The Proposed Saldanha Bay IDZ

Ambitious expectations of development in the Saldanha Bay area go back to the 1960’s and 1970’s when the export harbour was planned and built, followed subsequently by the establishment of Saldanha Steel amidst hopes of a thriving iron and steel industrial cluster associated with the port. At that stage Iscor controlled the iron and steel production chain and was able to manipulate the viability of steel operations countrywide. However, the comparatively recent unbundling of Iscor’s interests has now changed that picture entirely with clear implications for local steel production and for Saldanha Bay.

In the Apartheid era industrial decentralisation by way of the Regional Industrial Development Programme (RIDP) lay close to the heart of national economic development policy in South Africa – evidence for example the Atlantis debâcle in which millions of Rands of taxpayers’ money was spent chasing an unviable ideal. After transformation the new government adopted a regional development approach based on 11 potential Strategic Development Initiatives (SDI’s) to draw public investment and 4 potential Industrial Development Zones (IDZ’s). The new programme attempted to incorporate many of the lessons learned from earlier failures. The West Coast was confirmed as a potential SDI with Saldanha, Coega, East London, and Richards Bay as potential IDZ’s. The new approach was intended to be far more professionally clinical than the earlier RIDP programme, based on proper professional assessment of economic potential and requiring due diligence socio-economic and environmental feasibility analysis rather than raw emotion, blind ideology and sensationalist marketing and promotion in the motivation of SDI’s and IDZ’s. The approach recognised that success could only be achieved through close cooperation between the national, provincial and local spheres of government and the private sector. In particular, the skills and capacities, and the mandates required successfully to integrate and sustain the activities necessary in establishing and managing an IDZ transcended those of the local government sphere whose core Constitutional role in promoting local social and economic development (LED) was primarily through service provision, sound land-use management and good, stable local governance. A National Development Zone Authority (NDZA) was given the responsibility for the regulation, facilitation and administration of IDZ’s. Each IDZ would have a local Development Zone Authority (DZA) to carry out the regulatory and approval process of candidate businesses and the development and management of zones would be done by the private sector so as to reduce the burden on government agencies which in any event had neither the skills nor the capacity to perform such a function. SDI initiatives were realistically expected to create in the order of 60 000 to 70 000 direct jobs in total countrywide. Key imperatives of the new regional development initiative involved a move towards international competitiveness, regional co-operation, and a more diversified ownership base for businesses.

In the current context recent sensational claims in the popular press of an investment inflow of in the order of R86 billion to the West Coast and the creation of 40 000 jobs associated with a Saldanha Bay IDZ are at best premature with some potential reputational risk to the region. Some wild claims in the media apparently have placed the expected number of jobs as high as 80 000! The further claims in the media that a Saldanha Bay IDZ is supported by the other spheres of government at this stage are also premature, misleading and simply incorrect. Based on a pre-feasibility study conducted in 2009, the Western Cape Provincial Government through WESGRO in April 2010 appointed a Project Manager to manage the feasibility investigation that has to inform its decision as to whether to support the formal establishment of an IDZ at Saldanha or not. The process still has a long way to go with the first of the investigations forming part of that study and involving the international scoping of potential industrial opportunities in the proposed IDZ not yet begun. Tenders for this investigation close on 24th August 2010. At present the intention is that the feasibility work in terms of the WESGRO brief will be completed by March 2011. Speculation, for whatever reason, prior to the conclusion of a proper objective due diligence feasibility study by competent professionals is therefore both unfounded and unwise.

