Some Success Stories

ECDC has facilitated hundreds of projects and investments – from very large to fairly small – in a range of sectors throughout the Eastern Cape. These include:

• The 2,800-hectare Magwa Tea Estate in the Pondoland area of the former Transkei was established in the late 1960s by the homeland government, but was largely abandoned. The estate – which produces 70% of South African tea – was re-opened in 2004 after being given a lifeline by the provincial government, which mandated ECDC to support the estate with ongoing financial and technical assistance. The estate has been slowly but steadily stabilised and revitalised. In 2006/7, more than 3-million kilogrammes of tea – the best-ever yield at the estate – was harvested. Government and the private sector (the European MAN Ferrostaal and the Indian JV Gokals) have together invested some R50-million in revitalising and reinventing the estate. The project has secured more than 2,800 permanent and seasonal jobs – and business is growing. In 2006/7, the estate doubled production from the previous year under trying circumstances. An Outgrower’s Programme is encouraging some 1,000 community members to grow tea on their smallholdings to sell to Magwa.

• A R1.3-billion particle board plant, an investment by Steinhoff/PG Bison, one of Europe’s top five furniture groups, is the anchor of a timber cluster being established in the north eastern part of the Eastern Cape. Close to Ugie and Maclear, the plant, the largest of its kind in Africa, covers some 36 hectares of a 64-hectare site that will in time be the location of timber beneficiation. The first board, being produced for both local and export markets, is expected to be produced in early 2008. Government and its agencies has committed more than R56-million to critical infrastructure such as power lines, water and sanitation to the development. Apart from generally boosting the economy of the area, as is already being seen in the growth of other industries, it is estimated the project will create around 3,000 direct jobs with an initial annual salary bill of R88-million, as well as many more secondary jobs in a severely under-developed part of the province. Steinhoff International is a diversified industrial company with its core focus in the manufacturing, sourcing and distribution of furniture and household goods. PG Bison, a wholly-owned Steinhoff subsidiary, owns and manages close on 87 000 hectares of forest land, the bulk of which is situated in the far northern region of the Eastern Cape. In 2006/7, the Steinhoff Group acquired 67% of North Eastern Cape Forests from Mondi. ECDC has been involved in the planning and strategic management of the project from inception, and continues to facilitate the implementation of the infrastructure projects and to act as the over-arching implementing agent.

• ECDC played a facilitation role in the SeaArk shrimp farming project at the Coega IDZ, which has the potential for a massive commercial investment that could reach R3.5-billion over six years. It is being driven by SeaArk Africa, a 50% joint venture between SeaArk Holdings, a US-based commercial aquaculture entity, and the Bosasa Group of Companies, a diversified broad-based BEE group. The project involves a high-tech, indoor biosecure prawn grow-out facility that uses state-of-the-art technology developed by leading fish-farming experts in the US. It will breed giant shrimp primarily for the export market, and will include a processing, packing and distribution function. The facility, which would be fully operational by 2011, is due to be constructed on 1,100 hectares of land, which will boast 62,000 raceways as grow-out facilities. A memorandum of understanding has been signed and negotiations are underway for the project support agreement.

• ECDC brokered a groundbreaking tourism agreement with TUI AG, a Germany-based tour company, to put together tour packages through the Eastern Cape. TUI AG is one of the world’s largest tourist conglomerates with interests across Europe. It runs more than 3,500 travel agencies and 79 tour operators in 18 countries. It also owns 285 hotels in 31 countries, as well as numerous airlines, cruise ships and retail stores. Major subsidiaries include TUI AG Airlines, the largest holiday fleet in Europe, while its common brand, TUIfly, encompasses seven airlines. This Eastern Cape agreement is extremely significant to tourism in the province as it offers, for the first time in the province’s history, major international tour packages that incorporate a road route link between Port Elizabeth and Durban.

• Technological innovation is an important precursor to sustainable development, especially in non-industrial sectors. With this in mind, ECDC initiated and continues to champion, both in terms of financial support and technical assistance, the Nelson Mandela Bay Technology Hub. This is a division of the Eastern Cape IT Initiative (ECITI), a multi-faceted programme focused on providing support to SMMEs in ICT and related industries. This support is through the identification of key competencies within the focus area being developed in the province where the Hub is located, and which is in accordance with local and provincial economic growth and development strategies. As such, the Hub comprises an incubator for the growth and development of Eastern Cape’s SMMEs in the ICT sectors. In 2006/7, the Hub became an actualised entity with the appointment of a dedicated CEO, as well as a supporting steering committee. The committee, which incorporates representatives from the Nelson Mandela Metropolitan University, Volkswagen SA, Seda and Nafcoc, will act as a de facto advisor overseeing the project. The Hub has received funding from the Department of Trade and Industry of R9-million, with an additional R4.5-million being invested by the Nelson Mandela Bay Municipality.

• ECDC cultivated the establishment of the province’s first scooter and motorcycle assembly plant in the Markman industrial township in Port Elizabeth. This followed a R20-million investment by Italian company Ala Manufacturing. ECDC facilitated relationships between institutional, accounting and financial partners, as well as local suppliers and government services. This investment is creating significant spin-offs and business opportunities in the region. The plant began production with a staff of 20, but this is expected to grow fourfold within a year. Also, establishment of the plant will have a huge added-value impact on component suppliers in the region: Ala Manufacturers has committed itself to producing its range of 50cm³ to 150cm³ automatic-gearbox motorcycles entirely with local content within a year. The company has set itself the target of producing 5 000 units within its first year. While its target market is largely domestic, the company also aims to export to the SADC region and beyond.

