Development and plans for Musina-Makhado SEZ & Seshego and Nkowankowa Industrial Parks

Meeting report

Opening Remarks

The Acting Chairperson welcomed the committee and those present on the platform.

The apologies of Ms J Hermans (ANC) and Mr D Macpherson (DA) were noted.

The meeting agenda was adopted.

The Acting Chairperson said that the Committee will receive a briefing from the Limpopo Economic Development Agency (LEDA) on the development and plans for the Seshego and Nkowankowa Industrial Parks as well as a briefing from the Limpopo Department: Economic Development, Environment, and Tourism (LEDET) on the plans for the Musina-Makhado SEZ.

Mr Thabo Andrew Mokone, Member of the Executive Council (MEC), LEDET, introduced the delegation present in the meeting. The delegation included Mr Matodzi Rathumbu, Head of Department, LEDET; Ms Lilly Maja, Chief Director: Trade and Sector Development, LEDET; Mr Thakhani Makhuvha, Group Chief Executive Officer, Limpopo Economic Development Agency (LEDA); Mr Lehlogonolo Masoga, CEO: Musina-Makhado SEZ and Mr Solly Kgopong, Project Manager: Fetakgomo-Tubatse SEZ.

He said that Mr Makhuvha would present on Seshego and Nkowankowa Industrial Parks as funding was allocated for the refurbishment of the Industrial Parks. He explained that LEDET often visited the sites to check their progress and impact.

Presentation on Seshego and Nkowankowa Industrial Parks

Mr Makhuvha said that there are six LEDA Industrial Parks. This includes Thohoyandou, Seshego, Nkowankowa, Mkhuhlu, Lebowakgomo, and Giyani. Seshego and Nkowankowa created 1 154 and 3 708 jobs respectively and both focus primarily on Small, Medium, and Micro enterprises.

Nkowankowa is 161 hectares with 89 developed factories and a 73% occupancy rate. The DTIC made an investment of R40 million to put up security features.

Seshego is 154 hectares with 76 developed factories and a 79% occupancy rate. The DTIC made an investment of R35 million to put up security features.

The presentation outlined the main challenges the refurbishment efforts of Industrial Parks face. This includes:

• Communities revolt against illegal foreign nationals being employed in the Industrial parks
• Low rental income
• The property being used as storage without having an impact on unemployment reduction

(See presentation)

Presentation on Musina-Makhado SEZ (MMSEZ)

Mr Masoga pointed out that MMSEZ is located within the Vhembe district of Limpopo and illustrated how this strategic location could contribute to regional integration and the African Continental Free Trade Area (AfCFTA).

The presentation indicated that the MMSEZ would target energy and metallurgy on the South Site and on the North Site it will target Agro-Processing, Logistics, and General Manufacturing. The presentation further shared the progress to date. Notably among the accomplishments is the completion of a number of feasibility studies, the completion of the Environmental Impact Assessment (EIA), for the North Site, and the establishment of an investment promotion strategy. Projects that are still in progress include the Rail Connectivity feasibility study, North Site bulk infrastructure installation, and the launch of the Musina Office.

The project will create over 2000 job opportunities within the next 24 months, over 2000 locals will be provided with training with a focus on women and youth and it is expected that R240 million will be transferred to local businesses through the 30% local content rule. It will also promote regional economic integration, creating a new Smart City, and technology localization.

Challenges with this project included the land transfer from the Department of Public Works to develop the Musina airport, finalising the project-based EIA applications, and securing funding for the Musina Dam Feasibility Study.

Dr Mofasi Lekota, Board Chairperson, LEDA, said that the development of this project is critical due to worldwide competition. According to the United Nations (UN), there are around 6 000 SEZs, 4 000 of which are in East Asia, with 2 500 located in China. In Africa, there are around 250 SEZs, of which Nigeria and Kenya make up the majority. South Africa is therefore running behind in the establishment of SEZs. He highlighted that SEZs worldwide have sped up development and maintained promises to investors. South Africa is therefore benchmarking the success of its SEZs on the boost in Gross Domestic Product (GDP), increase in Foreign Direct Investment (FDI), and an increase in export. He noted that in China, SEZs contributed 20% to GDP, 46% to FDI, and 60% to exports.

