Toby Chance: Cabinet showdown looms with “Mr Coal” Mantashe over Special Economic Zone

In 2018, President Cyril Ramaphosa announced the Musina Makhado Special Economic Zone intended to attract more than R40 billion in investment. Seven years later, Toby Chance, the Democratic Alliance’s spokesperson on Trade, Industry and Competition describes how expenditure has run into “hundreds of millions of rands” with planned expenditure of “upwards of two billion Rand over the next couple of years” while “most of the work has been abandoned…uncompleted roads…electricity that hasn't been connected…huge dumps of materials that are sort of sitting idle”. However, one of two investors, a Chinese mining company, has already started clearing large areas on the south side to expose the coal seams. This as several civil societies are trying to stop the SEZ project with lawsuits. Eventually, it will be the call of Environment Minister Dr Dion George. “He has the power to effectively close it down, which unfortunately will cause a bit of a stink with the Minister Mineral Resources, Mr Mantashe - being Mr Coal in this country - because the whole development, certainly on the south side, is based on a massive exploitation of the coal fields. He would be keen to see that happening. A lot of contestation at Cabinet level and we say bring it on…”.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here:.Listen here:.Edited transcript of the interview.Chris Steyn (00:02.522)In 2018, President Cyril Ramaphosa announced a Special Economic Zone intended to attract 40 billion in investment. Seven years later, we get an update from Toby Chance, the Democratic Alliance's spokesperson on Trade, Industry and Competition. Welcome, Toby. Toby Chance (00:23.95)Good morning Chris. Chris Steyn (00:26.372)Now, Toby, you have visited the Musina-Makhado Economic Zone. What did your inspection find? Toby Chance (00:37.166)Thank you, Chris. Yes, I went up there in January with my colleague, Andrew De Blocq, who's the DA spokesman on Forestry, Fisheries and the Environment. And we were following the advice of our late great hero, Helen Suzman, said, if in doubt, go and see for yourself. So this is what we did. And we drove up to Northern Limpopo and spent a couple of days driving around and also flying over the neighbourhood. Huge area in the Vhembi district of Limpopo stretching from the South Limpopo Mountains, which is where Machado-Louis Trichard is based, and then all the way up to Musina, which is on the Limpopo River. And the purpose of the visit was to get an on the ground understanding of what this Special Economic Zone is all about, how far it's got, how far it hasn't got, and to understand the people, some of the objections and what is the actual impact going to be on that huge area in Limpopo. Chris Steyn (01:37.444)So following your visit, you sent written questions to Minister Parks Tau. And you also obviously wanted to find out how much government has spent on that zone. Please detail those questions for us. Toby Chance (01:52.536)So the questions I asked were about the expenditure that's been to date and also the planned expenditure and obviously not just by national government but by provincial government. And the expenditure to date is in the hundreds of millions of rands. And this has mainly been on consultants, on some basic infrastructure, some road construction and the planned expenditure is upwards of two billion Rand over the next couple of years, most of which will have to come from provincial government. What is unclear though is how much of the money has actually been spent on real work, as opposed to paying consultants and construction companies who may have taken the money without actually doing the work. And one of the things we found when we went up particularly to the Northern side, is that most of the work has been abandoned. So there are uncompleted roads, there's electricity that hasn't been connected, there's huge dumps of materials that are sort of sitting idle. So that was what caused our concerns, was that there's been a lot of money spent, but very little to show for it. And those are the questions that my colleagues in Limpopo province, Lindy Wilson and Jacques Smoller are going to be pursuing as well because that's where most of the money is supposed to be coming from, provincial government, not just a national government. Chris Steyn (03:27.128)Now which companies have committed to invest there? Toby Chance (03:31.906)This is another bone of contention because in the question that I put to Mr. Tau at the beginning of the year, I got a response that upwards of eight billion rand had been committed. But the number of companies is actually very small. We're only dealing with two companies actually, which is MC Mining, which is the company that is mining the coal. It used to be Coal of Africa, it's now being bought out by Chinese investor, now called MC Mining. And then Kinetic, which is another Chinese-owned company, who's planning on spending money to build the ferrochrome plant, which we'll come to the details of that later. But the planned 40 billion Rand that was announced by President Ramaphosa in 2018, nowhere close to that money has been committed, let alone spent. There's a long way to go before any of those commitments can be seen to actually come to fruition. Chris Steyn (04:32.378)How does this development actually fit into the Special Economic Zone strategy of the department? Toby Chance (04:40.714)Okay, so the Special Economic Zone strategy was developed 10 or 15 years ago. And the idea was that each of the provinces would have one or more Special Economic Zones which would attract investment, not only from South African companies, but also from international companies. And what was meant to make them special was their tax incentives, grants and incentives for locating businesses there so as to make it easier to set up without set up costs. Many of these zones have actually got off the ground, some successfully, some not so successfully. So, for example, the Dube Trade Port next to the airport north of Durban has got potential because it's obviously next to an airport and it's next to a port which makes it very cost