Musina Makhado SEZ hosts packed investment conference to transform Limpopo’s economy

2020-03-19T09:45:00+00:00March 19th, 2020|Events|

A new town complete with multiple affordable housing developments, schools and clinics is about to start arising in Musina in the far north of Limpopo.

All photos by Eamonn Ryan

It is the location of the recently-promulgated MusinaMakhado Special Economic Zone (MMSEZ) with links to Zimbabwe, Botswana and Mozambique, and three South African provinces – making it the fulcrum of a market of 60 million people. It is Limpopo’s flagship economic initiative.

The MMSEZ board of directors is under the chairmanship of Rob Tooley.

The MMSEZ board of directors is under the chairmanship of Rob Tooley.

The Musina-Makhado Special Economic Zone (MMSEZ) late last year hosted an investment conference in Sandton aimed at supplementing the R165-billion investment already committed by a consortium of Chinese investors, Sino, to operate mineral beneficiation operations. Several cooperation agreements were signed with various entities such as Mintek, Safcol, Transnet and Roads Agency Limpopo, all aimed at facilitating the successful implementation of MMSEZ.

Limpopo Premier Stanley Mathabatha anticipates investment of R200-billion to R250-billion once local investment was added to the R165-billion already committed, “and that is enough to build a new city in Musina-Makhado”. He says that 24 000 jobs were expected to be created in the initial phase of construction. These are workers who will not only be constructing housing – but requiring affordable homes for themselves.

The location of the MMSEZ neighbouring Zimbabwe, Botswana and Mozambique, with Limpopo also neighbouring the three provinces of North West, Gauteng and Mpumalanga, means logistics will be a key focus area. All developed regions of the world have a high proportion of their trade as inter-regional: in the case of SADC this was just 23% compared to 60% in Europe. Consequently, it is initiatives such as MMSEZ – and the bringing of border posts such as Beit Bridge up to 4th Industrial Revolution standards of automation for rapid transit – which would transform the economic landscape of SADC.

Much of the groundwork was now completed: the MMSEZ board under the chairmanship of Rob Tooley and CEO Lehlogonolo Masoga had been appointed, says keynote speaker and MEC for LEDET, Thabo Mokone. A meeting with neighbouring countries had been hosted to ensure an all-inclusive approach to developing a new export hub with increased access for the SADC region as a whole. This was being facilitated through a ‘one-stop investment shop’ which has been established by a dedicated team to manage all the government red-tape on behalf of foreign investors who may be unfamiliar with South African laws.

This one-stop-shop will be launched by February 2020 in provincial capital Polokwane, sponsored by the dti, says Lekota, emphasising that the provincial government gives its full backing to this project; that ease of doing business will be central to all investment initiatives; and any challenges experienced by investors in this area will be swiftly dealt with by the one-stop-shop. Central to this concept, and the entire MMSEZ is the Beit Bridge border post with Zimbabwe – the busiest border post in all Africa – and discussions are ongoing to convert this into a seamless and automated one-stop border post.

Limpopo Premier, Stanley Mathabatha, anticipates investment of R200-billion to R250-billion.

Limpopo Premier, Stanley Mathabatha, anticipates investment of R200-billion to R250-billion.

Tooley says the single biggest challenge for the region is water, exacerbated by the current drought in SADC. “Meetings are currently underway between Limpopo and Zimbabwe to bring in water to the MMSEZ,” he explains.

Limpopo is one of the least industrialised provinces in South Africa, albeit having the lowest unemployment rate and highest tourism market both of local and international tourists, in the latter case second only to Cape Town.

Limpopo Premier, Stanley Mathabatha, signals the ‘almost limitless’ opportunities as varying from manufacturing and mining, to food processing, the automotive sector to pharmaceuticals and logistics. “This project is at the very apex of economic priorities for the provincial government and also enjoys the highest priority of the national government and national president.

“The mineral deposits in the area and the mining value chain present opportunities for investment and consequent industrialisation because the mining lifespan exceeds 200 years. Doing business in the MMSEZ comes with tantalising tax incentives and a completely different ease of doing business.”

“The basic appeal of MMSEZ is the underdevelopment of Africa, and as a 4IR logistical hub we are a conduit to development in SADC. The challenge will be to ensure investments also create jobs – it can’t be one without the other. The quid pro quo of an SEZ is that although you lose on corporate tax, with jobs being created you gain on PAYE and VAT as the economy grows,” says Tooley.

North and South

Richard Zitha, MMSEZ SOC executive, made a presentation of the sites. The MMSEZ is in size larger than greater Johannesburg, and is split into a North (Musina) and South (Makhado) side, with each having a defined focus, which means there are qualifying criteria and not everyone can invest:

  • The 8 000ha South site is primarily an energy and metallurgical hub including coal-fired power plant, coking plant, stainless steel plant, high carbon ferrochrome plant, and silica-manganese plant. As a greenfield site, it comes with the bare minimum of infrastructure, construction of which is anticipated to commence in September 2020.
  • The 3 500ha North site is reserved for light industry, open to new investment opportunities focused around a logistics hub, warehousing and distribution for the SADC region, agro-processing, automotives, pharmaceutical and many others. Upgrading the infrastructure on this site will require R2.8-billion, with an additional R1.2-billion in Musina itself, based on preliminary studies. The Environmental Impact Assessment (EIA) on this site is complete, and it is poised to proceed with critical infrastructure construction from June 2020.

Funding for this will come from the National SEZ Fund and from Treasury and various development finance institutions (DFIs), including the IDC and DBSA, while the provincial government has also budgeted a significant amount of money for infrastructure beginning in the next financial year.

The entire concept is premised on the SEZ Act, which details all the incentives and rules, central to which is a 15% rate of corporate tax (compared to the usual 28%). In addition, there is building tax relief, employment tax incentives and bonded area customs relief, and for local investors facilitated access to other government investment programmes such as the Black Industrialist initiative.

THE ROADMAP:

  • Early 2020: site clearance, perimeter fencing and access control top secure investments
  • 2021: Commencement of civil works, internal roads and bulk services as well as ongoing investment roadshows. At this point, investors can safely commence their own construction on site.

Zitha says the concept of the MMSEZ was premised on extensive cross-border research to determine what commodities were crossing the Beit Bridge border with the top ten identified as being potential low-hanging fruit. The idea was that that instead of machinery and equipment being built in, say, Durban and shipped to a SADC country, it could far more advantageously be done in the MMSEZ.

He says it is hoped that companies would interrogate the potential for relocating their operations to MMSEZ to be closer to their SADC markets by taking advantage of the investment and tax incentives.

Both sites are currently designated SEZs and the South already gazetted, with the North in the process of being gazetted by the dti. The South is in the EIA-approval stage, and Mokone says that “in our view by April 2020 we should be seeing the commencement of works”.

Agreements were signed with Chinese investors to establish what will be known as a Bonded Trade City which will allow the beneficiation of various agricultural products, such as cotton, avocado and timber into various added-value products for the export market. Local manufacturers were also looking at relocating electrical vehicle production to the MMSEZ.