• Buffalo City Municipality, in its 30-year economic growth plan, identified the expansion of the East London harbour as a cornerstone of long-term economic development of the region. The proposed R5-billion expansion project will position the city to maximise the investment potential of the East London IDZ, and will stimulate port traffic by allowing the city to accommodate and cater to fourth-generation ships. In 2006/7, ECDC coordinated a detailed business case study into the proposed expansion on behalf of the East London IDZ, DaimlerChrysler SA, KPMG and Safmarine. The study concluded that the proposed investment could potentially create 60,000 jobs by securing R15-billion in new investments. Conversely, if the expansion initiative failed, the region could lose more than 16,000 existing jobs. This has prompted the city to establish a port steering committee, tasked with elevating the port expansion initiative onto the national agenda. ECDC supports this initiative, and, as a member of the port expansion steering committee, continues to take an active role in this process.

• OPM Tooling is supplying General Motors with Hummer parts worth R3-million a year, and has secured a joint venture with Antaya America to supply European and South American markets with parts.

• Agrarian transformation and food security are two of the biggest challenges and opportunities currently facing the Eastern Cape. To this end, the Eastern Cape government launched the Massive Food Programme, aimed at encouraging consolidation of land for commercial production purposes, particularly in the former Transkei and Ciskei. The aim of this flagship project is not only to increase the production of food crops, but also to encourage access to new markets through infrastructure, credit and training support. ECDC is a crucial partner in this process through its involvement over the past two years with the revitalisation of storage and milling capacity in the province. This initiative involves establishing several medium-sized milling operations at specific locations with a view to decreasing the province’s dependency on imported milled maize products. Recent successes for ECDC include facilitating the drawing up of three business plans for medium-sized mills. The necessary legal structures have been put in place and BEE shareholders have been identified. The first of these mills will be established at Flagstaff, followed by two more at Butterworth and in Mthatha, traditionally the best maize-growing areas in the province. All three mills are due to be operational by February 2008, the start of the next maize harvest.

• ECDC has assisted the Blue Crane Development Agency, in the Cacadu District of the province, to obtain Special Municipal Infrastructural Funding of R5-million for upgrading and expansion of the Somerset East Airport. The project has led to a number of spin-off developments for the region, including the establishment of an ultralight aircraft assembly plant as Albasera Aircraft, a Johannesburg-based manufacturer, relocates its operations to Somerset East. To this end, the development agency has entered into agreement with the Wits Aeronautical School to develop and manufacture a South African-designed light sport aircraft. Also, with operational support from ECDC, the agency is establishing a world-class specialist flying academy catering for fixed-wing and helicopter, private pilot, commercial, senior commercial and airline transport pilot training.

• ECDC, with the Development Bank of South Africa and SANParks, was a founding partner in an innovative eco-tourism and empowerment project, Kuzuko Game Reserve. This 14,500-hectare 'big five' safari park has been contractually incorporated into the Addo Elephant Park. The park is the first commercial investment by Jubilee Action, a British-based venture philanthropy organisation. An Employee’s Trust – comprising all the workers Kuzuko inherited when it bought a cluster of farms that make up the park – and the Disability Empowerment Concerns Trust jointly own 32% of Kuzuko.

• A major development for the Eastern Cape is the establishment of a biofuel industry. ECDC has been instrumental in facilitating and driving a strategic planning process that will culminate in an integrated, three-tiered Eastern Cape biofuel project. This initiative is in line with an overall national strategy to create a South African biofuel industry in the Eastern Cape, with the potential to create thousands of jobs and draw billions of rands in investment into the provincial economy. The Eastern Cape government has set aside R9.5-million for fencing land and planting canola, and R8-million for planting sugar beet in the Mbhashe area to kick-start the project. The biofuel project will create a huge new market for agricultural products, including canola, soya beans and sunflower. It involves establishing 500,000 hectares of now under-used land for integrated rotational cropping. These crops would be used to feed a proposed 200,000-ton-per-annum biodiesel plant in the East London Industrial Development Zone, as well as other biofuel and agro-processing initiatives. Linked to this project, ECDC is involved in setting up a number of SMMEs, which will assist farmers to access funding for the agri-equipment they need.

• The R45-million Blueberry project in the Stutterheim area is expected to create more than 2 317 annualised jobs, in an area struggling with a 55% unemployment rate, over 10 years. This 410-hectare greenfields initiative, which includes a farm and packaging facility, is being funded by the Industrial Development Corporation, from a business plan developed by ECDC. ECDC is finalising the shareholders’ agreement, after which the project will proceed to the first stage of implementation. Planting of the first 15 hectares should be complete by April 2008. The farm is expected to be fully operational by 2015, reaching full maturity by 2020. It is envisaged that 80% of the farm’s yield will be packaged fresh for the export market, and 20% processed for local consumption.

• ECDC continues to assist and support the Thina Sinako Provincial LED Support Programme through various partnerships and enterprises, as well as in facilitating access to finance. This programme has trained more than 900 people in Local Economic Development (LED) or project development. It has also trained 72 LED facilitators to assist people in the development of LED projects and grant fund applications. ECDC focuses its involvement with this important initiative in support of a more integrated view of LED, which allows for system improvement and participation in innovation, as well as allowing for useful leveraging of economic development resources. A success around this programme has been the Makana Goat Project, which was awarded a R4-million grant from the European Union (EU). A flagship development initiative of the Makana Municipality, this project already creates direct employment for more than 100 people in a severely under-developed part of the province. The EU grant has financed the training of 49 farmers, as well as provided for the building of sheds on 10 farms in the Makana area. The farms, which were acquired through the land restitution process, are expected to yield mainly cheese and yoghurt products.

• In tourism, a fly-fishing tourism project has started at Sterkspruit Dam, and three hiking and holiday lodges have been opened around Mkambathi and Port St Johns.

• ECDC facilitated funding of R300,000 from USAID for skills training and mentorship at the Dordrecht cheese factory.