Finding vast tracts of land with infrastructure geared to big industrial and commercial projects is not easy - let alone finding a new port. But the Eastern Cape's Coega Industrial Development Zone (IDZ) has it all and it is trying hard to lure local and foreign investors to find a home there.
The IDZ is located near Port Elizabeth and consists of more than 11 000 ha of land (what is provided is developed land with the basic infrastructure) that is available for tailor-made manufacturing plants, smelters, commercial business and ordinary land leases.
As SA's latest IDZ, Coega has sparked widespread investor interest but so far only three companies have signed up. Project managers, however, say a string of other agreements are being negotiated, some at an advanced level, including one with Canadian company Alcan, which might set up an aluminium plant.
A package of incentives - including exemption on import duty for raw materials and competitive electricity prices - is expected to make the greenfield project aimed at boosting the economy of the Eastern Cape a haven for exporters. There's a lot at stake in developing the IDZ. For residents of the impoverished Eastern Cape, Coega promises much-needed jobs. From a national perspective, Coega is an opportunity to attract foreign direct investment and provide a space and opportunity for local manufacturers to compete effectively in the export market.
Coega is a long-term project, says Gisela Kaiser, a project manager in the infrastructure development business unit. "It could take 50 years. It's the same as building an industrial city the size of Port Elizabeth."
Besides building and servicing the infrastructure, getting environmental impact assessments (EIA) alone, is time-consuming. And negotiating with potential clients could take years.
Driving though Coega on new tarred roads, one encounters several electricity substations - both big and small - and a huge textile manufacturing factory smelling of fresh paint - tailor-made for Belgian firm Sander, Coega's first tenant, which starts operating soon. In the distance the blue waters of the commercial port development, Port of Ngqura, shimmer. There is a sense of development in the making, albeit quietly and slowly.
Coega's once-empty landscape has recently begun to show signs of tangible infrastructure development, bringing a psychological boost to a project that, some might argue, has taken too long to get started since government endorsed the initiative in 1997.
With its almost desert-like landscape, Coega had to be developed from scratch. Getting enabling infrastructure, such as roads and open space for further development, was the initial focus of the project, says Kaiser. Most of this basic infrastructure is now in place, including the 7 km Neptune Road, which forms the main corridor for the development area and an upgraded and expanded N2 freeway. Water, electricity and telecommunications is a mere switch away.
A lot of energy is being expended on finding investors and negotiating mutually beneficial deals.
Coega's investment promotion programme, which commenced in 2003, has tied up three clients with the help of the department of trade & industry (DTI). They are: Sander, which becomes operational once its machinery arrives this year; steel company MAN-Ferrostal; and Straits Chemicals, which is subject to EIA approval, and will develop a chlorine-manufacturing plant and a water-desalination plant. Collectively their investments are worth R3,1bn.
Coega will be developed in phases - the first spans just more than 6 000 ha and basic infrastructure for the area is almost complete. The second phase, which will involve developing the enabling infrastructure and particular investor-driven infrastructure, will continue in the 2006/2007 financial year.
Among the plans being prepared for phase 1 are the industrial clusters: metals and metallurgical; chemical; automotive; logistics; high-end textiles; and energy. A European firm in the automotive sector has shown interest in locating in the automotive cluster, and may be signed up this year.
Coega is careful not to expose itself to risky and hasty development. It is pointless constructing huge buildings and having assets lying idle before the client has signed up, Coega managers say. Neither is it prudent to rush to fill land without proper enabling structures in place, Kaiser says.
Once investors make the investment decision, though, Coega has to be ready to act fast.
So it is always prepared, with various business units in place to meet specific investor needs.
Government plans to invest billions in the project. Infrastructure spending is already more than R1,3bn. This excludes the billions that Eskom will spend on power generation and transmission, Spoornet is to dedicate to a connecting rail network and the R3,2bn the National Port Authority has spent in developing the Port of Ngqura.
