Catalyst to economic growth in the Northern Cape for South Africa

Building a new industrial city in the Northern Cape as part of the Northern Cape Industrial Corridor: Namakwa SEZ in Aggenys where you will live, work and play.

Namakwa Special Economic Zone (SEZ)

The Northern Cape Department of Economic Development and Tourism, in conjunction with the national Department of Trade and Industry (the dti), is in the process of finalising submission documents for the declaration of a Namakwa Special Economic Zone.

The planned Namakwa Special Economic Zone to be established in the Aggeneys region of the Namakwa District of the Northern Cape Province will have a transformative effect on the local, regional, provincial and national economies.

The anchor investor of the SEZ will be Vedanta Zinc International, which is already running the Gamsberg Zinc Mine and intends to build a smelter.

The SEZ would advance the aims of developing infrastructure, accelerating skills development and empowerment, and consolidating economic development in the Northern Cape.

Executive Summary

At the official launch of the Vedanta Gamsberg Zinc Mine, President Cyril Ramaphosa suggested that the mine complex could be the core and catalyst for economic development for the region through the establishment of a SEZ. He specifically called for more beneficiation of South Africa’s minerals to take place in South Africa.

Vedanta Zinc International started exporting product from the mine in 2018 and has so far invested about $400-million in the project. The company is considering the construction of a smelter; together, these facilities would form the base of the SEZ.

Investors in related downstream activities such as fertiliser, explosives, paints and sulphuric acid would use product from the mine and the smelter. Further opportunities in renewable energy, transportation, storage and construction would naturally flow from the primary activities.

All investors would benefit from the special benefits that accrue to investors in SEZs (outlined below). The plan for the Namakwa SEZ complies with and is aligned with the Provincial Growth and Development Strategy of the Province, the Northern Cape Spatial Development Framework and the National Spatial Development Framework. Furthermore, the plan supports the concept of development corridors and local economic development.

Location

Aggeneys is in the Khai-Ma Local Municipality within the Namakwa District Municipality of the Northern Cape Province. Aggeneys is 66 km from Pofadder (headquarters of the local municipality) and 110 km from Springbok, where the office of the district municipality is located. All three towns are on the N14, the national road that links Springbok with Pretoria.

The proposed Namakwa SEZ is strategically located along a bulk commodity corridor, which runs from a planned port on the Atlantic coast (the Boegoebaai Deep Port Harbour) through Aggeneys to the large urban centre of Upington and beyond to the concentrations of iron ore and manganese ore at Sishen and Kathu. Upington Airport is capable of handling large aircraft.

The railway line that currently transports ore from Sishen to the coast at Saldanha is one of the engineering marvels of the world, moving 40-million tons every year along an 861 km route.

Anchor investment

The value proposition of the Namakwa SEZ is based on the existence of the Vedanta Gamsberg Zinc Mine and the proposed building of a smelter by Vedanta Zinc International. These would be the anchor tenants of the SEZ.

In 2010 Vedanta Resources acquired Black Mountain Mining (Pty) Ltd from Anglo American. Black Mountain Mining (Pty) Ltd, part of Vedanta Zinc International, owns and operates the Gamsberg Zinc Mine. By 2014 environmental authorisation had been granted to Vedanta, together with a waste management and water-use licence. Development work began in June 2016 and the mine is currently mining four-million tons per annum and producing up to 250 000/tpa of zinc metal in concentrate for export.

The mine’s approved capacity to produce zinc and lead concentrate is 10-million/tpa. The planned increase in volumes will lead to the concentrator plant producing 1.1-million/tpa of zinc and lead concentrate. The open-cast mine and concentrator plant are being developed in phases.

The construction of the concentrator plant began in 2017 with the official opening in February 2019. Phase 1 is complete, and planning work for the commencement of 
Phase 2 is currently underway.

Vedanta Zinc International started exporting product from the mine in 2018 and has so far invested about $400-million in the project. (Photo: Kevin Wright/Vedanta Zinc International)

Smelter

It is proposed that a smelter be built to treat zinc concentrate produced at Gamsberg. The zinc concentrate produced at the existing concentrator plant will be treated in the smelter using the conventional roast-leach-electrowinning (R-L-E) process.

The full process would involve the treatment of 680 000/tpa of zinc concentrate to produce 300 000/tpa of high-grade zinc ingots for export. As a by-product 450 000/tpa of 98.5% pure sulphuric acid will be produced for both export and consumption within South Africa*.

This information is taken from the Draft Scoping Report, Non-Technical Summary, prepared by SLR Consulting, January 2020.

Various types of infrastructure will be needed to support the smelter.
These include:
  • Secured landfill facility: 21 ha in extent and situated 1 km away from the smelter, connected by a paved road.
  • New water pipeline: Approximately 7 km water pipeline to connect the Horseshoe reservoir with the smelter complex.
  • Business partner camp: 12 ha for accommodation during the construction period.
  • Laydown area: 15 ha for use during the construction period.
  • Upgrade of transmission line: upgrade 66 kV transmission line to 132 kV transmission line within the existing servitude and associated upgrades to the Eskom substation at Aggeneys.

In 2018 alone, Vedanta spent R44-million on skills development, health, enterprise development and municipal infrastructure support, with a further R77.5-million spent with local businesses. In the period 2014 – 2019, Vedanta invested over R77-million on a range of CSR programs, and over R88-million on various training initiatives.

Gamsberg is considered one of the most digitally advanced mines in South Africa, which will give impetus to the provincial ICT sector.

Downstream investment

Non-ferrous metals such as zinc have characteristics that make them immensely useful in a wide range of downstream applications. Resistance to corrosion and their non-magnetic qualities are among the reasons for the wide range of uses to which they can be put. It is envisaged that investors wanting to take advantage of the by-products of the mine and the smelter will be attracted to the Namakwa SEZ.

