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Musina-Makhado Energy And Metallurgy Special Economic Zone -

MUSINA-MAKHADO ENERGY AND METALLURGY SPECIAL ECONOMIC ZONE SOCIO-ECONOMIC IMPACT ASSESSMENT REPORT June 2021

ENQUIRIES: PREPARED FOR:

PREPARED BY: Dr. Hein du Toit +27 12 460 7009 +27 12 346 5883 +27 82 8988 667 hein@demacon.co.za 1 www.demacon.co.za

Musina-Makhado Energy And Metallurgy Special Economic Zone – May 2021

DEMACON is a member of

SOUTH AFRICAN PROPERTY OWNERS ASSOCIATION

SOUTH AFRICAN COUNCIL OF SHOPPING CENTRES

(SAPOA)

(SACSC)

The information contained in this report has been compiled with the utmost care and accuracy within the parameters specified in this document. Any decision based on the contents of this report is, however, the sole responsibility of the decision maker.

Musina-Makhado Energy And Metallurgy Special Economic Zone – May 2021

SPECIALIST: DR HEIN DU TOIT Socio-Economic Assessment Specialist Name:

Dr Hein du Toit

Date of Birth:

12 February 1972

Profession:

Development Economist and Market Analyst

Years of Experience:

26 years

Education: • • • •

University of Pretoria (Cum Laude), 1991 – 1994 BTRP University of Pretoria (Cum Laude), 1999 – 2002 MSc (Real Estate) University of Pretoria in association with SAPOA, 2005 (Cum Laude) Certificate in Shopping Centre Management (CSCM) University of Pretoria (2018) PhD (Real Estate)

organisations, including the SA Property Owners Association (SAPOA), the SA Council of Shopping Centres (SACSC), the International Council of Shopping Centres (ICSC), SA Planning Institution (SAPI) and the South African Research and Innovation Management Association (SARIMA). He has been extensively involved in real estate market studies both locally and beyond SA borders including Angola, Botswana, Burundi, Central African Republic, Ghana, Mozambique, Namibia, People’s Republic of China, Swaziland, The Gambia and Zambia. His fields of expertise include, inter alia, real estate market studies, urban and rural economics, as well as economic and fiscal impact assessments. Hein regularly consults to SA’s leading commercial banks, listed funds, private funds, investors and developers, advocates’ chambers, attorneys, economic development agencies, all tiers of government (national, provincial, metropolitan/local) as well as parastatals, etc. Hein is part-time lecturer and guest lecturer for Bachelor and Master degree students. Hein periodically acts as external examiner and study leader for post graduate students.

Dr Hein du Toit. Hein du Toit is the Managing Director and founding member of DEMACON Market Studies. Hein is a specialist development economist and expert real estate analyst. He obtained a degree in Town and Regional Planning (Cum Laude) at the University of Pretoria in 1994 and a Masters Degree (MSc) in real estate market studies in 2002 (Cum Laude). He has completed specialist courses in, inter alia, Industrial Cluster Development for Cluster Practitioners (1999) and Shopping Centre Management – the Certificate in Shopping Centre Management (CSCM) in 2005 (Cum Laude). Hein completed his PhD in real estate market analytical techniques in 2018 and was awarded Academic Honorary colours by the University of Pretoria in 2002 and in 2018. His research has been published in, inter alia, the South African Journal of Economic and Management Sciences as well as the international Journal of Business and Retail Management Research. Hein was invited to read a paper on his research at the International Real Estate Conference in Brisbane in January 2003. He has also been invited as presenter to the South African Council of Shopping Centres’ Research Conference. Hein has more than 26 years field related experience. He has over the years been affiliated with various professional bodies and

Musina-Makhado Energy And Metallurgy Special Economic Zone – May 2021

SPECIALIST: J DU PLESSIS Socio-Economic Assessment Specialist Name:

Jean-Pierre du Plessis

Date of Birth:

03 May 1986

Profession:

GIS Specialist and Market Analyst

Years of Experience:

11 years

Education: • • •

University of Pretoria (2005 – 2008) - Bachelors Degree – Town and Regional planning ESRI South Africa (2014) - SAQA Accredited ArcGIS Basic Course: NQF 5 and 6 ESRI South Africa (2014) - SAQA Accredited ARCGIS Standard Course: NQF 4 and 6

Jean-Pierre du Plessis joined Demacon Market Studies in 2016. Jean-Pierre obtained his Baccalaureus Degree in Town and Regional Planning (including economics, statistics & sociology) from the University of Pretoria in 2008. In Jean-Pierre’s second year of study he was inducted into the Golden Key International Honour Society for excellence in his chosen field of study. The Town Planning course taught Jean-Pierre skills in verbal and graphic representation, strategic knowledge and approaches to urban and rural planning and skills pertaining to data gathering, capturing and analysis. Jean-Pierre is now furthering his career on a full-time basis at Demacon Market Studies. In the years following the completion of his degree, JeanPierre has been part of various studies and has gained excellent skills and expertise in the field of Geographic Information Systems (GIS). He has also recently completed multiple SAQA Accredited ArcGIS courses with Esri South Africa. He has ±12 years of field related experience. In 2013, Jean-Pierre registered as a Professional Planner (PR. PLN 1/1768/2013) with the South African Council for Planners (SACPLAN)

Musina-Makhado Energy And Metallurgy Special Economic Zone – May 2021

NEMA APPENDIX 6: SPECIALIST REPORTS NEMA Requirement

Addressed

(1) A specialist report prepared in terms of these Regulations must contain— (a) details of— (i) the specialist who prepared the report; and (ii) the expertise of that specialist to compile a specialist report including a curriculum vitae;

Page ii

(b) a declaration that the specialist is independent in a form as may be specified by the competent authority;

Available upon request

Chapter 1

(cA) an indication of the quality and age of base data used for the specialist report;

All data used reference. Bibliography contained in Annexure A

(cB) a description of existing impacts on the site, cumulative impacts of the proposed development and levels of acceptable change;

Chapter 7

(d) the duration, date and season of the site investigation and the relevance of the season to the outcome of the assessment;

July 2019 Chapter 1 – Overall methodology

(e) a description of the methodology adopted in preparing the report or carrying out the specialised process inclusive of equipment and modelling used;

Chapter 5 – Competitive and Comparative Advantage Chapter 7 – Quantitative and Qualitative Analysis

(f) details of an assessment of the specific identified sensitivity of the site related to the proposed activity or activities and its associated structures and infrastructure, inclusive of a site plan identifying site alternatives;

Chapter 7

(g) an identification of any areas to be avoided, including buffers;

N/A

iii

Musina-Makhado Energy And Metallurgy Special Economic Zone – May 2021

NEMA Requirement

Addressed Chapter 1 – Locality of the project Chapter 5 – MMSEZ in relation to: • economic output • employment

(h) a map superimposing the activity including the associated structures and infrastructure on the environmental sensitivities of the site including areas to be avoided, including buffers;

Chapter 6 – MMSEZ in relation to: • population distribution • population growth • employment • household income • LSM • Poverty levels Chapter 7 – MMSEZ in relation to tourism facilities

(i) a description of any assumptions made and any uncertainties or gaps in knowledge;

Chapter 7 Chapter 2 - Context of the MMSEZ development Chapter 3 - Perspective on future development as outlined by SDF’s, strategic planning documents and prevailing property trends Chapter 4 - Prospects of industries targeted by the MMSEZ

(j) a description of the findings and potential implications of such findings on the impact of the proposed activity or activities;

Chapter 5 - Economic context of communities hosting the MMSEZ Chapter 6 - Socio-Economic context of communities hosting the MMSEZ Chapter 7 - Outcome of the quantitative and qualitative impact assessment Chapter 8 - Conclusions

(k) any mitigation measures for inclusion in the EMPr;

Chapter 7

Musina-Makhado Energy And Metallurgy Special Economic Zone – May 2021

NEMA Requirement

Addressed

(l) any conditions for inclusion in the environmental authorisation;

Chapter 7

(m) any monitoring requirements for inclusion in the EMPr or environmental authorisation;

Chapter 7

(n) a reasoned opinion - whether the proposed activity, activities or portions thereof should be authorised;

Chapter 8

(iA) regarding the acceptability of the proposed activity or activities; and

Chapter 8

(ii) if the opinion is that the proposed activity, activities or portions thereof should be authorised, any avoidance, management and mitigation measures that should be included in the EMPr, and where applicable, the closure plan;

Chapter 8

(o) a description of any consultation process that was undertaken during the course of preparing the specialist report;

Chapter 7

(p) a summary and copies of any comments received during any consultation process and where applicable all responses thereto; and

Chapter 8

(q) any other information requested by the competent authority.

N/A

(2) Where a government notice by the Minister provides for any protocol or minimum information requirement to be applied to a specialist report, the requirements as indicated in such notice will apply

N/A

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

EXECUTIVE SUMMARY DEMACON Market Studies were requested by the Limpopo Economic Development Agency (LEDA) to compile a socio-economic impact assessment as part of the Scoping and Environmental Impact Reporting process for the Musina-Makhado Energy and Metallurgy Special Economic Zone (MMEMSEZ). The proposed MMEMSEZ is located across the shared border between the Musina and Makhado Local Municipalities which fall under the Vhembe District Municipality in the Limpopo Province. The nearest towns are Makhado (located 31 km south) and Musina (located 36 km north) of the proposed SEZ site. The MMSEZ will comprise an offering of mixed land uses and infrastructure provision to ensure the optimal manufacturing operations in the energy and metallurgical complex. It is envisaged that the energy and metallurgical complex shall comprise various manufacturing plants. In the context of the brief, the project will be executed in terms of an economic impact modelling framework. The methodology applied as part of the research project is outlined in the following diagram and explained in greater detail in the following paragraphs. STEP 1: INCEPTION AND PROJECT DEFINTION

STEP 3: MODEL DEVELOPMENT AND IMPACT ASSESSMENT The purpose of the step is to develop and calibrate an econometric impact model and simulate the economic effects of the proposed project as described in the preceding step and quantify the multiple economic impacts of the project by means of a computerised economic simulation model based on the input-output technique. STEP 4: IMPLICATIONS, RECOMMENDATIONS AND INPUTS TO MITIGATION PLAN The results obtained from previous steps will be interpreted to ensure sustainable development of the project. market based implementation guidelines will be formulated to guide project implementation towards maximising potential economic impacts and project sustainability.

Step 1 •Inception and Project Definition

Step 2 •Base Profile and Trend Analysis

The step will serve to refine the scope of the brief. It is imperative that the economic impact assessment to be performed, is tailored according to the project’s unique requirements. STEP 2: BASE PROFILE AND TREND ANALYSIS The step will seek to compile a comprehensive status quo dataset on the affected local economies, as well as pertinent land use and concise demographic / socio-economic indicators and profiles. These datasets will provide viral base information for development of the impact model for the area.

Step 3 •Model Development and Impact Assessment

Step 4 •Implications, Recommendations and Inputs to Mitigation plan

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEFINING THE ZONE OF INFLUENCE The locality, or zone of influence, is based on the concept of host and supporting municipalities. The host municipality refers to the geographic region (administrative demarcation) which is home to the SEZ project in question, while supporting municipalities are geographic regions that border the host municipality and are regions where labour and other resources and services are potentially sourced.

ZONE OF INFLUENCE Zone of Influence Host Municipalities Supporting Municipalities

TRANSPORT NETWORK National Road Regional Road

The proposed inclusion of the MMEMSEZ has a sphere of influence which extends to the following areas: ✓

The host municipalities:

•

✓

Musina Local Municipality and Makhado Local Municipality which includes the towns of Musina and Louis Trichardt and contains a portion of the Venda Tribal Authority homeland. The supporting municipalities:

•

which include the Greater Giyani, Greater Letaba, Thulamela, Blouberg, Molemole, and Collins Chabane local municipalities.

The economic data analysed in this report focuses on the Musina and Makhado Local Municipalities as the local economy/s in which the proposed SEZ is situated. The Musina and Makhado municipalities are situated in the Vhembe District Municipality, which in turn is situated in the Limpopo Province. Reference is also made to these economic geographies in order to fully analyse relevant economic data. The analysis of socio-economic data is focused on the Musina and Makhado host municipalities and bordering supporting municipalities. Detailed analysis is conducted on the host municipalities, while reference is made to supporting municipalities as well.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MUSINA-MAKHADO ENERGY AND METALLURGY SPECIAL ECONOMIC ZONE The MMEMSEZ is positioned between the towns of Musina and Makhado (Louis Trichardt) and extends along the western portion of the N1 highway. The proposed development site is positioned across the shared administrative border of the Musina and Makhado Local Municipalities and is positioned within the Vhembe District Municipality administrative region. The development site consists of 8 farms totalling 8 048 hectares. The location is positioned to function as a metallurgical cluster with the aim to beneficiate metals with supporting up- and down-stream activities. The initiative strives toward creating a mixed land-use offering that comprises necessary infrastructure that will support optimal development and operational activities once complete.

Residential Township

MMEMSEZ

CONCISE OVERVIEW OF OPERATIONS AT THE MMEMSEZ Energy Generation Operations

R69.6 billion Investment

3 780 jobs

Metallurgical Plants

R147.8 billion Investment

30 131 jobs

Supporting Industries

R8.1 billion Investment

1 979 jobs

Supporting Services

R39.3 billion Investment

12 400 jobs

Bulk Infrastructure and Waste Management

R2.7 billion Investment

510 jobs

Commercial District

R11.4 billion Investment

3 500 jobs

Residential District

R8.6 billion Investment

1 500 jobs

The proposed operations in the MMEMSEZ consists of multiple plants used for energy generation, metallurgy and bulk infrastructure supply. Proposed operations also incorporate storage facilities, bonded areas, machining, logistics, administrative functions and a visitor’s lodge. In support of the MMEMSEZ a residential township establishment is proposed. The residential township’s aim is to provide residential and commercial facilities to labourers employed at the SEZ. It should be noted that the proposed residential township is to be located on land separate from the SEZ and will be under ownership of the MMSOC. LABOUR REQUIREMENT 48 800 labourers are required by operational entities within the SEZ at full operational status compared to 5 000 labourers in the residential township. A total of 53 800 labourers are required by the SEZ. According to the Internal Master Plan (August 2019): ✓ 60% of executive positions are to be filled from the local labour market while the remaining 40% of positions are to be filled from the Chinese labour market. ✓ 75% of professional positions are to be filled from the local labour market while the remaining 25% of positions are to be filled from the Chinese labour market. ✓ 95% of ordinary staff positions are to be filled from the local labour market while the remaining 5% of positions are to be filled from the Chinese labour market. Based on the above, on average 89% or 47 694 of potential employment opportunities created internally by the SEZ and residential township are to be occupied by labour from the South African labour force.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MUSINA-MAKHADO ENERGY AND METALURGY SPECIAL ECONOMIC ZONE ANNUAL OUTPUT OF THE MMEMSEZ Total Output Value Project Type USD / Million

R / Million

Total Energy Generation Output

$3 636

R51 956

Total Metallurgical Plant Output

$20 756

R296 600

Total Supporting Industries Output

$1 315

R18 791

Total Supporting Services Output

$3 200

R45 727

Total Bulk Infrastructure Output

$171

R2 444

Total Commercial District Output

$900

R12 861

Total Residential District Output

$500

R7 145

$29 078

R415 518

$1 400

R20 006

$30 478

R435 523

Total MMEMSEZ Output Total Residential Township Output Total Output Value

REVENUE STREAMS The income derived from revenue streams (i.e. moneys paid by operational entities in the SEZ to the SEZ Operator for services rendered) are used by the SEZ Operator for capital, operating and maintenance purposes. The revenue streams include:

✓ ✓ ✓ ✓

Environmental management fee including a rehabilitation fund; Municipal waste collection Rates (refuse) & taxes (property) payable to the municipality Operator levy to all investors for the maintenance of roads, storm water, security and other non-met red service utilities; ✓ Sanitation (sewerage) collection & treatment, ✓ Industrial waste management, and ✓ Land lease to all investors. The revenue generated from the above revenue streams assist with the payment of service level agreements to other entities for services rendered to the SEZ. Services include: ✓ ✓ ✓ ✓

Municipal waste collection or fee at landfill site Taxes payable applicable to the municipality Bulk service providers e.g. water and electricity Land lease cost to SOC

SEZ IMPLEMENTATION PHASING According to the Internal Master Plan (August 2019) the broad phasing and operation of components of the SEZ is structured as follows: Construction Start (Year)

Construction End (Year)

Early Works and Internal Bulk Infrastructure

2020

2021

Phase 1 Construction

2022

2026

Phase 2 Construction

2026

2029

Phase 3 Construction

2029

2031

Item

✓ Potable water purification and distribution; ✓ Process water treatment & distribution; ✓ Electricity distribution;

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MUSINA-MAKHADO ENERGY AND METALURGY SPECIAL ECONOMIC ZONE INTERNAL MASTER PLAN OF THE MMEMSEZ

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

LOCATION ANALYSIS – NATIONAL, DISTRICT AND LOCAL CONTEXT KEY ATTRIBUTES ✓ The Musina area has been identified as being a rural service point by the NSDF, whilst the Makhado area has been identified as an urban growth point. ✓ The role of the Makhado area is to be an urban-rural anchor providing essential social economic services to surrounding rural communities. Linkages should be promoted to encourage accessibility. ✓ The Musina and Louis Trichard towns have been identified as provincial growth points by the local and provincial spatial development frameworks. ✓ The N1 highway is considered the primary corridor for both host municipalities and aligns to future investment expectations related to logistics and industrial development. ✓ The Musina host municipality is home to the logistics section of the Musina-Makhado SEZ. The Limpopo Eco-Industrial Hub is also planned north of the Musina town in order to link logistics and international trade to the proposed hub. ✓ The housing backlog in the host municipalities is in excess of 16 000 households. The host municipalities are not accredited to implement subsidy housing projects thus backlogs are dependent on provincial planning, funding and implementation.

MUSINA SPATIAL DEVELOPMENT FRAMEWORK

MAKHADO SPATIAL DEVELOPMENT FRAMEWORK

NSDF NODES AND CORRIDORS

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MANUFACTURING SECTOR – NATIONAL CONTEXT Based on the primary output of operations proposed as part of the MMEMSEZ, the following section considers the manufacturing sector of the South African, Limpopo Province and Host municipalities. Because the metallurgical operations at the SEZ seek to produce various metal related products, it is essential to consider operations in light of the manufacturing sector so as to determine the role and function of metallurgical operations specific to the project within the manufacturing sector. The following map provides an overview of the distribution of manufacturing activities throughout South Africa based on GVA output per Meso Zone. The map seeks to show the concentration of manufacturing output and assists with the identification of primary manufacturing nodes. The distribution of manufacturing nodes is used to determine the context of the Musina-Makhado SEZ in relation to major manufacturing areas.

Pretoria

Ekurhuleni

Polokwane

Middelburg

Brits

Nelspruit

Johannesburg Witbank Sasolburg Secunda Welkom Newcastle

Bloemfontein

Richards Bay

Isithebe

Stanger

Durban Atlantis Port Shepstone

Pietermaritzburg

Cape Town

Paarl / Wellington

Port Elizabeth

East London

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MANUFACTURING SECTOR – NATIONAL CONTEXT Apart from the distribution of manufacturing sector output, the relationship which the manufacturing sector has with NSDF identified national nodes and corridors provides an indication of the future direction and concentration of industrial and manufacturing activities. The NSDF has identified nodes at varying scales and importance throughout the country, these include national as well as urban regions, urban nodes of national importance and regional development anchors. The NSDF also identifies roads of national and regional importance and national development corridors. NSDF FEATURE

! (

National Urban Regions

! (

National Urban Nodes

! (

Regional Development Anchors

NSDF CORRIDORS Key National Roads Key Regional Roads National Development Corridors

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MANUFACTURING SECTOR – NATIONAL CONTEXT KEY ATTRIBUTES ✓ The manufacturing sector proportionally contributes 13.2% to national GDP and 9.3% to national employment. ✓ The majority of manufacturing sector GDP is produced in the Gauteng Province, whilst the Limpopo Province proportionally contributes the third lowest GDP (7.3%) of all provinces. ✓ Historical trends show that the manufacturing sector average annual growth has steadily been decreasing since 2008 and the proportional contribution that the sector makes to national GDP has been decreasing for the same time-period. ✓ In a similar fashion job creation in the sector has also steadily been decreasing since 2008 and in effect the proportional contribution by the sector has contracted. ✓ Exports of manufactured goods are outstripped by imports of manufactured goods.

MANUFACTURING GDP PROPORTIONAL CONTRIBUTION AND GROWTH

NATIONAL MANUFACTURING SECTOR

GDP

R572 936

13.2%

2018 - (R/million)

Contribution

JOBS

1 497 370

9.3%

2018 - jobs

Contribution

AVERAGE ANNUAL GDP GROWTH RATE

0.2% 2008 - 2018

MANUFACTURING PROPORTIONAL CONTRIBUTION

MANUFACTURING GDP AVERAGE ANNUAL GROWTH RATE

PROVINCIAL MANUFACTURING PROPORTIONAL CONTRIBUTION

MANUFACTURING EMPLOYMENT PROPORTIONAL CONTRIBUTION AND GROWTH

xiv

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MANUFACTURING SECTOR – PROVINCIAL AND LOCAL CONTEXT KEY ATTRIBUTES ✓

✓

The manufacturing sector of the Limpopo Province contributes in excess of R959 million to the national economy. Proportionally the province contributes 7.3% to the national economy. The Vhembe District is the smallest proportionally contributing district to manufacturing output for the province, contributing 12.1% or, R116 million, to total manufacturing GVA in 2018. The host municipalities play varying roles in regard to manufacturing GVA contribution to the district economy whereby, the Makhado host municipality contributes more than 60% to the manufacturing GVA of the district as appose to the Musina host municipality which contributes nearly 10%. In total the Makhado and Musina host municipalities contribute R703 million and R116 million respectively. Although the Limpopo Province and Vhembe District showed a contraction in the manufacturing sector between 2008 and 2018, the Makhado and Musina host municipality manufacturing sectors expanded during the same period.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MANUFACTURING SECTOR – PROVINCIAL AND LOCAL CONTEXT PROVINCE, DISTRICT AND LOCAL MANUFACTURING SECTOR GVA

ECONOMIC REGION

GVA

CONTRIBUTION

(R/million)

(%)

Limpopo Province

R9 595

Vhembe District

R1 163

Musina Local Municipality

R116

Makhado Local Municipality

R703

DISTRICT MANUFACTURING PROPORTIONAL CONTRIBUTION

3.3% (contribution to Limpopo economy)

2.3% (contribution to Vhembe economy)

2.2% (contribution to Musina economy)

3.3% (contribution to Makhado economy)

PROVINCE, DISTRICT AND LOCAL MANUFACTURING SECTOR EMPLOYMENT

AVERAGE ANNUAL GROWTH RATE

ECONOMIC REGION

JOBS

-0.003%

Limpopo Province

61 667

-0.3%

Vhembe District

11 143

1.9%

Musina Local Municipality

1 039

0.5%

Makhado Local Municipality

6 136

LOCAL MANUFACTURING PROPORTIONAL CONTRIBUTION

DISTRICT MANUFACTURING PROPORTIONAL CONTRIBUTION

CONTRIBUTION (%)

5.7% (contribution to Limpopo jobs)

4.7% (contribution to Vhembe jobs)

3.5% (contribution to Musina jobs)

6.2% (contribution to Makhado jobs)

AVERAGE ANNUAL GROWTH RATE

-1.1% -2.2% -0.1% -0.9%

LOCAL MANUFACTURING PROPORTIONAL CONTRIBUTION

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

METALLURGY IN SOUTH AFRICA Due to the extensive nature of the mining industry, the country is well positioned in terms of its role in beneficiation of minerals (specifically referring to metallurgy) and the provision of semi-refined and produced products.

In the context of the development of the South African economy this dynamic perpetuates the challenge of beneficiation versus raw materials exports. These challenges are compounded by resource distribution, distance to port and availability of water in a largely semi-arid climate.

The historical economic and infrastructure environment of the country assisted with the establishment of the country as a global ferroalloy producer. The abundance of raw materials coupled with historically cheap and stable electricity, well developed infrastructure and relatively cheap labour has positioned the country as a leading ferrochrome producer, major manganese ore and alloys exporter and producer of vanadium products. The country also produces ferrosilicon and silicon metal ore.

The distribution of production plants for ferroalloys are largely market based and therefor are concentrated in the Gauteng Province, with limited producers located in the Limpopo (Polokwane), Mpumalanga (Witbank) and KwaZulu-Natal (eThekwini) provinces (refer to the map below).

The ferrochromium production industry in South Africa is by far the largest contributor in regard to ferroalloys. An abundance of ferroalloy producers currently operate within the country and export the second most (after China) ferrochromium to the world market. The ferrochromium market has been under strain recently due to major changes in the Chinese economy and the demand shown by China for steel related products. Manganese alloy production in South Africa is a smaller role-player in the broader ferroalloys market of the country. The industry is confined to a limited number of producers and the majority of raw manganese materials are exported to major producers such as China. Ferrosilicon production in South Africa is a limited industry whereby the majority of ferrosilicon produced in the country is utilised by domestic consumers. The steel industry in South Africa is a major role-player in the context of local economic growth but is considered a minor global producer of crude and semi-finished steel products. Abundant raw materials do position the country as a prospective business proposition for Ghana / Germany that nevertheless have strong and exporting manufacturing sectors with a high demand for steel.

Metallurgical operations in South Africa are orientated towards markets and the proximity to natural resources as appose to agglomeration or logistical factors. The concept is further highlighted by Map 3.8 which shows the correlation of producers and proximity to markets and resources. The correlation shows that metallurgical processing plants associate with the largest economic output province in the country – Gauteng. The proximity to the province allows for ease of access to users of products produced by metallurgical plants as construction and downstream beneficiation industries are to a large degree positioned in the province. Additionally, metallurgical industries such as ferrochrome and ferrosilicon generally locate within a 50 km to 60 km radius of resource extraction locations compared to steel and ferromanganese producers who on average locate within a 300 km to 350 km radius of resource extraction areas. One of the primary reasons for steel and ferromanganese industries to locate further from resource locations are because of the proximity of these industries to the Gauteng Province – thus indicating that proximity to markets is preferred as appose to economically isolated locations further from primary markets.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

METALLURGY IN SOUTH AFRICA SOUTH AFRICA METALLURGICAL OPERATIONS IN THE CONTEXT OF INDUSTRIAL LOCATION CONSIDERATIONS

The location of metallurgical industries primarily in and around the Gauteng Province also affords access to primary logistical routes and modes of transport (rail transport). The ease of access to logistical infrastructure allows for the ease of access to major exporting ports such as Durban and Richards Bay.

ESTIMATED AVERAGE DIRECT LINE DISTANCE BETWEEN METALLURGICAL PLANTS AND MINERAL RESOURCES, MARKETS AND PORTS

Steel Plants

Ferrosilicon Plants

Ferromanganese Plants

Ferrochrome Plants

±306 km

±54 km

±342 km

±31 km

Steel Plants

Ferrosilicon Plants

Ferromanganese Plants

Ferrochrome Plants

±39 km

±64 km

±190 km

±81 km

Steel Plants

Ferrosilicon Plants

Ferromanganese Plants

Ferrochrome Plants

±39 km

±64 km

±190 km

±81 km

The following diagram provides an indication of the average “as the crow flies” distance between 1) closest resource and processing plant; 2) processing plants and closest market; and 3) processing plants and closest port (export orientation). The information serves as an indication of the relative positioning of existing metallurgical industries relative to key industrial location considerations – as discussed previously.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DISTRIBUTION OF MINERAL RESOURCES AND METALLURGICAL PLANTS IN SOUTH AFRICA

DISTRIBUTION OF METALLURGICAL MINERALS IN SOUTH AFRICA

DISTRIBUTION OF METALLURGICAL PLANTS IN SOUTH AFRICA

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

METALLURGICAL PRODUCTION IN SOUTH AFRICA KEY ATTRIBUTES ✓ South African ferrochrome production has been consistent since 2008. ✓ More than 80%of ferrochrome produced in South Africa is exported. ✓ The sales value of ferrochrome both domestically and internationally has been increasing since 2008. ✓ The production of ferrosilicon in South Africa gas decreased since 2008 and experienced a significant drop in 2017. ✓ Nearly 80% of ferrosilicon produced in South Africa is sold locally. ✓ The average export sales price of ferrosilicon has drastically increased since 2014 compared to the domestic sales rice which has marginally increased over the same period.

