Saldanha Bay, A Zone Dedicated to Serving The Oil & Gas Industry in South Africa

Interview with Kaashifah Beukes, Head of Executive Stakeholder Management of Saldanha Bay Industrial Development Zone

Can you start by describing for us the vision that the landowners and industrialists behind Saldanha Bay Industrial Development Zone initially had?

The land that the zone is designated is publicly owned by the state and the vision for Saldanha is to become a world class, internationally recognized thriving industrial centre of South African marine engineering where the local economies can benefit through entering the oil and gas value chain to service the global market.

You mentioned that a key component in this was to attract oil and gas players in the fields of manufacturing and logistics to try to facilitate downstream industries. What is the total number of companies already established in the IDZ?

The IDZ was established in 2013 by our president and since then we have been in the process of construction, servicing the land we have been designated and provided with, so there are no private sector players yet investing with the IDZ. Once we finish the construction phase the land will be ready for investment. At this stage we are in negotiations with many interested investors. We’re quite positive about the interest because half of the interest is from foreign companies and half from South African companies, which is very reassuring to us and to the state because that means that there are South Africans investing in South Africa. This is quite comforting for the long term potential and sustainability of the zone.

What are the most predominant sectors they envisage to be in the services between industry and logistics? What will the split be?

Currently the majority of the interest lies in engineering, fabrication and construction of various modules and equipment for the oil and gas industry. It speaks to the manufacturing history that South Africa has. South African economy is defined by automotive manufacturing. Manufacturing that comes from downstream, from mining and various other commodities that we have, so engineering, fabrication and construction is really the core sector of interest, followed by logistics and the support services and industries to off-shore exploration and production.

The vision for Saldanha is to become a world class, internationally recognized thriving industrial centre of South African marine engineering.

So do you feel that those core interests have the most potential for being established in Saldanha?

I feel they have the most potential but certainly we aim to establish a multifaceted centre where we have all of the support industries and services in terms of class certifications, survey of vessels that come into the bay, health and safety offices and crew changes. A full spectrum service centre.
What is the comparative advantage of Saldanha Bay over other IDZs in the country?

Our core competitive advantage is that we were the first IDZ to be designated in a port and that has led to many other advantages. Firstly, particularly in oil and gas industry you need to be in the port. It’s not just back of port land and services that you require should you operate a service company or if you’re a boat builder or vessel builder; you need to be in the port. This is one of our core competitive advantages in the IDZ program. Secondly, the port of Saldanha Bay itself has natural advantages. It is the biggest and deepest port in the southern hemisphere. It can handle vessels up to a depth of 23 meters. There is a lot of green field land for development and that is the land we are now servicing so there is space for industry to grow and for the IDZ to expand as the market dictates. We are close enough to a metropolitan centre like the city of Cape Town to make it attractive to people interested to move to South Africa or to move to Saldanha Bay.

So the IDZ regime regulates the structural inducements and incentives. Why would an investor choose one of South Africas industrial development zones from an international perspective?

What you must understand is that the industrial development zone program started in the department of trade and industry some time ago. During 2007-2008 the DTI actually reviewed the efficacy of the IDZ program and since then there have been quite good reforms to the policy and a new special economic zone act is in place which indicates many more comprehensive custom and fiscal incentives that weren’t accessible before. It’s a much more comprehensive integrated system of incentives that the department of trade and industry together with the South African Revenue Service (SARS) have established to present a comprehensive suite of incentives.

Would it be a fair criticism to point out that the IDZs in South Africa have not been able to offer investors a compelling enough reason to be here?

The question is a complex one. Some of the IDZs previously might not have achieved what they set out to do but they are becoming nodes of industry over the long-run. It requires us to look at IDZs with a long-term view. These investments, these initiatives are not for the short-term but the long-term. Twenty years from now, we will all see that the IDZs really are bustling nodes of activities across our country.

Do you believe that South Africa may be missing an opportunity to develop a repair and support industry for the rigs and support ships operating out the west coast of Africa?

When we started the program in 2010 that was the incentive. When we were doing our research in understanding the feasibility and business case of oil and gas, many said that South Africa had missed the boat and 5 years later people think we are right on time. The change in global climate and environment is one that we need to be cognisant of but with our vision for the zone in Saldanha Bay it is a long-term vision. It’s for the future.
Do u believe that there is buying from the highest level of government to ensure that the plans under operations Phakisa and Khulisa are successful?

