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HIGHLIGHTS

• R 1,84 billion (US$164 million) in new investments secured
• Coega IDZ is the first IDZ on the continent with double digit investment in one year
• Total revenue increases with 8%;while self-generated, non-state income rises 29%
• 29 000 South Africans benefit from job creation and skills upliftment programmes, 13 000 benefitted from Coega by community development programmes
• In 2013/14 FY, 901 people obtained drivers licences through CDC’s Driver Training Programme
• During the 2013/14 FY the CDC employed 159 interns.
• FY 2013/14 saw a total of 16 131 jobs created.
• Since inception, 47 186 construction and 4 409 operational jobs have been created; a further 50 000 direct and induced jobs were created during the 2013/14 FY.
• CDC has received an unqualified audit report 15 years in a row.

November 17, 2014: THE Coega Development Corporation (CDC), operator of the Coega Industrial Development Zone (IDZ) and the leader in stimulating socio-economic growth in South Africa, released “ground-breaking” key performance highlights from its 2013/14 financial year (FY) integrated annual report.

The results show an organisation on a strong growth trajectory, delivering on its mandate to attract both local and foreign direct investments to the Coega IDZ and driving socio-economic development in Nelson Mandela Bay and the Eastern Cape, the organisation said.

“We have gone beyond the call of duty to break through various barriers to achieve remarkable milestones in the context of difficult global investment climate,” said CDC Business Development Executive Manage, Christopher Mashigo. “This speaks to an organisation that is maturing and building on sustained momentum, but it is also a testament to excellent teamwork.”

The CDC is now following integrated reporting principles and charts its successes against  a triple bottom-line and its five year corporate strategy.

REVENUE

The CDC’s self-generated revenue this year grew by 29% to R383 million (US$ 35 million), when compared to the previous year, and, for the first time since the CDC’s inception, self-generated revenue was higher than state funding by 12%.  Total revenue (state funding and self-generated income) increased from R673 million (US$61 million) to R725 million (US$66 million), representing a year-on-year growth of 8%.


 


 

INVESTMENT ATTRACTION

The Coega IDZ became the first IDZ on the African continent to attract double-digit investment in one financial year – a historic achievement for a South African IDZ – this just as the Coega IDZ begins its transition towards becoming a fully-fledged special economic zone (SEZ) under new South African legislation. Ten investment projects worth R1,84 billion (US$164 million) were signed and secured for the Coega IDZ in FY 2013/2014.

These projects are as follows:

• INVESTOR (Origin)
• SECTOR
• PROJECT VALUE
• SAMRT SA (South Africa)
• Automotive
• R400-million (US$ 36 million)
• Qtech Moulding (SA) (T/A Oplas)
• Automotive
• R23-million   (US$ 2.1 million)
• Digistics (SA)
• Logistics
• R20-million   (US$ 1.8 million)
• ID Logistics (France)
• Logistics
• R35-million (US$ 3 million)
• Afrox (SA)
• Chemicals
• R300-million (US$ 27 million)
• No. 1 Corporation (SA)
• Agro-processing
• R40-million (US$3.6 million)
• ITPASA (SA)
• Manufacturing
• R30-million (US$ 2.75 million)
• Ulba Tantalum Africa (Kazakhstan)
• Chemicals
• R200-million (US$ 18.3 million)
• Powerway/Sungrow JV – Inverters (China)
• Renewable energy
• R127-million (US$ 11 million)
• Powerway/JA Solar JV (China)
• Renewable energy
• R666.6-million (US$ 61 million)
• TABLE 1:  TEN INVESTMENTS SIGNED IN 2013/14 FY.

The largest investments were recorded in the renewable energy sector (R793 million/US$72 million), followed by the chemical sector (R500 million/US$ 45 million), and the automotive sector (R423 million/US$38 million).  Key investments were secured from European, Far East and Central Asian firms.

“These mirrored government’s central priorities to help drive growth in turnkey sectors identified as crucial to the economic growth of the country. The double digit investment is a significant achievement which will support much needed job creation, and skills, training and development, contributing tremendously to the economy of Nelson Mandela Bay and the greater Eastern Cape,” said Mashigo.

“In the eight years since investment promotion of the IDZ began in earnest, and 15 years since the establishment of the Coega IDZ, we have transformed the IDZ into a dynamic, global investment hotspot attracting investors from China, India, the United States, Germany, Belgium, France, and South Africa.”

On this basis, the IDZ was to become a case study for industrial development excellence and effective operations in an African context. “We can easily be compared to other IDZ’s in the world and stand in a class of our own,” says CDC Head of Marketing and Communication, Dr Ayanda Vilakazi.

By the end of 2013/14 FY, the CDC had 25 operational investors with several other projects, valued at R3,3 billion (US$ 320 million) under construction in the IDZ.

“The CDC is forecasted to reach 30 operational investors by the end of the 2014/15 FY, making Coega the first IDZ to reach 30 investors,” says Dr Vilakazi. “We are already looking at making the new financial year another year of ground-breaking achievements.”

JOB CREATION, CSI AND SMME DEVELOPMENT

In addition to the unprecedented successes in investment promotion, the CDC contributed significantly to job creation and skills development during FY 2013/2014.

In this period, 16 131 individuals benefited both directly and indirectly from employment as a result of both Coega IDZ and other infrastructure projects. The CDC boasts a wide basket of infrastructure projects around the Eastern Cape and KwaZulu-Natal, where it acts as implementing agent for Departments of Health, Education, Roads & Public Works, and Social Development.

