Limpopo is banking on its nascent industrial sector and appeal as an investment destination to drive economic growth in a region not endowed with major industrial prowess.
The province’s industrial ambitions were outlined at a recent presentation by Pitsi Moloto, MEC for economic development, environment and tourism, who highlighted job creation and diversification of the industrial base as key future strategies.
To this end, mining, minerals beneficiation, agriculture, agro-processing, manufacturing and tourism have been identified as the sectors that hold the highest growth and impact potential.
Numerous industrial and skills development initiatives form part of this action plan, although the establishment of industrial development zones (IDZs), specifically one near Lephalale, is of particular interest.
Back in 2004 the province identified the potential to attract investors, create productive jobs and establish industries, but no further progress has been made beyond that.
The Lephalale IDZ raises questions for a number of reasons, not least of which is its location, lying closer to the Botswana border than any major South African city, although the reasoning is that it would serve and be served by the Medupi power station and other petrochemical and downstream industries.
But the biggest challenge is overcoming the stipulation by the department of trade and industry that IDZs be located at or close to an international port or airport, although Limpopo officials are confident that they are close to a breakthrough in negotiations with the department that will pave the way to at least the conducting of feasibility studies.
‘We are still in discussions with [the department] to allow us to apply for a feasibility study on Lephalale, because the idea is to establish an energy hub there,” says Moloto. ‘It is still at the conceptual stage, but we wish to create downstream industries through the beneficiation along the coal value chain.”
Sasol’s plans to establish an 80 000-barrel-a-day coal-to-liquids plant at Lephalale would certainly give this some traction and is Limpopo’s big hope in creating an anchor tenant for the IDZ that would serve to attract other investors.
Laura Peinke, research analyst at research and consulting firm Frost & Sullivan, agrees that the success of the proposal would be heavily dependent on whether the right industrial sectors are targeted to attract the right kind of investors.
She says gathering the right stakeholders is critical to getting projects such as these off the ground quickly and properly, with the government’s seeming inability to do so being one of its biggest failings. But the focus on downstream industries is the correct strategy.
‘The key to our manufacturing environment is that we must stop exporting purely raw materials and deliver added value. Even if there is only minimal beneficiation, it will be to the benefit of the economy as a whole,” she says.
Moloto says the downstream activities identified that would fulfil this requirement include industries around inorganic fertilisers, ethylene, methanol and propylene production.
A lot rests on initiating the feasibility study to determine and quantify basics such as the location of the IDZ, job-creation potential, viability of specific industries and local economic impact.
Peinke suggests that models such as economic development and job creation zones, and even export processing zones, may be a better bet than sticking steadfastly to the idea of establishing IDZs.
‘The first is more specific to sectors that will create jobs, as Mauritius has done for its sugar and textile industries, while the second model would be dependent on the completion of the Polokwane International Airport,” she says.
Moloto and the provincial government are hopeful that their efforts will win the support of the department in realising their vision for the industrial future of the province.
‘We hope to be in a position in about three months’ time when we will have a clear proposal that indicates whether it is viable and what the timeline for it is,” he says. ‘The [department] realises the urgency of the matter and that a viable, strategic industrial infrastructure investment is needed in the country and especially in Limpopo.”