(See presentation)

Presentation on Fetakgomo-Tubatse SEZ (FTSEZ)

Mr Mokone said he needed to step out of the meeting to deal with an urgent matter and assured the Committee that he would be back by the end of the presentation.

Mr M Cuthbert (DA) said that this meeting was scheduled due to concerns over these projects so it would not reflect positively on the provincial government and the department if the officials duck out of meetings that they had been asked to attend.

The Acting Chairperson noted the concerns and said that Mr Mokone should be present for the questions by the Committee after the presentation.

Mr Kgopong noted that the implementing partners for the Fetakgomo-Tubatse SEZ project are the DTIC, LEDET, the Sekhukhune District Municipality and Fetakgomo-Tubatse Local Municipality. Each partner has a specific function and role in the development of the SEZ.

He said that there are eight strategic focus areas for FTSEZ as follows:

• Complete preparations for the designation and establishment of the SEZ
• Aggressive investment, promotion, and attraction
• Develop an industrial ecosystem
• Engage stakeholders and manage development conflicts
• Support smart city development
• Accelerate Skills Development
• Benchmark with existing SEZs
• Capacitate the PMU

The presentation covered aspects of its strategic location. It is located within the Bushveld Igneous Complex (Eastern Limb); 1256 hectares of land have been secured. The vision of the SEZ is to become a global centre of excellence for sustainable solutions in green energy manufacturing, agro-processing, and mineral beneficiation. It aims to do this by developing an industrial ecosystem stretching over various sectors.

The presentation indicated that during Phase 1: Critical Implementation Path Milestones, 9 out of the 14 milestones were met. It further elaborated on other steps that formed a part of Phase 1 by indicating the progress, challenges, and next steps. This included:

• Signing of the Quadrapartite Agreement
• Skills Audit and creating a Development Plan
• The Environmental Impact Assessment
• SMME and Enterprise Development
• The Establishment of the SEZ as an entity and as a subsidiary of LEDA
• Acquisition of the Mining Input Supplier Park
• Provision of Electricity
• Updating the SEZ master plan
• Confirming adequate water sources
• Rezoning land for industrial use
• Construction of a perimeter fence and security amenities

Further, the presentation highlighted the implementation of a stakeholder management plan, the establishment of a community liaison programmeme, and the community socio-economic development programme. The latter includes the establishment of a skills development centre. The presentation set out the amounts committed by the Private Sector to establish the Steelpoort Smart City.

(See presentation)

Discussion

Mr Cuthbert said that there seems to be a lack of local provincial capacity to implement projects of such scale and that not enough is being done to unblock bottlenecks. He said that there are many regulatory hurdles and processes that need to be followed before a project can break ground. In a project such as Musina-Makhado SEZ, little progress has been made over the six years and due to the fact that the regulatory burden is so high, corners are being cut which leads to disputes with communities over these developments taking place. If projects are delayed, it makes it more difficult to get them off the ground, and eventually, investors will move on. He asked what the DTIC is doing to assist provincial governments in implementing these projects. He added that provinces should work on getting the basics right first, like service delivery, electricity supply, and water supply instead of having big ideas like bullet trains and smart cities.  He asked the MEC and Limpopo government to give an update on the challenge with the environmental impact assessment at Musina-Makhado.

Mr Z Burns-Ncamashe (ANC) asked if there are challenges with the District Development Model and the expected role-players. If there are challenges, where are the challenges? What is being done to mitigate the challenges? He explained that Musina is in a very strategic position to benefit from the opportunities created by the African Continental Free Trade Area, especially relating to the connection between South Africa, Botswana, Zimbabwe, and Mozambique. He asked if there were any bottlenecks relating to regulatory instruments. What is being done to circumvent these bottlenecks?

