East London - About 15 000 small-scale farmers in the Eastern Cape could earn a staggering R1.2bn a year if the proposed bio-fuel refinery plant at the East London Industrial Development Zone (IDZ) gets off the ground.
The plan to build the refinery is part of a strategy to use the East London IDZ to revive farming in the poverty-stricken province. Plans are afoot to produce a canola crop in the former Transkei area. It will then be refined into diesel in East London.
The diesel will be exported to Europe, where there is a bigdemand for environmentally-friendly bio-fuels. Canola is mainly used in the manufacturing of cooking oil.
Simphiwe Kondlo, chief executive of the East London IDZ, said this week that the industrial zone was talking to a German investor who had shown an interest in building the refinery in East London. Preliminary studies indicate that the plant will cost R350m to construct.
"We estimate that about R1.2bn in foreign exchange will flow to the farmers every year. If the project gets government approval, it could be up and running in the next 18 months," said Kondlo.
The farmers will also own a 20% stake in the refinery. Kondlo said the provincial government would provide road infrastructure, fencing and farming equipment in the areas where canola will be planted.
Two options on the canola plantation were initially considered.
Two options
The first was to appoint a private company to produce canola in return for paying land-use rental to rural communities.
The second option was to pull 15 000 small-scale farmers into a co-operative body that would allow them to plant the crop as a collective. Under the second option, a manager would have been appointed to oversee the project.
Kondlo said the second model was favoured by the government due to its potential to transfer skills to rural communities while giving them the 20% refinery stake.
Ernst Janovsky, head of agriculture at First National Bank, said the refinery would spur agricultural activity in the region as a new market would be created for local farmers.
"If it is feasible to produce canola cheaply in the region, then why not do it? This is going to have positive economic spinoffs for farmers in the region because it is going to create a new market for them," he said.
The East London IDZ is not only aiming at attracting biofuel investors, it is also scouting for agro-processing opportunities in the province.
The beneficiation of agricultural products could also increase economic activity in rural areas. Kondlo said the forestry, pulp and paper sector provided enormous opportunities as some of the products could be further beneficiated in East London.
R10bn by 2015
An area of opportunity existed in the Ugie-Maclear complex in the Eastern Cape, where chipboard maker PG Bison is building a plant.
The East London IDZ also wants to attract medium-sized investments in automotives and components manufacturing, logistics, business processing, outsourcing, electronics and white goods sectors.
It has already attracted 10 investors who have invested more than R500m. Another R300m in investments is in the pipeline and is headed for the IDZ before the end of March next year.
The IDZ can accommodate more than R10bn worth of greenfield investments.
The R10bn mark is expected to be reached by 2015, when all available land will be fully occupied. Only 30% of the land is occupied at present.
Another Eastern Cape IDZ, Coega, has already attracted more than R30bn in new investments.
The IDZs are purpose-built industrial parks designed to lift the country's manufacturing output while making it more competitive through cutting production costs.
- City Press