Coega and the Radiohead song

Reg Rumney, Thought Leader, 16 March 2008

Every time I drive through the upgraded stretch of road around the turn-off to the Coega Industrial Development Zone (IDZ), just before Port Elizabeth, a song floats unbidden into my head.

The Coega IDZ is a multibillion-rand industrial development complex covering 11 000ha, centred on a new deepwater port.

Nude is the haunting song, from Radiohead’s latest CD, In Rainbows. More pertinently the line that runs through my head is “not gonna happen”. Actually, the refrain is, “Don’t get any big ideas/They’re not gonna happen”.

I’m beginning to think the same about the aluminium smelter at Coega, a big idea if ever there was one. Ever since the IDZ was launched, there have been promises that the smelter would be up and running soon.

The aluminium smelter is the flagship for the job-creating initiative, an important one for this underdeveloped province, cursed with being the site of one of the first Bantustan experiments.

It’s almost treasonous in this part of the world to suggest that the port is a folly, though after R8-billion of investment in infrastructure with little to show, it is beginning to look like one.

The first thing to delay the go-ahead for the multibillion-rand smelter was a series of takeovers involving the company that originally planned the project. The latest takeover was of Alcan by Rio Tinto.

Now doubts about South African power utility Eskom’s ability to generate the cheap electricity needed for the energy-intensive smelter puts a big question mark over the project.

For those who don’t know why electricity is pivotal, remember that South Africa’s aluminium smelters basically export cheap electricity and know-how.

The ore to make the aluminium is imported in vessels that need a deepwater port, because the ore is heavy. It’s turned into aluminium at the smelter, and most of that aluminium is then put back on ships and exported right out again.

It’s a massive project, but not unique: a smelter at Richards Bay is well-established, and one in Maputo, Mozambique, has been running for years.

They don’t employ many people relative to the capital invested, but they bring in foreign exchange.

But you’ve read lots about other factories and plants and plans at Coega, right?

None of them is worth a string of coral-tree beans, compared with the smelter.

The 2007 annual report of the Coega Development Corporation notes that all the other investments are worth around R400-million compared with the smelter’s R20-billion. That’s 2%.

According to Coega Development Corporation business development director Khwezi Tiya, in a Moneyweb interview, about 14 investments in total are to be located in the Coega area, and the corporation is negotiating with at least six other investors.

It’s the Alcan smelter that really counts, though.

The number of proposed and potential investments in Coega projects that have fallen by the wayside over the years is extensive. They include an offset steel project, a Belgian textile factory, a $450-million zinc refinery, and fertiliser, cement and industrial gas plants.

The actual commissioning of the smelter would restore credibility to the Coega development.

So, for the sake of the people who planned this trailblazing IDZ, let’s hope the refrain of the Radiohead song is wrong.

Incidentally, what does Coega tell us about the difficulties of running a developmental state?


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