He emphasised the importance of implementing programmes and not only making plans to implement them. Historically these communities in question were deliberately kept on the periphery and excluded from mainstream development as they were a part of the self-governing states during Apartheid. He acknowledged that it is a mammoth task to reintegrate and reorganize these communities to ensure that they form a part of the mainstream. Opportunities need to be created in communities like Musina so that there is not a need for members of those communities to go to large cities like Johannesburg to find opportunities. An SEZ needs to contribute intensively toward economic generation, especially by promoting the export of finished products, not raw materials. He said that exporting raw materials means exporting jobs and that opportunities need to be created at all stages in the value chain. How is this a part of the plan and what is currently being implemented? How many jobs have been created so far?

He said that Limpopo is a rural province and there are communities under the jurisdiction of traditional leadership. On this, he asked how traditional leaders, as custodians of the land, a part of the stakeholder engagement processes. How is local leadership at a municipal level also a part of the projects? He emphasised that an inclusive approach to development needs to be taken and that the communities need to be part of the development around them.

Dr M Tshwaku (EFF) asked what the presenters needed from the Committee. He was disappointed that a project aimed at creating employment was not actually taking off even after all the time and money that had been invested. It seems like the goal post keeps changing and the project is dragging on; when is the project going to be completed? He said that four million people had lost their jobs with large numbers of existing job seekers and unemployed individuals and yet the projects are only creating jobs for a small number of people. The aim needs to be absorptive labour, employing thousands of people per project. The projects need to be reassessed as it seems like it is not working.

He said that the presentation mentioned that there is an abundance of water in Limpopo, yet the villages and rural communities do not have water. People still need to walk to rivers to collect water. He proposed that a water waste management project be created to clean up the water supply to the communities. He asked if there really was enough water in Limpopo.

Mr W Thring (ACDP) noted that the presentation the Committee received on the Seshego and Nkowankowa Industrial Parks prior to the meeting was outdated. He asked what the leveraging impact is of Seshego and Nkowankowa Industrial Parks. Could the return on investment be quantified? At Seshego, 200 jobs were created from one tenant but 422 jobs were created from 22 tenants on the manufacturing side. This is indicative of the difference between labour-intensive and capital-intensive sectors, focus should be placed on the former such as agro-processing, to reduce unemployment. Besides the uprisings from the communities on the uptake of foreign labour, what other challenges have there been from a municipal infrastructure perspective? From experience, SEZs tend to have challenges with municipal infrastructure.

On the Musina-Makhado presentation, he asked if the cancellation of the coal fire power station was the best way to go. Most industrialised countries built their economies on the use of coal. Australia is shutting down its coal fire power stations and has been unable to keep up with green-powered energy supplies. The policies are good but it is premature and the coal-fired power station should have been built while simultaneously working on green solutions.

He asked what the beneficiation numbers are of the projects that use of minerals at Musina-Makhado SEZ. Of the raw mention, what percentage is exported? What percentage of the raw materials that are exported are beneficiated? He asked the same for the Fetakgomo-Tubatse SEZ.

On the smart city, he asked about the timelines for completion and implementation. There have been brilliant presentations but when it comes to implementation and completion, there is an issue. With the energy supply constraints that South Africa is facing, how will the electricity challenges be mitigated when building the smelts in the Sekhukhune District? He said that one smelt uses enough electricity to power a whole metro.

Lastly, he asked, what guarantees would be given by the MEC and presenters regarding the critical milestones that have been set? If they are not met, will consequence management follow?

The Acting Chairperson asked if the Department would accept and fund a proposal for filming ecotourism written and produced by black locals, considering the natural beauty of Limpopo and the Musina region. What would the funding limit be? On the archaeological discovery by the University of Venda, how are the Department and province gearing themselves for trade relations with the West/East of the nation?

He said that in the Thulamela Municipality, Thohoyandou, there were factories that hosted a number of black industrialists, but those factories are now dilapidated. What are the plans to revive the area so that it can strive economically again? What are the plans to revive the airport between Makhado and Thulamela?

Mr Mokone responded to the question on Thulamela and said that there are different industrial parks in the province; almost all former Bantustan states have some form of industrial park. The focus, for now, is on the Seshego and Nkowankowa Industrial Parks. He suggested that the Committee be given a report on the activities of the other industrial parks so that they can get a better idea of the other activities.