FERRO-CHROME

TOTAL GLOBAL AND SOUTH AFRICA FERROCHROME PRODUCTION TOTAL (kt) GLOBAL FERRO-SILICON

INDUSTRY OVERVIEW

GLOBAL IMPORTANCE

In 2017 global ferro-chrome production rose by 8.7% to 12.9 Mt from 2016 mainly due to increased production by Zimbabwe, Sweden and India.

LARGEST

producer

exporter

3 484

2 951

kt (2017)

26.8%

45.0%

of total global production

of total global exports

GLOBAL IMPORTANCE

In 2017 global ferro-silicon production was dominated by China accounting for 66% of production. Global production has slowed due to decreased output by China.

KEY NOTES

✓ Consumption of ferro-

✓ ✓

chrome rose to 12.1 Mt in 2017 mainly because of increased stainless steel production in China. Between 2016 and 2017 the price of ferro-chrome increased by 43.7%. the price increase correlates with global chrome ore price increases.

SOUTH AFRICA PROPORTIONAL CONTRIBUTION TO TOTAL GLOBAL FERROCHROME EXPORTS (%)

PROPORTIONAL DISTRIBUTION BETWEEN LOCAL AND EXPORT PROPORTIONAL silicon has decreased SALES (kt) SALES (kt) since 2016 although

Avera

LARGEST

producer

exporter

48.2

8.6

kt (2017)

0.6%

3.5%

✓

world steel output grew by 20%. Decreased consumption is the result of lower utilisation of crude steel in China and very slow growth in world output of iron castings.

Local S

per Ye

16.1

of total global of total global production TOTAL SALES VALUEexports OF FERROCHROME IN SOUTH AFRICA (R’000) TOTAL SALES Local V S Unit Va PROPORTIONAL CONTRIBUTION BY FERRO-SILICON AND (R/t) - 2 SILICON METAL TO SOUTH AFRICAN OUTPUT (%)

R11 7

Export S Unit Va (R/t) - 2

R12 6

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

METALLURGICAL PRODUCTION IN SOUTH AFRICA KEY ATTRIBUTES ✓ South African Ferromanganese production has continuously decreased since 2011. ✓ Nearly 90% of ferromanganese produced in South Africa is exported. ✓ The export and local sales price of ferromanganese has maintained similar steady growth since 2008 with a significant spike since 2016. ✓ The average crude steel production in South Africa has steadily been decreasing since 2008. ✓ The domestic market marginally imports steel to the country, whilst the majority of steel produced are utilised by local consumers. ✓ The total sales value of steel has increased although production has decreased. The value of steel exports have remained static with indications of lower export demand in 2017.

FERRO-MANGANESE

TOTAL GLOBAL AND SOUTH AFRICA FERRO-MANGANESE STEEL PRODUCTION PRODUCTION

INDUSTRY OVERVIEW

GLOBAL IMPORTANCE

In 2017 global high-carbon ferro-manganese production rose by 16% to 4.2 Mt from 2016 mainly from production in China and Malaysia.

GLOBAL IMPORTANCE

TOTAL GLOBAL

In 2019 steel demand is estimated to reach 1 735 Mt (1.3% increase from 2018). Steel demand is expected to grow but in tandem with slowing global economic growth. KEY NOTES

KEY NOTES

✓ In 2017 production

LARGEST

producer

exporter

458

271

kt (2017)

11.0%

14.2%

of total global production

of total global exports

✓

slightly outstripped global demand although global demand has steadily been decreasing since 2013. The United States, Netherlands and Germany are the highest importers of high-carbon ferro-manganese.

PROPORTIONAL CONTRIBUTION BY MANGANESE ORE AND FERRO-MANGANESE TO SOUTH AFRICAN OUTPUT (%)

✓ Demand for steel is

forecast to remain PROPORTIONAL DISTRIBUTION BETWEEN LOCAL AND APPARENT STE positive in light of EXPORT China’s SALES (kt) economic deceleration, Local S slowing global economic LARGEST LARGEST Product growth and trade policy Ye producer uncertainty. exporter ✓ A slow-down in developed economies is expected to lead to kt (2017) kt (2017) decreased steel demand. ✓ Steel demand in 0.6% 0.4% developing economies is of total global of total global expected to remain production robust. IN SOUTH AFRICA TOTAL SALES TOTAL SALES VALUEexports OF FERRO-MANGANESE Local S (R’000) Unit V SOUTH AFRICA PROPORTIONAL CONTRIBUTION TO TOTAL (R/t) GLOBAL CRUDE STEEL EXPORTS (%)

Aver

3 484

2 562

9.8

R10

Export Unit V (R/t) -

R9 7

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

SPECIAL ECONOMIC ZONES IN SOUTH AFRICA KEY ATTRIBUTES ✓ Currently, 10 SEZ’s are designated in South Africa and 5 SEZ’s are operational. The majority of SEZ’s are distributed along the coast of the country in and around major sea and logistics ports. ✓ Investment opportunities in designated SEZ’s in the country primarily focus on:

• •

Metals beneficiation

• •

Agro-processing

• • • •

Logistics

Business process outsourcing Automotive industries ICT Renewable energy General manufacturing

• Pharmaceuticals ✓ Metals beneficiation and metallurgy are primary focused on ferrous and non-ferrous metals and precious and semiprecious metals.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

SPECIAL ECONOMIC ZONES FUNCTIONAL DIFFERENTIATION

LEGEND Operational SEZ Not Operational Metallurgy Focus

MUSINAMAKHADO SEZ

GAUTENG IDZ Mineral Beneficiation Agro- and Food-Processing Electronics Pharmaceuticals Aerospace and Aviation

Metallurgy

NKOMAZI SEZ Agro-Processing Automotive Logistics and Transport Minerals and Energy

MALUTI-A-PHOFUNG SEZ Automotive Agro-Processing Logistics General Processing ICT Pharmaceutical

RICHARDS BAY IDZ

SALDANHA BAY SEZ

Metals Beneficiation ICT Marine Industry Development Renewable Energy Agro-Processing

Oli / Gas Marine Repair

DUBE TRADE PORT

ATLANTIS SEZ Greentech Manufacturing Heavy and Light Manufacturing Large Scale user Industrial Warehousing / Logistics

EAST LONDON IDZ COEGA SEZ Metals / Metallurgy Automotive Business Process Outsourcing Chemicals Agro-Processing Logistics

Renewable Energy Automotive Aquaculture ICT Agro-Processing Manufacturing

Aerospace and Aviation Agro-Processing Electronics Medical and Pharmaceutical Clothing and Textiles Automotive

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

ECONOMIC PROFILE OF HOST MUNICIPALITIES SIZE AND CONTRIBUTION BY PROVINCIAL, DISTRICT AND LOCAL MUNICIPALITIES TO ITS CONTAINING ECNOMIC GEOGRAPHY

SIZE OF THE LOCAL ECONOMY AND CONTRIBUTION BY MINNG AND MANUFACTURING SECTORS

Musina Total GVA

Makhado Total GVA

R4 313 (R/million)

R20 056 (R/million)

Mining Contribution Manufacturing Contribution

20.6% 2.7%

Mining Contribution Manufacturing Contribution

ECONOMIC GROWTH

South Africa

1.3% Limpopo

3.5%

MUSINA LOCAL MUNICIPALITY

Vhembe District

Musina LM

MAKHADO LOCAL MUNICIPALITY

Makhado LM

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

ECONOMIC PROFILE OF HOST MUNICIPALITIES ECONOMIC SECTOR CONTRIBUTION TO TOTAL GVA OF THE MUSINA LOCAL MUNICIPALITY

ECONOMIC SECTOR CONTRIBUTION TO TOTAL GVA OF THE MAKHADO LOCAL MUNICIPALITY

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

EMPLOYMENT PROFILE OF HOST MUNICIPALITIES EMPLOYMENT GROWTH SIZE AND CONTRIBUTION BY PROVINCIAL, DISTRICT AND LOCAL MUNICIPALITIES TO ITS CONTAINING ECNOMIC GEOGRAPHY

SIZE OF THE LOCAL ECONOMY EMPLOYMENT AND CONTRIBUTION BY FORMAL AND INFORMAL SECTORS

Musina Total Employment

Makhado Total Employment

29 945 jobs

99 629 jobs

Formal Jobs Contribution

67.7%

Formal Jobs Contribution

65.8%

Informal Jobs Contribution

32.3%

Informal Jobs Contribution

34.2%

South Africa

Limpopo

MUSINA LOCAL MUNICIPALITY

Vhembe District

Musina LM

MAKHADO LOCAL MUNICIPALITY

Makhado LM

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

EMPLOYMENT PROFILE OF HOST MUNICIPALITIES ECONOMIC SECTOR CONTRIBUTION TO TOTAL EMPLOYMENT OF THE MUSINA LOCAL MUNICIPALITY

ECONOMIC SECTOR CONTRIBUTION TO TOTAL EMPLOYMENT OF THE MAKHADO LOCAL MUNICIPALITY

xxvii

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – OVERVIEW The following provides a concise breakdown of the strengths, weaknesses, opportunities and threats of the demography of the host and supporting municipalities. The purpose is to identify and refine the core problem and opportunity areas of the host and supporting municipalities in the context of the MMEMSEZ. The MMEMSEZ could influence the demography of the local municipalities but can also be influenced by the context of population and household status and capability as well as the labour force from which the SEZ is to source.

DEMOGRAPHIC STRENGHTS •Large potential labour pool from which to source labourers for the MMEMSEZ •Skilled labourers represent between 10% and 30% of the employed workforce •Majority of households reside within a formal dwelling •Majority of households have security of tenure (i.e own the property on which they reside)

DEMOGRAPHIC WEAKNESSES •High dependancy rates of local communities •Large portion of population aged 20+ years have not attained a matric certificate or higher (12% to 20%) •Minimal labour absorption capacity by local economies •Low average annual household income across all LSM groups (R35 000 to R60 000 average annual household income) •On average more than 75% of households in host and supporting municipalities can be classified as LSM 1 - housheolds have very limited access to household goods, services and purchasing power

DEMOGRAPHIC OPPORTUNITIES •Large potentially econmically active population group (50% to 70% of population) •large proportion of employed persons, employed in elemenary occupations - general labour skills required for the SEZ will be sourced from persons that have elementary occupation skills

DEMOGRAPHIC THREATS •Major population concentrations (i.e. major towns and traditional authorities) are located some distance (between 20 and 75 km) from the SEZ •Large proportion of people aged 20+ that have no schooling (15% to 25%) •High unemployment rate (20% to 50%) •Extreme poverty levels in host and supporting municipalities (i.e. 50% to 70% of households fall below to food poverty line - the food poverty line indicates the capability of households to sustain each member with the minimum number of calories to support survival)

From the information above, the population of host and supporting municipalities have the capacity to supply a vast labour pool from which the SEZ could source. A sizeable skilled labour pool also exists that could support the SEZ whilst low skilled labour engaged in elementary occupations could further support general SEZ manufacturing operations. Even though the demography has a large labour pool and sizeable skilled labour force, high dependency ratios, unemployment rates, a limited number of population that have attained a matric certificate or higher, low household incomes and high poverty rates could influence the capability of the local labour force to active engage with the SEZ. The SEZ could provide a basis from which households in the area of influence could improve their current livelihood through either direct employment at the SEZ, value-chain growth or new business development.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – POPULATION SIZE

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – AGE PROFILE

xxx

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – AGE PROFILE

xxxi

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES - OCCUPATION PROFILE

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – EMPLOYMENT PROFILE AND LABOUR ABSORPTION MUSINA HOST MUNICIPALITY

MAKHADO HOST MUNICIPALITY

LABOUR ABSORPTION PROFILE LABOUR ABSORPTION RATE

AVERAGE NUMBER OF NEW ECONOMICALLY ACTIVE POPULATION PER YEAR

AVERAGE NUMBER OF NEW JOBS CREATED PER YEAR

EFFECT

Musina

55,6

1 299

203

UNDERSUPPLY OF JOBS

Makhado

30,0

4 231

517

UNDERSUPPLY OF JOBS

Greater Giyani

20,2

1 378

108

UNDERSUPPLY OF JOBS

Greater Letaba

29,1

1 139

-92

UNDERSUPPLY OF JOBS

Thulamela

24,3

5 588

647

UNDERSUPPLY OF JOBS

Collins Chabane

18,8

801

UNDERSUPPLY OF JOBS

-194

LABOUR FORCE AND JOBS DECLINING

-173

LABOUR FORCE AND JOBS DECLINING

UNEMPLOYMENT RATE OF THE HOST AND SUPPORTING MUNICIPALITIES Blouberg

Molemole

23,5 32,0

-285 -101

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – DWELLING TYPOLOGIES

xxxiv

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOHRAPHIC PROFILE OF HOST MUNICIPALITIES – TENURE STATUS

xxxv

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – AVERAGE ANNUAL HOUSEHOLD INCOME

xxxvi

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRPAHIC PROFILE OF HOST MUNICIPALITIES – LIVING STANDARD MEASUREMENT LIVING STANDARD MEASURE IN THE HOST AND SUPPORTING MUNICIPALITIES

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DEMOGRAPHIC PROFILE OF HOST MUNICIPALITIES – POVERTY PROFILE POVERTY PROFILE OF THE HOST MUNICIPALITIES

PROJECT LOCATION MMEMSEZ

ADMIN BOUNDARY Host Municipalities

TRANSPORT NETWORK National Road Regional Road

% OF HOUSEHOLDS BELOW THE FOOD POVERTY LINE 0,0 - 20,0 20,1 - 40,0 40,1 - 60,0 60,1 - 80,0 80,1 - 100,0

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

BURDEN OF DISEASE Burden of disease data represents information which highlights the extent to which the leading causes of pre-mature death in health districts across South Africa can be reviewed. According to the District Health Barometer (2019/20) the proportions of deaths and years of life lost (YLLs) due to four broad cause groups (Communicable diseases, HIV-related and TB, Non-communicable diseases, and injuries) were calculated for each of the 52 districts. ‘Years of life lost’ is a measure of premature mortality based on the age at death and thus highlights the causes of death that should be targeted for prevention. In line with the second South African NBD study, the West level 26 model life expectancy was selected as the standard against which YLLs are calculated. The proportion of all deaths that are amenable to healthcare were also calculated for each district. Figure 1.1: Percentage of Deaths by Broad and Leading Cause – 2012 to 2017

Source: DEMACON ex DHB, 2020

Average Percentage of People Covered by Medical Insurance 9,0

8,5

8,0

7,2

Percentage

7,0 6,0 5,0 4,0 3,0

7,3

7,0

7,4 4,8

2,0

1,0 Makhado Local Authorities

Thulamela District Average

Musina

Collins Chabane Provincial Average

Source: DEMACON ex DHB, 2020

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

INDUSTRIAL LOCATION FACTORS AND BUILDING BLOCKS In the context of the MMEMSEZ it is necessary to consider the factors that could influence the sustainability of the development as well as locational factors that should be considered when establishing an industrial related development.

BUILDING BLOCKS TO SUSTAINABLE DEVELOPMENT

When considering the sustainability of an industrial development, four key factors are essential inputs to ensure the long-term viability of a project. The factors relate to multiple elements across hard and soft infrastructure requirements and social and economic inputs that support and grow industrial activities. The building blocks for sustainable development include: ✓ Land and the space economy – considering the availability of resources and bulk infrastructure, the potential to expand proposed operations in the future, the extent and stability of not only the business environment but the supply of utilities and property markets. ✓ Labour and demographic profiles – considering the availability of labour and the extent to which the local labour force has sufficient skills to support proposed operations, the degree to which local demographic trends change and shape the local community profile and the livelihoods of local communities. ✓ Capital investment – considering the potential for capital formation through operations and the leveraging of investment, the effectiveness of operations to sustain capital growth and encourage local value chain development, and the expansion capacity of the local economy to accommodate new businesses. ✓ Entrepreneurship growth – considering the local and international competitiveness of the national economy and local operations, the potential to ensure job creation and labour force work ethic and the growth of human capital through social investment.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

INDUSTRIAL LOCATION FACTORS AND BUILDING BLOCKS Location factors specific to the context of industrial development are important to identify industrial activities that are located in different socioeconomic and spatial localities. Industrial location factors can be considered based on two variables, the first being traditional and the second contemporary. ✓ Traditional location factors consider the positioning of an industrial development in regard to its proximity to resources, accessibility to markets, the potential to agglomerate and the availability of logistical infrastructure. ✓ Contemporary location factors consider the availability of utilities and the easy and stability of accessing these services, the proximity of industry to secondary functions, the availability and proximity of industry to labour resources and the availability of financial incentives. SUMMARY OF INDUSTRIAL LOCATION FACTORS Economic Base

Description

Traditional Industrial Location Factors Resources Market Agglomeration

Logistics

Proximity to natural resources and natural resources as the primary product. Natural resources are processed (beneficiated) to create final and intermediate products. Products created as a result of input from different industries located within proximity to each other (clustering industrial activities). Activity located based on its demand for logistics as its primary consideration – connectivity and movement dependent.

Based on previous information it becomes apparent that the MMEMSEZ is traditionally positioned in regard to: ✓ its proximity to natural resources whereby many of the input resources required to operate the SEZ are primarily found in the northern mining belt, ✓ the potential to create an agglomerated economic node through the development of multiple supportive metallurgical activities within the SEZ, and ✓ the proximity to major logistical routes and inland border trade areas such as the N1 highway, Beitbridge and Pont Drift Border Posts and the railway line between Beitbridge and Gauteng and Nelspruit / Matsulu. The SEZ is also contemporarily positioned in regard to: ✓ its amenity orientation whereby the SEZ could generate significant changes to the quality of life of local communities in the Musina and Makhado area, ✓ the availability of labour is prominent but could be influenced by mismatched labour force skills, and ✓ the financial incentive proposition of the SEZ additionally assists with the attractiveness of the SEZ.

Contemporary Location Factors Electricity (Utility) Industry’s location based on the accessibility of Orientation utilities such as water and electricity. Industry’s location based on its secondary Amenity Orientation function – adding value to quality of life, research and development, etc. Labour Cheap, reliable or stable labour Incentives

Financial incentives.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUANTITATIVE IMPACT ANALYSIS – METHODOLOGY The input-output model depicts economic relationships between different components of an economy by identifying monetary flows (expenditures, receipts) between various units. The relationship between the initial spending and the total effects generated by the spending is known as the multiplier effect (X + N) of a sector, or more generally as the impact of a sector on the economy as a whole. Impacts are measured in terms of the following: ✓ Business sales refers to the value of business sales (turnover) generated in the economy as a result of the mine. ✓ GGP refers to the value of all final goods and services produced during a one-year period within the boundaries of a specific area as a result of the mine. ✓ Total employment reflects the number of additional jobs created by economic growth due to the mine. Note that the public costs of attracting these employment opportunities, as well as the quality thereof, are not necessarily reflected.

ECONOMIC IMPACT OF DEVELOPMENT

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUANTITATIVE IMPACT ANALYSIS – CONSTRUCTION AND OPERATIONAL ✓ A capital investment amount of R287.6 billion could be injected to implement the MMEMSEZ. ✓ The annual business sales of the MMEMSEZ could obtain R435.5 billion. ✓ A total of 53 800 jobs (47 694 employees sourced from the local market) could be created at full operational capacity.

✓ The capital investment and annual output variables have been derived from a US Dollar value (supplied in the Internal Master Plan - 2019). ✓ A South African Rand value is derived by making use of a R14.29 exchange rate – the exchange rate is determined by making use of the average median exchange rate between the US Dollar and South African Rand between August 2018 and August 2019.

CONSTRUCTION AND OPERATIONAL PHASE QUANTITATIVE IMPACT ANALYSIS CONSTRUCTION PHASE IMPACTS

OPERATIONAL PHASE IMPACTS

ESTIMATED SEZ CAPITAL INVESTMENT

ESTIMATED SEZ ANNUAL SALES REVENUE

± R 287.6 billion

± R 435.5 billion

ADDITIONAL BUSINESS SALES Direct Impact

R411,4 billion

Indirect Impact

R61,9 billion

ADDITIONAL BUSINESS SALES Induced Impact

R100,4 billion

Total Impact

R573,7 billion

ADDITIONAL GGP Indirect Impact

R26,8 billion

Induced Impact

R44,6 billion

Total Impact

R195,4 billion

ADDITIONAL EMPLOYMENT Direct Impact

492 651 jobs

R623,1 billion

Indirect Impact

R93,7 billion

Induced Impact

R152,0 billion

Total Impact

R868,8 billion

ADDITIONAL GGP

Direct Impact

R124,0 billion

Direct Impact

R187,8 billion

Indirect Impact

R40,5 billion

Induced Impact

R67,5 billion

Total Impact

R295,9 billion

ADDITIONAL EMPLOYMENT Indirect Impact

107 011 jobs

Induced Impact

239 103 jobs

Total Impact

838 765 jobs

Direct Impact

746 111 jobs

Indirect Impact

162 066 jobs

Induced Impact

362 117 jobs

Total Impact

1 270 294 jobs

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

OTHER QUANTIFIABLE IMPACT ANALYSIS Based on the extent and size of the MMEMSEZ, the range of impacts that could be generated by the SEZ is expansive. As a result, a number of key impacts have been identified that should be considered alongside the quantitative impact of the initial investment and operation of the SEZ. Other quantifiable impacts that have been identified for analysis include: ✓ The impact of direct employment created by the SEZ on the tax revenue of South Africa, and ✓ The impact of the SEZ on the local tourism industry. MMEMSEZ EMPLOYEES IMPACT ON INCOME TAX REVENUE

IMPACT OF THE MMEMSEZ ON THE LOCAL TOURISM INDUSTRY

The immediate area (i.e. 30 km radius from the SEZ) is primarily rural in nature, dominated by farms and wilderness areas. The inclusion of a heavy industrial node the scale of the MMEMSEZ impacts on the natural environment and by extension tourism activities.

In order to determine the potential impact that could be generated, the following assumptions have been applied: ✓ Assumed monthly employee income per employment type:

• • •

Executive positions – R25 000 per month

Assuming that tourist facilities within a ±30 km radius of the SEZ have a 100% occupancy rate per month, only domestic tourists are taken into consideration and R1 152 income is generated per night of stay, tourist facilities have the potential to generate in excess of R56.86 million p/y.

Professional positions – R15 000 per month

General labour positions – R8 000 per month. ✓ The SARS taxation brackets of the 2019/20 financial year have been applied, and ✓ The calculation does not consider non-taxable benefits that employees may be afforded. Executive Positions

Professional Positions

General Labour

The tourism industry can also be reviewed in terms of the catering and accommodation sector (associated with the tourism industry) Item Catering and Accommodation Sector GVA (R/million)

Musina R74.98

Makhado R194.96

Average Annual Growth Rate

2.7%

0.6%

Contribution to Total Economic Output

1.4%

0.9%

Employee Structure Number of Employees Gross Monthly Renumeration (per Employee) Total Monthly Personal Income Tax (per Employee) Total Income Tax Revenue (Annual)

6 994

4 842

41 964

R25 000.00

R15 000.00

R8 000.00

R4 158.05

R1 663.72

R335.00

R348 976 820

R96 668 787

R168 695 280

Total Income Tax All Employees (Annual)

R614 340 887

Although leisure tourists may be affected by the MMEMSEZ, business tourism may increase. Overnight business trips to the Limpopo Province are limited whilst day trips represent 3.97% of all day trips. Thus, due to the business environment of the SEZ, trips to and from the SEZ may increase from not only domestic but foreign business tourists. Revenue potential from leisure tourists would be diminished even though business tourism may supplement some of the revenue lost – business tourists typically have shorter number of bed nights as appose to leisure tourists.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUALITATIVE IMPACT ASSESSMENT - METHODOLOGY The evaluation of impacts is conducted in terms of a set of fixed criteria. The various socio-economic impacts and benefits of this project is discussed in terms of the status, extent, duration, probability, and magnitude of the impact. Finally, an accumulative impact and significance rating is applied to rate each identified impact in terms of its overall magnitude and significance. In order to adequately assess and evaluate the impacts and benefits associated with the project it was necessary to develop a methodology that would scientifically achieve this and reduce the subjectivity involved in making such evaluations. For informed decision making it is necessary to assess all legal requirements and clearly defined criteria in order to accurately determine the significance of the predicted impact or benefit on the surrounding social environment. The nature or status of the impact is determined by the conditions of the environment prior to construction and operation. A discussion on the status of the impact will include a description of what causes the effect, what will be affected and how it will be affected. The status of the impact can be described as negative, positive or neutral. The following provides an outline and overview of the methodological elements described above. The outline and overview forms part of the overall qualitative impact assessment and is compiled into a singular feature which outlines the identified impact, its assessment based on the methodological elements and potential mitigation measures that can be considered. IMPACT SIGNIFICANCE ITEM Positive

Status of the impacts

Neutral

Negative

N Site Specific

Local

Provincial / Regional

National

Internationally

Immediate

Short-Term

Medium-Term

Long-Term

Permanent

Magnitude of the impact

None

Low

Medium - Low

Medium

Medium - High

Very High / Don’t Know

Probability of the impact

No Occurrence

Minor Possibility of Occurrence

Possible Occurrence

Likely Occurrence

Expected Occurrence

Will Occur

No Impact

Low

Low to Medium

Medium

Medium to High

High

1 - 15

16 - 30

31 - 45

46 - 60

60+

Extent of the impact Duration of the impact

Impact Rating

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUALITATIVE IMPACT ASSESSMENT - OVERVIEW The following provides a broad and concise overview of potential impacts that could arise from the MMEMSEZ during the construction and operational phase. The purpose is to outline the basis and extent of potential impacts so as to guide further detailed analysis.

✓ Impacts on the local and/or regional economy, ✓ Impacts on local communities, ✓ Impacts on the local labour force, ✓ Impacts on the natural environment,

The extent of potential impacts as a result of the construction and operation of the SEZ is diverse and across multiple core themes. The core themes under which potential qualitative impacts are identified consist of:

✓ Impacts on local infrastructure and utility services, and ✓ Impacts on the local property market.

