Musina SEZ: Pre-feasibility Study Presentation

25 June 2014

Musina Pre-feasibility

Musina

Demographic Orientation

Musina

Policy Review

• The study reviewed the following: – National policies and strategies

– Provincial policies and strategies

– Local policies and strategies

• These were reviewed against the following criteria: – Policy

– Aim

– Incentives

– Drivers

– Impact on SEZ

Sector Analysis

Agro-processing – Value Chain

Sector Analysis

Fresh produce - Market The demand for fresh produce

in South Africa is estimated at

R12 billion per annum. A large

percentage of the trade in fresh

produce is done through the 18

Fresh Produce Markets in the

country.

Fresh Produce Market Value R Volume

Johannesburg 3 037 276 224.94 1 314 489.18

Tshwane 1 454 351 983.06 668 845.95

Cape Town 1 126 228 885.39 517 607.69

Durban 806 279 080.44 383 320.75

Springs 372 502 302.71 200 171.49

Pietermaritzburg 298 810 047.52 152 340.44

Bloemfontein 264 306 165.41 131 383.24

East London 255 110 566.58 124 633.93

Klerksdorp 246 088 066.69 140 210.68

Port Elizabeth 238 922 137.54 118 957.01

Welkom 151 553 618.25 80 464.08

Vereeniging 146 247 890.46 99 164.42

Kimberley 73 995 783.72 40 203.67

Uitenhage 40 964 915.98 25 556.04

Witbank 39 002 319.35 22 371.46

Umtata 31 968 066.86 16 893.14

George 18 923 568.90 10 082.83

Nelspruit 17 602 073.72 10 098.44

Polokwane (closed) -

Total R8 620 133 697.53 4 056 794.44 ton

Sector Analysis

Agro-processing – Opportunities

Exports

Commodity 1994 2000 2005 2012

Animal Products -5.0 -9.0 -11.9 24.9

Vegetable Products 79.3 -13.1 83.9 19.5

Animal or Vegetable Fats

and Oils

-31.0 11.8 2.9 23.1

Prepared Foodstuffs,

beverages en tobacco

29.6 28.0 -4.1 17.2

The following table reflects the year-on-year growth in exports of various

commodities to selected SADC countries and includes exports to

countries such as DRC, Zimbabwe, Mozambique and Angola.

Sector Analysis

Agro-processing – Opportunities

Special Note:

Primary Production in the Musina Area will not support Agro-

Processing in the short to medium term and an integration of

fresh produce markets with the JFPM is essential to

establishment of any such trade hubs.

Sector Analysis

Logistics – Value Chain

Sector Analysis

Logistics - Market

• Opportunity: – Dar es Salaam Corridor - key road and rail corridor to Zimbabwe,

Zambia, DRC Malawi and Tanzania:

– Corridor catchment economic characteristics:

• Population of 110 million;

• GDP of US$ 40 billion; and

• Expected GDP growth 6-8%.

– Transport growth:

• Plans to expand to 1 million TEU capacity;

• Sector growth is projected at 8-10%; and

• Opportunity to intermodal hubs.

– The market growth clearly supports the growth and development of

adequate border facilities to support for transport operators at

Beitbridge/Musina

Sector Analysis

Logistics - Market Opportunity:

South African logistic companies

operating in South Africa are

expanding into Africa.

Countries of

Operation Unitrans Barloworld Eqstra

Value

Group

Super

Group

Cargo

Carriers Trencor Grindrod Bidfreight Imperial

Angola

Botswana

DRC

Lesotho

Mozambique

South Africa

Swaziland

Zimbabwe

Sector Analysis

Logistics – Opportunities

• The proximity of the proposed Musina SEZ to the border

post of Beitbridge, offers opportunities for a number trade,

logistic and border related services and facilities, such as: – Bonded Warehouses – rail and road and inter model

– Vehicle distribution yard and centre

– Distribution centre

– Container Yards

– Truck stops with maintenance and repair & Petrol depot

Sector Analysis

Logistics – Opportunities

• Key drivers – The Musina Logistic SEZ is inland and this drives a different set of

needs encapsulated in the “dry port logistic” concept. This concept, as

well as the following competitive and comparative advantages supports

the establishment of the above opportunities within the SEZ: • Geographic Location of Musina relative to SADC;

• Gateway into Africa;

• Low cost infrastructure;

• Access to available labour;

• Access to Networks of road and rail infrastructure:

• Trucks and strong International logistics companies already use the route

• Volume logistic and people movement through border;

• Growth of SADC and rest of Africa; and

• Increase of Vehicle sales and motor Industry related activities in Africa.

