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Ekurhuleni is the main manufacturing hub in South Africa.
So we want to take that existing synergy and lend tradeable services that are export-focused,” says Seipati Mangadi, CEO of the Gauteng Industrial Development Zone Company (Gauteng IDZ).
The Gauteng IDZ, a subsidiary of the Gauteng Growth and Development Agency (GGDA), was established in 2009, with the aim to develop and operate the designated Industrial Development Zone (IDZ) at OR Tambo International Airport.
Mangadi joined Gauteng IDZ in 2010, and shortly after Gauteng was awarded a permit to develop an industrial hub in the airport’s special economic zone (SEZ).
At that early stage of the game the SEZ was still very much an amalgamation of concepts, which Mangadi inherited and had to develop a commercial case for.
They had to identify particular sectors to focus on in order to develop an industrial hub.
“In this instance, one linked to our magnificent OR Tambo International Airport, the biggest port of entry for the SADC region. As such, our mandate is to undertake economic development in and around the Ekurhuleni area,” says Mangadi.
The Gauteng IDZ focuses on sectors with high-value, low-mass products, as the primary mode of transport for any products being exported from the IDZ is, of course, via air freight.
The incentives provided by the Gauteng IDZ are export-oriented, including corporate incentive tax of 15%, customs and excise incentives, employment tax incentives and VAT incentives.
The lay of the land
The SEZ at OR Tambo consists of two sections: a 7.5ha and 32ha site. It is on the southern precinct of the 7.5h site that the well-known 4ha jewellery manufacturing precinct, which the Gauteng IDZ championed early on, will be situated.
Since announcing this project in 2016, the Gauteng IDZ has also embarked on the development of a 3.5ha agro-processing plant in the northern precinct, which Mangadi says will be operational early next year.
“It has taken us a good two years to get the northern precinct development done, but bear in mind the land was completely unserviced… We have since built a serious development.”
A nearly 4ha factory has been built on this precinct.
Design of the jewellery manufacturing precinct is currently underway, Mangadi says. “We will be clustering jewellery manufacturers and diamond beneficiates.
We are hopeful that the regulator and the state diamond trader will take occupancy there, as we want the entire value chain represented in that space.”
Mangadi admits that they have gone through a learning curve when it comes to development, but she is hopeful that this will help shorten the trajectory of the southern precinct’s completion.
“In my opinion, come the end of 2020, we will be doing site handovers and starting operations.”
She expects the jewellery manufacturing precinct to be operational by 2021.
Parallel to the work being done on the 7.5ha site, Mangadi says they are currently developing a pipeline for the other 32ha at OR Tambo.
She hopes to attract electronics and pharmaceutical manufacturers – particularly pharmaceutical products that require “just-in-time production and need to be loaded onto a plane for transport”.
Further afield, in Springs, about 40km from the OR?Tambo SEZ, the Gauteng IDZ is in the process of developing a platinum group metal (PGM) SEZ in partnership with Implats, who is availing a piece of land for this.
Mangadi is in the process of having this SEZ geographically defined as such by the department of trade and industry.
She projects that after SEZ designation is provided and funding becomes available, it will take around 18 months just to complete the bulk infrastructure development.
During that time, they will work on contract negotiations to prepare for operations.
She believes that five years from now the PGM SEZ at Springs should be operational.
Funding
Funding has proven challenging and has certainly played a part in project lag. Luckily, the financial burden has eased over the past two years since the new SEZ Act was promulgated, explains Mangadi.
“Before this, we didn’t have a structured facility to get funding. With the SEZ Act, we are now in a position to put forward proposals and access funding.”
The current economic climate is a serious concern, but Mangadi assures that the funding for all the work on the 7.5ha OR Tambo precinct has been secured – a total of R208m in public funds for the bulk development of the entire site and a further R134m in public funding and R129m in private funds for the development of the northern precinct.
Securing funding going forward may be challenging, but Mangadi is not defeatist about this.
“We are going to have to be agile, we are going to have to be innovative with our operating models. There is a chance to even bring in a private operator, which the new SEZ Act allows us to do, but we are not there yet… Those are the kinds of things we will have to look at in the future – all the SEZs in the country will have to, in my opinion, because at some point we will run low on funds.”
The developments Mangadi is working on for the next three to four years, are funded, she says.
This article originally appeared in the 27 September edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