Local / Regional Economy Burden of Disease

Property Market

Local Communities

Qualitative Impact Themes Labour Force

Infrastructure and Utilities

Natural Environment

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUALITATIVE IMPACT ASSESSMENT – CONSTRUCTION PHASE Impact Increased demand for products and services from local businesses (e.g. retail, entertainment, accommodation, construction, etc) Opportunity to expand local businesses through production, capacity and sales (e.g. construction, manufacturing, retail, etc.) or the establishment of new businesses Localised labour supply side constraint (in terms of quantity and quality of requisite skills) Increased pressure hard infrastructure (e.g. roads, electricity, etc.) – increased maintenance burden and new investment

Status of Impact

Impact Significance Prior to Mitigation

35 Medium

45 Medium

28 Low - Medium

Local construction sector value chain limitations – supply side constraints

Short- to medium-term employment opportunities (Job creation across the skills spectrum)

Local labour supply side constraints to be met through “importation” of labour

Temporary increase of household income

Medium

Increased daily loads on the local transportation network to transport labour to and from the site (home to work and work to home commute)

Low - Medium

Increased pressure on soft infrastructure (e.g. social amenities and services) - increased maintenance burden and new investment

Low - Medium

Relocation of affected communities

Impact

28 28 60

Impact of air, noise and soil quality on existing economic activities

Increased demand for various land uses

60 Medium - High

In-flux of employment seekers

Increased burden of disease

20 Medium

45 Medium

24 Low - Medium

45 35 Medium

Increased risk that social ills could materialise

18 Medium

Introduction of industrial activities to natural environment

55 Medium - High

Impact on local property markets, i.e. diminished amenity value and increased property value

Increased prospect of informal settlements

Medium

Impact Significance Prior to Mitigation

Medium

Medium - High Partial loss of areas visual appeal and amenity value, in particular for tourism and accommodation activities

Status of Impact

50 Medium - High

44 Medium

Increased pressure on local healthcare sector

36 Medium

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUALITATIVE IMPACT ASSESSMENT – OPERATIONAL PHASE Impact Sustained demand for products and services from local businesses (e.g. retail, entertainment, accommodation, construction, etc) Local businesses supply side constraints to fulfil increased demand for products and services Opportunities to expand local business base through production, capacity, and sales (e.g. construction, manufacturing, retail, etc.) or the establishment of new businesses Opportunity to develop backward and forward linking industries for the manufacturing sector, i.e. inputs to the manufacturing sector and sale of intermediate and final products Diversification of the regional economy

Status of Impact

Impact Significance Prior to Mitigation

55 Medium - High

50 Medium - High

Impact

Sustained increase of household income during the operational phase of the project Sustained pressure on soft infrastructure (e.g. social amenities and services) - increased maintenance burden and new investment

In-flux of employment seekers

Medium

Sustained risk that social ills could materialise

Linkages to national SIP projects and areas

50 Medium - High

65 High

Medium-term employment opportunities (Job creation across the skills spectrum) – includes direct, indirect and induced impacts as a result of the SEZ’s operation. Localised labour supply side constraint (in terms of quantity and quality of requisite skills)

Local labour supply side constraints to be mitigated through targeted skills development of local communities

50 Medium - High

28 Low - Medium

40 Medium

45 Medium

28 Low - Medium

40 18 Low - Medium

Social investment by the SEZ into local communities

Medium - High Opportunity to attract additional foreign and domestic investment to the local economy

Impact Significance Prior to Mitigation

Medium

Status of Impact

50 Medium - High

Partial loss of areas visual appeal and amenity value, in particular for tourism and accommodation activities

Impact of air, noise and soil quality on existing economic activities

Impact on local property markets, i.e. diminished amenity value and increased property value

Sustained demand for new development (i.e. residential, retail, etc.) State revenue potential through additional rates and taxes (to address inter alia infrastructure supply and maintenance demand)

55 Medium - High

65 High

50 Medium - High

36 Medium

44 Medium

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUALITATIVE IMPACT ASSESSMENT – OPERATIONAL PHASE Impact

Local labour supply side constraints to be mitigated through targeted skills development of local communities

Sustained pressure hard infrastructure (e.g. roads, electricity, etc.) – increased maintenance burden and new investment

Increased daily loads on the local transportation network to transport labour to and from the site (home to work and work to home commute)

Increased pressure on local healthcare sector

Status of Impact

Impact Significance Prior to Mitigation

Impact

Increased prospect of informal settlements

Medium - High

55 Medium - High

36 40

Impact Significance Prior to Mitigation

36 Medium

Speculative pricing activity in nearby towns can be expected

Increased burden of disease

Medium

Status of Impact

36 Medium

40 Medium

Improved access to healthcare

36 Medium

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

SOCIO-ECONOMIC IMPACT ASSESMENT CONCLUSION The relatively small size of the manufacturing sector in the Limpopo Province poses an opportunity by the Musina-Makhado SEZ to create local, national, provincial and socio-economic gains. The SEZ and its intended operations are positioned to play a substantial role in the growth and diversification of the economy (local, regional and national) by introducing mineral beneficiation in the metals and ferro-alloys industries (an industry that is limited in the province). The SEZ is set to become the first operational special economic zone in the province and is positioned to agglomerate supportive and down-stream industries into the local, regional and international markets. The SEZ is positioned to create considerable economic and social impacts. The proposed operations of the SEZ could, through leveraging of the economic multiplier effect, potentially create up to 4.4 jobs for every R1 million capital invested. In addition to the estimated 52 000 on-site employment opportunities to be created by the SEZ, approximately 838 000 new employment opportunities could be created during the entire construction phase (10 year-period) and up to 1.2 million new operational phase jobs created and sustained (at maturity and full capacity). The additional business sales that could be created by the SEZ during construction phase of the project amounts to more than R573 billion whilst the operational phase additional sales created and sustained could account for more than R868 billion. Additional GGP created during the construction phase (10-year period) could amount to more than R195 billion and during the operational phase a total of approximately R295 billion additional GGP could be created and sustained annually. Aside from the direct impact generated by capital and operational expenditures, various local socio-economic impacts could be created. Its common cause that nearby communities are tribal in nature and that skills levels are low. The labour requirements of the SEZ in general and those of its future operators in particular, need to be timeously identified to ensure optimal alignment by local training and recruitment initiatives – and to minimise the need for imported labour. The magnitude of capital investment anticipated could potentially create considerable demand and supply side impacts. The fairly rapid nature of the scale of investment planned over a fairly focused timeframe will create considerable demand and supply side pressures. Proper planning will be required to ensure that labour force settlement and associated community development takes place in a structured manner and that demand side responses are timeously implemented in a phased manner – including but not limited to land for human settlement, formal housing initiatives and associated development of ancillary facilities such as retail, recreation, healthcare, education, banking, policing, etc. The increased livelihoods of local communities also affect the demand for socio-economic services. The increased spending potential of local communities allow for the growth in demand for additional services and directly influences the growth of new businesses. It should be noted that although a significant number of employment opportunities could be generated, these opportunities are not instantaneous but progressive over time. Independent studies indicate that the sphere of influence generated by a SEZ diminishes as the distance from the SEZ core increases. Agglomeration of economic activities in support of the SEZ would augment the impact created by the SEZ.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The influx of labour to the area is set to stimulate various demand and supply side impacts. The prospect of job opportunities would fuel considerable inmigration to the area, thereby creating a myriad of impacts on economic infrastructure, including hard as well as soft infrastructure. Hard infrastructure includes road, rail, water sanitation, electricity. Soft infrastructure includes the full spectrum of social facilities and amenities including but not limited to hospitals, police stations, libraries, home affairs offices, community halls, post offices, cemeteries, schools and creches, sports facilities, active and passive recreational spaces, resources centres. Well-structured supply side responses need to be in place to ensure orderly development - the SEZ development will be accompanied by extensive infrastructure upgrades and investments. As with any large scale development, there is a risk that social ills could materialise. – informal settlements, sex workers, STD’s, communicable diseases, HIV/AIDS, TB, crime. Proper planning for orderly human settlement could mitigate the likelihood of these risks materialising. The area reveals a particular burden on diseased, characterised by the following: ✓ Age groups younger than 5 years

•

The leading cause of death for the age cohort is characterised by communicable diseases that exclude HIV and TB and maternal, perinatal and nutritional disorders (71% of deaths).

• Leading causes include diarrhoeal diseases, protein-energy malnutrition and lower respiratory infections. ✓ Age groups 5 to 14 years •

• Leading cases include HIV?AIDS (13 to 15%), Tuberculosis (8 to 13%) and Diarrhoeal diseases (11% to 12%). ✓ Age groups 15 to 24 years •

The leading cause of death for females are HIV-related and TB causes (31% of deaths. The leading cause of death amongst males in the age cohort are as a result of injuries (54% of deaths).

•

Females within the age cohort are primarily affected by HIV/AIDS and Tuberculosis, whilst males are primarily affected by Accidental Threats to Breathing and Road Injuries. ✓ Age groups 25 to 64 years

• •

The leading cause of death within the age cohort includes non-communicable diseases (36% to 42%) and HIV-related and TB (32% to 33%) causes.

• •

The leading cause for death in the age cohort is non-communicable diseases (72% to 77%).

Male and female population within the age cohort are primarily affected by HIV/AIDS (16% to 18%), Tuberculosis (13% to 16%) and lower respiratory infections (7% to 8%). Diabetes is the primary on-communicable disease affecting the age cohort. ✓ Age groups 65 and older Leading cases affecting population in the age group include cerebrovascular disease (11% to 17%), diabetes (10% to 12%) and hypertension heart disease (9% to 12%).

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

healthcare systems, demand for related social amenities and the capability of local communities to earn a living given current economic conditions and lockdown regulations. Local property markets could be impacted. Whereas SEZ activity could spur property market activity in nearby towns, the industrial nature of the SEZ could potentially diminish the amenity value of adjacent farms. Property owners adjacent to the SEZ could experience a decrease of market value while new developments in local towns could spur property values. The construction and operation of the SEZ is likely to promote business and economic development in the local economy. The considerable additional job creation is set to create increased levels of disposable income and associated increases in buying power which, in turn, could create further downstream benefits in various value chains including retail, wholesale, education, healthcare, insurance, banking, real estate, recreation, travelling, export and imports, etc. – and associated rates and taxes. The extent to which these benefits are likely to materialise will, however, hinge on the model adopted. If domestic labour legislation is waved and labour is imported en masse (as has happened elsewhere in Africa where large industrial developments have been driven by not only by foreign investors and foreign developers) these benefits will, in all likelihood, not materialise to the same extent. Contract procurement for professional services as well as all labour procurement contracts would have to be managed with extreme care. The development of resource and labour requirement plans, well in advance could ensure optimal alignment between skills requirements and domestic skills supply. Lessons from elsewhere in Africa furthermore indicates that overcoming the language barrier would be a noteworthy challenge. Considerable effort would have to made by the foreign investors/developers to ensure alignment with the dominant domestic language profile. Procurement of services and labour from the South African market would greatly enhance economic (and social) spin-off effects of the SEZ. Where gaps in the domestic economy might exist in terms of specialised supply side expertise, new business development and skills transfer should be of utmost importance. As far as possible, down-stream beneficiation and value adding of raw materials should be encouraged to prevent the export of “cheap”, un-beneficiated raw materials, only to be re-imported in an expensive, beneficiated state. A onerous skills development burden should be imposed on the foreign operator to ensure compliance with local labour and related legislation. Skills development and empowerment across the spectrum of South African communities, including minority groups, should be actively promoted. The use of foreign labour should be limited. Particular care should be taken during the operational phase to ensure that economic benefits are not eroded over time by systematically deteriorating environmental conditions – especially towards the end-of-life phase of mining and industrial plants. Proper decommissioning and rehabilitation plans should be timeously formulated. Stringent ongoing monitoring, evaluation and adjustment will be advisable.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

TABLE OF CONTENTS 1

5.2 5.3 5.4 5.5

INTRODUCTION ................................................................................. 2 1.1 1.2 1.3 1.4 1.5

INTRODUCTION ............................................................................. 2 PROJECT BRIEF ............................................................................ 2 METHODOLOGY ............................................................................ 2 LOCALITY / ZONE OF INFLUENCE .............................................. 3 REPORT OUTLINE ......................................................................... 5

2.1 INTRODUCTION ............................................................................. 7 2.2 PROJECT BACKGROUND ............................................................. 7 2.3 PROPOSED OPERATIONS, INVESTMENT VALUE AND EMPLOYMENT REQUIREMENTS ......................................................... 10 2.4 SYNTHESIS .................................................................................. 21 LOCATION ANALYSIS .................................................................... 23 3.1 3.2 3.3 3.4 4

INTRODUCTION ........................................................................... 23 SPATIAL PERSPECTIVE ............................................................. 23 PROPERTY TRENDS ................................................................... 34 SYNTHESIS .................................................................................. 36 MANUFACTURING AND METALLURGICAL SECTOR ANALYSIS 39

4.1 INTRODUCTION ........................................................................... 39 4.2 NATIONAL MANUFACTURING SECTOR CONTEXT ................. 40 4.3 PROVINCIAL, DISTRICT AND LOCAL MANUFACTURING CONTEXT ............................................................................................... 49 4.4 ROLE AND FUNCTION OF METALLURGY IN THE SOUTH AFRICAN CONTEXT .............................................................................. 53 4.5 SPECIAL ECONOMIC ZONES IN SOUTH AFRICA .................... 61 4.6 SYNTHESIS .................................................................................. 68 5

ECONOMIC PROFILE ...................................................................... 71 5.1

INTRODUCTION ........................................................................... 71

DEMOGRAPHIC PROFILE .............................................................. 92 6.1 INTRODUCTION ........................................................................... 92 6.2 STUDY AREA DELINEATION ...................................................... 92 6.3 POPULATION AND HOUSEHOLDS ............................................ 94 6.4 AGE PROFILE .............................................................................. 97 6.6 HIGHEST LEVEL OF EDUCATION .............................................. 98 6.7 OCCUPATION PROFILE AND SKILLS ........................................ 99 6.8 EMPLOYMENT PROFILE AND LABOUR ABSORPTION ......... 100 6.9 DWELLING TYPE ....................................................................... 102 6.10 TENURE STATUS .................................................................. 103 6.11 AVERAGE ANNUAL HOUSEHOLD INCOME ........................ 104 6.12 LIVING STANDARD MEASUREMENT ................................... 106 6.13 POVERTY PROFILE OF THE HOST AND SUPPORTING MUNICIPALITIES .................................................................................. 109 6.14 BURDEN OF DISEASE PROFILE OF THE HOST AND SUPPORTING MUNICIPALITIES ......................................................... 110 6.15 DISCUSSION .......................................................................... 111 6.16 SYNTHESIS ............................................................................ 114

2 MUSINA-MAKHADO ENERGY AND METALLUGY SPECIAL ECONOMIC ZONE OVERVIEW ................................................................. 7

ECONOMIC STRUCTURE AND PERFORMANCE...................... 72 EMPLOYMENT STRUCTURE AND TRENDS ............................. 76 COMPETITIVE AND COMPARATIVE ADVANTAGE ANALYSIS 80 SYNTHESIS .................................................................................. 89

SOCIO-ECONOMIC IMPACT ASSESSMENT ............................... 118 7.1 7.2 7.3 7.4 7.5 7.6

INTRODUCTION ......................................................................... 118 INDUSTRIAL LOCATION FACTORS AND BUILDING BLOCKS118 QUANTITATIVE IMPACT ASSESSMENT .................................. 121 OTHER QUANTITATIVE IMPACT ANALYSIS ........................... 125 QUALITATIVE IMPACT ASSESSMENT ..................................... 127 SYNTHESIS ................................................................................ 158 CONCLUSION ................................................................................ 161

8.1 8.2 8.3

INTRODUCTION ......................................................................... 161 ANALYSIS OVERVIEW .............................................................. 161 SOCIO-ECONOMIC IMPACT OVERVIEW ................................. 162

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

List of Diagrams

Figure 3.3: Historic and Current Makhado Properties on the Market ....... 34

Diagram 1.1: Research Project Methodology Steps ................................... 2

Figure 3.4: Number of Residential Dwellings Completed per Type and Year for the Musina and Makhado Local Municipalities .................................... 35

Diagram 2.1: Concise Overview of Operations in the MMEMSEZ and Residential Township Land Uses .............................................................. 10 Diagram 4.1: South Africa Metallurgical Operations in the Context of Industrial Location Considerations ............................................................ 54 Diagram 4.2: Estimated Average Direct Line Distance Between Metallurgical Plants and Mineral Resources, Markets and Ports ............. 54

Figure 3.5: Size of Non-Residential Buildings Completed per Type and Year for the Musina and Makhado Local Municipalities .................................... 35 Figure 4.1: National Manufacturing Sector Overview ............................... 42 Figure 4.2: National Manufacturing Sector Imports and Exports .............. 43 Figure 4.3: National Manufacturing Sector Structure and Growth ............ 45

Diagram 7.1: Building Blocks for Sustainable Development ................... 119 Diagram 7.2: Composition of a Successful Cluster ................................ 121 Diagram 7.3: Economic Impact of the Development .............................. 121

Figure 4.4: Coke, Petroleum Products and Nuclear Fuel Sub-Sector Overview.................................................................................................... 47 Figure 4.5: Basic Iron and Steel Products; Casting of Metal Sub-Sector Overview.................................................................................................... 48

Diagram 7.4: Multiplier Effect of a Metallurgical Manufacturing Industry 122 Figure 4.6: Provincial, District and Local Manufacturing Sector Profile .... 49 Diagram 7.5: Construction and Operational Phase Quantitative Impact Input Variables ................................................................................................. 122 Diagram 7.6: Drivers of SEZ Performance (Conceptual Framework)..... 128

Figure 4.7: Provincial, District and Local Manufacturing Sector Profile .... 50 Figure 4.8: Manufacturing Sector GVA and Employment Growth per Economic Geography - 2008 to 2018 ....................................................... 51

Diagram 7.7: Core Themes of the Qualitative Impact Analysis .............. 133 Figure 4.9: Manufacturing Sector Employee Compensation per Economic Geography (2018) ..................................................................................... 51 List of Figures Figure 6.10: Percentage of Deaths by Broad and Leading Cause – 2012 to 2017 ...................................................................................................... xxxix

Figure 5.1: Location Quotients per Economic Sector in the Musina Local Economy Compared to the National Economy (2014 to 2018) ................. 81 Figure 5.2: Location Quotients per Economic Sector in the Makhado Local Economy Compared to the National Economy (2014 to 2018) ................. 82

Figure 3.1: Historic and Current Musina Properties on the Market .......... 34 Figure 3.2:Number of Properties Sold and Average Sales Price in the Musina Host Municipality .......................................................................... 34

Figure 5.3: Musina Local Economy Industry Target Classification (2014 to 2018) ......................................................................................................... 86

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 5.4: Musina Local Economy Industry Target Classification (2014 to 2018) ......................................................................................................... 88

Figure 7.3: Proportional Distribution of Investment into Special Economic Zones per Industrial Sector (2015/16) ..................................................... 130

Figure 6.1: Population and Household Size.............................................. 94

Figure 7.4: Summary of Construction and Operational Phase Qualitative Impacts .................................................................................................... 134

Figure 6.2: Age and Gender Profile of the Host and Supporting Municipalities ............................................................................................. 97

List of Tables

Figure 6.3: Highest Level of Education for the Host and Supporting Municipalities ............................................................................................. 98

Table 2.1: MMEMSEZ Proposed Operations and Residential Township Land Uses ................................................................................................. 11

Figure 6.4: Distribution of Employed Persons in the Host Municipalities 101

Table 2.22.3: Broad Overview of the Planned Capacity of MMEMSEZ Operations Planned Capacity ................................................................... 12

Figure 6.5: Dwelling Typologies for the Host and Supporting Municipalities ................................................................................................................ 102 Figure 6.6: Tenure Typology for the Host and Supporting Municipalities 103 Figure 6.7: Average Annual Household Income for Host and Supporting Municipalities ........................................................................................... 104 Figure 6.8: Living Standard Measurement for Host and Supporting Municipalities ........................................................................................... 107

Table 2.42.5: Broad Overview of the MMEMSEZ Total Investment Value 12 Table 2.62.7: Broad Overview of the Total Number of Labourers Required in the MMEMSEZ and Residential Township ............................................ 13 Table 2.8: Broad Overview of the MMEMSEZ Total Annual Output ......... 14 Table 2.9: Implementation Phasing of the MMEMSEZ ............................. 15 Table 2.10: Detailed Breakdown of the MMEMSEZ Operational Entities . 18

Figure 6.9: Poverty Profile of the Host and Supporting Municipalities .... 109 Table 5.1: Location Quotient Interpretations ............................................. 80 Figure 6.10: Percentage of Deaths by Broad and Leading Cause – 2012 to 2017 ........................................................................................................ 110 Figure 6.11: Average Percentage of People Covered by Medical Insurance ................................................................................................................ 110

Table 5.2: Location Quotients per Economic Sector in the Musina Local Economy Compared to the National Economy (2014 to 2018) ................. 81 Table 5.3: Location Quotients per Economic Sector in the Makhado Local Economy Compared to the National Economy (2014 to 2018) ................. 82

Figure 7.1: Quantitative Socio- Economic Impact During Construction and Operational Phase of the MMEMSEZ ..................................................... 123

Table 5.4: Industry Target Classification System - Categories ................. 84

Figure 7.2: Total Socio-Economic Impact during the Construction and Operational Phase of the MMEMSEZ ..................................................... 124

Table 5.5: Musina Local Economy Industry Target Classification (2014 to 2018) ......................................................................................................... 85

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Table 5.6: Makhado Local Economy Industry Target Classification (2014 to 2018) ......................................................................................................... 87

Map 2.1: National Context of the MMEMSEZ ............................................. 8 Map 2.2: Provincial Context of the MMEMSEZ ........................................... 8

Table 6.1: Living Standard Measurement (LSM) Variables .................... 106 Map 2.3: District Context of the MMEMSEZ ............................................... 8 Table 7.1: Summary and Description of Industrial Location Factors ...... 120 Map 2.4: Local Context of the MMEMSEZ .................................................. 8 Table 7.2: Estimated Impact of MMEMSEZ Employee Income Tax Revenue ................................................................................................................ 125 Table 7.3: Short-Stay Accommodation Within a 30 km Radius of the MMEMSEZ .............................................................................................. 126

Map 2.52.6: Site Context of the MMEMSEZ ............................................... 9 Map 2.7: Internal Master Plan of the MMEMSEZ - August 2019 .............. 20 Map 3.1: Frame 1 Proposals ..................................................................... 24

Table 7.4: Catering and Accommodation Sector Size and Contribution to the Host Municipalities Economic Output ..................................................... 127

Map 3.2: Frame 2 Proposals ..................................................................... 24

Table 7.5: Status of the Impact ............................................................... 130

Map 3.3: Frame 3 Proposals ..................................................................... 25

Table 7.6: Extent of the Impact ............................................................... 130

Map 3.4: Frame 4 Proposals ..................................................................... 25

Table 7.7: Duration of the Impact ............................................................ 131

Map 3.5: Frame 5 Proposals ..................................................................... 26

Table 7.8: Magnitude of the Impact ........................................................ 131

Map 3.6: Musina Spatial Development Framework Settlement Hierarchy 29

Table 7.9: Probability of the Impact ........................................................ 131

Map 3.7: Musina Spatial Development Framework Proposed Residential Development ............................................................................................. 29

Table 7.10: Cumulative Impact ............................................................... 132 Map 3.8: Musina Spatial Development Framework Proposals ................. 30 Table 7.11: Impact Significance Rating .................................................. 132 Table 7.12: Qualitative Construction Phase Impacts .............................. 136

Map 3.9: Makhado Spatial Development Framework Nodes and Corridors ................................................................................................................... 32

Table 7.13: Qualitative Operational Phase Impacts ............................... 145

Map 3.10: Makhado Spatial Development Framework Land Use ............ 32

List of Maps

Map 3.11: Makhado Spatial Development Framework, 2011 ................... 33

Map 1.1: Musina-Makhado Energy and Metallurgy Special Economic Zone - Zone of Influence ...................................................................................... 4

Map 4.1: Distribution of Manufacturing Output and Major Manufacturing Nodes ........................................................................................................ 40

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 4.2: Distribution of Manufacturing Sector output in relation to National Spatial Development Framework Nodes and Corridors ........................... 41 Map 4.3: Distribution of Coke and Petroleum Products Production (GVA R/million) ................................................................................................... 46

Map 6.6: Poverty Profile of the Host and Supporting Municipalities ....... 109 Map 7.1: Distribution of Tourist Facilities in a ±30 km Radius of the MMEMSEZ .............................................................................................. 126

Map 4.4: Distribution of Metals and Metal Products (GVA - R/million) ..... 46 Map 4.5: Distribution of Manufacturing Output and Major Manufacturing Nodes in the Limpopo Province ................................................................ 52 Map 4.6: Distribution of Metallurgical Mineral Resources ......................... 55 Map 4.7: Distribution of Metallurgical Processing Plants .......................... 56 Map 4.8: Special Economic Zones in South Africa ................................... 62 Map 4.9: Special Economic Zones Focus Areas in South Africa.............. 63 Map 4.10: Limpopo Eco-Industrial Park .................................................... 67 Map 5.1: Spatial Distribution of Total GVA in the Host Municipalities ...... 74 Map 5.2: Distribution of Employment in the Host Municipalities ............... 78 Map 6.1: Geography of Host and Supporting Municipalities in the Context of the Proposed Musina-Makhado Special Economic Zone ......................... 93 Map 6.2: Spatial Distribution of Population Throughout the Host Municipalities ............................................................................................. 95 Map 6.3: Average Annual Population Growth of the Host Municipalities Population per Spatial Location ................................................................ 96 Map 6.4: Average Annual Household Income Distribution in the Host Municipalities ........................................................................................... 105 Map 6.5: Distribution of LSM in the Host Municipalities .......................... 108

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

ABBREVIATIONS EIA

Environmental Impact Assessment

FPL

Food Poverty Line

LEDA

Limpopo Economic Development Agency

MMEMSEZ

Musina-Makhado Energy and Metallurgy Special Economic Zone

SADC

Southern African Development Community

SEZ

Special Economic Zone

INTRODUCTION

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

1 INTRODUCTION 1.1

INTRODUCTION

DEMACON Market Studies were requested by the Limpopo Economic Development Agency (LEDA) to compile a socio-economic impact assessment as part of the Scoping and Environmental Impact Reporting process for the Musina-Makhado Energy and Metallurgy Special Economic Zone (MMEMSEZ). The proposed MMEMSEZ is located across the shared border between the Musina and Makhado Local Municipalities which fall under the Vhembe District Municipality in the Limpopo Province. The nearest towns are Makhado (located 31 km south) and Musina (located 36 km north) of the proposed SEZ site. The MMSEZ will comprise an offering of mixed land uses and infrastructure provision to ensure the optimal manufacturing operations in the energy and metallurgical complex. It is envisaged that the energy and metallurgical complex shall comprise various manufacturing plants. 1.2

PROJECT BRIEF

In terms of the brief of the project, the need was expressed for a socioeconomic impact assessment pertaining to the establishment of the MMEMSEZ. The socio-economic impact assessment seeks to determine the scope and range of possible socio-economic impacts that could be generated by the proposed SEZ based on the construction and operation of the project. The socio-economic impact assessment will form part of a wider range of studies and specialist inputs to a final environmental impact assessment (EIA) report – an EIA and its process is used to identify, predict and assess the potential positive and negative impacts of a proposed project (including reasonable alternatives) on the biophysical, social and economic

environment and to propose appropriate management actions and monitoring programmes. 1.3

METHODOLOGY

In the context of the brief, the project will be executed in terms of an economic impact modelling framework. The methodology applied as part of the research project is outlined in the following diagram and explained in greater detail in the following paragraphs. Diagram 1.1: Research Project Methodology Steps

Step 1 • Inception and Project Definition

Step 2 • Base Profile and Trend Analysis

Step 3 • Model Development and Impact Assessment

Step 4 • Implications, Recommendations and Inputs to Mitigation plan

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

STEP 1: INCEPTION AND PROJECT DEFINTION

The proposed inclusion of the MMEMSEZ has a sphere of influence which extends to the following areas:

The step will serve to refine the scope of the brief. It is imperative that the economic impact assessment to be performed, is tailored according to the project’s unique requirements.

✓ The host municipalities:

STEP 2: BASE PROFILE AND TREND ANALYSIS The step will seek to compile a comprehensive status quo dataset on the affected local economies, as well as pertinent land use and concise demographic / socio-economic indicators and profiles. These datasets will provide viral base information for development of the impact model for the area.

•

Musina Local Municipality and Makhado Local Municipality which includes the towns of Musina and Louis Trichardt and contains a portion of the Venda Tribal Authority homeland. ✓ The supporting municipalities:

•

which include the Greater Giyani, Greater Letaba, Thulamela, Blouberg, Molemole, and Collins Chabane local municipalities.

The economic data analysed in this report focuses on the Musina and Makhado Local Municipalities as the local economy/s in which the proposed SEZ is situated.