Sector Analysis

Logistics – Opportunities

Key drivers

Opportunity Driver Investment

Vehicle handling area Export via SA to Africa TBA

Bonded warehouse Import and export ease to do

business

TBA

Consolidated

Warehouse

Consolidation need for the

optimization of the Supply chain to

Africa

TBA

Container yard Container management for Goods

consolidation

TBA

Truck stop Driver rest rooms , canteen , fuel ,

maintenance , weighbridge

TBA

Sector Analysis

Logistics - Recommendations

• It is recommended for the Musina SEZ to have a sector focus

on the logistics. The main aim of this sector should be: – To improve the connection between the Gauteng, Limpopo province

and SADC;

– To reduce the total cost of logistics;

• To increase the efficiency of the logistics system;

• To increase economic activity in the Musina in particular and

Limpopo in general;

• To improve supply chain interactions. Musina will become a

designated area in which all logistics-related activities are brought

together to promote seamless supply chains, i.e. a one-stop

logistics shop; and

• Businesses tend to gravitate to these areas, thus, travel cost and

congestion should be reduced.

Petro Chemical Sector Analysis

• The study group evaluated the study that was conducted

and plans that were developed for the Limpopo Eco

Industrial Park (LEIP)

• The plans for the development of the LEIP have reportedly

being included in the Musina Integrated Development Plan

(IDP) and the project carries the full support of the

Provincial Government

• The LEIP has been used as the basis for the sector review

that was conducted for the potential development of the

Petro Chemical sector in the Musina SEZ

Petro Chemical Sector Analysis – High

Potential Areas

• The following high potential opportunities have been

identified for the Petro Chemical Sector and some of the

feasibility studies have been completed already as

highlighted below: – Coke Plant + power generation - US$850 million

– Coal-to-Liquids Plant - US$1.4 billion

– Methanol Plant - US$900 million

– Synthetic Bitumen Plant - US$550 million

– Small Solar Plant - US$15 million

– Plasma Waste Gasification Plant - US$46 million

– Waste Water Treatment Plant - US$20 million

Sector Analysis

Petro Chemical Sector Analysis –

Opportunities • While the technological viability of the proposed processes

appears sound, the economic viability of the project

depends largely on the quality and price of coal sourced

from the area, the price of crude oil and by-products and

the access to markets (transport costs) that will enable it to

recover the exceptional high capital cost of constructing the

proposed plant and clean up the high volume of

greenhouse gas emissions - i.e. carbon dioxide.

• This is a long term opportunity that could be incorporated in

the SEZ, but the SEZ should not be dependant upon the

establishment of this sector.

REGIONAL TRANSPORT

North- South Corridor

REGIONAL TRANSPORT

• According to the Limpopo Province Freight Databank, an average of

292 freight trucks crosses the Beitbridge Border crossing per day.

• An estimated 2.52 million tons of road freight cargo is transported

through this border post annually, with the tonnage split almost

equally northbound and southbound.

• The road freight cargo is varied, with 40% of the vehicles being

tarpaulin covered and only 6% carrying containers.

• In conclusion, although the road network links to Musina faces

challenges with planned maintenance and ongoing upgrades, no

immediate threat by the existing road infrastructure is foreseen for

the establishment of the Musina SEZ.

REGIONAL TRANSPORT

• Rail Network – The town of Musina is located on an existing main railway line.

Musina is located on a mainline that stretches 579 km from Pretoria

to Beitbridge, (via Musina.)

– Thus also linking Musina to City Deep in Johannesburg – which in

turn is linked to all the South African Ports.

– The mainline also extends across the border linking to various other

Sub-Saharan African countries, as the line links with two continuous

rail routes within present day Zimbabwe.

REGIONAL TRANSPORT

– Rail cargoes total

approximately 1,26 million

tons per annum compared to

road freight of 2.52 million

tons per annum.

– Typically rail freight cargo

comprises of the following

main commodities:

• Petroleum – 150,000 tons,

• Containers – 150,0000

tons, and

• Coal products – 60,000

tons.

REGIONAL TRANSPORT

– In respect of rail cargo clearing, international containers and break-

bulk cargo to and from the ports of South Africa and Mozambique

travel in-bond through the border. However, visual checks take

place by railway officials at Musina, in respect of container seals

and break-bulk cargo tarping. South African exports by rail are

bonded at City Deep and as mentioned, but checked for integrity at

Musina.

