Boom time for Saldanha Bay IDZ

Benefits for national economy

Saldanha Bay IDZ is poised to be a hub of economic activity if economists from the UCT-GSB's calculations are accurate.
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The Saldanha Bay IDZ could bring unprecedented wealth to the area, and prove economically beneficial for the country, according to a recent panel discussion held at the University of Cape Town’s Graduate School of Business (UCT-GSB).

Contrary to widespread belief, the proposed Saldanha Bay Industrial Development Zone (IDZ) will create almost 6 000 jobs in its first year, according to UCT-GSB economist, Barry Standish.

Standish revealed the findings of his team’s economic analysis of the Saldanha Bay IDZ business plan at a panel discussion held recently at the UCT-GSB. 

According to Standish’s analysis of the business plan, the Saldanha Bay IDZ will have created 2 600 direct jobs by the end of its first year, and 14 702 total (direct and indirect) jobs will be created within 18 years of business.

The results of the cost to benefit analysis for South Africa showed a total benefit with a present value of R42 807 700, versus only R4 503 300 in present value costs.  

“The real benefit comes from the benefit cost ratio – for every R1 that society spends, it will equate to R9.50 return,” said Standish.

The proposed development had been met with criticism from academics and media as far back as 2010, who felt expectations given to the development were optimistic.

Standish said that in conducting the analysis, his team took efforts to show the unfeasibility of the project, but were instead surprised at encountering the second highest cost-benefit to society in South Africa of any analysis his team has ever managed. 

Standish’s team then performed a more extreme analysis, known as a sensitivity analysis.

“A sensitivity analysis tightens assumptions made in a basic cost benefit analysis – it pushes up costs such as infrastructure setup costs and private business setup costs, essentially looking at a worse case scenario.  After analysing the business proposal with these extremes in place, the proposed project remained economically efficient.

“The conclusion of our analysis was that the IDZ will create jobs, have significant economic impact, and prove economically robust,” said Standish. 

The application for the IDZ was proposed by the Saldanha Bay Industrial Development Zone Licensing Company (SBIDZ LiCo), a wholly-owned subsidiary of the Western Cape Investment Promotion Agency (WESGRO).

The purpose of the proposed IDZ is to encourage the creation of an engineering and logistics services complex, serving the needs of the upstream exploration and production service companies operating in oil and gas fields in sub-Saharan Africa.

Herman Jonker of the Department of  Economic Development and Tourism in the Western Cape said the biggest concern in the development of the Saldanha Bay IDZ to date, and part of the reason for the MBD’s initial skepticism, has been the history of enterprise and development in the area: “Many different projects have been taken at the Saldanha Bay site before, with little ‘trickle-down’ benefit and sustained economic development coming from these; some of the projects have themselves proved profitable, but with little benefit to wider society,” said Jonker.  

Speaking at the panel discussion, Kaashifa Beukes of SBIDZ LiCo, said that “in compiling the business plan, SBIDZ LiCo looked at the history of projects in the sector, and undertook various studies to determine the best project for the region in order to meet job creation, economic development, and regional and local imperatives,” said Beukes.

As a result of this, Beukes said that the IDZ will primarily operate in three spheres: renewable energy production and manufacturing; as an oil supply base; and in steel and mineral manufacturing.

SBIDZ LiCo submitted the business plan to the Manufacturing Development Board (MDB) in October 2012, and despite initial skepticism from the MDB, Beukes said that following review of the business plan, the board showed enthusiastic support.

In February, Trade and Industry Minister Rob Davies said: “Saldanha Bay has been recognised as an area with great economic potential both for the quality of its port facilities, and for the entrepreneurial quality of its residents.

As such, it is strategically placed in the Presidential development node and thus the national, provincial and municipal authorities have explored ways of unlocking this potential.

It is equally important that local industry participate and be involved in the economic upliftment of the area.”

Beukes said that they have managed stakeholders in the local community to ensure full participation and approval.

“We met with each of the 13 different area wards to ensure that the different values and interests were taken into account,” she said.

Oil and gas rigs operating offshore of Namibia and Angola and as far north as Gabon on the west coast and in Mozambique and Tanzania on the east coast could be serviced in the proposed IDZ, which would exist alongside those at Coega and Richards Bay.

If granted IDZ status, Saldanha Bay will join Coega, East London, Richards Bay and OR Tambo International Airport as existing IDZs. 

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