The Musina and Makhado municipalities are situated in the Vhembe District Municipality, which in turn is situated in the Limpopo Province. Reference is also made to these economic geographies in order to fully analyse relevant economic data. The analysis of socio-economic data is focused on the Musina and Makhado host municipalities and bordering supporting municipalities. Detailed analysis is conducted on the host municipalities, while reference is made to supporting municipalities as well. In order to gain insight into the spatial orientation of the host and supporting municipalities, Map 1.1 is provided.

LOCALITY / ZONE OF INFLUENCE

The locality, or zone of influence, is based on the concept of host and supporting municipalities. The host municipality refers to the geographic region (administrative demarcation) which is home to the SEZ project in question, while supporting municipalities are geographic regions that border the host municipality and are regions where labour and other resources and services are potentially sourced.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 1.1: Musina-Makhado Energy and Metallurgy Special Economic Zone - Zone of Influence

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

1.5

REPORT OUTLINE

The remainder of the report is structured under the following main headings:

MUSINA-MAKHADO ENERGY AND METALLUGY SPECIAL ECONOMIC ZONE OVERVIEW

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

2 MUSINA-MAKHADO ENERGY AND METALLUGY SPECIAL ECONOMIC ZONE OVERVIEW 2.1

INTRODUCTION

Chapter 2 of the report provides a brief overview of the MMEMSEZ. The chapter seeks to provide a contextual background geographically, as well as operationally, of the MMEMSEZ, and to highlight the key benefits of the project; potential role-players to the project; any issues and/or restrictions that may hamper the sustainable operation of the project; and to identify key considerations. The purpose of the chapter is highlight key information in regard to: ✓ ✓ ✓ ✓

the background and proposed operation of the MMEMSEZ, estimated capital investment of the MMEMSEZ, the estimated employee requirement of the MMEMSEZ, proposed phasing of implementation and operational start of the MMEMSEZ, and ✓ other notable information (i.e. water requirements, logistics, etc). The following sections provide a concise overview of the MMEMSEZ in terms of:

Project Background

Proposed Operations, Investment Value and Employment Requirements

Project Master Plan

Key Considerations

2.2

PROJECT BACKGROUND

The Musina-Makhado Special Economic Zone (MMSEZ) consists of two locations positioned along the N1 Corridor which connects South Africa to the broader Southern Africa Development Community (SADC) and is also positioned in line with the Trans-Limpopo Spatial Development Initiative. The Limpopo Economic Development Agency is responsible for the facilitation and management of the planning and development of the proposed SEZ. The first location of the SEZ is situated north of Musina at the border of South Africa and Zimbabwe. The site is positioned to facilitate light-industrial and agro-processing activities (inclusionary of logistics port activities) that due it its proximity to the N1 Corridor and South Africa-Zimbabwe border can access broader markets and participants. The second location, and the focus of this impact assessment, is positioned between the towns of Musina and Makhado (Louis Trichardt) and extends along the western portion of the N1 highway. The proposed development site is positioned across the shared administrative border of the Musina and Makhado Local Municipalities and is positioned within the Vhembe District Municipality administrative region. The development site consists of 8 farms totalling 8 048 hectares. The second location is positioned to function as a metallurgical cluster with the aim to beneficiate metals with supporting up- and down-stream activities. The initiative strives toward creating a mixed land-use offering that comprises necessary infrastructure that will support optimal development and operational activities once complete. The following maps provide a contextual overview of the spatial positioning of the MMEMSEZ.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 2.1: National Context of the MMEMSEZ

Map 2.3: District Context of the MMEMSEZ

Source: DEMACON GIS, 2019

Map 2.2: Provincial Context of the MMEMSEZ

Map 2.4: Local Context of the MMEMSEZ

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 2.52.6: Site Context of the MMEMSEZ

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

VALUE

AND

operations also incorporate storage facilities, bonded areas, machining, logistics, administrative functions and a visitor’s lodge.

The following section seeks to review the various operations proposed as part of the MMEMSEZ. The purpose is to identify manufacturing plants and other operational activities proposed in the SEZ and the approximate investment value for each activity.

In support of the MMEMSEZ a residential township establishment is proposed. The residential township’s aim is to provide residential and commercial facilities to labourers employed at the SEZ. It should be noted that the proposed residential township is to be located on land separate from the SEZ and will be under ownership of the MMSOC.

The section further seeks to identify the approximate timeframe for implementation and the expected start year of operations. The phasing provides an essential indication of the likely start of construction and operations as well as the rate at which investment could be expected. The phasing further provides information in regard to the expected need for employees at the SEZ and the rate at which new employees would be required from the market. The section also identifies the sources of income for the SEZ, bulk infrastructure requirements, logistical requirements, as well as additional developmental activities (i.e. proposed residential township development) proposed in support of the SEZ. The following sub-sections focus on: ✓ The proposed operations in the SEZ – including estimated investment value and processing capacity, ✓ The estimated labour required to operate proposed plants and ancillary operations, ✓ Bulk infrastructure requirements of the SEZ, ✓ The phasing of the SEZ, ✓ Sources of income for the SEZ, ✓ Logistical requirements of the SEZ and ✓ The proposed residential township development supporting the SEZ. 2.3.1

PROPOSED OPERATIONS IN THE SEZ AND SUPPORTING RESIDENTIAL TOWNSHIP

The proposed operations in the MMEMSEZ consists of multiple plants used for energy generation, metallurgy and bulk infrastructure supply. Proposed

The following diagram and table provide an overview of the proposed operations that form part of the MMEMSEZ as well as land uses incorporated as part of the proposed residential township. Diagram 2.1: Concise Overview of Operations in the MMEMSEZ and Residential Township Land Uses Energy Generation Operations

MMEMSEZ

PROPOSED OPERATIONS, INVESTMENT EMPLOYMENT REQUIREMENTS

Metallurgical Plants

Supporting Industries

Supporting Services Bulk Infrastructure and Waste Management

Residential Township

2.3

Commercial District

Residential District

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Table 2.1: MMEMSEZ Proposed Operations and Residential Township Land Uses Project Type

Project Name

Project Type

Project Name

Bulk Infrastructure and Waste Management

Process and Sewerage Treatment

Bulk Infrastructure and Waste Management

Industrial and Domestic Water

Residential Township

Office Buildings

Residential Township

Government Offices

Residential Township

5-Star Hotel

Residential Township

3-Star Hotel

Energy Generation

Thermal Power Plant

Energy Generation

Coal Washery

Energy Generation

Coking Plant

Energy Generation

Heat Recovery Power Generation (included as part of Coking Plant)

Metallurgical Plant

High Vanadium Steel

Metallurgical Plant

Manganese Steel

Metallurgical Plant

Ferromanganese

Residential Township

Shopping Malls, Supermarket & Farmers Market

Metallurgical Plant

Silicon-Manganese

Residential Township

Worship Buildings

Metallurgical Plant

Stainless Steel Residential Township

Smart Buildings

Metallurgical Plant

Ferrochrome

Metallurgical Plant

Vanadium-Titanium Magnetite

Residential Township

Residential (Large Erven)

Supporting Industries

Cement

Residential Township

Residential (Medium Erven)

Supporting Industries

Refractories Residential Township

Apartment Blocks

Supporting Industries

Lime

Supporting Services

EMSEZ Administrative Centre

Residential Township

Hospital

Supporting Services

Visitors Lodge and Conservation Area

Residential Township

Schools

Supporting Services

Logistics Centre

Residential Township

Museum

Supporting Services

Bonded Area

Residential Township

Gymnasium

Supporting Services

Machinery Zone Residential Township

Central Plaza

Supporting Services

Processing Zone

Supporting Services

Fuel and Gas Storage Facilities

Residential Township

Parking (Basement)

Bulk Infrastructure and Waste Management

Domestic Waste Site

Residential Township

Parking (Open)

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

From Table 2.1 it is evident that the MMEMSEZ proposes a broad range of operations that can broadly be classified in accordance to five functions: ✓ ✓ ✓ ✓ ✓

Energy generation, Metallurgical plants, Supporting industries, Supporting services, and Bulk infrastructure and waste management

Similarly, the proposed residential township incorporates a wide range of land uses that can be summarised in accordance with the following two functions: ✓ A commercial district, and ✓ A residential district.

Metallurgical plants seek to process a total of 1 900 (10 ktpa) of raw materials to produce metallurgical steel and other products. Industries such as the cement, lime and refractories plants can process a total of 350 (10 ktpa). Sewerage and wastewater treatment seeks to process more than 50 (10 m²/day) of waste water. The following table provides a concise overview of the total investment value per the broad range of operations in the SEZ. The table also provides a concise overview of the total investment value for the proposed residential township. A detailed breakdown per plant and other activities can be found in Section 2.3.7. Table 2.42.5: Broad Overview of the MMEMSEZ Total Investment Value Total Investment Value Project Type

The following table provides a concise overview of the planned capacity per the broad range of operations in the SEZ. A detailed breakdown per plant and other activities can be found in Section 2.3.7. Table 2.22.3: Broad Overview of the Planned Capacity of MMEMSEZ Operations Planned Capacity Project Type

USD / Million Total Energy Generation Investment

$4 873

R69 634

Total Metallurgical Plant Investment

$10 346

R147 843

$565

R8 074

$2 750

R39 297

Total Bulk Infrastructure Investment

$190

R2 715

Total Commercial District Investment

$800

R11 432

Total Residential District Investment

$600

R8 574

$18 724

R267 563

$1 400

R20 006

$20 124

R287 569

Total Supporting Industries Investment

Planned Capacity Total Supporting Services Investment

Total Energy Generation Capacity

3 690 MW

Total Metallurgical Plant Capacity

1 900 (10 ktpa)

Total Supporting Industries Capacity Total Bulk Infrastructure Capacity

R / Million

350 (10 ktpa) 52.5 (10k m²/day)

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

Total MMEMSEZ Investment Total Residential Township Investment

Planned energy generation estimates indicate that the SEZ seeks to generate 3 690 MW of electricity to support metallurgical, supporting and administrative functions

Total Investment Value

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

Table 2.3 shows that the total investment value for operations in the SEZ amounts to $18.724 billion. To convert the US Dollar investment value to

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

South African Rands, an average Rand to Dollar exchange rate between August 2018 and August 2019 is used (the calculation of an average over a year was done to compensate for day-to-day fluctuations and to provide the most common and stable exchange rate). The average exchange rate between August 2018 and August 2019 is R14.29 per 1 US Dollar. When applying the exchange rate to the US Dollar investment value, the total South African Rand investment value for the MMEMSEZ is approximately R267.563 billion.

The following table provides a concise overview of the number of labourers required per operational entity in the MMEMSEZ as well as labour required in the residential township. The table and also further identifies the number of employees per skills classification. A detailed breakdown per plant and other activities can be found in Section 2.3.7. Table 2.62.7: Broad Overview of the Total Number of Labourers Required in the MMEMSEZ and Residential Township Skills Classification Total

The total US Dollar investment value for the proposed residential township amounts to $1.4 billion. Converted to South African Rand the investment value is calculated to be R20.006 billion. The total investment value for the MMEMSEZ and residential township amounts to $20.124 billion. From a South African Rand perspective the total investment amount is R287.569 billion.

Project Type

340

2 948

3 780

Total Metallurgical Plant Labour

3 917

2 712

23 502

30 131

257

178

1544

1 979

1 612

1 116

9 672

12 400

398

510

455

315

2 730

3 500

195

135

1 170

1 500

6 344

4 392

38 064

48 800

650

450

3 900

5 000

6 994

4 842

41 964

53 800

Total Supporting Industries Labour

2.3.2

Total Residential District Labour

The Internal Master Plan of the MMEMSEZ (August 2019) outlines the total number of labourers required per operational entity and within the residential township. The master plan further highlights the number of employees required per skills classification and labour market source.

Ordinary Staff

491

515% of the total investment value is vested with the establishment of metallurgical plants, followed by energy generation (26%) and supporting services (15%). The development of a residential township proportionally represents 7% of the total investment value.

The proposed operations in the MMEMSEZ require labour to enable the functionality of plants, supportive industries and administrative functions. Likewise, the residential township also requires labour in order to facilitate optimal functionality. Based on the planned capacity of each proposed operation in the SEZ as well as proposed land uses in the residential township, an estimated number of labourers have been calculated.

Professionals

Total Energy Generation Labour

Total Supporting Services Labour Total Bulk Infrastructure Labour Total Commercial District Labour

ESTIMATED LABOUR REQUIRED TO SUPPORT OPERATIONS IN THE MMEMSEZ

Executives

Total MMEMSEZ Labour Total Residential Township Labour Total Labour

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

According to Table 2.4, 48 800 labourers are required by operational entities within the SEZ at full operational status compared to 5 000 labourers in the residential township. Approximately 13.0% of labourers are required in executive roles compared to 9.0% of labourers required for professional positions and 78.0% of labourers required as ordinary staff. Labourers are primarily required to support metallurgical operations (56%61.7%) and administrative and support services (235.4%).

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

According to the Internal Master Plan (August 2019): ✓ 60% of executive positions are to be filled from the local labour market while the remaining 40% of positions are to be filled from the Chinese labour market. ✓ 75% of professional positions are to be filled from the local labour market while the remaining 25% of positions are to be filled from the Chinese labour market. ✓ 95% of ordinary staff positions are to be filled from the local labour market while the remaining 5% of positions are to be filled from the Chinese labour market. Based on the above, on average 89% or 43 26147 694 of potential employment opportunities created internally by the SEZ and residential township are to be occupied by labour from the South African labour force. In more detail: ✓ 3 8064 196 executive employment opportunities will be available to the South African labour force, ✓ 3 6323 294 professional employment opportunities will be available to the South African labour force, ✓ 39 86636 161 ordinary staff employment opportunities will be available to the South African labour force.,

applied to the capital investment value have been applied to this subsection. Table 2.8: Broad Overview of the MMEMSEZ Total Annual Output Total Output Investment Value Project Type USD / Million Total Energy Generation Output

$3 636

R51 956

Total Metallurgical Plant Output

$20 756

R296 600

Total Supporting Industries Output

$1 315

R18 791

Total Supporting Services Output

$3 200

R45 727

Total Bulk Infrastructure Output

$171

R2 444

Total Commercial District Output

$900

R12 861

Total Residential District Output

$500

R7 145

$29 078

R415 518

$1 400

R20 006

$30 478

R435 523

Total MMEMSEZ Output Total Residential Township Output

2.3.3

TOTAL ANNUAL OUTPUT OF THE MMEMSEZ AND RESIDENTIAL TOWNSHIP AND SEZ SOURCES OF REVENUE

The operation of the MMEMSEZ and residential township would result in a monetary output for operators and investors of the SEZ. The output is based on the expected processing capacity of plants and other function of the SEZ and the sale of products to the market. The purpose of the sub-section is to provide an overview of the estimated annual monetary output of the SEZ and other activities. The information provides background to the anticipated impact that the SEZ may have on the broader economy. The following table provides an overview of the estimated monetary output that could be achieved by the MMEMSEZ and residential township during full operational capacity. It should be noted that assumptions similar to those

R / Million

Total Output Value

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

Table 2.5 shows that the bulk of monetary output that could be generated by the MMEMSEZ and residential township is from MMEMSEZ operations. The total estimated monetary output of the MMEMSEZ and residential township is R435.5 billion of which R415.5 billion is generated by the SEZ and R20.0 billion is generated by the residential township. Monetary output generated by metallurgical operations proportionally represent 68% of total output value, followed by energy generation (12%) and supporting services (11%).

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The Internal Master Plan (August 2019) further notes that products produced by the MMEMSEZ will by and large be marketed to the Chinese market (i.e. 70% of products produced). Approximately 20% of products produced are marketed to the African market (mostly SADC and DRC), while 10% of products produced are marketed to the South African market. A detailed breakdown of estimated monetary output per operational activity of the MMEMSEZ and residential township are provided in Section 2.3.7. Aside from monetary output generated by operations in the SEZ and the operation of the residential township, a number of revenue streams generate income directly for the SEZ and SEZ Operator. The income derived from revenue streams (i.e. moneys paid by operational entities in the SEZ to the SEZ Operator for services rendered) are used by the SEZ Operator for capital, operating and maintenance purposes.

2.3.4

MMEMSEZ AND RESIDENTIAL TOWNSHIP PHASING

The phasing of the MMEMSEZ and residential township construction and operation are concurrent processes meaning that when one component of the SEZ is completed operations can start whilst construction of other components continue. It should be noted that the phasing of the MMEMSEZ implementation is dependent on the approval of the EIA application as well as procurement of external bulk services such as electricity and water. Additionally, construction of access roads and road reconfigurations to the SEZ have to be completed in order to facilitate operations at the SEZ. According to the Internal Master Plan (August 2019) the broad phasing and operation of components of the SEZ is structured as follows: Table 2.9: Implementation Phasing of the MMEMSEZ Construction Start (Year)

Construction End (Year)

Early Works and Internal Bulk Infrastructure

2020

2021

Phase 1 Construction

2022

2026

Phase 2 Construction

2026

2029

Phase 3 Construction

2029

2031

The revenue streams include:

Item

✓ ✓ ✓ ✓ ✓ ✓ ✓

Potable water purification and distribution; Process water treatment & distribution; Electricity distribution; Environmental management fee including a rehabilitation fund; Municipal waste collection Rates (refuse) & taxes (property) payable to the municipality Operator levy to all investors for the maintenance of roads, storm water, security and other non-met red service utilities; ✓ Sanitation (sewerage) collection & treatment, ✓ Industrial waste management, and ✓ Land lease to all investors. The revenue generated from the above revenue streams assist with the payment of service level agreements to other entities for services rendered to the SEZ. Services include: ✓ ✓ ✓ ✓

Municipal waste collection or fee at landfill site Taxes payable applicable to the municipality Bulk service providers e.g. water and electricity Land lease cost to SOC

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

Detailed information in regard to the phasing and sub-phase of each SEZ component is provided in Section 2.3.7. 2.3.5

EXTERNAL AND INTERNAL BULK INFRASTRUCTURE

The MMEMSEZ as well as residential township requires extensive bulk infrastructure in order to operate effectively and sustainably. The provision of these services in the context of the Limpopo Province, which is a water scarce area, is of paramount importance in order to secure future sustainability of the SEZ and associated facilities.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

EXTERNAL BULK SERVICES

✓ ✓ ✓ ✓ ✓

According to the Internal Master Plan (August 2019), the provision of external bulk services is the responsibility of the MMSOC. The MMSOC is responsible for the following (please refer to the Internal Master Plan – August 2019 for more details):

The SEZ plans to internally treat sewerage and water and seek to optimally reuse water as far as possible. In a similar fashion electricity provision is facilitated by the SEZ, while connections to outside telecommunications and data providers will be facilitated.

Thus, it is necessary to provide an overview of the provision of external and internal bulk services as an indicator to the increased demand that is likely to impact on the local, regional and provincial service delivery infrastructure.

✓ ✓ ✓ ✓ ✓

Upgrading of existing roads to the MMEMSEZ. Building of new interchanges from the N1 national road. Upgrading and installation of existing and new railway lines. Providing of bulk water up to the boundaries of the MMEMSEZ site. Providing of electricity/substation(s)/switch station(s) to the boundaries of the MMEMSEZ and relocating an existing 132kVA line. ✓ Telecommunication/data facilities up to the border of the EMSEZ site. According to the Internal Master Plan water demand in the area, which includes the MMEMSEZ, all new mines, and water needs of the Musina and Makhado Municipalities escalate from 95 million m³ litres of water per annum in 2020 to 132 million m³ litres of water per annum by 2040. it has been noted that the MMEMSEZ will seek to acquire water from multiple sources which includes sourcing water from Zimbabwe. Current plans are still underway in determining the provision and quantity thereof. The demand for electricity by the MMEMSEZ is largely contained by the MMEMSEZ through the power plant being constructed as part of SEZ. The power plant will supply the needs of the SEZ and at full operational capacity will be able to export electricity to South Africa. Up to the time that the power plant is erected, the SEZ requires electricity from Eskom. It is estimated that 1 MVA of electricity is required during the construction phase where after demand from Eskom will decrease as the power plant comes online.

Communication infrastructure, Data infrastructure, Sewer infrastructure, Water infrastructure, and Electricity infrastructure.

2.3.6

LOGISTICAL REQUIREMENTS OF THE MMEMSEZ

The MMEMSEZ will, once fully operational, require significant logistical operations in order to transfer raw materials and other products to the SEZ and transport finished products to local, African and international markets. The following is an excerpt from the Internal Master Plan (August 2019) regarding the inbound and outbound logistical requirements of the SEZ. INBOUND LOGISTICS It is planned that all inbound transport of material will take place either via rail or truck road transport. Access to all sites were planned for both methods. Weighbridges will be installed to weigh all incoming and outgoing material. It is planned to upgrade the existing Mopane railway station with a shunting yard to cater for 50 trains per day with each 50 wagons per train and 300 road trucks per day (at full capacity in phase 3) with enough parking area for the road trucks. Provision were made for bulk fuel and gas storage facilities in the northern area of the MMEMSEZ site.

INTERNAL BULK SERVICES

A bonded area was provided where al final products can be stored, administrated, inspected, weighed, checked, sealed and loaded for export or local use. Weighbridge(s), administration centre and allocated areas will be established to cater for all different investors.

Internal bulk services of the MMEMSEZ include:

OUTBOUND LOGISTICS

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The train inbound and outbound facilities will be the same. All trains will come in and out on the same rail tracks/path. Enough rail lines will be provided to handle the volume and shunting required and planned. A bonded area was provided where al final products can be stored, administrated, inspected, weighed, checked, sealed and loaded for export or local use. Depending on the final products or materials, it can be taken out of the MMEMSEZ site (bonded area) either by train or road trucks in sealed containers. An exit only for final products will be provided at the southwest side of the MMEMSEZ site. Therefore, all materials will flow from the north side to the south side of the MMEMSEZ site. The Internal Master Plan (August 2019) identifies that approximately 4 552 (10k tpa) of inbound materials are expected compared to 1 090 (10k tpa) outbound products.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

2.3.7

DETAILED OVERVIEW OF PROPOSED OPERATIONS, INVESTMENT VALUE AND EMPLOYMENT OPPORTUNITIES IN THE MMEMSEZ

The following table provides a detailed breakdown of the operations proposed in the MMEMSEZ, the total estimated investment value per operational entity, and the number of employment opportunities that could be generated by each operational entity. Table 2.10: Detailed Breakdown of the MMEMSEZ Operational Entities Project Type

Project Name

Total Planned Capacity

Total Investment Value US Dollar / Million

Rand / Million

Total Number of Labourers Executives

Professionals

Ordinary Staff

Total Output Value Total Employment Opportunities

US Dollar / Million

Rand / Million

Energy Generation

Thermal Power Plant

3 300 MW

$3 750

R53 587

143

858

1 100

$1 815

R25 936

Energy Generation

Coal Washery

2 000 (10 ktpa)

$150

R2 143

130

780

1 000

$540

R 7 717

Energy Generation

Coking Plant

300 (10 ktpa)

$759

R10 846

218

151

1 310

1 680

$1 140

R16 290

Energy Generation

Heat Recovery Power Generation (included as part of Coking Plant)

390 MW

$214

R3 058

$141

R2 013

Metallurgical Plant

High Vanadium Steel

100 (10 ktpa)

$500

R7 145

325

225

1 950

2 500

$1 000

R14 290

Metallurgical Plant

Manganese Steel

100 (10 ktpa)

$600

R8 574

520

360

3 120

4 000

$1 800

R25 722

Metallurgical Plant

Ferromangane se

50 (10 ktpa)

$300

R4 287

133

800

1 025

$1 100

R15 719

Metallurgical Plant

SiliconManganese

50 (10 ktpa)

$266

R3 801

130

780

1 000

$556

R7 945

Metallurgical Plant

Stainless Steel

300 (10 ktpa)

$2 400

R34 296

624

432

3 744

4 800

$6 000

R85 739

Metallurgical Plant

Ferrochrome

300 (10 ktpa)

$1 500

R21 435

801

554

4 806

6 161

$2 900

R41 441

Metallurgical Plant

VanadiumTitanium Magnetite

1 000 (10 ktpa)

$4 780

R68 305

1 384

958

8 303

10 645

$7 400

R105 745

Supporting Industries

Cement

200 (10 ktpa)

$145

R2 072

468

600

$180

R2 572

Supporting Industries

Refractories

50 (10 ktpa)

$90

R1 286

569

729

$300

R4 287

Supporting Industries

Lime

100 (10 ktpa)

$330

R4 716

507

650

$835

R11 932

Phasing Phase 1

Phase 2

Phase 3

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Project Type

Project Name

Supporting Services

EMSEZ Administrative Centre

Supporting Services

Visitors Lodge

Supporting Services

Total Planned Capacity

Total Investment Value US Dollar / Million

Rand / Million

Total Number of Labourers Executives

Professionals

Ordinary Staff

Total Output Value Total Employment Opportunities

US Dollar / Million

Rand / Million

$400

R5 716

104

624

800

$300

R4 287

Logistics Centre

$500

R7 145

143

858

1 100

$600

R8 574

Supporting Services

Bonded Area

$700

R10 003

390

500

$800

R11 432

Supporting Services

Machinery Zone

$500

R7 145

325

225

1 950

2 500

$600

R8 574

Supporting Services

Processing Zone

$650

R9 288

975

675

5 850

7 500

$900

R12 861

Supporting Services

Fuel and Gas Storage Facilities

Bulk Infrastructure and Waste Management

Domestic Waste Site

Bulk Infrastructure and Waste Management

Process and Sewerage Treatment

14 (10k m²/day)

$90

R1 286

117

150

$61

R872

Bulk Infrastructure and Waste Management

Industrial and Domestic Water

39 (10k m²/day)

$100

R1 429

281

360

$110

R1 572

Residential Township

Commercial District

170 000 m²

$800

R11 432

455

315

2 730

3 500

$900

R12 861

Residential Township

Residential District

1 161 200 m²

$600

R8 574

195

135

1 170

1 500

$500

R7 145

$20 124

R287 569

6 994

4 842

41 964

53 800

$30 478

R435 523

Total

Phasing Phase 1

Phase 2

Phase 3

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

The following map provides an overview of the internal master plan of the MMEMSEZ (August 2019)

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 2.7: Internal Master Plan of the MMEMSEZ - August 2019

Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2021

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

2.4

SYNTHESIS

The following provides a concise overview of Chapter 2. MMEMSEZ OVERVIEW ✓ The proposed development site is positioned across the shared administrative border of the Musina and Makhado Local Municipalities and is positioned within the Vhembe District Municipality administrative region. ✓ The development site consists of 8 farms totaling 8 048 hectares. ✓ The metallurgical cluster’s aim is to beneficiate metals with supporting up- and down-stream activities. The initiative strives toward creating a mixed land-use offering that comprises necessary infrastructure that will support optimal development and operational activities once complete. ✓ The MMEMSEZ proposes a broad range of operations that can be classified in accordance to five functions: • Energy generation, • Metallurgical plants, • Supporting industries, • Supporting services, and • Bulk infrastructure and waste management ✓ A proposed residential township incorporates a wide range of land uses that can be summarised in accordance with the following two functions: • A commercial district, and • A residential district.

• •

The total US Dollar investment value for the proposed residential township amounts to $1.4 billion. Converted to South African Rand the investment value is calculated to be R20.006 billion. 51% of the total investment value is vested with the establishment of metallurgical plants, followed by energy generation (26%) and supporting services (15%). The development of a residential township proportionally represents 7% of the total investment value.

✓ 48 800 labourers are required by operational entities within the SEZ at full operational status compared to 5 000 labourers in the residential township. • Approximately 13.0% of labourers are required in executive roles, • 9.0% of labourers required for professional positions, and • 78.0% of labourers required as ordinary staff. ✓ The source labour market for labourers can be summarised as: • 60% of executive positions are to be filled from the local labour market while the remaining 40% of positions are to be filled from the Chinese labour market. • 75% of professional positions are to be filled from the local labour market while the remaining 25% of positions are to be filled from the Chinese labour market. • 95% of ordinary staff positions are to be filled from the local labour market while the remaining 5% of positions are to be filled from the Chinese labour market. ✓ The bulk of monetary output that could be generated by the MMEMSEZ and residential township is from MMEMSEZ operations. • The total estimated monetary output of the MMEMSEZ and residential township is R435.5 billion of which R415.5 billion is generated by the SEZ and R20.0 billion is generated by the residential township.

