.

Mr. P Silinga responded to the issue of land by saying that the area being targeted is very low yield agricultural land. The agricultural interest has been very subtle because it is an arid area. On the issue of how long it would take to complete the project, Mr. Silinga stated that the nature of the project is a long-term multi-stage project, which would have stages following on from each other according to economic viability and development. He went on to add that the nature of the project is that it is complex and the IDZ regulations are a lengthy process. This on its own can be frustrating. He made a case in point where the various stakeholders were in various ways not able to fully participate in the University of Port Elizabeth debate about the project.

Mr. R Harte of the CDC commented on the issue of public participation noting that every discursive process on the project has been subjected to public discussions and debates.

Mr. M Rasmeni (ANC) asked whether the project would benefit the people of the province at large or would it only benefit the P.E area. Secondly, he also asked how far the relocation process of the Coega community is progressing. What type of dwellings are they being offered and also if these are of a higher standard than their previous dwellings. Lastly he also asked if those with businesses have had their businesses transferred or relocated as well.

On the issue of benefit to the province as a whole, Mr Silinga pointed out that the Skills development forum was set up to train people in province and not only the area for a skilled workforce. He also mentioned that the contractors have indicated that appointing specialists from outside would be more costly, so training local contractors has been the priority.

Mr. P Silinga responded on the issue of relocations by saying that the relocation of the Coega community was a successful project. The community was moved to an area about 30 km's east of the metropolis. The CDC decided to assist the metropolis in relocating the community. To ensure quality control, homeowners were employed as part of the building team. He commented that the project should be complete in 2-3 months time.

Mr. L Zita (ANC) asked if there is any sense that there are potential investors coming in and what lessons are being learnt from projects of this nature?
Mr. Sibisi, an official from the Department of Trade and Industry spoke about the issue of IDZ's and stated that these zones are meant as prototypes that can be used in other regions with a strong focus on the competitive advantage that they have on a particular product. It was developed with the main aim of ensuring a partnership between the private and the public sector.

Mr. Duma N (ANC) asked if the jobs created are going to be sustainable even after the construction phase is complete given the diverse skills requirements of the potential investors.

Ms L Taljaard (DA) asked if the presenters could give an exact figure of the compounded infrastructure and capital investment costs versus the returns.

Mr. N Bruce (DA) commented that the infrastructure has to be tailored to the nature of investors that the project wants to attract. Is it a wise thing to invest huge amounts of money without indications from potential investors regarding their willingness to invest? In short Mr Bruce was not convinced about the viability of the project.

On the issue of costs, Mr. P Silinga concurred with Mr. Bruce that to the extent possible, they would provide purpose built infrastructure. The estimated costs for the IDZ infrastructure is about R 600 million he noted that not all required infrastructure will be funded from the fiscus because private investors will have a significant contribution as well.

Mr. Silinga went on to add that road infrastructure costs are estimated around the region of R 80 million. He went on to add that the National Road Agency acknowledged that they would have had to in any case develop the road infrastructure in the area had it not been for the development. The development was therefore welcomed with open arms. The marine infrastructure according to Mr. Silinga would cost around R 2.4 billion for the Ngqurha port as earlier pointed out.

Mr. Graham Price also commented on the issue of costs saying that they don't believe that there would be any need for huge subsidising as the private sector would come in with their own capital. Mr. R Harte pointed out that the Annual Financial Report as well as the report on environmental impact assessment and the Human Rights Commission Report will shed further insight into the project as a whole.