Various wastes and by-products will be generated by the smelter that could be useful to investors. Waste includes: Iron cake stabilized (dry), Jarofix; effluent treatment plant cake (dry); evaporation pond salts (dry); and cellhouse sludge (dry).

By-products include: manganese cake (dry); Cu-Cd cement (dry); Co-Ni cement (dry); and sulphuric acid (wet).

Investors in this category include businesses in the follow sectors:
  • Sulphuric acid (including pharmaceutical, automotive batteries and paper bleaching)
  • Fertiliser
  • Explosives
  • Paints

There is another category of potential investors in the SEZ who will provide ancillary services to the companies using the by-products of the mine and smelter complex. These include:

  • Construction
  • Engineering
  • Transport
  • Storage
  • Housing

A third category of investor will provide power, over and above what is available from the national grid. All of the enterprises within the SEZ will require power, so the opportunity exists for independent power producers to propose alternative energy sources.

The Northern Cape is already the country’s leading province with regard to solar power, and there are also a number of wind-power projects operating throughout the province. A total of 18 investments were made into the province between January 2011 and March 2016. Companies from a wide array of countries were among the successful investors including Enel Green Power (Italy), ACWA Power International (Saudi Arabia), Mainstream Renewable Power (Ireland) and Accione (Spain).

The tower at Khi Solar One near Upington is one of South Africa’s tallest structures. (Photo: Abengoa Solar).

Benefits of SEZ investment

The planned Namakwa SEZ reflects a trend in South African industrial planning. National government is supporting the idea of creating industrial parks and SEZs as a means to cluster together businesses that can benefit from proximity to one another and as a way to boost local manufacturing through incentives and tax rebates. The policy aims to attract new skills and develop new industries.

SEZs are created in terms of an act of the national parliament, the Special Economic Zones Act of 2014 (Act 16 of 2014). The act defines an SEZ as “geographically designated areas of the country that are set aside for specifically targeted economic activities and supported through special arrangements and systems that are often different from those that apply to the rest of the country”.

Lower corporate tax rates and duty-free imports are among the advantages that accrue to investors.

Key goals behind the establishment of SEZs are:
  • To encourage industries to develop in clusters, leading to economies of scale, skills-sharing and easier access by suppliers
  • To create industrial infrastructure to promote investment
  • To promote cooperation between the public and private sectors
  • To use the zones as a launching pad for other developments.

Apart from attracting foreign direct investment and boosting employment, SEZs can also play a role in adding new sectors or sub-sectors to an economy.

Various industrial parks (private or public) are pursuing similar goals. The emphasis in most of these initiatives is on beneficiation, mainly of minerals but also of agricultural products. South Africa’s most recent Industrial Policy Action Plan has a manufacturing focus, so beneficiation supports the diversification of the economy and strengthens the country’s ability to make things.

Incentives

The current suite of incentives consists of tax incentives, administered by SARS; grants, administered by the DTIC; and various incentives offered by the municipalities where the SEZ is located.

The SARS-administered tax incentives are as follows:
  • Corporate Income Tax Incentive: Businesses located in a SEZ may be eligible for a reduced rate of 15 percent.
  • Building Allowance: Businesses and operators may be eligible for the building allowance which allows companies to reduce their taxable income linked to expenditure incurred on the cost of any new or unused building or improvement. This allowance may be claimed at a rate of 10% per annum.
  • Employment Tax Incentive: Allows employers hiring people, regardless of age, to reduce the amount of employees’ tax paid on behalf of their employees whilst leaving the wage received by the employee unaffected. It allows employers hiring people to reduce the amount of employees’ tax paid by the employer. This creates a cost-sharing mechanism between employers and government.
  • Customs and Excise Incentive: Goods imported into a customs-controlled area (CCA) situated in a SEZ are relieved from applicable import customs, excise duties and economic restrictions whilst stored and undergoing manufacturing (which includes processing, cleaning and repair) within the CCA. Goods manufactured in the CCA and subsequently supplied to the local domestic market are subject to the payment of the import customs and excise duties that were relieved at time of importation on the imported goods (raw materials). The liability for customs and excise duties, which enjoyed relief on imported goods used in manufacturing in the CCA, cease upon subsequent export.
  • Value-Added Tax Incentive: Goods and services that are acquired from the domestic market are charged with VAT at 0% and the import of goods is exempt from VAT. This applies only in the SEZs CCA.

Versatile zinc offers great investment opportunities

Zinc is an incredibly versatile and useful product so there are many investment opportunities related to Gamsberg and the proposed smelter within the Namakwa SEZ.

Uses of zinc

Coats and protects steel from corrosion, temperature and oxygen. Used in the automotive parts industry for door-lock housing, pawls, retractor gears and pulleys in seatbelt systems, camshafts and sensor components. Zinc oxide is widely used in the manufacture of several products such as paints, rubber, cosmetics, pharmaceuticals, plastics, inks, soaps, batteries, textiles and electrical equipment.

Identified investment opportunities

Fertiliser phosphates

Sulphuric acid as by-product could allow for the establishment of a sulphuric acid plant to support and stimulate agriculture in the province.

Zinc-coated steel

The availability of locally-produced zinc concentrate creates production opportunities at steel plants throughout the country.

Battery storage

Zinc is a cheaper product than lithium for use in new-technology batteries. New technology is creating opportunities for zinc-bromide redox flow batteries.

Copper smelter project

Potential for further exploration and mining in the region, which the smelter could stimulate.


Enquiries:

Interested parties, please contact the Northern Cape Department of Economic Development and Tourism:

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