✓ The total investment value for the MMEMSEZ and residential township amounts to $20.124 billion. From a South African Rand perspective the total investment amount is R287.569 billion. • The total investment value for operations in the SEZ amounts to $18.724 billion or approximately R267.563 billion.

LOCATION ANALYSIS

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

3 LOCATION ANALYSIS 3.1

INTRODUCTION

3.2

SPATIAL PERSPECTIVE

Chapter 2 seeks to provide an analysis of the locational attributes of the zone of influence (as discussed in Chapter 1). The locational attributes in this instance, refers to the spatial and developmental direction and status of the greater district and local (host municipalities) zone of influence in regard to strategic focus areas, nodal development, and developmental initiatives.

3.2.1

To purposefully assess and analyse the locational attributes of the afore mentioned zones of influence, an analysis of policy documents such as the Spatial Development Framework (SDF).

✓ A national spatial schema to inform, direct and guide all future infrastructure investment and development spending decisions by government and the private sector, ✓ A carefully chosen distinct set of nationally significant places, connectors and areas in and around which to align, integrate and coordinate investment by the private sector and all three spheres of government, and ✓ A spatially explicit assessment and accounting tool for monitoring and evaluating all spending and investment decisions by government and the private sector in space and time.

The analysis will firstly focus on identifying the locational directives at a district scale, where after the local or host municipality/s locational directives will be considered. It should be noted that a lagging effect does exist between policy directives and on-the-ground conditions. Additionally, an overview of the manufacturing industry, and more specifically manufacturing / metallurgical sub-sectors is conducted. The overview will seek to review the scope and extent of manufacturing, specifically aligned to the SEZ, within the context of South Africa, the Limpopo Province, and the host municipalities. This information will assist in understanding the importance and relevance of the manufacturing industry within the various spheres of the economy and will allow for identifying the contextual background to manufacturing operations of the sort. Lastly, an analysis of property development trends will be considered in order to purposefully understand the spatial development of the local zone of influence and the relevant impacts associated with demand and supply characteristics.

NATIONAL CONTEXT

DRAFT NATIONAL SPATIAL DEVELOPMENT FRAMEWORK (2018) The National Spatial Development Framework of 2018 (Draft) is structured to outline desired spatial growth based on five frames for spatial development. The spatial frames identified by the NSDF provide:

The five frames identified by the NDSF identifies key and priority areas where government and private sector investment opportunities could/should be directed. In light of the Musina-Makhado SEZ, it is essential to understand the intended and proposed future environment within which the SEZ is proposed to function and whether the SEZ is aligned to future spatial plans of National Government. The following seeks to investigate the proposals outlined by the NSDF in accordance with the affected project area.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

FRAME 1: URBAN REGIONS, CLUSTERS AND DEVELOPMENT CORRIORS AS THE ENGINES OF NATIONAL TRANSFORMATION AND ECNOMIC GROWTH

FRAME 2: PRODUCTIVE RURAL REGIONS AND REGIONAL DEVELOPMENT ANCHORS AS THE FOUNDATION OF NATIONAL TRANSFORMATION

To focus and sustain national economic growth, drive inclusive economic development and derive maximum transformative benefit from urbanisation and urban living.

To ensure national food security, rural transformation and rural enterprise development and quality of life in rural South Africa through a set of strong urban-rural development anchors in functional regional-rural economies.

According to the NSDF, the town of Makhado is identified as a regional growth centre whilst Musina town is identified as a rural service centre. Additionally, the N1 Highway is identified as a national connectivity corridor. The corridor links with other inter-regional development corridors such as the N4, N2 and N3 Highways.

The Musina and Makhado areas are positioned within the NSDF identified gri and resource enterprise resource region. The purpose of the region is to identify, protect and manage development of land with high agricultural production potential, and small-scale agriculture and resource enterprise development potential.

Corridor development in this frame is essential in light of the MusinaMakhado SEZ whereby the focus is on enabling trade with SADC and other countries trade flows are seen as a tool to strengthen cities and towns positioned along these corridors.

The frame also identifies Makhado as a regional growth centre and Musina as a rural service centre. Makhado is viewed as a rural urban anchor. The frame identifies that local rural-urban anchor towns should be prioritised and strengthened to support regional development based on agriculture, mining production and regional tourism.

Map 3.1: Frame 1 Proposals Map 3.2: Frame 2 Proposals

Source: DEMACON ex NSDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

FRAME 3: NATIONAL ECOLOGICAL INFRASTRUCTURE SYSTEM AS ENABLER FOR A SHARED AND SUSTAINABLE RESOURCE FOUNDATION

FRAME 4: NATIONAL CONNECTIVITY AND ECONOMIC INFRASTRUCTURE NETWORKS AS ENABLER FOR A SHARED, SUSTAINABLE AND INCLUSIVE ECONOMY

To protect and enable sustainable and just access to water and other national resources for quality livelihoods of current and future generations.

To develop, expand and maintain a transport, trade and communication network in support of national, regional and local economic development.

No detail specific interventions and focus areas impact on the Musina and Makhado area except for inter-regional resource development based on cross-border parks and the protection of ridges.

The frame identifies that existing strategic inter-regional and national road, rail, ports, harbours and logistics hubs should be capitalised on and extended. In this regard the N1 highway and Beitbridge border post is of essence. The spatial infrastructure should also support a sustainable mining economy.

Map 3.3: Frame 3 Proposals

The Makhado area is also seen as the north-western most section of a consolidated urban growth area stretching from Mbombela to Thohoyandou. The consolidation area seeks to intensify corridor areas and consolidate the development footprint and national connectivity. Map 3.4: Frame 4 Proposals

Source: DEMACON ex NSDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

FRAME 5: NATIONAL SOCIAL SERVICE AND SETTLEMENT INFRASTRUCTURE NETWORK IN SUPPORT OF NATIONAL WELLBEING

3.2.2

To ensure effective access to the benefits of high quality basic, social and economic services in a well-located system of vibrant rural service towns, acting as urban-rural anchors and rural-rural connectors.

The Vhembe District Municipality has identified, through its Integrated Development Plan and Limpopo Spatial Development Framework, a hierarchy of settlements that focus development in strategic localities for the purposes of economic and social development.

The Makhado town as regional growth point and Musina as rural service centre should through consolidated settlement and rural economic development interventions strengthen local access to social and economic activities and services.

According to the Vhembe IDP the following nodes can be identified in the district:

Investment into rural-to-rural public transport and other transport and communication linkages with rural anchors should be undertaken to enable access to higher order services and economic functions. Consolidated sustainable settlement patterns should be encouraged in rural hinterlands through the consolidation of these settlement areas and discouraging growth of new settlements in unsustainable areas. Map 3.5: Frame 5 Proposals

DISTRICT CONTEXT AND LOCATIONAL ATTRIBUTES

DISTRICT INTEGRATED DEVELOPMENT PLAN (2017/18)

✓ Provincial Growth Points – Musina, Makhado and Thohoyandou. ✓ District Growth Points – Elim, Waterval, Malamulele, Vuwani and Sibasa. ✓ Municipal Growth Points – Masisi, Shakadza, Mutele, Dzanani, Madombidzha, Ka-Majozi, Mhlinga, Tshilamba and Tshandama. According to the Vhembe IDP, the following corridors are of importance to the district: ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

N1 National Road from Polokwane to Beitbridge R522 from Vivo to Makhado R523 from Vivo via Waterpoort to Masekwapoort R521 from Vivo to Pont drift Border R572 from Musina to Pont drift R524 from the Makhado central business district to Punda Maria and Mozambique R529 from Basani, Malamulele, Giyani to Moiketsi R81 from Road R524 to Giyani R525 from Mopani the N1 Road to Pafuri Gate R578 from Kruger National Park, Malamulele,Vuwani, Giyani via Elim to the N1 National Road Thohoyandou, Masisi, Tshikondeni and Phafuri gate D4 from N1, Vleifontein ,Elim Vuwani Malamulele to Shangoni gate

Source: DEMACON ex NSDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

3.2.3

LOCAL CONTEXT AND LOCATIONAL ATTRIBUTES

MUSINA SPATIAL DEVELOPMENT FRAMEWORK (2014/15) It should be noted that due to the latest version of the Musina SDF being published in the 2014/15 financial year, the SDF does not consider the inclusion of portions of the previous Mutale Local Municipality after the redemarcation of municipal boundaries for the 2016 local government elections. Background And Settlement Hierarchy The Musina Local Municipality’s administrative boundaries have been changed by the Demarcation Board for 2016’s local government elections. The municipality’s eastern border has been expanded to include the northern portions of the former Mutale Local Municipality. The area included into the Musina Local Municipality is primarily rural in nature. The majority of the area included forms part of the Vhembe Traditional Authority. The municipal area consists of a primary urban centre (town) and a number of smaller settlements, usually rural in nature and primarily functioning as residential clusters for local communities. The Musina SDF identifies that the settlement hierarchy of the municipality can be described as follow: ✓ First Order Settlement or Provincial Growth Node:

•

Includes the town of Musina and adjacent Nancefield extension. The Musina Town and surrounding suburbs are characterised by reasonably high levels of economic and service delivery levels and acts a service centre to local and surrounding communities. ✓ Third Order Noes/Settlements:

•

✓ Fifth Order Nodes/Settlements:

•

Includes areas such as Madimbo, Malale, Tshikhudini, Tanda and Dombani. These settlements are considered to be residential conglomeration areas with no to tlimited economic activity and service delivery activities. These settlements are considered to have limited opportunities for economic and service delivery development.

Transportation And Corridors The Musina Local Municipality is dissected by various major transportation routes at various scales and levels. The most important of these is the N1 Highway which traverses the municipality from north to south and is considered to be a primary corridor for the municipality. Other major corridors include: ✓ The R572 (east-west linkage from Musina), R525 (east-west linkage between Mopane and Feeskraal), and R509 (north-south linkage between Musina and Tshipise). These corridors are considered to be secondary corridors that link important settlements and provide direct transportation routes. ✓ The R521 road which is a north-south linkage between Pontdrift and Alldays is considered to be a tertiary corridor. The SDF notes that the N1 highway between Musina and Beitbridge is a primary public transport corridor, while the R521 is a primary commuter corridor which connects Polokwane, Dendron and Alldays. With regards to freight corridors, the SDF notes that the N1 highway between Polokwane and Beitbridge is the most important, while the R521 from Vivo to Pontdrift and the R572 from Musina to Pontdrift are secondary freight transport routes.

Includes the Tshipise settlement due to the service delivery nature of the settlement. Tshipise provides a limited selection of economic and service delivery functions and services the local community, surrounding farming communities and tourists visiting the area.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Municipal Housing Backlog and Settlement Densities The municipality is also characterised with exceptionally low settlement densities apart from the Musina and Nancefield areas and areas situated along the major rivers that traverse the municipal area. The municipality has determined that the Musina Town and surrounds should be the focus of densification and compact urban development in order to facilitate ease of service delivery and economic growth potential. The housing backlog of the municipality is determined to be approximately 12 600 households. Apart from 200 subsidised housing opportunities being constructed in the Nancefield area, no other immediate housing projects are being undertaken. This is due to long waiting processes with COGHSTA which has to accredit the municipality to implement subsidised housing projects. The SDF has identified that due to the economic growth of the municipality an influx of new residents is experienced. The influx of new residents in search of economic opportunity primarily locate in backyard and informal settlements in and around the Musina town and in some cases wider rural settlements. Future Development Plans The future development of the municipality is largely concentrated in the Musina town and its surrounds. According to the SDF, a total of 553 ha of land is available for development in the Musina urban edge. From a longterm perspective, the town has the opportunity to expand into more than 3 900 ha of land. Nearly 1 000 ha would be considered not developable or required for service provision. The municipality and more specifically Musina town is considered to be the focus of future investment. Investment potential exists through: ✓ The revitalisation of the Musina central business district:

•

The CBD is influenced by high levels of congestion, informality and urban decay.

•

It is proposed that: ‒ The CBD be revitalised to accommodate business and economic growth, ‒ Infrastructure and services be upgraded to ease congestion and provide an environment that is suited to investment, ‒ Providing spaces for informal traders, ‒ Upgrading of the existing taxi rank in Musina to an integrated public transport node. ✓ Creating urban-rural linkages:

•

Integration of rural settlements to the Musina urban node through public transport and mobile service delivery. ✓ MUTASSHI Special Economic Zone:

•

The purpose of the project is to develop a special economic zone and logistics hub,

•

The focus area for the project is the activity corridor between Musina and Beitbridge border post,

•

The proposed development seeks to include a regional shopping centre, 10-unit warehouses, double storey office blocks and 10 industrial buildings. ✓ Beitbridge Gateway Economic Zone:

•

The objective is to mirror the development taking place on the Zimbabwean side of the border to include: ‒ Low carbon sustainable city, ‒ Recreational centre, ‒ Development of an e-commerce logistics hub, and ‒ The establishment of an empowerment incubator. ✓ Limpopo Eco-Industrial Park:

• •

The project is to be developed in the Antonville area, The proposed development is to include: ‒ A coke plant ‒ A power co-generation plant, ‒ A gas to liquid plant, ‒ Plasma waste gasification plant, and

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

‒ Brick making factory. ✓ N1 Bypass:

Map 3.7: Musina Spatial Development Framework Proposed Residential Development

•

Development of a bypass road for the N1 Highway to eliminate heavy vehicle through fare in the CBD of Musina, and a truck stop is also proposed with the bypass. ✓ Proposed upgrading of the Pontdrift border post to alleviate congestion at the Beitbridge border post. ✓ Residential development expansion, infill and densification.

• • • •

2 270 future mixed-use residential erven proposed, 2 500 high density residential erven proposed, 1 200 medium density residential erven proposed, and 160 low density residential erven proposed.

Map 3.6: Musina Spatial Development Framework Settlement Hierarchy

Source: DEMACON ex Musina SDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 3.8: Musina Spatial Development Framework Proposals

Source: DEMAON ex Musina SDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MAKHADO SPATIAL DEVELOPMENT FRAMEWORK Background And Settlement Hierarchy The Makhado Local Municipality is situated south of the Musina Local Municipality and is an important bypass for travellers and freight travelling between Musina and Polokwane. The municipality consists of a central urban core (town) and semi-urban and rural settlements distributed primarily towards the eastern parts of the municipality. The eastern area of the municipality contains the western most areas of the Venda Traditional Authority. The Makhado SDF identifies that the settlement hierarchy of the municipality can be described as follow: ✓ First Order Settlement or Provincial Growth Node:

•

Includes the town of Louis Trichardt and adjacent Tshikota. The Louis Trichardt town and surrounding suburbs are characterised by reasonably high levels of economic and service delivery levels and acts a service centre to local and surrounding communities. ✓ Second Order Nodes/Settlements:

• • •

District growth point – Elim/Waterval

•

Local service points – Buysdorp, Thalane, Amancisini, Valdesia, Vleifontein, and Waterpoort.

Municipal growth point – Madombidzha

Population concentration points – Ravele, Tshino, Tshwakhuma, and Maebane. ✓ Third Order Nodes/Settlements:

The municipality’s population is primarily situated in rural and traditional authority areas, whilst the formalised urban component of the municipality constitutes a small percentage of the population.

Development potential, services and economic growth in the rural areas are hampered by the lack of private ownership. Land ownership in the rural areas of municipality is primarily under traditional authority administration and the municipality has a number of issues related to servicing communities, obtaining billing and revenue generation through the provision of services and accessing land for new development opportunities. Nevertheless, agriculture is a dominant land use in rural communities, while land uses such as commercial, business, retail and industrial are found in Louis Trichardt. Land ownership in the municipality primarily consists of private ownership but, government entities do own nearly 30% of land. It should be noted that a portion of government owned land is associated with tribal authorities, whose land is kept by government in the form of a trust. Transportation And Corridors The transportation network and corridors in the Makhado municipality is characterised by national and regional roads. Most notably, the N1 highway is the dominant corridor in the municipality but traverses in a north-south direction. Regional roads such as the R523, R522, R524, and R578 traverse the municipality in an east-west direction, creating linkages between the primary corridor and communities in rural localities. Major public transport routes identified by the SDF include: ✓ ✓ ✓ ✓ ✓ ✓

The N1 highway between Louis Trichardt and Nzhelele, The N1 highway and R578 between Louis Trichardt and Elim, The R578 between Elim and Giyani, The R524 between Thohoyandou and Tshakhuma, The R523 between Thohoyandou and Nzhelele, and The R578 between Bugeni and Giyani.

Rural settlements also show disparities in regard to their levels of development and infrastructure. In some instances, such as Elim, high levels of infrastructure and economic development can be observed.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Municipal Housing Backlog

Map 3.10: Makhado Spatial Development Framework Land Use

The Makhado SDF notes that the current housing backlog in the municipality is 16 207 households. Primarily, households in the municipality undertake subsidised housing and peoples housing processes to obtain a subsidised housing unit. The locality of many households in traditional authority areas make it difficult to implement housing projects due to the lack of private ownership. The housing priority list currently focusses on villages in rural areas of the municipality and has earmarked 2 950 houses to be built over the short- to medium-term. Map 3.9: Makhado Spatial Development Framework Nodes and Corridors

Source: DEMACON ex Makhado SDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 3.11: Makhado Spatial Development Framework, 2011

Source: DEMACON ex Makhado SDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 3.2:Number of Properties Sold and Average Sales Price in the Musina Host Municipality

The following section seeks to provide an overview of trends associated with property transactions in the Musina (Musina Town) and Makhado (Louis Trichardt) local municipalities. The significance of this information is to provide an indication of the underlying growth and sale of properties so as to determine the attraction of people/households to the local economy and their degree of permanency. The following provides a brief overview of property transactions in the host municipalities and the rate of construction of new development. It should be noted that historical data for property transaction trends in the Makhado Municipality could not be obtained due to a lack of historical data collection. Figure 3.1: Historic and Current Musina Properties on the Market Houses Apartments / Flats

NUMBER OF PROPERTIES

CURRENTLY ADVERTISED

Vacant Land

12 1 2

500

300000

450

247200 250000

400

198975 200000

350

200000

175000 300 250

150000

200

91037

150 100

Farms

1 0 34

48780

48730 36886

50000

50 437

197

117

278

120

186

2010

2011

2012

2013

2014

2015

2016

2017

2018

Number of Sales

Average Sales Price

Source: DEMACON ex Property Brokers, 2019

NUMBER OF PROPERTIES

HISTORICAL TRENDS

CURRENTLY ADVERTISED

30 20

Houses

181

Apartments / Flats

Vacant Land

75 51 13 68

Commercial Properties Industrial Properties

10 0 Jul '18

100000

64850

Figure 3.3: Historic and Current Makhado Properties on the Market Commercial Properties Industrial Properties

May '18 Jun '18

Sales Price

PROPERTY TRENDS

Number of Properties

3.3

Aug '18 Sep '18 Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Total on the market

Farms

New to the market

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 3.4: Number of Residential Dwellings Completed per Type and Year for the Musina and Makhado Local Municipalities

Figure 3.5: Size of Non-Residential Buildings Completed per Type and Year for the Musina and Makhado Local Municipalities

Residential Buildings Completed - Musina

Non-Residential Space Completed - Musina

14 000 12 000

10 000 15

8 000

6 000 6

4 000

2 129

2 000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2008

Residential Buildings Completed - Makhado

2009

2010

2011

2012

2013

2014

2015

2016

Non-Residential Space Completed - Makhado

1 000 900 800 700 600 500 400 300 200 100 -

25 000 20 000 554

15 000 10 000

5 505

5 000 2008 2008

2009

2010

Dwelling-houses

2011 Flats

Source: DEMACON ex StatsSA, 2019

2012

2013

2014

Townhouses

2015

2016

Average

2009

2010

2011

2012

2013

2014

Office and banking space

Shopping space

Industrial and warehouse space

Average

2015

2016

Source: DEMACON ex StatsSA, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The historic trends show that in the Musina host municipality a limited amount of property is advertised monthly for sale and that currently only 13 residential properties are on the market. Alternatively, in the Makhado host municipality, more than 200 residential properties are listed for sale. The information also shows that the average sales price for properties in the Musina host municipality rose between 2010 and 2017 after which in 2018 the sales price drastically reduced.

3.4

SYNTHESIS

The following provides a concise overview of Chapter 2 in order to outline the key salient factors, influences and trends impacting on economic, market and property development in the host municipalities and broader national and global economic landscape. NATIONAL, DISTRICT AND LOCAL CONTEXT

When considering the number of residential buildings and non-residential space completed in both host municipalities, it can be observed that developmental activity for residential and non-residential development is occurring in the Makhado Local Municipality. On average more than 500 residential buildings are completed annually compared to the Musina Local Municipality which only completes on average 6 residential buildings. Non-residential space development also occurs at a steady pace in the Makhado Municipality whereby on average more than 5 500 m² of nonresidential space is completed annually. The Musina Municipality also experienced continued (although sporadic) completion of non-residential space since 2008 at an average rate of 2 129 m² per year. The information shows that in the Musina host municipality permanency of residence is more stable than in the Makhado host municipality. It should also be noted that developmental activity in the Makhado Municipality far outpaces that of the Musina Municipality. The reason for this is that subsidised and affordable housing development has steadily been implemented in the Makhado Municipality as appose to the Musina Municipality where little to no affordable and subsidised housing is being constructed. The average sales price of properties is also flat when compared to other urban localities thus indicating limited growth in regard to property prices in the area.

✓ The Musina area is identified as a rural service point by the NSDF, whilst the Makhado area is identified as an urban growth point. ✓ The role of the Makhado area is to be an urban-rural anchor providing essential social economic services to surrounding rural communities. Linkages should be promoted to encourage accessibility. ✓ The Musina and Louis Trichard towns are identified as provincial growth points by the local and provincial spatial development frameworks. ✓ The N1 highway is considered the primary corridor for both host municipalities and aligns to future investment expectations related to logistics and industrial development. ✓ The Musina host municipality is home to the logistics section of the Musina-Makhado SEZ. The Limpopo Eco-Industrial Hub is also planned north of the Musina town in order to link logistics and international trade to the proposed hub. ✓ The housing backlog in the host municipalities is in excess of 16 000 households. The host municipalities are not accredited to implement subsidy housing projects thus backlogs are dependent on provincial planning, funding and implementation.

The following maps provide an indication of urban expansion areas for the prominent urban towns of the host municipalities.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

PROPERTY TRENDS ✓ Property development activity occurs more frequently in the Makhado Municipality than in the Musina Municipality. To a large extent the development activity in Makhado can be attributed to subsidised and affordable housing development.

✓ Although the developmental activity in the Musina Municipality is stagnant, property sales in the area is relatively active. In 2018 more than 180 properties were sold in the municipality.

✓ Ownership stability is also more prominent in the Musina Municipality when considering the number of properties advertised for sale. Currently only 13 residential properties are listed for sale in the Musina Municipality as appose to the more than 200 properties in the Makhado Municipality. ✓ Development of non-residential space (office, retail and industrial) maintained steady development levels in the Makhado Municipality as appose to the Musina Municipality which experienced more sporadic development trends. ✓ More than 5 500 m² of non-residential space is completed in the Makhado Municipality annually and is specifically concentrated in the development of shopping and industrial space. The Musina Municipality completes on average more than 2 100 m² of nonresidential space primarily in shopping and industrial space.

MANUFACTURING AND METALLURGUCAL SECTOR ANALYSIS

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4 MANUFACTURING AND METALLURGICAL SECTOR ANALYSIS 4.1

INTRODUCTION

The following chapter seeks to provide an overview of manufacturing and metallurgy in South Africa with specific focus on identifying the metallurgical sector context within which the MMEMSEZ will function once implemented. The SEZ intends to implement a variety of metallurgical operations that include, but is not limited to: ✓ ✓ ✓ ✓ ✓

A ferrochrome plant (production of ferrochrome metal), A ferrosilicon plant (production of ferrosilicon metal), A pig iron plant (production of pig iron metal), A steel plant (production of mild steel metal), and A stainless-steel plant (production of stainless steel).

In support of the above-mentioned metallurgy operations, the following activities are proposed in support of production: ✓ Thermal power plant (the production of energy/electricity in support of intended metallurgical operations) , ✓ Coking plant (for use as an energy generator and chemical additive in the production of metals), and ✓ Lime plant (used as a flux component to remove impurities in metals). The purpose is to identify the current manufacturing and metallurgical context in South Africa and the role that metallurgy plays in the manufacturing sector of the national economy. The section also seeks to identify the role of metallurgy (steel/metal manufacturing) within a provincial and local context in order to determine the extent to which metallurgy plays a role in localised environments.

Additionally, the section focuses on determining the potential market gap associated with the proposed SEZ and its operations from a regional and local perspective. The information assists with understanding the importance and relevance of metallurgy and manufacturing within the various spheres of the economy and allows for identifying the contextual background to metallurgy operations. The section thus focuses on the manufacturing section of the national, provincial and local economy with reference to specific metal manufacturing activities and information. The following sections provide a concise overview of the manufacturing and metallurgy sectors in terms of:

National, Provincial and Local Manufacturing Sector Context

Role and Function of Metallurgy in South Africa

Special Economic Zones in South Africa

Synthesis

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.2

NATIONAL MANUFACTURING SECTOR CONTEXT

Based on the primary output of Map 4.1: Distribution of Manufacturing Output and Major Manufacturing Nodes operations proposed as part of Ekurhuleni Pretoria the MMEMSEZ, the following section considers the manufacturing sector of the South African, Limpopo Province and Host municipalities. Brits Because the metallurgical operations at the SEZ seeks to produce various metal related products, it is essential to consider operations in light of the manufacturing sector so as to determine the role and function of metallurgical operations specific to the project within the manufacturing sector.

Polokwane

Middelburg

Nelspruit

Johannesburg Witbank Sasolburg Secunda Welkom Newcastle

Bloemfontein

Richards Bay

The following map provides an overview of the distribution of manufacturing activities throughout South Africa based on GVA output per Meso Zone. The map seeks to show the concentration of manufacturing output and assists with the identification of primary manufacturing nodes. The distribution of manufacturing nodes is used to determine the context of the Musina-Makhado SEZ in relation to major manufacturing areas.

Isithebe

Stanger

Durban Atlantis Port Shepstone

Pietermaritzburg

Cape Town

Paarl / Wellington

Port Elizabeth

East London

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Apart from the distribution of manufacturing sector output, the relationship which the manufacturing sector has with NSDF identified national nodes and corridors provides an indication of the future direction and concentration of industrial and manufacturing activities. The NSDF has identified nodes at varying scales and importance throughout the country, these include national as well as urban regions, urban nodes of national importance and regional development anchors. The NSDF also identifies roads of national and regional importance and national development corridors. Map 4.2: Distribution of Manufacturing Sector output in relation to National Spatial Development Framework Nodes and Corridors

Source: DEMACON ex CSIR and NSDF, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.1: National Manufacturing Sector Overview

NATIONAL MANUFACTURING SECTOR

GDP

R572 936

13.2%

2018 - (R/million)

Contribution

JOBS

1 497 370

9.3%

2018 - jobs

Contribution

AVERAGE ANNUAL GDP GROWTH RATE

MANUFACTURING GDP PROPORTIONAL CONTRIBUTION AND GROWTH

0.2% 2008 - 2018

MANUFACTURING PROPORTIONAL CONTRIBUTION MANUFACTURING GDP AVERAGE ANNUAL GROWTH RATE

PROVINCIAL MANUFACTURING PROPORTIONAL CONTRIBUTION

MANUFACTURING EMPLOYMENT PROPORTIONAL CONTRIBUTION AND GROWTH

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.2: National Manufacturing Sector Imports and Exports

NATIONAL MANUFACTURING SECTOR IMPORTS AND EXPORTS EXPORTS VALUE

R488 325

IMPORTS VALUE

R724 691

2018 - (R/million)

HISTORICAL IMPORT AND EXPORT TREND FOR THE MANUFACTURING SECTOR (R/million)

PRIMARY MANUFACTURING SECTOR The manufacturing sector of the South African economy is one of the largest contributors to national capital formation. The manufacturing sector has historically played a significant role in the shaping of the national economy due to the abundance of natural resources as well as the historically strong agricultural and trade sectors. Map 3.1 shows that manufacturing throughout the country is primarily concentrated in metropolitan regions. Dominantly, the Gauteng Province shows the highest concentration of manufacturing GVA output which is proportionally concentrated in the City of Johannesburg, City of Tshwane and Ekurhuleni metropolitan areas. Throughout the country other metropolitan regions such as the City of Cape Town, eThekwini, Nelson Mandela Bay, Buffalo City and Mangaung have sizeable manufacturing sector output. Unlike the Gauteng Province which has historically benefitted from mining activity as a key driver to the development of manufacturing activities, port cities such as eThekwini, Buffalo City. Nelson Mandela Bay and Cape Town have a competitive advantage because of the availability of shipping ports for exports.

