China Drive

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The massive expansion of the Richards Bay port facilities has been exercising minds recently - particularly as the project is being driven by that eastern giant, China.

The expansion plans include a R2bn investment in a ship repair facility, a R1.2bn expansion of the Richards Bay Coal Terminal (RBCT), a R1.5bn investment in a new container handling facility and an entirely new fresh produce terminal. In addition, R188m has also been earmarked to expand the liquid bulk terminal.

There have also been reports in the South African press that Drako Oil & Gas is prepared to invest R26bn more in a new oil refinery at Richards Bay.

This expansion is inevitably fuelling considerable activity elsewhere too. Mhalathuze municipality, which encompasses the Richards Bay area, is negotiating 21 projects for the area's Industrial Development Zone (IDZ). These are worth some R6.3bn and should create 1300 jobs. Overall presently, 62 projects, worth a total R16bn, are in various stages of planning. According to the mayor's office, they would together create an estimated 4600 jobs.

Much of this will be owed to the expanding role of China in the trade patterns of both South Africa, as well as the continent as a whole.

At the moment, Pretoria runs a substantial trade deficit with Beijing, which totalled R16.41bn in 2004. Yet South Africa is increasingly viewed by the Chinese as a good source for raw materials such as coal, wood chips, aluminium and other minerals. South Africa also views China as a potential export market for more specialised products, including rail technology.

Elsewhere, largely due to China's growing appetite for raw materials, Africa as a whole should experience growth of 5.8% this year, the highest for 30 years, according to the IMF.

According to research carried out by Portcon International, the National Ports Authority's (NPA's) consulting arm, a container facility at Richards Bay would initially attract 15,000 twenty-foot equivalent units (teus) per year, which would rise to 60,000 teus in the medium term. Over time, it is hoped that the expanded capacity will alleviate some of the congestion at the Port of Durban.

The RBCT is one of the world's largest coal export terminals, handling 68m tonnes a year. Following completion of the new coal berth, the terminal will expand its capacity from 72m tonnes to 86m tonnes, making it the largest coal terminal in the world.

Black Economic Empowerment (BEE) is also boosting the tonnage of coal headed for the ports. Under the "use it or loose it" principle, mining companies that have no plans to develop deposits are forced to sell to black investors. This has led some analysts to predict that export demand from BEE mines could rise to as much as 20m tonnes by 2008, outstripping planned capacity expansion at the ports.

The port's R2bn ship repair facility will be operational in 2009 and the NPA is currently in negotiations for a lease agreement with the Imbani consortium. Imbani and its partners, China Harbour Construction and Wenchong Shipyards, were named by the NPA as the preferred bidders to build and operate the dry dock in February 2004.

Under the proposal, Imbani will employ South Africans in the dry dock, while training will be provided by the Chinese partners.

However, importation of labour, always a contentious issue in South Africa, has brought considerable opposition from the unions.

Yet President Thabo Mbeki stated in a recent speech that if South Africa is to achieve 6% growth the country will need to import people with specialist skills.

Tito Mboweni, the Reserve Bank governor, also highlighted the challenges facing South Africa in a recent speech to the third national congress of the Federation of Unions of South Africa (Fedusa), stating that the country needs to maintain and upgrade its infrastructure for economic growth.

"Without a well-considered infrastructure we are going to be found wanting," the governor said. "It is not because the money is not there; it is the implementation, because we are highly unskilled."

For the moment, the government's widely praised track record on creating a favourable environment for foreign direct investment, increasing exports and cutting unemployment has bought them considerable leverage. They will be using this to the full in overcoming any objections to the port's expansion.

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