But there are far deeper issues around an IDZ in Saldanha that need to be interrogated. The cost-effectiveness of SDI’s as an essentially neo-liberal policy tool to achieve accelerated economic development in the South African context is currently under intense scrutiny by professional economists and economic geographers against the background of a lack of evidence that such initiatives actually work and that on balance they deliver real benefits to host communities. This interest has been further spurred by the frustrated expectations of other comparatively recent IDZ initiatives, most notably those of Coega and East London in the Eastern Cape where huge public investments appear to have delivered no significant return. Socio-economic studies in South Africa further suggest that typically IDZ initiatives may be expected to result in large inflows of job seekers, all of whose expectations inevitably cannot be met, resulting in a host of social and other problems of local unemployment in the receiving host community where the initial jobs are created. The capacity of the West Coast region to absorb and to deal effectively with such problems is therefore also a key determinant of IDZ feasibility. IDZ’s in the local context also can and frequently do mean relatively little in terms of upliftment for the host population, with many skills provided and positions filled by management and more skilled labour imported from elsewhere and local people typically tending to fill the more menial positions. In the order of 71% of the labour force in the West Coast District have incomplete secondary education or less, so this is a real risk for the West Coast where the potential for large-scale direct absorption of local labour in more skilled jobs in relatively more sophisticated industries could be limited. The disturbing record of a number of regional development programmes suggests that many businesses typically have been drawn to decentralised areas by the lure amongst others of cheap labour and other incentives, infrastructure and services directly or indirectly subsidised by the taxpayer rather than by economic “fit” into the region. The lure of incentives will always draw great interest and enthusiasm from prospective investors who will promise the earth to share in the benefits as long as they last. In fact, experience suggests that in many instances investors and private owners of property designated for industrial development are the people who benefit by far the most in the process and therefore who are its most vehement proponents. The figures currently being bandied about locally and in the media in relation to the Saldanha Bay IDZ are truly astronomical and need to be tested against a sound professional framework. This must, amongst other things take place in the feasibility study phase now in process. The people of the West Coast need a credible reality check. Expressions of intent rather than of real commitment against a clear development protocol that explicitly benefits the local community in the final analysis mean relatively little. Experience further suggests that there is a need to draw a clear distinction on the one hand between development in the West Coast region by largely expatriate operations that merely reside there because of contrived artificial advantage bringing little in terms of backward and forward linkages and benefits in the region, and development of the region on the other hand of which the measure is not only the number of jobs created but the meaningful economic mobilisation and engagement of local human and physical resources to mutual benefit in the development process.

In the absence of support from other government spheres pending the conclusion of responsible due diligence investigations it appears that to all intent and purpose the Saldanha Bay IDZ initiative at present is being promoted as a proprietary initiative by the Saldanha Bay Municipality at some significant cost to local ratepayers and at some reputational risk to the Municipality and the region, should this initiative prove unsustainable. Approximately R1,4 million had in the 12 months to May 2010 been spent by the Municipality for this purpose. That Saldanha is a potential regional economic motor in the Western Cape is not in question. It is recognised as part of a potential West Coast SDI, lying at the northern extremity of the 2030 Metropolitan Functional Region (MFR) of the City of Cape Town. The potential importance of the Port of Saldanha as a complement to the Port of Cape Town in the handling of general cargo is also acknowledged in the Metropolitan Integrated Transport Plan (MITP) of the City. The question therefore immediately arises as to the wisdom, sense or sustainability of ad hoc proprietary local initiatives conducted in relative isolation of the City of Cape Town that is by far the strongest economic driver in the Western Cape and of other key players, and out of the context of the integrated planning of the MFR in its entirety as the economic powerhouse of the province. Would an overarching mechanism representative of all relevant role-players not be a more suitable vehicle for achieving the present purpose than the structures currently in place or proposed?

Professional development experience in these matters suggests the need to hasten slowly. In the final analysis sound development decisions are not taken in a sensationalist feeding frenzy but in the cold light of objectivity. The West Coast carries its fate in its own hands. It should not allow itself, for the want of measured good judgement, to become merely another costly and sensational regional development failure.

Johan Ackron is Convenor of the Langebaan Action Group of the Langebaan Ratepayers and Residents’ Association

He is a development economist in the School of Public Management and Planning of the University of Stellenbosch