HISTORICAL PROPORTIONAL RATIO OF IMPORTS TO EXPORTS FOR THE MANUFACTURING SECTOR (R/million)

Inland manufacturing hubs such as Welkom, Newcastle, Witbank, Middelburg and Brits have largely benefitted from mining activity as a driver for the manufacturing industry whilst, nodes such as Sasolburg and Secunda benefit from petrochemical products produced by SASOL. Manufacturing hubs in Polokwane and Nelspruit have benefitted from the strategic locations of the cities in relation Gauteng and bordering countries. Although the spatial perspective shows that manufacturing activity is distributed beyond primary nodal and metropolitan areas, the manufacturing activity is largely localised or provide intermediate products in the minerals beneficiation value chain. In 2018 the manufacturing sector as a whole contributed R572.9 billion or 13.2% to the South African economy. Although the sector has shown growth in the total GDP produced between 2008 and 2018, the proportional

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

contribution made by the sector to the total output of the national economy has steadily been decreasing.

market internationally and domestically, local steel producers have limited production output and so influences the rate of growth of the sector.

In 2008 the manufacturing sector proportionally contributed 16.0% to the national economy, whilst in 2018 the sector contributed 13.2%. The change in proportional share contribution can be attributed to shifts in other major economic sectors such as wholesale and retail trade and general government.

Total exports for 2018 from the manufacturing sector totalled R488.3 billion, whilst imports for the sector reached R723.7 billion. The value of exports and imports in the manufacturing sector has experienced an increasing trend between 2008 and 2018 with imports accelerating in value from 2017 whilst exports started to decline from 2016. On average, the value of imports are 43.9% higher than the value of exports.

Greater accessibility to retail activities across South Africa has boosted growth in GDP of the sector, whilst the general growth of government in terms of size and expenditure has generated substantial expansion. The national economy between 2008 and 2018 has shown an average annual growth rate of 1.5% which is substantially greater than the manufacturing sector which showed nominal growth of 0.2% for the same time-period. The manufacturing sector has largely been influenced by events in the agriculture, mining and steel industries whereby recent droughts across the country has slowed agricultural output and thus slowed the manufacturing of food and related products.

In line with the decreasing share of national GDP output and decelerating GDP growth, employment in the manufacturing sector has also steadily been decreasing. In 2008 the sector employed in excess of 1.6 million people. In 2018 employment in the manufacturing sector has decreased to nearly 1.5 million people, shedding almost 175 000 jobs. The proportional contribution by the sector to employment in the country has as a result also decreased whereby the sector contributed 9.3% to total employment in the country in 2018 compared to 11.4% in 2008. SECONDARY MANUFACTURING SECTORS

Additionally, the mining sector has seen drastic downscaling because of the weak commodity prices, increasing electricity/utility prices and decreasing minable mineral resources, thus leading to decreased output and employment downscaling. Decreasing mining productivity also hampers the manufacturing sector which is reliant on outputs from mining sector. Lastly, major changes in the demand for steel and other ferrous metal products, especially from China and domestically has hampered the production of steel and metal-based products. China, which is one of the largest producers of steel related products, is also one of the major countries to which local ferrous-metal producers export to. Due to a recent slowdown in national economic growth and decelerating development demand in the country, combined with a saturated steel

The manufacturing sector consists of a number of secondary (sub-sectors) sectors that focus on different market segments. The following section seeks to explore the composition of the national manufacturing sector in order to provide background and understanding as to the composition of the sector and role of metallurgy. The section also investigates secondary manufacturing sectors within which the MMEMSEZ will function. The purpose is to provide a broader view of the national economy’s dependence and incorporation of activities specific to the SEZ.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.3: National Manufacturing Sector Structure and Growth

MANUFACTURING SUB-SECTORS The proposed operations as part of the Musina-Makhado SEZ primarily fall within the Coke, Petroleum Products and Nuclear Fuel and Basic Iron and Steel Products; Casting of Metal sub-sectors of the Manufacturing Sector. STRUCTURE OF THE MANUFACTURING SECTOR

AVERAGE ANNUAL GROWTH OF MANUFACTURING SUB-SECTORS

MANUFACTURING SUB-SECTOR ANALYSIS The manufacturing sector is structured in accordance with 10 sub-sectors that produce output in the economy across a wide range of tertiary sectors. In accordance to the proposed operations as part of the MMEMSEZ (excluding support services such as electricity generation) secondary sectors such as Coke, petroleum and nuclear fuel (contained in the petroleum products, chemicals, rubber and plastic primary sub-sector) and basic iron and steel products (contained in the metals, metal products, machinery and equipment primary sub-sector) are of importance and should be considered as part of this analysis. The sub-sectors specifically speak to the output produced by the coking, ferrochrome, ferrosilicon, pig iron, steel and stainless-steel plants. Apart from the food, beverages and tobacco sub-sector (26.8%), the petroleum products, chemicals, rubber and plastic (21.0%) and metals, metal products, machinery and equipment (17.7%) sub-sectors contribute the second and third largest proportional contributions to the total output of the manufacturing sector in 2018. The petroleum products, chemicals, rubber and plastics sub-sector experienced above average annual growth (1.0%) between 2008 and 2018 when compared to the manufacturing sector as a whole (0.2%). The metals, metal products, machinery and equipment sub-sector however experienced negative growth over the same period (-1.2%). As mentioned previously numerous domestic and international factors have influenced the iron industry recently and as a result the sub-sector has undergone a contraction trend. The following maps provide a spatial overview of the total GVA output for the coke, petroleum products etc. and metals and metals products subsectors per local municipality (fine-grained information is not available).

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 4.3: Distribution of Coke and Petroleum Products Production (GVA - R/million)

Map 4.4: Distribution of Metals and Metal Products (GVA - R/million)

Source: DEMACON GIS, 2019 Source: DEMACON GIS, 2019

The data shows that the output of coke and petroleum products are primarily concentrated in the Gauteng and Mpumalanga Provinces, as well as in the major metropolitan regions of the country. It should be noted that due to data limitations the production of coke products cannot be separated from petroleum products. The concentration of coke and petroleum products in the Gauteng and Mpumalanga provinces are mainly on account of the distribution of SASOL production plants and coal mines. The export of coking products also forms part of the exports for the country thus a high concentration of output is generated by port cities due to the processing and export of these products.

The data shows that output for metals and metal products are primarily concentrated in the Gauteng and Mpumalanga Provinces as well as major metropolitan areas. The distribution of major metals processing plants is concentrated in the Gauteng Province as well as select locations such as Newcastle, Durban and Pietermaritzburg. The concentration of activities in and around the Gauteng Province provides a competitive advantage with regard to the production of metal products because the agglomeration of these production areas drives growth of manufacturing activities in other sectors and also assists with growing the construction sector.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.4: Coke, Petroleum Products and Nuclear Fuel Sub-Sector Overview COKE, PETROLEUM PRODUCTS AND NUCLEAR FUEL GVA (R/million)

46 031

Jobs

UTILISATION OF PRODUCTION CAPACITY (%)

27 797

Contribution to total GVA

8.0%

Contribution to total employment

1.9%

Avg. Annual growth rate (10-years)

4.3%

Avg. Annual growth rate (10-years)

-1.7%

PHYSICAL VOLUME OF PRODUCTION (INDEX – BASE 2015 = 100) FORMAL EMPLOYMENT AND RENUMERATION TREND GROSS AVERAGE MONTHLY INCOME

R46 517

TOTAL EXPORT AND IMPORT TREND (R/million) TOTAL VALUE OF SALES (R/1000)

TOP COUNTRIES EXPORTED TO 1. France 2. Germany 3. United States of America

TOP COUNTRIES IMPORTING FROM 1. Taiwan 2. Finland 3. Malta

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.5: Basic Iron and Steel Products; Casting of Metal Sub-Sector Overview UTILISATION OF PRODUCTION CAPACITY (%)

BASIC IRON AND STEEL PRODUCTS; CASTING OF METAL (2018) GVA (R/million)

20 267

Jobs

41 239

Contribution to total GVA

3.5%

Contribution to total employment

2.8%

Avg. Annual growth rate (10-years)

-2.8%

Avg. Annual growth rate (10-years)

-3.9%

PHYSICAL VOLUME OF PRODUCTION (INDEX – BASE 2015 = 100) FORMAL EMPLOYMENT AND RENUMERATION TREND GROSS AVERAGE MONTHLY INCOME

R26 099

TOTAL EXPORT AND IMPORT TREND (R/million) TOTAL VALUE OF SALES (R/1000)

TOP COUNTRIES EXPORTING TO 1. China 2. United States of America 3. Indonesia

TOP COUNTRIES IMPORTING FROM 1. Taiwan 2. Germany 3. Sweden

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.3

PROVINCIAL, CONTEXT

DISTRICT

AND

LOCAL

MANUFACTURING

Figure 4.6: Provincial, District and Local Manufacturing Sector Profile

PROVINCE, DISTRICT AND LOCAL MANUFACTURING SECTOR GVA

Apart from reviewing the manufacturing sector from a national perspective, due consideration can be given to the provincial, district and local contexts of manufacturing. The host municipalities, Musina and Makhado Local Municipalities, are incorporated as part of the local context because these local economic regions contain the MMEMSEZ. Additionally, a contextual review of the Vhembe District is undertaken due to the district economy containing the host municipalities. Lastly, focus is shifted to the Limpopo Province in order to provide a broader perspective of the provincial contribution and status with regard to manufacturing.

ECONOMIC REGION

GVA

CONTRIBUTION

(R/million)

(%)

Limpopo Province

R9 595

The following infographics provide a concise overview of the size, contribution and average annual growth rate of GVA and employment in the manufacturing sector for the different economic regions mentioned above.

Vhembe District

R1 163

Musina Local Municipality

R116

Makhado Local Municipality

R703

Figure 3.6 shows that the manufacturing sector of the Limpopo Province contributes in excess of R959 million to the national economy. Proportionally, the province contributes 7.3% to the national economy. The Vhembe District is the smallest proportionally contributing district to manufacturing output for the province, contributing 12.1% or, R116 million, to total manufacturing GVA in 2018. The host municipalities play varying roles in regard to manufacturing GVA contribution to the district economy whereby, the Makhado host municipality contributes more than 60% to the manufacturing GVA of the district as appose to the Musina host municipality which contributes nearly 10%. In total the Makhado and Musina host municipalities contribute R703 million and R116 million respectively.

DISTRICT MANUFACTURING PROPORTIONAL CONTRIBUTION

3.3% (contribution to Limpopo economy)

2.3% (contribution to Vhembe economy)

2.2% (contribution to Musina economy)

3.3% (contribution to Makhado economy)

AVERAGE ANNUAL GROWTH RATE

-0.003% -0.3% 1.9% 0.5%

LOCAL MANUFACTURING PROPORTIONAL CONTRIBUTION

Although the Limpopo Province and Vhembe District showed a contraction in the manufacturing sector between 2008 and 2018, the Makhado and Musina host municipality manufacturing sectors expanded during the same period.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.7: Provincial, District and Local Manufacturing Sector Profile

PROVINCE, DISTRICT AND LOCAL MANUFACTURING SECTOR EMPLOYMENT

ECONOMIC REGION

JOBS

Limpopo Province

61 667

Vhembe District

11 143

Musina Local Municipality

1 039

Makhado Local Municipality

6 136

DISTRICT MANUFACTURING PROPORTIONAL CONTRIBUTION

CONTRIBUTION (%)

5.7% (contribution to Limpopo jobs)

4.7% (contribution to Vhembe jobs)

3.5% (contribution to Musina jobs)

6.2% (contribution to Makhado jobs)

AVERAGE ANNUAL GROWTH RATE

-1.1% -2.2% -0.1% -0.9%

LOCAL MANUFACTURING PROPORTIONAL CONTRIBUTION

The manufacturing sector at all levels contributes nominally to the total GVA output of each economic geography. In a similar fashion, the contribution by the manufacturing sector to the total amount of jobs per geographic region is marginal. For the Limpopo Province the manufacturing sector proportionally contributes 5.7% or 61 667 jobs to total employment in the province. The Limpopo Province also contributes 4.1% to the total number of manufacturing jobs in the country. The Vhembe District’s manufacturing sector proportionally contributes 18.1% (third largest contributor) to the Limpopo Province’s manufacturing sector. The district’s manufacturing sector only contributes 4.7% or 11 143 jobs to the total employment of the district. The host municipalities show a similar trend indicating the limited expansion of the sector. The Musina host municipality’s manufacturing sector proportionally contributes 3.5% to total employment in the municipality compared to the Makhado host municipality where the manufacturing sector proportionally contributes 6.2% to total employment. The host municipalities combined proportionally contribute more than 64% to total manufacturing jobs in the Vhembe District. The Makhado host municipality proportionally contributes 55.1% of manufacturing jobs compared to 9.3% by the Musina host municipality. Although the host municipalities experienced an expansion of the manufacturing sector between 2008 and 2018, jobs in the sector have contracted. The Musina host municipality’s manufacturing sector jobs contracted on average by -0.1% annually compared to the Makhado host municipality which contracted by -0.9% annually. The trend is also apparent at district and provincial levels whereby manufacturing jobs contracted on average by -2.2% in the Vhembe District and -1.1% in the Limpopo Province.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 4.8: Manufacturing Sector GVA and Employment Growth per Economic Geography - 2008 to 2018 MANUFACTURING GVA AVERAGE ANNUAL GROWTH RATE (2008 – 2018)

MANUFACTURING EMPLOYMENT AVERAGE ANNUAL GROWTH RATE

Figure 4.9: Manufacturing Sector Employee Compensation per Economic Geography (2018) COMPARISON OF EMPLOYEE COMPENSATION IN THE MANUFACTURING SECTOR PER ECONOMIC GEOGRAPHY

ECONOMIC GEOGRAPHY

TOTAL EMPLOYEES

TOTAL MANUFACTURING SECTOR COMPENSATION

AVERAGE MONTHLY COMPENSATION (2018)

AVERAGE ANNUAL GROWTH RATE (‘08 to ‘18)

(2018 R/million)

1 497 370

R362 075

R20 151

2.5%

Limpopo

61 667

12 103

R16 356

4.3%

Vhembe DM

11 143

1 472

R11 011

2.2%

Musina LM

1 039

R118

R9 465

5.3%

Makhado LM

6 136

R903

R12 265

2.7%

South Africa

MANUFACTURING COMPENSATION GROWTH (2008 – 2018)

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 4.5: Distribution of Manufacturing Output and Major Manufacturing Nodes in the Limpopo Province

Musina

Louis Trichardt Thohoyandou

Polokwane

Malamulele

Giyani

Ellisras

Tzaneen

Phalaborwa Potgietersrus Lebowakgomo Thabazimbi Burgersfort Modimolle Steelpoort Northam

Marble Hall Groblersdal

Source: DEMACON ex CSIR and StatsSA, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.4

ROLE AND FUNCTION OF METALLURGY IN THE SOUTH AFRICAN CONTEXT

Metallurgy can be considered to be the art and science of extracting metals from their ores and modifying the metals for use in other products. In other words, metallurgy functions as a manufacturing process, or otherwise considered beneficiation process, to transform raw ferro materials into various intermediate or final products related to steel and metals. In the context of South Africa, the country has historically maintained significantly high concentrations of mineral resources (refer to the map below). The mining industry in the country is well established and produces a range of raw mineral resources that are either locally beneficiated and used or exported, or raw materials are exported for further refinement. Due to the extensive nature of the mining industry, the country is well positioned in terms of its role in beneficiation of minerals (specifically referring to metallurgy) and the provision of semi-refined and produced products. The historical economic and infrastructure environment of the country assisted with the establishment of the country as a global ferroalloy producer. The abundance of raw materials coupled with historically cheap and stable electricity, well developed infrastructure and relatively cheap labour has positioned the country as a leading ferrochrome producer, major manganese ore and alloys exporter and producer of vanadium products 1. The country also produces ferrosilicon and silicon metal ore. The ferrochromium production industry in South Africa is by far the largest contributor in regard to ferroalloys. An abundance of ferroalloy producers currently operate within the country and export the second most (after China) ferrochromium to the world market. The ferrochromium market has been under strain recently due to major changes in the Chinese economy and the demand shown by China for steel related products.

Manganese alloy production in South Africa is a smaller role-player in the broader ferroalloys market of the country. The industry is confined to a limited number of producers and the majority of raw manganese materials are exported to major producers such as China. Ferrosilicon production in South Africa is a limited industry whereby the majority of ferrosilicon produced in the country is utilised by domestic consumers. The steel industry in South Africa is a major role-player in the context of local economic growth but is considered a minor global producer of crude and semi-finished steel products. Abundant raw materials do position the country as a prospective business proposition for Ghana / Germany that nevertheless have strong and exporting manufacturing sectors with a high demand for steel. In the context of the development of the South African economy this dynamic perpetuates the challenge of beneficiation versus raw materials exports. These challenges are compounded by resource distribution, distance to port and availability of water in a largely semi-arid climate. The distribution of production plants for ferroalloys are largely market based and therefor are concentrated in the Gauteng Province, with limited producers located in the Limpopo (Polokwane), Mpumalanga (Witbank) and KwaZulu-Natal (eThekwini) provinces (refer to the map below). As illustrated by the following diagram, metallurgical operations in South Africa are orientated towards markets and the proximity to natural resources as appose to agglomeration or logistical factors. The concept is further highlighted by Map 3.8 which shows the correlation of producers and proximity to markets and resources. The correlation shows that metallurgical processing plants strongly associate with the largest economic output province in the country –

Basson J, Curr TR, Gericke WA, South Africa’s Ferro Alloys Industry – Present Status and Future Outlook.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Gauteng. The proximity to the province allows for ease of access to users of products produced by metallurgical plants as construction and downstream beneficiation industries are to a large degree positioned in the province. Additionally, metallurgical industries such as ferrochrome and ferrosilicon generally locate within a 50 km to 60 km radius of resource extraction locations compared to steel and ferromanganese producers who on average locate within a 300 km to 350 km radius of resource extraction areas. One of the primary reasons for steel and ferromanganese industries to locate further from resource locations are because of the proximity of these industries to the Gauteng Province – thus indicating that proximity to markets is preferred as appose to economically isolated locations further from primary markets. Diagram 4.1: South Africa Metallurgical Operations in the Context of Industrial Location Considerations

Source: DEMACON, 2019

allows for the ease of access to major exporting ports such as Durban and Richards Bay. The following diagram provides an indication of the average “as the crow flies” distance between 1) closest resource and processing plant; 2) processing plants and closest market; and 3) processing plants and closest port (export orientation). The information serves as an indication of the relative positioning of existing metallurgical industries relative to key industrial location considerations – as discussed previously. Diagram 4.2: Estimated Average Direct Line Distance Between Metallurgical Plants and Mineral Resources, Markets and Ports

Steel Plants

Ferrosilicon Plants

Ferromanganese Plants

Ferrochrome Plants

±306 km

±54 km

±342 km

±31 km

Steel Plants

Ferrosilicon Plants

Ferromanganese Plants

Ferrochrome Plants

±39 km

±64 km

±190 km

±81 km

Steel Plants

Ferrosilicon Plants

Ferromanganese Plants

Ferrochrome Plants

±190 km

±81 km

±39 km ±64 km Source: DEMACON, 2019

The following infographic pages provide a concise overview of the ferrochrome, ferro-silicon and ferro-manganese industries in South Africa by providing key production and trade information. Additionally, information is supplied on the South African steel industry.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 4.6: Distribution of Metallurgical Mineral Resources

Source: DEMACON ex DMR, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 4.7: Distribution of Metallurgical Processing Plants

Source: DEMACON GIS and DMR, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.4.1

FERRO-CHROME MARKET OVERVIEW TOTAL GLOBAL AND SOUTH AFRICA FERROCHROME PRODUCTION (kt)

FERRO-CHROME

Ferrochrome

INDUSTRY OVERVIEW

GLOBAL IMPORTANCE

Average Production per Year

In 2017 global ferro-chrome production rose by 8.7% to 12.9 Mt from 2016 mainly due to increased production by Zimbabwe, Sweden and India.

3 349 kt

KEY NOTES

LARGEST

producer

exporter

3 484

2 951

kt (2017)

26.8%

45.0%

of total global production

of total global exports

✓ Consumption of ferro-

✓ ✓

SOUTH AFRICA PROPORTIONAL CONTRIBUTION TO TOTAL GLOBAL FERROCHROME EXPORTS (%)

v PROPORTIONAL DISTRIBUTION BETWEEN LOCAL AND EXPORT SALES (kt)

Average Local Sales per Year

16.1%

TOTAL SALES VALUE OF FERROCHROME IN SOUTH AFRICA (R’000)

Local Sales Unit Value (R/t) - 2017

R11 770 Export Sales Unit Value (R/t) - 2017

R12 649

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.4.2

FERRO-SILICON MARKET OVERVIEW TOTAL GLOBAL AND SOUTH AFRICA FERRO-SILICON PRODUCTION (kt)

FERRO-SILICON

Ferro-silicon

INDUSTRY OVERVIEW

GLOBAL IMPORTANCE

Average Production per Year

In 2017 global ferro-silicon production was dominated by China accounting for 66% of production. Global production has slowed due to decreased output by China.

91.9 kt

KEY NOTES

LARGEST

producer

exporter

48.2

8.6

kt (2017)

0.6%

3.5%

of total global production

of total global exports

✓ Consumption of ferro-

✓

silicon has decreased since 2016 although world steel output grew by 20%. Decreased consumption is the result of lower utilisation of crude steel in China and slow growth in world output of iron castings.

PROPORTIONAL CONTRIBUTION BY FERRO-SILICON AND SILICON METAL TO SOUTH AFRICAN OUTPUT (%)

PROPORTIONAL DISTRIBUTION BETWEEN LOCAL AND EXPORT SALES (kt)

Average Local Sales per Year

59.8%

TOTAL SALES VALUE OF FERRO-SILICON IN SOUTH AFRICA (R’000)

Local Sales Unit Value (R/t) - 2017

R13 713 Export Sales Unit Value (R/t) - 2017

R16 482

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.4.3

FERRO-MANGANESE MARKET OVERVIEW

FERRO-MANGANESE

TOTAL GLOBAL AND SOUTH AFRICA FERRO-MANGANESE PRODUCTION

Ferromanganese

INDUSTRY OVERVIEW

GLOBAL IMPORTANCE

Production per Year

In 2017 global high-carbon ferro-manganese production rose by 16% to 4.2 Mt from 2016 mainly from production in China and Malaysia.

704 kt

KEY NOTES

7th

3rd

LARGEST

producer

exporter

458

271

kt (2017)

11.0%

14.2%

of total global production

of total global exports

Average

✓ In 2017 production

✓

slightly outstripped global demand although global demand has steadily been decreasing since 2013. The United States, Netherlands and Germany are the highest importers of high-carbon ferro-manganese.

PROPORTIONAL CONTRIBUTION BY MANGANESE ORE AND FERRO-MANGANESE TO SOUTH AFRICAN OUTPUT (%)

PROPORTIONAL DISTRIBUTION BETWEEN LOCAL AND EXPORT SALES (kt)

Average Local Sales Production per Year

9.8% TOTAL SALES VALUE OF FERRO-MANGANESE IN SOUTH AFRICA (R’000)

Local Sales Unit Value (R/t) - 2017

R10 015 Export Sales Unit Value (R/t) - 2017

R9 730

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.4.4

STEEL MARKET OVERVIEW

STEEL PRODUCTION

TOTAL GLOBAL AND SOUTH AFRICA CRUDE STEEL PRODUCTION (kt)

Crude Steel

INDUSTRY OVERVIEW

GLOBAL IMPORTANCE

Production per Year

In 2019 steel demand is estimated to reach 1 735 Mt (1.3% increase from 2018). Steel demand is expected to grow but in tandem with slowing global economic growth.

6 891 kt

KEY NOTES

25th

31st

LARGEST

producer

exporter

✓ Demand for steel is

✓

3 484

2 562

kt (2017)

0.4%

0.6%

of total global production

of total global exports

Average

✓

forecast to remain positive in light of China’s economic deceleration, slowing global economic growth and trade policy uncertainty. A slow-down in developed economies is expected to lead to decreased steel demand. Steel demand in developing economies is expected to remain robust.

SOUTH AFRICA PROPORTIONAL CONTRIBUTION TO TOTAL GLOBAL CRUDE STEEL EXPORTS (%)

APPARENT STEEL USE PER YEAR (kt)

Average Apparent Steel Use per Year

5 635 TOTAL SALES VALUE OF CRUDE STEEL IN SOUTH AFRICA (R’000)

Total Sales Value (R) 2018

R139.2 billion Total Export Value (R) 2018

R76.4 billion

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.5

SPECIAL ECONOMIC ZONES IN SOUTH AFRICA

Because of the nature of the Musina-Makhado Special Economic Zone it is essential to review the current operational environment of special economic zones in South Africa. The purpose of the section is to: ✓ consider the current intended outcome of SEZ’s in South Africa, ✓ identify the current operational SEZ’s in the country, ✓ determine the core focus of operational SEZ’s in South Africa in order to determine potential competitive advantages, ✓ consider the impact generated by SEZ’s in South Africa and the potential benefits and pitfalls. The following sub-sections focus on providing an overview in regard to the above-mentioned purpose of the section. 4.5.1

INTENDED OUTCOME OF SPECIAL ECONOMIC ZONES IN SOUTH AFRICA

Special economic zones or SEZ’s are specific geographic localities designated under the SEZ Act 16 of 2014 that concentrate and direct targeted economic activities and promotes foreign direct investment in order to bolster economic growth, industrialisation and industry growth, infrastructure investment, increased global competitiveness through exports and development and socio-economic benefits to local communities. The Industrial Policy Action Plan (2018) identifies SEZ’s as one of the major role-players in accelerating economic growth in South Africa and driving industrialisation of the economy. The purpose of SEZ’s are to2:

✓ facilitating the creation of an industrial complex, having strategic national economic advantage for targeted investments and industries in the manufacturing sector and tradable services; ✓ developing infrastructure required to support the development of targeted industrial activities; ✓ attracting foreign and domestic direct investment; ✓ providing the location for the establishment of targeted investments; ✓ enabling the beneficiation of mineral and natural resources; ✓ taking advantage of existing industrial and technological capacity, promoting integration with local industry and increasing value-added production; ✓ promoting regional development; ✓ creating decent work and other economic and social benefits in the region in which it is located, including the broadening of economic participation by promoting small, micro and medium enterprises and cooperatives, and promoting skills and technology transfer; and ✓ the generation of new and innovative economic activities. The purpose of SEZ’s provide a clear and concise directive for stimulating economic growth across numerous platforms and systems. The outcome of SEZ’s could: ✓ accelerate local development through the encouragement of investment opportunities in local communities; ✓ increase the stock of direct foreign investments in the country because of favourable investment spaces; ✓ accelerate economic development and growth in the broader economic geography; ✓ increase the volume of value-added exports; ✓ create employment opportunities and allow for socio-economic upliftment; and ✓ assists with the diversification of regional economies through the implementation of a multitude of industries.