REGIONAL TRANSPORT

– According to the Freight Transport Implementation Strategy of the

Department of Transport and Roads, the following key challenges

were identified for rail in the Limpopo Province:

• Underutilization of the rail infrastructure

• Insufficient rolling stock allocation to mainline and branches

• Lack of coordinated planning between Transnet (Transnet

Freight Rail), Provincial Government and Industry

• Freight transport mainly consists of road and rail, with limited

intermodal freight

• Loss of Rail Market Share to road freight results in lack of

competitiveness within the freight transport sector – detrimental

to the consumer or prospecting investors

• The reduction in the railway line capacity and operational

efficiency means the railways become unattractive for freight

transport customers or prospecting investors

REGIONAL TRANSPORT

• However, the private sector had presented to the public sector a

proposed Gateway City project initiative in the form of a one-stop shop

solution to counter the current logistical challenges and to incorporate

the Musina SEZ .

• The proposed Gateway City project is essentially a private sector led

initiative to build a logistics hub and multi-model facility adjacent to the

Beitbridge Border Crossing.

• The land is ideally located and is owned by the Lee Family.

• The land includes the farms of Templehof, Munnichhausen and some of

the land on the farm located on the east side of the N1, as per the

highlighted demarcated land illustrated in the slide to follow:

REGIONAL TRANSPORT

• Approximately 4900ha of land which and

have started the restructuring process of

placing parcel of land into different entities.

• The Lee family is prepared to donate their

land to the Limpopo Government for the

following: – Expansion for Customs, SARS and the Border

Control Operational Coordinating Committee

(BCOCC)

– Inland Port

– Roads and infrastructure

REGIONAL TRANSPORT

• The Lee family proposed that

the Gateway Logistics Hub be

located on 100ha of land that

already have been

appropriately zoned and

recently apparently been

declared as the “Township of

Beitbridge.” The Lee family

have already introduced a

Logistics Hub Master Plan

which was presented and

welcomed by; SANRAL, SARS,

BCOCC, Customs and the

Department of Public Works.

REGIONAL TRANSPORT

• The Lee’s family’s proposal also

correlates with Transnet’s long-

term planning to have a

Multipurpose Terminal in the

same geographic area.

• Transnet’s proposed sites

(“Proposed Development Site I”

and “Proposed Development Site

II”) are highlighted in this image,

which is currently owned by the

Lee Family

Musina

Availability of Land

• Two possible sites have been identified for the Musina

SEZ.

• Due to the various sectors that this SEZ will service, both

sites might have to be developed.

• The difference in industries also might require that the site

not be co-located.

• For the purpose of the report the sites were called the

Limpopo Eco-industrial Park (LEIP) site and the Lee Family

land.

Musina

Availability of Land

Environment and

Sustainability

General context

• 2 proposed sites near Musina town,

±2km apart

• Both bordering Limpopo River on

northern side

• Both lie along the N1, leading to the

South African border with Zimbabwe

• Sites within and close to Marelani and

Musina Nature Reserves, respectively

Environmental Status Quo

• Land cover – Both sites predominantly

natural

• Threatened Ecosystems – None have been identified

within or in close proximity to

either site

Environment and

Sustainability

Summary

• The pre-feasibility study has proven that significant

opportunity for the establishment of a SEZ exists around

the logistics sector.

• The agriculture and petro-chemicals sectors also indicated

opportunity, but only in the medium to longer term.

• The Musina area is ideally situated on the North-South

Corridor, which is the gateway to the SADC markets.

• If a basic foundation of hard and soft infrastructure and an

effective support system can be established upon which the

key drivers or catalytic projects can build, the Musina SEZ

can become a reality.

Next Steps

• Approval of the pre-feasibility report.

• Confirmation of the land that we should focus on for the

remainder of the Feasibility Study process.

• The project team to continue with feasibility study and

business plan, whilst aligning with the role of the Limpopo

Project team vested in LEDA.

Contact details

Mott MacDonald PDNA 25 Scott Street, Waverly, 2000 PO Box 7707, Johannesburg, 2002

James Nelson JC Greyling

Project Director Project Manager

Telephone: +27 11 566 8367 +27 11 566 8300

Facsimile: +27 86 600 7699 +27 86 600 7699

Mobile: +27 76 580 1500 +27 83 271 2358

E-mail: James.Nelson@mottmac.com

jc.greyling@mottmac.com