There is a lot of buying from the higher levels of government in that operation Phakisa itself is administered through the offices of the presidency. What we’ve seen is in our relationship and our work with Transnet, who is the custodian of Transnet National Ports Authority, which is the landlord of all our ports. We’ve seen quite good progress on the plans for the mega infrastructure projects that are planned for Saldanha through Phakisa and similarly with Khulisa in the province there’s good movement on the ground when it comes to challenges that the province faces.

Has the oil prices over the last year resulted in any questions being raised about the wisdom of South African aspiration to pursue an aggressive roll out of an oil services hub?

The discourse is there but what we can say quite confidently from the interest in Saldanha Bay, which has sustained itself since the volatility in the oil price, is that there is a definite interest in oil and gas and in a marine engineering centre in the port of Saldanha Bay. One cannot overlook the natural advantages that we have, and the regulatory and fiscal incentives that we have but also the position of the port and the zone at the tip of Africa is very attractive to many players. The port will also be able to catch passing trade as well as be quite accessible for those operating off the west and east African coast, due to the sheer size of the area and the good historical infrastructure that South Africa has.

So it’s strategic. In light of the ‘lower for longer’ oil price outlook is it having any impact on the current prospects for attracting investors into the industrial zone?

The price volatility is demanding companies look for cost efficiencies, companies need to become more cost efficient in their operations in this sector—that is what the oil price volatility has done. So we need to as an organization try to attract investment, we need to make it easy for them to do that business and to seek those cost efficiencies in their processes.

What are the steps that a foreign company would need to take to obtain IDZ status? Would you consider those steps overly bureaucratic at the moment? How would it actually work?

One of the good things of the special economic zones act is that it allows for better integration of such issues of start-ups and of foreign entrants into our market to engage with the department of trade and industry, the revenue service, the customs authorities through ourselves to make it easier to make it less bureaucratic to access the South African market because that is essentially what we want them to do. We have made it our mission to help facilitate and understand the processes that are applicable and facilitate any assistance interested developers may have.

Should foreign companies be overly concerned with the regulation regarding employing South Africans referring specifically to the BBBEEE scheme? Is that impacting on the development of the IPZs? Are they wary of this?

Companies are wary of this. Our aim is to assure them of a productive labour market and we do that on many fronts. We partner with many organizations, learning institutions and the community on matters of skills development. What limits and affects productivity is the shortage of skilled labour locally. Similarly we do quite a lot with it on enterprise development on supply development and we believe that once these two fundamental issues are actively addressed they temper that concern.

Do you feel that there is sufficient skills base here to build that industry?

There is historically an engineering and manufacturing skills base in South Africa. The challenge that we acknowledge is that it is not necessarily located in Saldanha. To ensure that, one needs to understand that nationally for South Africa incorporated this will be a success for the province. But for this locale we need to insure that success is felt by the people that live here because at the end of the day the project and the program is about bettering the livelihoods of Saldanha.

Is it a place that one would actually want to live?

Yes. Some of the neighbouring towns are tourists hubs, they get quite busy in our tourist seasons, you have the Lange Baan lagoon which is adjacent to the IDZ and that is a perfect spot for wind surfing and various water activities. It’s known as a place where families are welcome and tourists are welcome.

How many kilometres is it from Cape Town?

160km.

Finally how positive a factor has the weakness of the South African rand been in attracting foreign companies to the IDZ?

The weakness of the rand is attractive to foreign companies and so that is certainly stimulating their interest but that is not the only interest or only stimulant. It’s the multifaceted package that we offer that is attractive to foreign companies.

Do you have any broad message about South Africa itself? Why South Africa now?

South Africa has the historical basis of engineering and of infrastructure. You can get a part or machine to anywhere in South Africa in 24 hours and in some of our neighbouring countries in Africa that is very difficult to do. So companies that choose to locate their base of operation in South Africa are benefited by the infrastructure and logistics networks that we have across our country. Also our ports are improving their efficiencies in their operations. Transnet National Ports Authority has a program called smart ports that they are rolling out which seeks to benefit the end user. That is making a difference to how the private sector sees the ports. Also we acknowledge the challenges we are facing with regards to skills and suitably equipped competent labour where you need it. So we are working with the whole of government to address these challenges.

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