Special Economic Zones Act 16 of 2014

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.5.2

CURRENT AND PROPOSED SPECIAL ECONOMIC ZONES IN SOUTH AFRICA

The following maps provide a concise overview the distribution of operational and proposed SEZ’s in South Africa and the intended focus areas of each SEZ. Map 4.8: Special Economic Zones in South Africa

LEGEND Operational SEZ

MUSINAMAKHADO SEZ

GAUTENG IDZ

Not Operational NKOMAZI SEZ

MALUTI-APHOFUNG SEZ

RICHARDS BAY IDZ

SALDANHA BAY SEZ

ATLANTIS SEZ COEGA SEZ

EAST LONDON IDZ

DUBE TRADE PORT

Source: DEMACON ex DTI, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 4.9: Special Economic Zones Focus Areas in South Africa

LEGEND Operational SEZ Not Operational Metallurgy Focus

MUSINAMAKHADO SEZ

GAUTENG IDZ Mineral Beneficiation Agro- and Food-Processing Electronics Pharmaceuticals Aerospace and Aviation

Metallurgy

NKOMAZI SEZ Agro-Processing Automotive Logistics and Transport Minerals and Energy

MALUTI-A-PHOFUNG SEZ Automotive Agro-Processing Logistics General Processing ICT Pharmaceutical

RICHARDS BAY IDZ

SALDANHA BAY SEZ

Metals Beneficiation ICT Marine Industry Development Renewable Energy Agro-Processing

Oli / Gas Marine Repair

DUBE TRADE PORT

ATLANTIS SEZ Greentech Manufacturing Heavy and Light Manufacturing Large Scale user Industrial Warehousing / Logistics

EAST LONDON IDZ COEGA SEZ Metals / Metallurgy Automotive Business Process Outsourcing Chemicals Agro-Processing Logistics

Renewable Energy Automotive Aquaculture ICT Agro-Processing Manufacturing

Aerospace and Aviation Agro-Processing Electronics Medical and Pharmaceutical Clothing and Textiles Automotive

Source: DEMACON ex DTI, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.5.3

DESCRIPTION OF SPECIAL ECONOMIC ZONES IN SOUTH AFRICA

The following provides a brief description of each SEZ in South Africa in order to determine functions and offerings presented by SEZ’s and to outline the potential competitive advantage that the Musina-Makhado SEZ may have in comparison to other SEZ’s. The section outlines a brief description of each SEZ in South Africa and provides a concise outline of the sector focus for SEZ’s. The information provides a basis to determine the extent to which operations proposed in the Musina-Makhado SEZ are beneficial to not only the local economy but the regional and national economy as well.

COEGA SEZ

RICHARDS BAY IDZ SECTOR FOCUS Metals Beneficiation

ICT

Marine Industry Development

Renewable Energy

Agro-processing DESCRIPTION The Richards Bay IDZ is a purpose-built and secure industrial estate on the north-eastern South African coast. The N2 business corridor links the province’s two major ports, Durban and Richards Bay, and connects with Maputo in Mozambique and, ultimately, areas of East Africa. It is linked to an international seaport of Richards Bay, tailored for the manufacturing and storage of minerals and products to boost beneficiation, investment, economic growth and, most importantly, the development of skills and employment.

SECTOR FOCUS Metals / Metallurgy

Automotive

Business Process Outsourcing

Chemicals

Agro-processing

Logistics

EAST LONDON IDZ SECTOR FOCUS Renewable Energy

Automotive

Aquaculture

ICT

Agro-processing

Manufacturing

DESCRIPTION The Coega IDZ leverages public-sector investment to attract foreign and domestic direct investment in the manufacturing sector with an export orientation. The IDZ has attracted investment in the agro-processing, automotive, aquaculture, energy, metals logistics and business process services sectors. This has advanced socioeconomic development in the Eastern Cape through skills development, technology transfer and job creation.

DESCRIPTION the zone has become a prime industrial park, renowned for its customised solutions for various industries, including automotive, agro-processing and aquaculture. The ELIDZ offers growth-oriented companies a specialised manufacturing platform, innovative industrial and business solutions, and access to new markets and strategic industry networks.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

DUBE TRADE PORT

NKOMAZI SEZ

SECTOR FOCUS

Aerospace and Aviation

Agro-processing

Agro-Processing

Automotive

Electronics

Medical and Pharmaceutical

Logistics and Transport

Minerals and Energy

Clothing and Textiles

Automotive

DESCRIPTION Areas that have been designated as the IDZ are the Dube Trade Zone and the Dube AgriZone. The Dube Trade Zone focuses on manufacturing and valueaddition primarily for automotive, electronics and fashion garments. The facility involves warehousing, manufacturing, assembling real estate resource, complete with a single facility in which all freight-forwarders and shippers are located (Dube TradeHouse). The Dube AgriZone is a high-tech, future-farming facility

DESCRIPTION The Nkomazi SEZ is conceptualised as an agro-processing hub, which will be supported by mixed services such as warehousing and logistics. The processing of agricultural products in the Nkomazi SEZ will be based on automated and semi-automated as well as high-tech manufacturing technologies, which will be largely based on green or renewable energy uses. The supporting services will include logistics (intermodal logistic; production logistics) and warehousing facilities, which will also promote the utilisation of green sources of energy.

GAUTENG IDZ

MALUTI-A-PHOFUNG SEZ SECTOR FOCUS

SECTOR FOCUS Automotive

Agro-Processing

Mineral Beneficiation

Agro- and FoodProcessing

Logistics

General Processing

Electronics

Pharmaceuticals

ICT

Pharmaceutical

Aerospace and aviation

DESCRIPTION

This newly established SEZ offers exporters a logistics base that facilitates access to the Port of Durban, and intermodal logistics solutions for the transfer of freight between road and rail. The zone is well-suited and licensed for general manufacturing, offering a convenient production base for light and medium manufacturing.

aims to develop land around OR Tambo International Airport to stimulate economic development through the use of the IDZ mechanism. The OR Tambo IDZ supports the growth of the beneficiation of precious metals and minerals sector, with a focus on light, high-margin, export-oriented manufacturing of South African precious and semi-precious metals.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

SALDANHA BAY SEZ SECTOR FOCUS Oil and Gas

Marine Repair

DESCRIPTION The proposed Atlantis SEZ is part of the City of Cape Town’s initiative taken in 2011 to establish a Greentech manufacturing hub in Atlantis. This was in response to the Department of Energy’s Renewable Energy Independent Power Producer Programme (REIPPP). Localisation of manufacturing and the resultant job creation is one of the key priorities of Government through the REIPP programme.

ATLANTIS SEZ SECTOR FOCUS Greentech Manufacturing Large Scale User Industrial

Heavy and Light Manufacturing Warehousing and Logistics

DESCRIPTION It is envisioned that this IDZ will serve as the primary oil, gas and marine repair engineering and logistics services complex in Africa, servicing the needs of the upstream oil exploration industry and production service companies operating in the oil and gas fields off Sub-Saharan Africa. Situated approximately two hours north of Cape Town, the SBIDZ will include logistics, repairs and maintenance, and fabrication activities.

From the map above it can be observed that SEZ’s in South Africa are primarily located at major coastal ports, border posts or inland port / transportation nodes. Although many SEZ’s in the country are not currently fully operational, work is undertaken in the establishment of core functions and management structures, as well as the attraction of initial investments to encourage activity. Of the nine SEZ’s in South Africa, six SEZ’s are positioned as part of a coastal port or located in close proximity to a port. The six SEZ’s include the Richards Bay IDZ, the Dube Trade Port, the East London IDZ, the Coega SEZ, Saldanha Bay SEZ and Atlantis SEZ. The Gauteng IDZ and Maluti-A-Phofung SEZ are positioned as inland port localities which function as part of major logistical localities by means of road, rail and air transportation. The Musina-Makhado SEZ and Nkomazi SEZ are positioned in proximity of major border posts to Mozambique and Zimbabwe. SEZ’s in South Africa focus investment opportunities on a wide variety of industries but also correlate in regard to similar intended production outcomes. Primarily, SEZ’s focus investment opportunities in sectors such as: agro-processing; mineral beneficiation and metallurgy; general manufacturing; ICT and electronics; medical and pharmaceuticals; and logistics and transportation. When considering the intended operations of the MMEMSEZ, the mineral beneficiation and metallurgy activities incorporated as part of other SEZ’s primarily focus on ferrous and non-ferrous metal and precious and semiprecious metal production. The production of metallurgical products form part of the Coega SEZ (Ferrous and Non-Ferrous Metals), Richards Bay IDZ (Aluminium), Nkomazi SEZ (Ferrous and Non-Ferrous Metals) and the Gauteng IDZ (Precious and Semi-Precious Metals) special economic zones.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.5.4

LIMPOPO ECO-INDUSTRIAL PARK

The Limpopo Eco-Industrial Park (LEIP) is a locally driven project to establish the world’s first zero solid waste eco-industrial park. The LEIP is to be established on previously utilised mining land known as Antonville. The site situated north-east of Musina and seeks to form part of the greater Musina SEZ.

as an anchor project for the SEZ. The LEIP is currently undertaking steps to obtain approval to be registered as an operator within the Musina SEZ. Map 4.10: Limpopo Eco-Industrial Park

The LEIP primarily focuses on industrial activities associated with: ✓ metallurgical coke and power co-generation plant to produce coke and electricity, ✓ gas-to-liquid plant to produce sulphur free diesel, naphtha and liquid petroleum gas, ✓ plasma waste gasification plant to produce synthetic gas and slag (used for road tarring), and ✓ brick making plant to produce bricks from slag produced by the plasma waste plant. Additionally, the LEIP will include other non-industrial developments such as: ✓ Business incubation centre for SMME’s, ✓ Industrial ecology facility which acts as a research and development facility for students, researchers and engineers, ✓ Nature preservation area which is a nature area to be run as an ecotourism SMME and will provide recreational activities to staff, and ✓ Two residential eco-estates that will provide housing to workers. The LEIP also seeks to provide effective and efficient services provision through water treatment works, solid waste disposal and electricity provision. According to Eco-Industrial Solutions, the developer of the LEIP, the LEIP has applied for formal approval, in principle, to be designated a SEZ under the Special Economic Zone Act 16 of 2014. The designation of the LEIP as an SEZ will allow for the establishment of the Musina Special Economic Zone. In principle the LEIP has received approval and has been identified

Source: DEMACON GIS, 2019

LIMPOPO ECO-INDUSTRIAL PARK SECTOR FOCUS Metallurgical Coke

Power Generation

Gas-to-Liquid

Plasma Waste Gasification

Brick Making

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

4.6

SYNTHESIS

The following provides a concise overview of Chapter 3 in order to outline the key salient factors, influences and trends impacting on the manufacturing, metallurgical and special economic zones in the host municipalities and broader national and global economic landscape.

✓ The compensation of employees in the manufacturing sector of the Limpopo Province, Vhembe District and Musina and Makhado Host Municipalities are below the national average. ✓ Nationally, employee compensation in the manufacturing sector is on average R20 151 per month and growth at an average annual rate of 2.5%. METALLURGICAL CONTEXT AND ACTIVITY ANALYSIS

MANUFACTURING SECTOR CONTEXT ✓ The manufacturing sector nationally proportionally contributes 13.2% to national GDP and 9.3% to national employment. ✓ The majority of manufacturing sector GDP is produced in the Gauteng Province, whilst the Limpopo proportionally contributes the third lowest GDP (7.3%) of all provinces. ✓ Historical trends show that the manufacturing sector average annual growth has steadily been decreasing since 2008 and the proportional contribution that the sector makes to national GDP has been decreasing for the same time-period. ✓ In a similar fashion job creation in the sector has also steadily been decreasing since 2008 and in effect the proportional contribution by the sector has contracted. ✓ Exports of manufactured goods are outstripped by imports of manufactured goods. ✓ The manufacturing sector in the Limpopo Province contributes 7.3% to national GDP and within the province proportionally contributes 3.3% to the provincial economy. At a district and local geographic level, the contribution by the manufacturing sector is marginal (between 2% and 3% of total economic output).

✓ Based on the proposed operations of the Musina-Makhado SEZ, the output of the SEZ will form part of the manufacturing sector of the economy. More specifically, the focus of activities are focused on the metallurgical industry which manufactures (beneficiates) raw minerals into steel related products. ✓ The manufacturing sector is the 4th largest economic sector of South Africa and contributes 13.2% to the national GDP. The sector also proportionally contributes 9.3% to the total employment of the country. The Limpopo province proportionally contributes 7.3% to the total manufacturing output of the country. ✓ The metallurgical component of the SEZ focuses on ferroalloys of chrome, silicon and manganese and the production of steel and stainless steel. ✓ Ferroalloys in South Africa contribute to global production: • Ferro-chrome – 2nd largest producer • Ferro-silicon – 8th largest producer • Ferro-manganese – 7th largest producer • Crude steel – 25th largest producer ✓ Steel and ferroalloy exports have been dampened by decreased global demand as a result of slowing economic growth and construction in China. ✓ The production of steel and ferroalloys have also declined due to falling global demand. Historically, ferroalloy production has

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

maintained stable production output, whilst steel production has continuously been decreased over time. ✓ The sales price of ferroalloys and steel have maintained steady growth annually even though global demand has tapered off in recent years. SPECIAL ECONOMIC ZONES INSOUTH AFRICA ✓ Currently, 10 SEZ’s are designated in South Africa and 5 SEZ’s are operational. The majority of SEZ’s are distributed along the coast of the country in and around major sea and logistics ports. ✓ Investment opportunities in designated SEZ’s in the country primarily focus on agro-processing, mineral beneficiation and metallurgy, general manufacturing, ICT and electronics, medical and pharmaceuticals and logistics and transportation. ✓ Metals beneficiation and metallurgy are primary focused on ferrous and non-ferrous metals and precious and semi-precious metals.

ECONOMIC PROFILE

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5 ECONOMIC PROFILE 5.1

INTRODUCTION

The aim of Chapter 3 is to outline and analyse the size of the local and regional economy and, identify the key driving forces behind economic growth and development. The chapter is focused on providing an analysis of historical trends (not the forecasting of future opportunities) and the potential impacts that could arise as a result of past trends. The data used as part of the chapter is current up to 2018 and thus analysis of economic data is restricted to 2018. The following sections provide a concise overview of the local economy in terms of:

Economic Structure and Performance

Employment Structure and Trends

Competitive and Comparative Advantage Analysis

Synthesis

Comparatively, the employment structure and trends section undertakes analysis on the same basis and principle as the preceding section. The purpose is to understand the growth and distribution of employment in the host and supporting municipalities. The competitive and comparative analysis section seeks to undertake an assessment of the structure and performance of the host municipalities geographic region in order to identify local strengths and potential for economic development. Lastly the Chapter synthesises outcomes observed from preceding sections in order to provide a concise overview of the key and salient features to be taken into consideration.

The purpose of the economic structure and performance section is to profile the structure and performance of the host and supporting municipalities with regard to the size of provincial, district and local municipalities, the sectoral composition of the host municipalities, and historical growth trends of the host and supporting municipalities.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.2

ECONOMIC STRUCTURE AND PERFORMANCE

SIZE AND CONTRIBUTION BY PROVINCIAL, DISTRICT AND LOCAL MUNICIPALITIES TO ITS CONTAINING ECNOMIC GEOGRAPHY

Size of the Provincial Economy Limpopo 7,3%

SIZE OF THE LOCAL ECONOMY AND CONTRIBUTION BY MINNG AND MANUFACTURING SECTORS

Musina Total GVA

Makhado Total GVA

R4 313 (R/million)

R20 056 (R/million)

ECONOMIC GROWTH South Africa 3,3%

2,9% 3,2%

2,2% 2,6% 1,9%

1,1%

1,5% 0,5%

0,7%

-1,4%

Mining Contribution

Remainder of South Africa 92,7%

20.6%

Manufacturing Contribution

2.7%

Mining Contribution

1.3%

Manufacturing Contribution

3.5%

Limpopo 2,7% 1,5%

MUSINA LOCAL MUNICIPALITY

2,7%

2,2% 1,0%

1,2%

2,3%

1,9%

0,2%

-0,6%

-1,4%

6 000

Size of the District Economy

5 000 4 000

Vhembe DM 16,0%

Vhembe District

3 000

3,2%

3,0%

2 000 1 000

Remainder of Limpopo Province 84,0%

1,4% 1,7% 1,6%

1,2%

0,9%

-0,6%

0,3%

0,8%

0,3%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total GVA

Mining GVA

Manufacturing GVA

Musina LM

MAKHADO LOCAL MUNICIPALITY Size of the Local Economy

Remainder of Vhembe DM 48,2%

Musina LM 10,5%

-4,6%

25 000 20 000 15 000

Makhado LM

10 000 Makhado LM 41,4%

4,7% 2,7% 2,4% 2,1% 4,2% 2,9% 2,8% 1,0% 0,5%

2,1%

5 000

4,0%

3,2%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total GVA

Mining GVA

0,4%

1,3%

1,6% 1,5% 1,7% 0,9%

0,3% 0,7% 0,3%

Manufacturing GVA 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 - 2014 - 2015 - 2016 - 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

South Africa

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

ECONOMIC SECTOR CONTRIBUTION TO TOTAL GVA OF THE MUSINA LOCAL MUNICIPALITY

PRIMARY SECTOR

Agriculture

ECONOMIC SECTOR CONTRIBUTION TO TOTAL GVA OF THE MAKHADO LOCAL MUNICIPALITY

Manufacturing

2.2%

10.1%

Utilities

Agriculture

2.2%

3.4%

2.2%

PRIMARY SECTOR

4.7%

26.8%

Construction

3.0%

2.4%

Mining

SECONDARY SECTOR

1.2%

6.8% Mining

Utilities

ECONOMY

10.2%

16.7% TERTIARY SECTOR

TERTIARY SECTOR

31.9% Government

15.3% Community Services

3.0%

Community Services

6.5%

66.4% Business Services

Trade

85.1%

Government

Business Services

Trade

19.2%

12.9%

21.5%

27.8% Transport

7.4%

Transport

6.1%

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 5.1: Spatial Distribution of Total GVA in the Host Municipalities

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.2.1

DISCUSSION

ECONOMIC ACTIVITY AND SIZE Economic activity and size refer to the overall size of a defined economic area and its contribution to larger economic geographies. The following seeks to outline the size of local, district and provincial economies by considering the Gross Value Added (GVA)contribution made by each of the afore mentioned economies to the large economic geography in which it resides. Gross Value Added (GVA) – The level of economic activities within a specific area. GVA is calculated as the difference between output and intermediate consumption in the economy. this is the difference between the value of goods and services produced and the cost of raw materials and other inputs, which are used in production by all sectors of an economy. The data shows that the Musina and Makhado local municipalities contribute 10.5% and 41.4% to the total GVA of the Vhembe DM. The Vhembe district municipality contributes 16.0% to the total GVA of the Limpopo Province, whilst the Limpopo Province contributes slightly more than 7% to the National GVA. Additionally, the total size of the Musina and Makhado local municipality economies have continually increased between 2008 and 2018. The mining and manufacturing sectors play marginal roles in the context of the host municipality economies. The mining sector in the Musina local economy does however contribute one fifth to the municipal GVA thus positioning the sector as a prominent role-player in the context of the Musina Local Municipality.

contribution by each host municipality economic sector to total GVA of said economy and the shifts and changes that has occurred due to output changes by each sector. The data shows that in the Musina local economy, the sectors that proportionally contribute the most to total GVA of the municipality are the wholesale and retail trade, mining and quarrying, and general government sectors. Alternatively, in the Makhado local economy, the general government, wholesale and retail trade and financial and business services sectors proportionally contribute the most to the total GVA output of the local economy. Most notably, within the Musina and Makhado local economies the wholesale and retail trade and general government sectors have shown an increase in the proportional share of the sectors to total output. The information shows that a potential focus on the government services and retail activities are becoming apparent as a appose to a focus on industrybased sectors. ECONOMIC GROWTH The rate at which an economic area grows is an indication of the economic areas potential to expand, and historical trends can provide valuable information with reference to future potential as well as sensitivity to fluctuations in the larger economic sphere. The data shows that the average annual growth rate for the Musina local economy has maintained a growth rate consistently higher that national, provincial and district averages over the short and medium term.

SECTORAL ANALYSIS – ECONOMIC OUTPUT (GVA) In order to further understand the host municipality economies within which the proposed SEZ is to function, analysis of the composition of the afore mentioned municipality economies can be conducted. The composition of the host municipality economies can be achieved by considering the

Within the Makhado local economy average annual economic growth has steadily been decelerating since 2011 and maintains average annual growth below national, provincial and district growth rates.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.3

EMPLOYMENT STRUCTURE AND TRENDS

SIZE AND CONTRIBUTION BY PROVINCIAL, DISTRICT AND LOCAL MUNICIPALITIES TO ITS CONTAINING ECNOMIC GEOGRAPHY

Size of the Provincial Economy

SIZE OF THE LOCAL ECONOMY EMPLOYMENT AND CONTRIBUTION BY FORMAL AND INFORMAL SECTORS

Musina Total Employment

Makhado Total Employment

29 945 jobs

99 629 jobs

EMPLOYMENT GROWTH South Africa 5,2%

3,7% 2,0% 2,3% 2,8% 1,6%

0,0%

2,0% 1,1%

-2,7% -2,9%

Limpopo 6,7%

Formal Jobs Contribution

Remainder of South Africa 93,3%

Informal Jobs Contribution

67.7%

Formal Jobs Contribution

32.3%

Informal Jobs Contribution

65.8% Limpopo

34.2%

4,3%

MUSINA LOCAL MUNICIPALITY

2,8% 1,5% 2,1% 1,4%

4,6% -1,3%

-3,1% -3,9%

1,5% 0,6%

40000

Size of the District Economy

Remainder of Limpopo Province 78,0%

Vhembe DM 22,0%

30000

Vhembe District

20000

5,8%

2,9% 1,7% 4,1% 0,9% 1,5%

10000 -2,7% 0

-1,5%

1,3% 0,4%

-4,8%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Formal Employment

Informal Employment

Musina LM 13,3%

MAKHADO LOCAL MUNICIPALITY Size of the Local Economy Musina LM 12,7% Remainder of Vhembe DM 45,2%

0,8%

120000

0,5%

-4,5% -4,9% -5,3%

-0,9%

1,6% 1,1%

100000 80000 60000

Makhado LM

40000 Makhado LM 42,2%

4,5% 5,6%

5,1%

20000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Formal Employment

2,8% 1,5% 4,4% 0,7% 1,6%

-2,9%

-4,8%

-1,6%

1,2% 0,2%

Informal Employment 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 - 2014 - 2015 - 2016 - 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 South Africa

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

ECONOMIC SECTOR CONTRIBUTION TO TOTAL EMPLOYMENT OF THE MUSINA LOCAL MUNICIPALITY

ECONOMIC SECTOR CONTRIBUTION TO TOTAL EMPLOYMENT OF THE MAKHADO LOCAL MUNICIPALITY Manufacturing

Manufacturing Agriculture

3.5% Utilities

6.2% Utilities

13.0% PRIMARY SECTOR

0.2%

38.3%

PRIMARY SECTOR

0.4%

13.1%

Construction

3.9% SECONDARY SECTOR

6.1%

0.1%

7.6%

Agriculture

Construction

Mining EMPLOYMENT

EMPLOYMENT

SECONDARY SECTOR

Mining

0.9% TERTIARY SECTOR

37.4%

Government

Community Services

TERTIARY SECTOR

6.8%

7.2%

22.0%

54.1%

Business Services

9.6%

Trade

74.3%

23.5% Community Services

12.7% Transport

3.2%

Transport

3.0%

21.5%

Trade

Business Services

9.9%

Government

15.9%

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 5.2: Distribution of Employment in the Host Municipalities

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.3.1

DISCUSSION

EMPLOYMENT SIZE Apart from how an economic region fares with regards to its growth in output, the creation of employment opportunities is an important element of the economy. Employment generated by an economic region supports individuals and households that reside within the bounds of an economic region and allows for the circulation and movement of money through the purchasing of goods and services. As a basis for investigating and analysing employment within the local economy and its broader spheres, consideration can be given to the size and contribution by local, district and provincial economies to their containing economies in terms of number of people employed. The data shows that the Makhado local municipality contributes more than 40% to the total employment of the Vhembe District as appose to the Musina local economy which contributes 12.7%. The Vhembe District economy in regard of the Limpopo economy and its employment plays a large role whereby slightly more than 22% of employment is generated within the district economy. At a national sphere, the Limpopo economy only contributes 6.7% to the total employment of the country. Based on the employment contribution made by the host municipalities to district and provincial economies, reference can be made to the formality of employment. Employment is largely viewed in regard to whether it is in the formal economy such as any of the 10 official economic sectors and which is subject to formal legislation and taxation, or the informal economy which is economic activity not captured as part of official statistics and is largely unregulated and free of taxation.

2011 (in line with continued economic growth), whilst employment in the informal economy has marginally been increasing over the same period. In the Makhado local economy formal employment contributes nearly two thirds of employment opportunities. Formal employment shows a marginal increase between 2011 and 2018 and aligns to the slow rate of economic growth in the local economy. Informal employment has steadily been decreasing since 2015. SECTORAL ANALYSIS – EMPLOYMENT The data shows that in the Musina local economy the agriculture, wholesale and retail trade and community services sectors proportionally contribute the most to employment. In a similar fashion, the Makhado local economy employs persons proportionally within the same economic sectors as the Musina local economy. EMPLOYMENT GROWTH The rate at which an economic area grows in terms of employment is an indication of the capability of an economy within a designated geographic area to productively increase economic output to the extent that new employment opportunities can be created. The Musina local economy is experiencing above average employment growth annually and outperforms national, provincial and district employment creation rates. The Makhado local economy is experiencing a growth in employment but at a subdued pace slower than that of the national, provincial and district averages.

The data shows that roughly 67.7% of persons employed in 2018 in the Musina local economy are employed in the formal economy. The historical trends indicate that formal employment has steadily been increasing since

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.4

COMPETITIVE AND COMPARATIVE ADVANTAGE ANALYSIS

Competitive Advantage Analysis (CAA) is an assessment of the structure and performance of the economy of a geographic region to identify local strengths (“competitive advantages”) and potential for economic development. The following approach used for CAA is focussed on examining local industries/sectors to identify leading and lagging economic sectors and the potential future prospects of these sectors for employment growth. The following section will seek to identify the Location Quotient (LQ) and Industry Target Classifications of the host economies. 5.4.1

LOCATION QUOTIENT

Local Quotient (LQ) is used as a measure of the specialisation in a geographic region meaning that, a LQ measures the concertation of certain industry sectors in an identified region relative to an aggregate/reference economy. The LQ can further be defined by the following definition: LQ = (Local Employment in Industry/Total Local Employment) / (National Employment in Industry/Total National Employment). The interpretation of LQ’s is based on the comparison of calculated LQ’s (the measure of employment concentration) for various economic sectors within a defined region.

In order to interpret LQ scores, Table 3.1 is provided. The table outlines LQ scores, and associated interpretation. It should be noted that a low (or high) location quotient does not necessarily mean the industry group is small (or large), unimportant (or important) in the region – simply that it is less so or more so compared with the reference economy. As such, a location quotient is used to calculate comparative advantages. Table 5.1: Location Quotient Interpretations Location Label Interpretation Quotient Local needs are not being met and goods Less than 0.75 Low and services are imported Most local needs are being met by the sector. The region will probably be both 0.75 to 1.24 Medium importing and exporting goods and services in the sector. Sector is serving the needs that extend 1.25 to 4.99 High beyond the boundaries of the municipality – likely to export goods and services. High level of local dependence on the More than Very sector – typically a single industry 5.00 High community. The following tables and figures (Table 3.2 and 3.3 and Figure 3.1 and 3.2) illustrate the LQ of the host economies between 2014 and 2018 in comparison to the national economy (reference economy). This is done in order to identify how concentrated the local economy is within the reference economy.