The CDC also trained 14 441 people in critical skills needed for various industries, particularly artisans, where there is a significant gap in the market. The CDC also played a critical role in skills development.  During the FY 2013/14 the CDC employed 159 interns.

More than 13 000 people were empowered and uplifted through Coega corporate social investment initiatives.  The CDC invested in excess of R17 million (US$ 150 000) into community projects with sustainable and life-changing empowerment in mind during the FY 2013/14.

The company is forecasting to increase CSI investment to R21 million in 2014/15, in line with its vision to be a catalyst for socio-economic growth, said Dr Vilakazi.

SMME development was also strategic priority on the 2013/2014 FY agenda.  The CDC achieved a 37,9% Small, Micro and Medium Enterprises (SMME) participation and involvement rate, and the value of SMME development projects awarded in the year under review was R76 million (US$ 6,9 million).

The CDC was also the first state-owned enterprise to achieve a B-BBEE Level 1 contribution status. “We took a view at the beginning of the 2013/14 that if we demanded that companies improve their level of competitiveness in terms of B-BBEE Scorecard, the CDC must lead by example,” said Dr Vilakazi.

PROVINCIAL INFRASTRUCTURE PROJECTS

The CDC further entrenched itself during the 2013/2014 FY as one of the leading implementing agents on major construction projects with a portfolio of 74 infrastructure projects worth R4,7 billion (US$ 431 million) in its external programmes division. 

“The infrastructure programme for the CDC is not just about the bricks and mortar, but more about the impact of these programmes on the lives of the communities, for example, building hospitals, impacts the lives of communities in terms of improving access to healthcare and ensure improvement on the quality of life of the citizen,” Dr Vilakazi explained.

“In a similar way building schools ensures better access to education and learning environments; and can improve standard of living and income as measured by the Gini-coefficient.”

Coega is involved in construction and/or upgrading of health sector facilities (hospitals, clinics and community health centres), education facilities (schools and early learning centres) and other municipal services such as roads in the Eastern Cape and KwaZulu-Natal. 

STRATEGY AND SUSTAINABILITY

According to Mashigo, the CDC is operating within a new context, mainly as a result of the enactment of the new SEZ Act and the end of a five-year rolling strategy in 2013/14.

“The time is ripe for a reviewed approach to building on the momentum and achievements of the past years and to differentiate the offering from other competing IDZ’s and implementing agents. This means some slight adjustments to our strategic course.

“This has been a watershed year for the CDC with the convergence of a number of initiatives of strategic long term significance. The CDC has defined a new five-year strategy that will focus on financial sustainability, strategic partnership and business intelligence,” he said.

Figure 3: The CDC’s new strategic approach.

“The future growth of the IDZ and the concomitant job creation will be largely dependent on allocations from the SEZ Fund and the work of the centralised SEZ investment promotion unit.

“The external services arm of the CDC will now have a dual role of providing the bulk of funding for CDC’s operations as well as funding to grow the Eastern Cape’s own capabilities in conjunction with client, mainly government, departments. The nett revenue generated from these operations is re-invested into the IDZ operations in order to grow investors as well as the pipeline.

“Our external services division will continue to be strengthened as we rigorously pursue IDZ investments.  To date, we have projects in negotiation stage that are valued at R8,1-billion (US$ 74 million) and those under feasibility at R116,3-billion (US$10,6 million). However total investment portfolio amount to R151-billion as at March 2014. This portfolio is expected to reach R200-billion within the next two years – most of the projects being realised annually.

“The overarching imperative for the CDC – which has been the case for a number of years – is self-funding.  Great strides have been made in this regard but new and possibly radical funding and revenue streams and models will be put in place and that is a key focus as the CDC develop the next rolling five year strategy. Each Rand that we can spare from the fiscus is a Rand that can be used towards other important socio-economic projects by the National Treasury.

“We are also pleased by the SEZ Act of 2014 which is bolstering investment interest in South Africa through a host of incentives,” he said.

Notably are the following incentives:
Global competitiveness through incentives: Tax incentives, rebates and customs controlled areas and linkages with Africa broadly and sub-Saharan African more specifically. The current operating environment carries amongst other the following benefits:

• Corporate Tax Rate of 15% for qualifying investments (instead of 28%) in a SEZ approved area
• Value Added Tax and Customs Relief – Only available to Qualifying entries within a Customs Control Area
• Extended Employee Tax Incentive (ETI), commonly referred to as the Youth Wage Subsidy, aimed at encouraging employers to hire young and less experienced work-seekers. This incentive is meant to encourage employment of the youth affording them a reasonable stipend to improve their socio-economic levels. The program has been extended for use in an IDZ with the additional advantage of that it is not limited to youth only (those between 18 and 30 earning under R6000).
• Accelerated Depreciation and it is anticipated that this will make the erection/acquisition or improvement of buildings within the IDZ subject to an allowable deduction in the form of an accelerated depreciation allowance

Municipal Incentives

·         Joint financing of Feasibility study and/or business plan development - directed at medium to large investments, as defined by the National Small Business Amendment Act (2003) new investment that will create 50 or more permanent jobs and have minimum asset value of between R2 million and R5 million on the sector the business operates.

·         Rebate on Building plan approval cost

·         Discounts on Services (water, sewerage, refuse, electricity and property rates)

·         Discount on Municipal land and building      

From a governance perspective, the CDC received an unqualified audit report 15 years in succession. This is due to proper controls and systems that ensure proper governance. The Coega Board Executives adhere to the PFMA and other legislature requirements.
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·         For the full annual report, please access the online 2013/2014 Integrated Annual Report

Issued by COEGA