A region with niches that provide global competitive advantage
The Eastern Cape is the third largest province in South Africa. Located on the eastern coast, it lies between the Western Cape and KwaZulu-Natal.
With two working harbours and the transhipment hub of Coega due to become operational later this year, three airports offering direct flights to the main urban centres and an excellent rail and road infrastructure, the province continues to be prioritised by the South African government for further economic development.
This support has fuelled the province's growth and has led to the province's economic growth outstripping population growth.
It is home to about seven million people on 170 000 square metres with its capital in Bhisho and two major cities, East London and Port Elizabeth.
Gross Domestic Product
Latest statistics put the province's GDP at R137 billion with the province contributing approximately 8% to South Africa's GDP. The recent Eastern Cape Business Barometer shows that by April 2008, the provincial economy had grown by 3,4% behind the Western Cape and Gauteng. Annual GDP growth in excess of 4% has been forecast for the province to 2010.
Already Buffalo City, the province's second largest economic hub incorporating East London, Bhisho and King William's Town, has commanded average economic growth rates of 5,7% in the last few years.
Sectors which have fuelled this growth include:
The province's golf tourism received a R2 billion injection when the provincial economic development and environmental affairs department approved the construction of the Gqunube Golf Estate in Buffalo City in December 2007. The 420 hectare estate will feature a five-star hotel and spa, conference facilities, 789 houses and a golf lodge.
A study commissioned by the Eastern Cape Development Corporation points to a growing rail tourism sector and notes the province already enjoys success with the Apple Express, the Port Elizabeth narrow gauge vintage train.
Eco tourism is growing which leverages off the province's robust agricultural sector which includes an increasingly exotic range of produce such as paprika, essential oils and snails.
Agriculture and agro-processing
ECDC continues to target the agricultural sector to create jobs. Projects facilitated by the corporation include aloe ferox, cotton flax and flowers, amongst others.
The province's timber industry also received a massive boost when timber products manufacturer and distributor PG Bison opened its R1,3 billion board plant outside Ugie. The board plant which covers some 36 hectares of a 64 hectare site is designed to accommodate possible future timber beneficiation processes.
The province is also attracting massive aquaculture investments into the province. These include Seark's shrimp farm, located at the Coega IDZ. Irvin & Johnson, another large food company, started its finfish project near Port Elizabeth. Furthermore, the East London IDZ is also home to a pilot abalone project as well as a kob hatchery.
Blessed with a rich plant biodiversity and one of the six plant kingdoms in the world and almost 10% of all plants known to mankind, South Africa's natural products industry carries investment potential. Globally natural products and their derivatives account for 50% of all drugs in clinical use to date. A significant portion of daily medicine emanates from the 30 000 medicinal plants found in this region and the 20 000 harvested tonnes of more than 1 000 plant species with a street value of R270 million are traded every year in the formal and informal sectors for indigenous medicinal use. Coupled with this, the international healthcare trend geared towards alternative and natural health remedies provides Southern Africa with the opportunity to increase export of medicinal plant products.
The corporation, which is responsible for facilitating private sector investment in the province, is targeting rose geranium, chamomile, lavender, lemon balm, lemon oils which are destined fashion, medical, health, beauty and home use. Already 110 hectares are under cultivation.
The R2,3 billion Billion Group's Hemingways Super Regional Mall stretching some 70,000 m2 in the city and the R500 million Mdantsane shopping centre covering some 30,000 m2, are some of the largest private sector construction projects in the province.
The 25 hectare R2 billion Triple Point development encompassing a retail, commercial and residential precinct is also well underway.
Mthatha, which also serves as a gateway to the Wild Coast, has also seen an increase in retail and commercial developments, including the Mthatha Plaza. There are plans to build a 30 000m2 mall to boost the local economy.
Investor confidence has also been boosted with the anticipation of solid growth opportunities driven by the lucrative Coega Industrial Development Zone (IDZ) initiatives. The zone has already secured about R20,4 billion in investments.
Industrial Development Zones
The Coega IDZ's deepwater port in the Nelson Mandela Bay Metro is primed to generate R24 billion worth of investments, creating further spin-offs for retail and residential property demand in this vicinity.
The 11,500 hectare zone, has also been instrumental in the development of the R3,2 billion Port of Ngqurha, the province's third port, which is being positioned as a trans-shipment hub and is expected to be operational by 2008. Rail linkages between Coega and the port are to be built at a R500 million cost.
