THE INDUSTRIAL DEVELOPMENT Corporation of South Africa (IDC) has approved a 12.5 per cent conditional equity participation in the R16 billion (USD 2,2 billion) Coega Aluminium smelter project, led by French company Aluminium Pechiney. A statement from the IDC board says this decision comes after an extensive due diligence process with the assistance of HSBC Investment Services (Africa) and Hatch (Africa) as financial and technical advisors respectively. The smelter, to be located in the Coega Industrial Development Zone near Port Elizabeth, is expected to provide substantial benefits to the Eastern Cape and the South African economy as a whole. R3,5 billion will be spent on locally manufactured capital good and services, up to 6 000 jobs will be created at the peak of the construction period, and thousands more through linkages in down-stream activities in the regional economy. Export earnings are expected to be around R5,6 billion per annum when the smelter is fully operational, according to IDC executive vice president marketing and corporate affairs, Neo Sowazi.. “The IDC has a very good track record as a stimulant to regional economic activity, especially in the aluminium industry, having been involved from 1965 in the Alusaf (Bayside) and later Hillside smelters,” says the IDC chief executive officer Khaya Ngqula. “The Bayside and Hillside smelters played a major role in attracting engineering and other industries to Richards Bay while also stimulating port development in the area. Our recent and very successful aluminium project is Mozal in Mozambique. All three smelters have played major catalytic roles in stimulating local economic activity and we expect similar results from this project in the Eastern Cape.” The Board approval hinges on certain assurances and conditions, such as: Adequate returns on investment; Certain technology guarantees from the technology providers Aluminium Pechiney; Full subscription to the equity requirements and the ability of all shareholders to adequately meet their obligations to a project of this magnitude; Broad- based empowerment including employee participation, and Acceptable electricity and alumina supply agreements. Sowazi says a hostile takeover bid of Pechiney by the Canadian Alcan Corporation “whilst not directly influencing the decision, is being closely monitored at this stage”.