On the archaeological discovery, there is an ongoing programme at the Mapungubwe Heritage site. LEDET and the National Department of Environment are working together on this, it will be incorporated as a part of the SEZ.

He said that the Department has attempted to enter the film industry but has not taken off due to budget cuts.

On the use of minerals at Fetakgomo-Tubatse SEZ and Musina-Makhado SEZ, he said that R600 million had already been spent to kickstart Musina-Makhado SEZ, contractors are on site dealing with bulk infrastructure and the South African private sector have been engaged and are showing interest. When the Committee does a site visit, there will certainly be concrete achievements to see.

On the EIA, he replied, all studies have been done, the EIA has been awarded and appeals have been dealt with. He assured the Committee that the Department is ready for any eventuality as professionals have been appointed and the necessary studies have been done.

On Mr Burns-Ncamashe’s question about community consultation, he said that despite COVID-19 everyone was consulted, this included all the chiefs in Vhembe. He guaranteed that with the District Development Model (DDM), the municipalities are also involved. He said that in the presentation that Mr Kgopong delivered on the slide regarding the implementation programme, there are indicators of the milestones and the dates. The Department followed up on each milestone.

He said that the plan was initially to use coal for electricity production but as the project progressed, it was clear that alternatives needed to be considered. He agreed with the Committee and said that the use of coal would once again need to be considered. This is a matter that all stakeholders will need to engage in. He reiterated the importance of the SEZs and said that the issues of roads and water are also being dealt with through the SEZs.

On the question about the abundance of water, he said there is water in the De Hoop dam. There were agreements with the private sector to build a reticulation plan but the plans were not executed. He said that the Department is engaging with these actors on the issue as the water will need to be used for human consumption and industrialization.

Mr Makhuva reiterated the impact of the EIA on the timeline as it put the project back almost two years. He said this is still an ongoing struggle as some parties are now happy with the outcomes and are challenging the process as they are entitled by law to do so.

On the coordination and challenges regarding the District Development Model, he said that the Department had worked closely with stakeholders in Vhembe led by the district municipality. The municipality coordinates all efforts in the district to ensure a coordinated approach to development and the Department partakes in the DDM coordination meetings and the intergovernmental relations forums. He said that the Vhembe municipality is very supportive of the SEZ plans and strategies.

He said that the Department has engaged with the Department of Trade, Industry, and Competition (DTIC). In these engagements, Limpopo has been identified as the ideal candidate to epitomise the AfCFTA due to its strategic location. Once the SEZ’s operations are in full swing, it will become the champion of collaboration and economic and social integration. To avoid bottlenecks at the border and to allow for the free flow of goods, he said that they are collaborating with the Border Management Authority on initiatives such as the One Stop border post.

He added to what Mr Mokone said about the film industry by saying that it is slightly outside of the scope of industrialisation but it is an opportunity for the Limpopo Tourism Agency.

On the question of the revival of the airport, there was no success in this regard. As it stands, it is not a primary priority for the Department as it focuses on an existing military landing strip that has been demilitarised. The development of this landing strip into an airport with international status is being explored through the use of private sector funding. However, it is necessary for the land to be transferred to the municipality for this to take place.

On the De Hoop dam, he said there had been engagement with the Department of Water and Sanitation (DWS) and the potential investors to make it a private-public partnership because there are insufficient resources in the fiscus to support the development of the project.

He said that the Smart City is going the be the consequence of small and big efforts made between now and the next 10-15 years. A lot of effort and resources are being invested into technology because a smart city cannot be realised without technology. When the new college is built inside the SEZ and the industrial park takes off, it will create a new community in a short period of time in the SEZ which will create a foundation for the Smart City. Musina will grow towards the South and Makhado will grow towards the North; eventually, the two towns will grow together to form an ecosystem of development that will translate into a Smart City.