effective for companies to locate there. The Atlantis Special Economic Zone in the southwest in the Western Cape is also really doing very great work. Kouga in the Eastern Cape is struggling. Much of the investment that has been promised hasn't come about, but I think that there's a renewed interest, particularly from pharmaceutical companies to locate there. And then Richards Bay, which is in KZN, is focused on obviously products for export. But they're still complaining that they're not actually getting the tax incentives that they were promised. And then of course, there's the MMSEZ, which was Limpopo's promised SEZ, which is in fact, there are two sites, the south side has been proclaimed, but the north side still hasn't been proclaimed. The north side being the one next to Musina. So I think that the Department of Trade and Industry and Competition has got some work to do because the strategy has changed within the department. The three Ds, decarbonisation, diversification and digitalisation is the strategy that the DTIC is now pursuing. Toby Chance (07:03.094)And the question must be asked is does a heavy industrial complex in a pristine natural environment such as Limpopo, which is going to involve a massive amount of coal mining and polluting industry actually fit in with that strategy? And that's the question that we'll be asking from now on. Chris Steyn (07:21.21)Which other departments are involved, Toby? Toby Chance (07:25.838)Well, a plethora of departments because of the extensive nature of this project. Starting off with the Department of Water; one of the big issues around the development is does Limpopo, particularly Northern Limpopo, have the necessary water to supply this zone? And the answer is probably it doesn't. In fact, our Deputy Minister of Water was up there last week, Sello Seitlholo, and he was pointing out the fact that there was a massive deficit between supply and demand. They're planning on damming the Limpopo River, which is itself a problem, and then piping water down to the site to wash the coal and to cool the steel. But the Limpopo River is dry for half of the year, so that's a real issue. So the Department of Water Affairs has to take account of that. Then there's the Department of Agriculture, obviously because of the huge impact on agriculture that this zone will have, the Department of Mineral Resources because of the mining component, Department of Tourism because of the impact on tourism, International Relations because of the downstream effects of the damming of the Limpopo on Mozambique and Zimbabwe, and then obviously Energy because there's going to have to be several thousand megawatts of power generated to produce the electricity necessary to power the steelworks. So it's a highly complex project involving many, many government departments. Chris Steyn (08:59.694)Now, who are currently the main promoters of this particular zone? Toby Chance (09:05.802)It's mainly the provincial government of Limpopo, the Limpopo Department of Environment, LEDET, and Economic Development and Tourism, so that's LEDET. And then the agency, is LEDER, the Limpopo Economic Development Agency. And so those are the entities that are promoting it particularly. The Premier has also come out strongly in favour of the project. Strangely, the Department of Trade, Industry and Competition is sort of taking, I would say something of a backseat view on this, very much delegating it to the provincial government, but it does have to have the final say on whether the SEZ is fulfilling the mandate of the SEZ Act. And we'll be keeping a close eye on the request from the provincial government to have the northern side proclaimed, and to see whether there are actually justifiable reasons why another SEZ should be set up there. I should just point out that there was another Special Economic Zone that is also in the running, which is in the sort south-eastern part of Limpopo, which is also a mineral and energy complex. And this, to me, would be the more sensible plan to actually focus on that SEZ which is closer to transport links, has already got infrastructure spent on it. It would make more sense to have that zone as the Limpopo Special Economic zone and not worry too much about the one that they're planning near Makhado. There could be arguments in favour of an SEZ in the Musina district because it is a gateway to Africa and certainly there's potential through transport links up into our neighbouring countries to build manufacturing capabilities and trading facilities up there. So we'll have to have a close look at what the rationale would be once they've put their request into the national government. .Read more:.BN Briefing: Iran bunker-busted, now what? Broker Cyril, whitelisting, BEE shock explainer, Robotaxi.Chris Steyn (11:12.526)Meanwhile, several civil societies are trying to stop this project or this zone with lawsuits. What can you tell us about that? Toby Chance (11:21.622)Yes, actually a large number. I'll just read them out to you here. I've got quite a list of organisations - and their main reasons are number one, the flawed public hearing process. Number two, the environmental impact assessment hasn't been properly done. Number three, there was a conflict of interest between the authorising authority, is the Limpopo Department of Economic Development and the agency - and of course the huge negative environmental impact that will be undoubtedly caused by this development. So the organisations are Living Limpopo, which is led by Lauren Liebenberg based up in Limpopo and that's been a very strong advocate of reasons why this development shouldn't go ahead. There's the Baobab Foundation, Dr Sarah Venter. Some of the viewers may remember that Carte Blanché did a programme on this in March where both these ladies were interviewed and put out the case for why this project shouldn't go ahead. The Vhembi Biosphere Reserve, John Rosmerin is somebody who's been very vocal on this, he was the chairman of the Biosphere Reserve for many years and is still active in opposing the project. Then there's the Voice of Creation, Mapatadelene Makulululi, who is a community activist, is very opposed to the project because