/ 1 March 2022

Final rubber stamp for the Musina-Makhado Special Economic Zone travesty

210301 Musina Makhado Sez Puttick 19 1
Residents of Tshikuwi village near the zone collect water from communal taps. There is a concern that water resources are not sufficient to supply the zone. (James Puttick)

The Musina-Makhado Special Economic Zone (MMSEZ), a pet project of President Cyril Ramaphosa since 2018, arising from China-South Africa bilateral economic initiatives, was approved on 23 February. The Limpopo Economic Development Environment and Tourism Agency (Ledet) signed off on the environmental authorisation for the establishment of the zone to the MMSEZ state-owned entity, which oversees the Chinese operator, the South African Energy Metallurgical Base (SAEMB). 

The complicated management structure is intended to obfuscate the fact that this is South Africa’s first special economic zone to be mainly funded and operated by a Chinese company. The company, previously known as Shzenzhen Hoi Mor, has at its helm Yat Hoi Ning, who has a history of alleged company fraud from mining operations in Zimbabwe. 

Aside from Ning’s reputation, or perhaps because of it, Ledet officials have been cagey about the extent of Chinese investment 

The shadowy presence of Chinese investment in the zone was evident at the purportedly hugely successful MMSEZ investor roadshow held on 1 September 2021, opened by Ramaphosa. Aside from a delegation from a “sister” Chinese province to Limpopo, neither the Chinese operator nor Chinese investors made an appearance. Instead, Anglo-American pledged investment in the zone, along with a good deal of government hype about how the MMSEZ could be the radical transformation catalyst to our ongoing lack-lustre industrial development.

The names of the Chinese companies operating in the zone are still not in the public domain, although the environmental authorisation finally reveals that “11 memorandums of understanding to the tune of $1.1-billion have been signed with China for investment in the development of the metallurgical cluster”. 

It is obvious that the major impetus for the approval of the MMSEZ comes from China’s increasing investment presence in South Africa, with this zone being hailed as potentially having a “catalytic impact … on transformation goals to achieve radical economic transformation…”. This transformation is conceived not only in South Africa, but extending through Southern Africa into the rest of Africa. 

MMSEZ mega-hype

Pre-empting Ledet’s release of the environmental authorisation of the environmental impact assessment last week, the Dubai 2020 Expo was the South African government’s chance to go big on the MMSEZ. Led by Limpopo economic development MEC Thabo Mokone — with representation from the department of trade and industry, Ledet, the Limpopo Economic Development Agency (Leda) and the department of mineral resources and energy — the presentation streamed live on YouTube 7 February 2022 for a full hour and a half, extolling the many virtues of investing in the zone. 

From a political economy perspective, the incentives offered to investors are controversial, because they favour SEZ industrialisation in geographical enclaves rather than a holistic approach to boosting economic development. Corporate tax breaks at 15% (as opposed to 27% outside the zone) VAT exemptions, and reduced rates for water and electricity, as well as the provision of “world class infrastructure” were mentioned by the MMSEZ chief executive, Lehlogonolo Masoga at the expo. 

Unsurprisingly, the environmental impact of the MMSEZ was not mentioned in the Dubai presentation, but the lack of water for the zone was raised obliquely by Masoga, who campaigned hard for investment in the “huge” Musina dam, on which Leda has conducted a pre-feasibility study. The feasibility of the dam remains questionable, as does the inter-basin water transfer from Zhove Dam in Zimbabwe. 

Mention was made of the Africa Economic Free Trade Area (AfCTA) and the $85-billion trading opportunities that this agreement offers investors. As of 2022, Limpopo, through the MMSEZ, is being advertised on various social-media platforms as the “gateway to Africa … from the Cape to Cairo” and “Limpopo is open for business”.

Despite the questions of MMSEZ start-up functionality, it is unconscionable in terms of climate change that the zone is going ahead with a coal plant at its epicentre. Interested and affected parties involved in opposing the zone, including many residents in and around the MMSEZ, are strongly opposed to the effects on livelihoods of increased coal mining, as well as the effects of the coal plant on the drought-prone Vhembe district. 

The environmental study justifies the coal plant by stating that it will not go ahead “unless it is a coal-fired carbon capture and storage unit that can sequester all emissions …” The viability of such a high-cost solution to emissions is doubtful, as the Medupi power plant has made all too clear, a point that environmental groups have mentioned many times. Earthlife Africa for example, campaigned against Medpui since 2007 on the similar grounds of unviable carbon mitigation strategies. Two decades later, Medupi still has no carbon capture, despite contractual obligations with the World Bank to ensure carbon capture and sequestration.

At the Dubai expo, the mineral resources and energy department’s senior specialist, Jaap van der Merwe, stated that there is also scope for carbon tax trading between the MMSEZ and its fellow Limpopo SEZ, Fetakgomo Tubatse, a so-called “green” special economic zone located some 300km from Mozambique and designated for light industry and manufacturing. Carbon tax trading is viewed as a climate change cop out, but it seems that the government is prepared to sell the MMSEZ coal plant at all costs.

Sadly, one of the main selling points of the MMSEZ to local residents is job creation. Throughout the farcical MMSEZ public participation process the question of job opportunities has been elevated to centre stage of why the SEZ should go ahead, with the environmental authorisation stating that the minimal mitigation impacts of the zone are outweighed by its economic transformation and employment creation benefits.

Job promises have varied, with the figure of up to 100 000 jobs mentioned by Leda officials to Limpopo residents in September 2021. The final environmental authorisation scopes this down to 21 000 jobs in the first five years of the MMSEZs establishment rising to 50 000 over 10 years. The environmental authorisation also states that skills creation for the zone will be the responsibility of the Chinese operator and minimal Chinese employment is stated as desirable. The official pronouncements bely the history of Chinese investment in Africa, of which two good examples of the lack of job creation remain the Addis Ababa-Djibouti railway line and the Nairobi to Mombasa Port railway. 

The history of Chinese-led infrastructure and industrial projects in Africa is well known, despite propaganda to the contrary. Fortunately, the MMSEZ requires further environmental authorisations for each component of the metallurgical cluster, including the coal plant. The evolution of the zone will be a contested one, with interested and affected parties representing the Vhembe biosphere and commercial farmers preparing to appeal the environmental authorisation. 

More seriously, despite the environmental authorisation’s promises of job and skills creation for Limpopo province, will be more disappointment for local residents because long-term jobs requiring skills are filled from outside the province. This is the central reason residents, such as those in the Mulambwane Community Property Association, have backed the MMSEZ, with the knowledge that Limpopo has the highest unemployment in South Africa. 

The environmental authorisation states that the Chinese operator bears responsibility for skills creation and the allocation of contracts to small, medium and micro enterprises . Mention is also made of the training vocational education college in Musina. How much employment, entrepreneurial opportunities and skills creation will occur is anyone’s guess. 

Historical examples of similar Chinese led bilateral development cooperation predicts that long-term job creation will not benefit the large sector of unemployed in the province. The environmental authorisation’s stated trade-off between environmental impacts to achieve industrial development and socioeconomic benefits looks to be the ultimate South African zero-sum game, no matter how big the government’s media hype.