He added on the issue of coal power that using coal power presents challenges because if producers produce value-added products for the export market using ‘dirty power’, there will be ‘dirty power’ tax going forward. Guidance from the National government will be needed in this regard to keep in line with the global trends.

On the percentages of the beneficiation of resources, he added that this information was not available as these initiatives are investor-led, and this information would that have to be provided by the investors. He said that at the beginning of 2021 National Cabinet decided to impose export tariffs on the export of raw chrome ore to encourage beneficiation domestically. Since this decision, he added, little action has been taken regarding enforcement.

Mr Kgopong said on the DDM in the Sekhukhune district, there has been a clear agreement on who does what at what time. He said that the DDM also linked to the Integrated Development Plans (IDPs) of the district and confirmed that there had been continuous engagement with the traditional leadership and feedback to the communities.

He said, on the issue of water, that this is an especially important aspect for investors. In the medium to long term, the plan is to pipe the water to support the SEZ development while also ensuring that the communities will benefit from this. He confirmed, however, that Limpopo is not a water-rich region.

In response to the questions about the mineral beneficiation, he said that 12.2 million tonnes of Chrome are produced, of that 46% is exported, with 84% of this going to China. The export value of Platinum group metals is $11.9 billion.

He reiterated that beneficiation is critical and said that the Automotive Industry Development Programme had done a great deal for South Africa. On the energy consumption of smelters, he said that he is aware of the issue and that Glencore owns the largest smelters and that renewable energy options are being explored to support the development of the SEZs.

Lastly, he said that the milestones were created through a workshop between the DTIC, the MEC, and the municipalities. Technical committees have also been created for oversight and further oversight is conducted by the MEC.

Mr Makhuvha responded to the questions on the industrial parks. He said that the updated version of the presentation would be sent to the secretariat.

On the impact of the money invested, he said that the industrial parks were inherited from the previous dispensation and as such, most of them had to be revitalised and revamped to attract and retain tenants. The investment has thus assisted in the refurbishment and construction, which created 197 jobs, and then helped sustain the jobs created and secure new tenants.

He said Mr Thring’s assessment was correct regarding job creation in labour-intensive sectors. He added that it is difficult to control the type of tenants the industrial parks attract while also sustaining the park with rental incomes.

On the question of the industrial parks' challenges, he said that they are mainly related to water and electricity. As a solution to this, alternative energy solutions are being explored, like solar plants. He added that an application had been made to the DTIC to receive further funding for revitalising other industrial parks in the area through the Industrial Parks Revitalization Programme (IPRP).

Mr Rathumbu said, on the development of the airport, the development of the airport is being considered by the Department of Transport and Community Safety.

Mr Mokone requested that the Committee send questions to the office of the MEC; a written response will then be issued within seven days.

Mr Maoto Malefane, Acting Chief Director of SEZs, DTIC, addressed the question about the role of the DTIC in SEZs. Government has decided to create a balanced economic development plan based on the economic potential of all the regions. If the Department followed what Mr Cuthbert said, the department would perpetuate the existing spatial planning that only benefits a few areas. For example, Gauteng, Durban, Port Elizabeth, and Pietermaritzburg collectively contribute 60% of South Africa’s GDP. Not only does it unfairly benefit these areas, it also causes people to flock to them, leading to a backlog in infrastructure. This plan aims to drive the economy through re-industrialisation and industrial decentralisation. He noted that the possibility of a cross-border SEZ is also being explored to facilitate African Continental Free trade Area trade issues. He also explained that no SEZ develops rapidly; it takes time and needs to be considered, beyond this Musina-Makhado is also dealing with issues relating to the EIA. The DTIC has started with the development of another industrial park, 280 hectares have been secured and the development of the park will proceed while the DTIC works on the process of getting the designation. All relevant spheres of government have been engaged and will play a critical role in accelerating the process.

The Acting Chairperson thanked the MEC and team, members, and the secretariat. He reminded the Committee of the name change as decided on 8 September 2022. The new Committee name is the Portfolio Committee on Trade, Industry, and Competition.

The Acting Chairperson noted that the next meeting would be on 27 September 2022 and then adjourned the meeting.