A RECORD OF DECISION (RoD) has cleared the way for French aluminium group Pechiney to build a R20-billion aluminium smelter at Coega, near Port Elizabeth. Pechiney is expected to make a final decision on the smelter early in 2003. Provisions made in the RoD include that construction begins within one calendar year of the date of issue of the RoD, that construction be completed within 42 months of commencement, and that conditions relating to the operation of the project should remain valid for the lifetime of the project. In a statement, the government said it had taken the decision to let the project go ahead for a number of reasons. Among these were that the proposed construction and operation of the smelter at Coega would represent “the single largest investment” in the Nelson Mandela Metro and the Eastern Cape in recent years. According to government, while the overall benefit or impact of the investment in the smelter on the South African economy was dependent on the source of the capital used to finance the project, “on the other hand the project could be regarded as the catalyst that will kick-start the IDZ”. It added: “To date the Coega Development Corporation has not managed to confirm a major investor in the form of an anchor tenant for the IDZ. “The aluminium smelter will thus be an important long-term anchor tenant in the zone. In this regard establishment of the smelter might be seen as a vote of confidence in the IDZ and indeed in the country. This might induce further economic growth and development of the IDZ.” The Pechiney smelter project will produce approximately 500 000 tons of aluminium annually, using the alumina reduction electrolysis process. It will be operated with new generation smelting technology (AP50), developed by Aluminium Pechiney. Facilities associated with the aluminium smelter will include an electrical substation on site to provide power to the smelter; facilities for materials handling and storage, including storage silos for the storage of raw materials (alumina and petroleum coke), as well as loading and unloading equipment at the Ngqura port. There will also be a conveyor that will be used for the transport of alumina and petroleum coke from the harbour to the smelter. The total area of the site to be occupied by Pechiney is 120ha. Of this, 50ha will consist of buildings and other hardened surfaces such as roads, parking and other paved areas. Work has already started on preparing the site for Pechiney. This includes the provision of high-voltage electricity to the area identified by Pechiney and the construction of roads. The total investment cost of the massive Pechiney aluminium smelter project at Coega will be approximately $2 094-million (R20-billion), according to an economic impact report conducted on behalf of the French giant. Of this, $1 042-million (R9,2-billion) will constitute direct investment (capital costs) into South Africa. And increased income for the Port Elizabeth area is predicted to be about $26-million (R230-million) a year. The report states that approximately $744-million (36 per cent) of the total investment cost will be sourced in South Africa, with $279-million being financed with local equity and $465-million provided on loan by South African lending institutions such as the Industrial Development Corporation, the Development Bank of Southern Africa and commercial banks. Financial agreements are currently being negotiated on loans, while international loan finance is being sourced from a number of export credit agencies, bilateral agreements and international banks. Pechiney will provide 40 per cent of the total equity component, with the rest coming from the IDC (13 per cent), Eskom (13 per cent) black economic empowerment groups (five per cent), and other private partners (30 per cent). The report states the average number of jobs for the 26-month construction period will be approximately 2 000. Some six thousand workers are expected to be employed during the 12- month peak construction period. The majority of these jobs will be unskilled or semi skilled. At the end of the construction phase, during operation, the smelter is anticipated to employ 750 permanent staff. These include 550 positions for semi-skilled and skilled shift operators and 200 highly skilled technical and management positions. A further 200 to 300 sub-contractors are anticipated to be employed permanently at the smelter, bringing the total employment number to approximately 1 000 permanent employees. On a national scale, over the construction period the aluminium smelter will result in additional income of between $184-million (R1,6billion) and $267-million (R2,4-billion). As a result of this investment and downstream economic activity, the report says between 36 541 and 57 553 direct, indirect and induced jobs will be affected, either in the form of existing jobs that are sustained or as new jobs created. These jobs will mainly occur in the construction, iron and metal sectors of the country. The report further states that on a national scale, during operation phase, the Pechiney investment will lead to the creation of 9 814 indirect jobs. Including the 6 321 jobs created through the induced effects of the development, a total of 16 135 direct, indirect and induced jobs will be created or existing jobs sustained indirectly. Of these jobs, some 36 per cent will be created in the Nelson Mandela Metro and the remainder elsewhere in South Africa – mostly in the electricity sector. At operation phase in 2006, the smelter will contribute to local government taxes about $14-million – to increase to $31-million by 2013 – and about $6-million in indirect taxes through downstream activities.