The East London IDZ, which is the first licensed IDZ in South Africa, has notched up 21 investors which has taken investments well over the R1 billion mark. Investors are from the agro-processing, automotive and renewable energy as well as construction. A large proportion of the investors are suppliers to the Mercedes Benz operation in East London.
Existing investors include Johnson Controls, Feltex, Feltex Caravelle, Eurofit and TI Automotive.
Amongst the latest tranche of investors is Mercedes-Benz South Africa which has acquired additional capacity by leasing a storage facility for its imported and export-bound vehicles. It also high production volumes of its C-Class units destined for the US market.
MBSA has also committed R1 billion to its new plant which produces the Mitsubishi Colt for local and export markets.
The zone has improved its approach to the development of the zone by offering a high level customization to accommodate investors' unique needs.
The 430 hectare zone targets the automotive, timber, agricultural industries as well as the province's pharmaceutical sector, which should show growth considering the increasing role of generics, particularly with antiretrovirals and a global need for these products.
Furthermore investments into the automotive industry as well as growth in sales, has supported local growth.
This includes a R12 billion contract awarded to Volkswagen SA to supply engines to the German Hanover plant.
General Motors has invested R1,5 billion into its assembly plants in Port Elizabeth where it produces the Opel Corsa, Astra, Cadet and Isuzu.
General Motors, Volkswagen SA and Mercedes Benz SA buy over R13,2 billion of components annually, 40% of which is sold locally supporting a major industry of 165 automotive component manufacturers.
In January 2008, the Ford Motor Company of Southern Africa invested more than R1,5 billion in its local operations which will be split between its vehicle assembly plant in Silverton, Pretoria, and the engine plant in Port Elizabeth.
The Eastern Cape's automotive industry is of national importance, producing approximately 40% of South African car sales and 60% of car exports by unit. When the components industry is thrown into the mix, 26% of South Africa's auto sector value added is provided by the province.
In keeping with the worldwide pressure to find additional sources of energy, the province is also looking at opportunities with wind and biofuels. A biofuels processing plant is to be the location for a biofuel processing plant. The province, and the Mzimvubu district, has being targeted for a biofuels planting project which will feed this plant.
Why the Eastern Cape?
These developments have helped improve the province's ability to attract investments by presenting an appealing proposition to investors:
- The policy framework for foreign direct investment (including economic and political stability and trade policies and agreements);
- Economic determinants (such as market mix, per capita income, cost of input costs and access to regional and global markets, raw materials and required skills);
- Business facilitation (such as social amenities and post-investment support);
Although the Eastern Cape has a small local market and a low per capita income, it offers low labour costs, good social amenities and post-investment support. The province has also begun to promote exports into neighbouring African states whose economies are experiencing substantial growth and the Middle East is also a new market the province is exploring.
Eastern Cape exporters have access to European markets because of standing trade agreements between South Africa and the European Union and also countries with which South Africa has trade agreements.
The provinces main export destinations are Europe, more specifically Germany for automotives and the USA.
Provincial Growth and Development Plan (PGDP)
The Eastern Cape government's PGDP focuses on three sectors - manufacturing, tourism and agriculture - and includes sub-sectors automotive and fabricated metal components, textiles and garments, niche horticulture and food processing.
Accelerated Shared Growth Initiative of South Africa (ASGISA)
In 2007, the provincial government launched Asgisa Eastern Cape which will manage and oversee the execution of multibillion-rand mega projects that aim to accelerate growth in the eastern part of the province.
These projects include the multibillion-rand Mzimvubu Basin Water Project which is expected to create 300 000 jobs. It is aimed at facilitating and growing investment for Asgisa in the province and to create a natural link between the booming first economy and to develop the second economy.
This project will strengthen water security and electricity supply in the province and nationally.
All these developments point to increased investor confidence in the province and a buoyant Eastern Cape economy. Investor confidence in the province has been supported by four years of excellent equity returns and GDP growth in excess of 5% and a massive property boom. More investments are expected to flow into the province as sound infrastructural growth further entrenches the Eastern Cape's value proposition as a compelling place to live, work and do business.
For more information, contact:
Eastern Cape Development Corporation
Telephone 043 704 5600
Article Tags: Eastern Cape | economic development | infrastructure | investment promotion