of the fact that it will take away much of the heritage that her communities have relied on. Then there's the Earthlife Africa DirectorMakoma Lekalakala. She's also come out strongly against it. There's the Endangered Wildlife Trust, represented by Cathy Vise, Christo Reeders attorneys and All Rise attorneys, and of course, the UN. So there are many court cases that are pending, actually on this project. One of the issues that will come up strongly is the delegation of authority by the then Environment Minister, Barbara Creasy to the Limpopo Government for the environmental impact assessment. That has been challenged. There will come a time when the current Minister, Dion George, will be called upon to make a decision on whether the… Toby Chance (13:47.904)….environmental impact assessment was conducted correctly. He has the power to effectively close it down, which unfortunately will cause bit of a stink with the Minister Mineral Resources, Mr Mantashe being Mr Coal in this country because he whole development, certainly on the south side, is based on a massive exploitation of the coal fields. He would be keen to see that happening. A lot of contestation at Cabinet level and we say bring it on because this project has been sort of lurking there for some years and hasn't really had the national prominence that it deserves, which is one of the reasons why we're pursuing it now. Chris Steyn (14:32.794)Now your party, Democratic Alliance, being strongly opposed to its continuation, what can you do? Toby Chance (14:41.996)Well, we're doing a lot of things, both at provincial level and national level. As I said, my colleagues in the provincial government or provincial legislator are using the legislative tools that they have available to essentially expose what's going on. And if there's any with corruption, obviously that's something that we need to uncover. At national level, as I mentioned, Minister George will certainly make a decision at some point as to the viability of this project. And I think we have to point out the long-term negative sustainability impact, by which I mean there's a mine that maybe will, you know, produce coal for 30 years and then it'll be closed down. The same with the steelworks, you know, whereas if you if the economic development model were based upon the combination of agriculture, biotourism, archaeological tourism and light manufacturing, that would have a much longer positive impact. It would also be a closer matching of skills available in that area to the skills required in those industries. One of the objections that we have is that there's a huge skills mismatch between what this zone would require, particularly in the South site, and what skills are available. We'd probably find that a large number of the workers that were brought in would be Chinese workers. I don’t have any objection to Chinese workers per se, but it's not creating local employment. And then of course, because it's a mainly Chinese owned enterprise, you know, the profits will be extracted and South Africa's also commitments to reducing carbon emissions, which essentially means that our carbon budget will be exploited by these companies at a time when we need to be investing in carbon neutral projects as opposed to projects that are going to be spewing carbon and other noxious gases into the atmosphere. Chris Steyn (16:45.754)When can we expect a decision? Toby Chance (16:49.902)I can't really give an answer to that, Chris. I think there are lots of decisions that have to happen in parallel. As I mentioned, Minister George, at some point has to make a decision. There has to be a decision by the department as to whether to proclaim the northern site as a Special Economic Zone. The courts have to make decisions. So, for example, mining has started. They've started clearing large areas on the south side to expose the coal seams. That is being challenged in court as to whether they have actually exceeded their authorities by ignoring permits that haven't been issued. So there's lots of decisions that have to be made in parallel by different institutions. I think we, as in the DA, will be keeping an eye on all of those decisions and making sure that the law is being followed to the letter, but also that the different interest groups are being listened to. So, for example, there's a big issue around the fact that the Vhembi Bioregional plan has not yet been proclaimed and enacted by the Limpopo government. One of the reasons being that it comes out strongly against any development as such in the Special Economic Zone. So, there's huge conflict again between promoters of this project and, you know, forces that are against it even within the Limpopo province. So there's a lot of water that has to flow under the bridge before any final decision is made. Ultimately also it comes down to the investors. The investors may just see that the risk and the negative social and economic impact could be just too much for them. It may just be that they'll decide it's too much hassle for us to invest, we'll go somewhere else. The other factor which I haven't mentioned is that this project if it goes ahead will see South Africa steel manufacturing virtually double and this is at a time when as we know there's huge problems with our existing steel industry there's a massive oversupply of steel globally and steel prices are under pressure so the question is why locate another steel plant in northern Limpopo nowhere near any iron ore it's a thousand kilometers to get the iron ore from Kumba up to… Toby Chance (19:13.794)…you know, up to Limpopo and then they've got to export the steel, you know, on a railway that doesn't exist. So, you know, these are all some big issues that have got to be unpacked and properly ventilated and discussed and decisions made. So it's a complex beast. Chris Steyn (19:31.458)Indeed. Thank you. was Toby Chance, the Democratic Alliance's Spokesperson on Trade Industry and Competition speaking to BizNews. And I'm Chris Steyn. Thank you, Toby. Toby Chance (19:42.924)Thank you, Chris.

Toby Chance: Cabinet showdown looms with “Mr Coal” Mantashe over Special Economic Zone

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