Higher LQ scores indicate that an economic sector is a dominant role-player within the identified region as compared to a reference economy, while lower LQ scores are an indication of scarcity of certain economic sectors. Additionally, LQ scores also provide an indication of the comparative advantage of an economic sector. A comparative advantage can be identified by LQ scores greater than 1.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Table 5.2: Location Quotients per Economic Sector in the Musina Local Economy Compared to the National Economy (2014 to 2018) Economic Sector

LQ 2012

2016

Agriculture, forestry and fishing

5.52

5.55

Mining

0.29

0.31

Manufacturing

Label Very High Low

Figure 5.1: Location Quotients per Economic Sector in the Musina Local Economy Compared to the National Economy (2014 to 2018)

Change

0,76

Community, social and personal services

0,76

Community, social and personal services

Increase Increase

General government

0,62

Business services

0,64

0.37

0.39

Low

Increase

Finance and insurance

Food, beverages and tobacco

0.76

0.84

Medium

Increase

Finance and business services

Textiles, clothing and leather goods

0.07

Low

Decrease

Communication

Wood and paper; publishing and printing Petroleum products, chemicals, rubber and plastic Other non-metal mineral products Metals, metal products, machinery and equipment Electrical machinery and apparatus Radio, TV, instruments, watches and clocks Transport equipment

0.05

0.06

Low

Increase

0.09

Low

Increase

Furniture and other manufacturing

0.49

0.47

Low

Decrease

Utilities

0.45

0.49

Low

Increase

Transport equipment

Construction Wholesale & retail trade; catering and accommodation Wholesale & retail trade

0,65

0.66

Low

Increase

Radio, TV, instruments, watches and clocks

0.92

1.00

Medium

Increase

Electrical machinery and apparatus

Low

Decrease

2.64

2.33

High

Decrease

0.13

Low

Increase

Low

Same

Low

Same

0.92

1.01

Medium

0.94

Medium

Increase

0.74

0.75

Medium

Increase

Transport

0.88

0.87

Medium

Decrease

Communication

0.12

0.11

Low

Decrease

0.54

0.57

Low

Increase

Finance and insurance

0.17

0.16

Low

Decrease

Business services

0.61

0.64

Low

Increase

General government

0.61

0.62

Low

Increase

Community, social and personal services

0.77

0.76

Medium

Decrease

Transport & communication

Finance and business services

Source: DEMACON Market Studies, 2019

0,75

Catering and accommodation

0,94

Wholesale & retail trade

1,01 1,00

Wholesale & retail trade; catering and…

0,66

Construction Water

Electricity

Electricity & water

0,49

Furniture and other manufacturing

0,47 0,09

0,13

Metals, metal products, machinery and equipment

Increase

0.90

0,87

Transport

Tertiary Sector

0.10

0,57 0,11

Transport & communication

2,33

Other non-metal mineral products

Primary Secondary Sector Sector

Catering and accommodation

0.12

0,16

Petroleum products, chemicals, rubber and plastic

0,10

Wood and paper; publishing and printing

0,06

Textiles, clothing and leather goods

0,07 0,84

Food, beverages and tobacco Manufacturing

0,39

Mining

0,31 5,55

Agriculture, forestry and fishing -

LQ 2016

1,00

2,00

3,00

4,00

5,00

6,00

LQ 2006

Source: DEMACON Market Studies, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Table 5.3: Location Quotients per Economic Sector in the Makhado Local Economy Compared to the National Economy (2014 to 2018) Economic Sector

LQ 2012

2016

Label

Figure 5.2: Location Quotients per Economic Sector in the Makhado Local Economy Compared to the National Economy (2014 to 2018)

Change

Agriculture, forestry and fishing

1.78

High

Decrease

Mining

0.04

Low

Increase

Manufacturing

0.65

0.64

Low

Decrease

Community, social and personal services

1,21

Community, social and personal services

1,21 1,26

General government 0,57

Business services

0,39

Finance and insurance

Food, beverages and tobacco

0.98

0.92

Medium

Decrease

Textiles, clothing and leather goods

0.33

0.30

Low

Decrease

1.63

1.78

High

Increase

Transport

0,70

0.24

Low

Increase

Transport & communication

0,65

1.28

1.20

Medium

Decrease

Catering and accommodation

0,69

0.37

0.33

Low

Decrease

0.18

0.17

Low

Decrease

0.24

0.23

Low

Decrease

0.23

Low

Furniture and other manufacturing

0.45

.45

Low

Tertiary Sector

Decrease

Electricity & water

Decrease

Construction Wholesale & retail trade; catering and accommodation Wholesale & retail trade

1.08

0.94

Medium

Decrease

Transport equipment

0,23

Radio, TV, instruments, watches and clocks

0,23

Electrical machinery and apparatus

0,17

1.01

Medium

Decrease

1.15

1.06

Medium

Decrease

Metals, metal products, machinery and equipment

0.71

0.69

Low

Decrease

Other non-metal mineral products

0.65

Low

Decrease

Petroleum products, chemicals, rubber and plastic

0.75

0.70

Low

Decrease

Wood and paper; publishing and printing

Communication

0.44

0.40

Low

Decrease

Textiles, clothing and leather goods

Decrease

Finance and insurance

0.40

0.39

Low

Decrease

Business services

0.62

0.57

Low

Decrease

General government

1.32

1.26

High

Decrease

Community, social and personal services

1.22

1.21

Medium

Decrease

Source: DEMACON Market Studies, 2019

Primary Secondary Sector Sector

0.69

Transport

Low

0,90 0,45

Furniture and other manufacturing

1.09

0.54

0,94

Construction

Decrease

Medium

0.59

1,01

Wholesale & retail trade; catering and… -

0.90

Finance and business services

1,06

Wholesale & retail trade

Water

0.98

Transport & communication

0,40

Communication

Electricity

Utilities

Catering and accommodation

0,54

Finance and business services

0,33 1,20 0,24 1,78

0,30 0,92

Food, beverages and tobacco

0,64

Manufacturing 0,04

Mining

1,78

Agriculture, forestry and fishing -

LQ 2016

1,00

2,00

3,00

4,00

5,00

6,00

LQ 2006

Source: DEMACON Market Studies, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

ECONOMIC SECTORS WITH A HIGHLY COMPETITIVE ADVANTAGE

ECONOMIC SECTORS WITH A MEDIUM COMPETITIVE ADVANTAGE

When comparing the LQ for the Musina and Makhado local economies it becomes evident that due to subtle differences in primary employing and GVA contributing sectors the specialisation of both economies differ even though similarities can be observed.

In the Musina local economy, economic sectors that show medium LQ scores include: the manufacturing of food, beverages and tobacco products; wholesale, retail, trade, catering and accommodation; and transport and communication.

In the Musina local economy the agriculture sector has the highest LQ (Very High) compared to other economic sectors. In effect, the remarkably high LQ is indicative of the capability of the sector to service needs outside its geo-economic region and export goods and services.

Within the Makhado local economy, economic sectors that show medium LQ scores include: the manufacturing of food, beverages and tobacco products; the manufacturing of other non-metal mineral products; the provision of utilities; construction; wholesale, retail, and trade; and community and social services.

The LQ of the agriculture sector has shown a slight increase since 2014 and is also one the largest proportional contributors to the local economy’s output while also being the largest employer. The sector thus has a competitive advantage over other economic sectors. Additionally, the only other economic sector that shows a competitive advantage over other economic sectors in the Musina local economy is the manufacturing of other non-metal mineral products.

Although economic sectors such as wholesale, retail and trade and construction proportionally contribute sizeable GVA output and employment opportunities as appose to manufacturing related sectors, these sectors have the propensity to service local needs, but most likely import and export goods and services to conduct business. .ECONOMIC SECTORS WITH A LOW COMPETITIVE ADVANTAGE

In contradiction, the Makhado local economy LQ outcomes do not show a clear dominant economic sector but highlights a number of sectors that score high LQ scores.

The remaining economic sectors for the Musina and Makhado local economies have low LQ scores indicating that these sectors generally do not service local needs and that goods and services have to be imported.

Economic sectors such as agriculture, the manufacturing of wood and paper products and general government services have a competitive advantage over other economic sectors.

TRESS INDEX

Only the agriculture and general government services sectors have proportionally high contributions to the total employment and GVA output of the local economy.

When considering indicators such as the Tress Index (measures the diversification or concentration of an economy) for a local economy, the Musina (49.3) and Makhado (57.0) local economies are moderately diversified (score close to 100 is indicative of a concentrated economy dependent on a single or at most two driving economic sectors).

The agriculture and general government sectors do show a decrease in LQ scores since 2014 as appose to the manufacturing of wood and paper products which shows an increase.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.4.3

INDUSTRY TARGET CLASSIFICATION

This classification is based on a combination of the location quotient, Provincial / District Sector Growth and LSRG / DSRG (Local/District Sector Relative Growth) values and it is expressed qualitatively not quantitatively. It is somewhat different in the way that it classifies the sectors, the categories are phrases that suggest the kind of prospects for growth that could be expected and, in some cases, whether the sector should be a retention target. Table 5.4: Industry Target Classification System - Categories LSRG

Provincial Growth

Location Quotient

Classification

Definition

Medium or High (> 0.75)

Current Strength

Sector currently growing strong

Low (<0.75)

Emerging Strength

Indication that a sector is experiencing growth and can be classified as having definite development potential

Medium or High (> 0.75)

Prospects limited by external trends

External trends represent a multitude of elements that strain development and growth and include competitiveness, exchange rate, fluctuations, performance of international economies, oil prices etc.

Low (<0.75)

Prospects limited by external trends and weak base

A weak base is an indication that the sector is structurally not particularly strong and limited in its diversification. This along with external trends strain the development prospects

Medium or High (> 0.75)

High priority retention target

Indication of a previously dominant or economically important sector that needs to retain its positive economic position – making it a priority for growth and development.

Low (<0.75)

Prospects limited by weak base and declining competitiveness

A week base indicates a need for diversification and declining competitiveness reflects that it might not be structural as strong as is needed for development potential

Medium or High (> 0.75)

Prospects limited by external trends and declining competitiveness

External trends hinder development, supported by declining levels of competitiveness.

Low (<0.75)

Prospects limited overall

Growth prospects are limited to a minimum for this sector and the economy should rather focus on other economic sectors.

Positive

Leading

Negative

Positive

Lagging

Negative

The following shows the industry target classification for the Musina local economy compared to the National economy.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Table 5.5: Musina Local Economy Industry Target Classification (2014 to 2018) National Sector % Growth

LSRG

Economic Sector

Industry Targeting Value

Class

Value

Class

Value

Class

Agriculture, forestry and fishing

5,55

Very High

Mining and quarrying

0,31

Low

14,1%

Positive

3,0%

Leading

Current Strength

-9,2%

Negative

7,0%

Leading

Prospects limited by weak base and external trends

Manufacturing

0,39

Food, beverages and tobacco

0,84

Low

1,2%

Positive

6,5%

Leading

Emerging Strength

Medium

12,0%

Positive

13,6%

Leading

Textiles, clothing and leather goods

0,07

Current Strength

Low

-7,1%

Negative

-0,1%

Lagging

Prospects limited overall

Wood and paper; publishing and printing

0,06

Low

-6,6%

Negative

6,6%

Leading

Prospects limited by weak base and external trends

Petroleum products, chemicals, rubber and plastic

0,10

Low

6,8%

Positive

-9,4%

Lagging

Prospects limited by weak base and declining competitiveness

Other non-metal mineral products

2,33

High

5,5%

Positive

-10,4%

Lagging

High priority retention target

Metals, metal products, machinery and equipment

0,13

Low

-3,1%

Negative

4,4%

Leading

Prospects limited by weak base and external trends

Electrical machinery and apparatus

Low

-10,1%

Negative

0,0%

Lagging

Prospects limited overall

Radio, TV, instruments, watches and clocks

Low

7,5%

Positive

0,0%

Lagging

Prospects limited by weak base and declining competitiveness

Transport equipment

0,09

Low

1,9%

Positive

3,1%

Leading

Emerging Strength

Furniture; other manufacturing

0,47

Low

-0,3%

Negative

-2,0%

Lagging

Prospects limited overall

Electricity, gas and water

0,49

Low

1,8%

Positive

11,4%

Leading

Emerging Strength

Construction

0,66

Low

12,1%

Positive

3,6%

Leading

Emerging Strength

Wholesale and retail trade, catering and accommodation

1,00

Medium

11,2%

Positive

12,4%

Leading

Current Strength

Wholesale and retail trade

1,01

Medium

10,0%

Positive

13,0%

Leading

Current Strength

Catering and accommodation services

0,94

Medium

19,7%

Positive

8,1%

Leading

Current Strength

Transport, storage and communication

0,75

Medium

5,1%

Positive

4,1%

Leading

Current Strength

Transport and storage

0,87

Medium

9,0%

Positive

1,1%

Leading

Current Strength

Communication

0,11

Low

-11,8%

Negative

-7,5%

Lagging

Prospects limited overall

Finance, insurance, real estate and business services

0,57

Low

11,5%

Positive

8,7%

Leading

Emerging Strength

Finance and insurance

0,16

Low

-0,6%

Negative

0,6%

Leading

Prospects limited by weak base and external trends

Business services

0,64

Low

13,9%

Positive

7,4%

Leading

Emerging Strength

General government

0,62

Low

-2,8%

Negative

3,8%

Leading

Prospects limited by weak base and external trends

Community, social and personal services

0,76

Medium

7,5%

Positive

0,3%

Leading

Current Strength

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 5.3: Musina Local Economy Industry Target Classification (2014 to 2018) 16,0%

14,0% Wholesale and Retail Trade

Local Sector Relative Growth (%)

12,0% Utilities 10,0%

Finance and Business Services 8,0% Mining

Manufacturing

6,0%

Construction

4,0%

General Government Agriculture Transportation and Communication

2,0%

Community Services

0,0% -2,0% -15,0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

National Sectoral Growth (%) Source: DEMACON Market Studies, 2019 Note: The size of each data point reflects the location quotient value. The y-axis quantifies market share movements, whereas the x-axis quantifies market size.

The information shows that in the Musina local economy current strength economic sectors include: agriculture; the manufacturing of food, beverages and tobacco products; wholesale, retail, trade, catering and accommodation; transportation and storage; and community and personal services. Economic sectors closely related to the proposed SEZ show that mining is limited by a weak base and external trends, and manufacturing and utility services are emerging strengths in the local economy. The manufacturing of non-metal mineral products is identified as a high priority retention target meaning that the sector has to potential to become a major economic role-player not only as a source of economic growth and output but as an employment industry.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The following shows the industry target classification for the Makhado local economy compared to the National economy. Table 5.6: Makhado Local Economy Industry Target Classification (2014 to 2018) National Sector % Growth

LSRG

Economic Sector

Industry Targeting Value

Class

Value

Class

Value

Class

Agriculture, forestry and fishing

1,78

High

14,1%

Positive

1,4%

Leading

Current Strength

Mining and quarrying

0,04

Low

-9,2%

Negative

5,4%

Leading

Prospects limited by weak base and external trends

Manufacturing

0,64

Low

1,2%

Positive

-0,2%

Lagging

Prospects limited by weak base and declining competitiveness

Food, beverages and tobacco

0,92

Medium

12,0%

Positive

-5,6%

Lagging

High priority retention target

Textiles, clothing and leather goods

0,30

Low

-7,1%

Negative

-8,8%

Lagging

Prospects limited overall

Wood and paper; publishing and printing

1,78

High

-6,6%

Negative

10,2%

Leading

Prospects limited by external trends

Petroleum products, chemicals, rubber and plastic

0,24

Low

6,8%

Positive

2,0%

Leading

Emerging Strength

Other non-metal mineral products

1,20

Medium

5,5%

Positive

-5,0%

Lagging

High priority retention target

Metals, metal products, machinery and equipment

0,33

Low

-3,1%

Negative

-9,0%

Lagging

Prospects limited overall

Electrical machinery and apparatus

0,17

Low

-10,1%

Negative

0,0%

Lagging

Prospects limited overall

Radio, TV, instruments, watches and clocks

0,23

Low

7,5%

Positive

0,0%

Lagging

Prospects limited by weak base and declining competitiveness

Transport equipment

0,23

Low

1,9%

Positive

-1,3%

Lagging

Prospects limited by weak base and declining competitiveness

Furniture; other manufacturing

0,45

Low

-0,3%

Negative

0,3%

Leading

Prospects limited by weak base and external trends

Electricity, gas and water

0,90

Medium

1,8%

Positive

-6,8%

Lagging

High priority retention target

Construction

0,94

Medium

12,1%

Positive

-12,4%

Lagging

High priority retention target

Wholesale and retail trade, catering and accommodation

1,01

Medium

11,2%

Positive

-6,9%

Lagging

High priority retention target

Wholesale and retail trade

1,06

Medium

10,0%

Positive

-6,8%

Lagging

High priority retention target

Catering and accommodation services

0,69

Low

19,7%

Positive

-2,4%

Lagging

Prospects limited by weak base and declining competitiveness

Transport, storage and communication

0,65

Low

5,1%

Positive

-4,1%

Lagging

Prospects limited by weak base and declining competitiveness

Transport and storage

0,70

Low

9,0%

Positive

-5,2%

Lagging

Prospects limited by weak base and declining competitiveness

Communication

0,40

Low

-11,8%

Negative

-7,1%

Lagging

Prospects limited overall

Finance, insurance, real estate and business services

0,54

Low

11,5%

Positive

-6,9%

Lagging

Prospects limited by weak base and declining competitiveness

Finance and insurance

0,39

Low

-0,6%

Negative

-2,4%

Lagging

Prospects limited overall

Business services

0,57

Low

13,9%

Positive

-8,4%

Lagging

Prospects limited by weak base and declining competitiveness

General government

1,26

High

-2,8%

Negative

-2,7%

Lagging

Prospects limited by external trends and declining competitiveness

Community, social and personal services

1,21

Medium

7,5%

Positive

1,0%

Leading

Current Strength

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 5.4: Musina Local Economy Industry Target Classification (2014 to 2018) 10,0%

Community Services

Mining

5,0%

Local Sector Relative Growth (%)

Manufacturing Agriculture 0,0% General Government

Transportation and Communication

-5,0%

Wholesale and Retail Trade

Finance and Business Services

-10,0% Utilities Construction -15,0%

-20,0% -15,0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

The information shows that in the Makhado local economy current strength economic sectors include agriculture and community and personal services. Economic sectors closely related to the proposed SEZ show that mining is limited by a weak base and external trends, manufacturing is limited by a weak base and declining competitiveness, and utility services are a high priority retention target. Other high priority retention target economic sectors include: the manufacturing of food, beverage and tobacco products; the manufacturing of other non-metal mineral products; construction industries; and wholesale and retail trade. An emerging strength in the local economy is the manufacturing of petroleum products, chemicals, rubber and plastics.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

5.5

SYNTHESIS

The following provides a concise overview of Chapter 3 in order to outline the key salient factors, influences and trends impacting on the economies of the Musina and Makhado host municipalities. ECONOMIC STRUCTURE AND PERFORMANCE ✓ ECONOMIC ACTIVITY AND SIZE • The Musina and Makhado local municipalities contribute 10.5% and 41.4% to the total GVA of the Vhembe DM. • The Vhembe district municipality contributes 16.0% to the total GVA of the Limpopo Province • The Limpopo Province contributes slightly more than 7% to the National GVA. • The manufacturing sector in both municipalities contribute marginally to the total output of the host municipalities. ✓ SECTORAL ANALYSIS • The largest proportional contributing sectors to total economic output in the Musina Municipality are: ‒ wholesale and retail trade, ‒ mining and quarrying, and ‒ general government. • The largest proportional contributing sectors to total economic output in the Makhado Municipality are: ‒ general government, ‒ wholesale and retail trade, and ‒ financial and business services. ✓ ECONOMIC GROWTH • The average annual growth rate for the Musina local economy has maintained a growth rate consistently higher that national, provincial and district averages over the short and medium term. • The average annual economic growth rate of the Musina local economy has steadily been decelerating since 2011 and

maintains average annual growth below national, provincial and district growth rates. EMPLOYMENT STRUCTURE AND TRENDS ✓ EMPLOYMENT SIZE • The Makhado local municipality contributes more than 40% to the total employment of the Vhembe District as appose to the Musina local economy which contributes 12.7%. • Slightly more than 22% of provincial employment is generated within the Vhembe district economy. At a national sphere, the Limpopo economy only contributes 6.7% to the total employment of the country. ✓ SECTORAL ANALYSIS • The largest proportional contributing sectors to total employment in the Musina Municipality are: ‒ agriculture, ‒ wholesale and retail trade, and ‒ community services. • The largest proportional contributing sectors to total economic output in the Makhado Municipality are: ‒ agriculture, ‒ wholesale and retail trade, and ‒ community services. ✓ EMPLOYMENT GROWTH • The Musina local economy is experiencing above average employment growth annually and out performs national, provincial and district employment creation rates. • The Makhado local economy is experiencing a growth in employment but at a subdued pace slower than that of the national, provincial and district averages.

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

COMPETITIVE AND COMPARATIVE ADVANTAGE

‒ Manufacturing is limited by a weak base and declining ‒

✓ ECONOMIC SECTORS WITH HIGHLY COMPETITIVE ADVANTAGE • Economic sectors such as agriculture, the manufacturing of wood and paper products and general government services have a competitive advantage over other economic sectors.

‒

competitiveness. Other high priority retention target economic sectors include: the manufacturing of food, beverage and tobacco products; the manufacturing of other non-metal mineral products; construction industries; and wholesale and retail trade. An emerging strength in the local economy is the manufacturing of petroleum products, chemicals, rubber and plastics.

✓ ECONMIC SECTORS WITH MEDIUM COMPETITIVE ADVANTAGE • In the Musina local economy, economic sectors with a medium competitive advantage include: the manufacturing of food, beverages and tobacco products; wholesale, retail, trade, catering and accommodation; and transport and communication. • In the Makhado local economy, economic sectors with a medium competitive advantage include: the manufacturing of food, beverages and tobacco products; the manufacturing of other non-metal mineral products; the provision of utilities; construction; wholesale, retail, and trade; and community and social services. ✓ INDUSTRY TARGET CLASSIFICATION • Musina Local Economy ‒ Current strength economic sectors include: agriculture; the manufacturing of food, beverages and tobacco products; wholesale, retail, trade, catering and accommodation; transportation and storage; and community and personal services. ‒ Manufacturing and utility services are emerging strengths in the local economy. ‒ The manufacturing of non-metal mineral products is identified as a high priority retention target meaning that the sector has to potential to become a major economic role-player not only as a source of economic growth and output but as an employment industry.

•

Makhado Local Economy ‒ Current strength economic sectors include: agriculture and community and personal services.

DEMOGRAPHIC PROFILE

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6 DEMOGRAPHIC PROFILE 6.1

INTRODUCTION

The purpose of this chapter is to provide a socio-economic overview of the host municipalities (Musina and Makhado Local Municipality), as well as the supporting municipalities (municipal authorities directly adjacent to host municipalities). The chapter provides insight and analysis of the socio-economic participants in the study area and focusses on information pertaining to the size and distribution of population/households, the income generated by households, general education levels, the dwellings in which households reside and their tenure status, and the employment status of the economically active market segment. The following sections provide a concise overview of the local economy in terms of:

Population Size

6.2

Tenure Status

Average Annual Household Income

Living Standard Measure

STUDY AREA DELINEATION

The study area to which the chapter and its inherent information relates to is based on the host municipalities (Musina and Makhado Local Municipality) and the supporting municipalities (Municipal authorities directly adjacent to host municipalities) that relate to the locality of the proposed SEZ. To show the study area, Map 6.1 provides a geographic perspective of the host and supporting municipalities.

Age Profile

Highest Level of Education

Employment Status

Dwelling Types

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 6.1: Geography of Host and Supporting Municipalities in the Context of the Proposed Musina-Makhado Special Economic Zone

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.3

POPULATION AND HOUSEHOLDS

The following section seeks to outline the number of people and households that reside within the study area and identify the average household size of households. Additionally, a comparison between the inherent population and households present during 2011 will be compared to the current 2019 population. Figure 6.1: Population and Household Size

MUSINA

MAKHADO

HOST MUNICIPALITY

114 690

558 890

PEOPLE IN THE

PRIMARY

TRADE AREA

44 945

158 555

HOUSEHOLDS

682 896 558 890 263 550

Musina

Makhado

Greater Giyani

Greater Letaba

Thulamela

Collins Chabane

159 401

108 840

Blouberg

Molemole

NUMBER OF HOUSEHOLDS OF THE HOST AND SUPPORTING MUNICIPALITIES 183 286

158 555

Household

Population

Household

Average Annual

Growth Rate

6.7%

10.6%

1.0%

2.0%

POPULATION GROWTH

74 992

97 526

72 977

44 945

Musina

Makhado

Greater Giyani

Greater Letaba

Thulamela

Collins Chabane

40 387

30 088

Blouberg

Molemole

AVERAGE HOUSEHOLD SIZE OF THE HOST AND SUPPORTING MUNICIPALITIES 3,5

3,5

Makhado

Greater Giyani

2,6

HOUSEHOLD GROWTH

361 150 221 291

114 690

Population

POPULATION GROWTH

POPULATION SIZE OF THE HOST AND SUPPORTING MUNICIPALITIES

3,7

3,9

3,6

Thulamela

Collins Chabane

Blouberg

Molemole

3,0

HOUSEHOLD GROWTH

Musina

Greater Letaba

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 6.2: Spatial Distribution of Population Throughout the Host Municipalities

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 6.3: Average Annual Population Growth of the Host Municipalities Population per Spatial Location

Source: DEMACON GIS, 2019

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.4

AGE PROFILE

The age profile of the study area serves as an indicator for consumers active within the current market. Consumer behaviour is largely associated with ageprofiles because of differentiations in wants and needs of different age groups. In the context of the proposed SEZ, the age profile assists in understanding the current and potential workforce that could be active as part of operations and also informs elements such as movement, migration and family planning. Figure 6.2: Age and Gender Profile of the Host and Supporting Municipalities

MUSINA

MAKHADO

HOST MUNICIPALITY

AGE PROFILE OF THE HOST AND SUPPORTING MUNICIPALITIES

Molemole 85+

0,1%

0,3%

85+

80 - 84

0,0%

0,2%

75 - 79

0,1%

0,2%

70 - 74

0,2% 0,3%

65 - 69

60 - 64

0,7%

0,1%

0,8%

80 - 84

0,1%

0,6%

75 - 79

0,2%

0,7%

0,4%

70 - 74

0,4%

0,9%

0,6%

65 - 69

0,5%

1,0%

0,8%

60 - 64

1,0% 1,3%

Blouberg

Collins Chabane

1,1%

55 - 59

50 - 54

1,1%

50 - 54

1,6%

45 - 49

1,8%

2,5%

40 - 44

2,1%

2,7%

35 - 39

2,3%

2,6%

40 - 44

2,5%

35 - 39

3,8%

5,7%

5,3%

6,3%

20 - 24

5,4%

15 - 19

5,5%

10 - 14

4,2%

5-9 0-4

2,7%

3,2%

30 - 34 25 - 29

1,9%

4,5%

25 - 29

6,0%

20 - 24

4,6%

15 - 19

4,6%

10 - 14

4,4%

5-9

6,4%

10,0%

30 - 34

5,8%

6,4% 5,0%

0,0% Male

5,0%

10,0%

0-4

1,9%

19,2%

36,4%

37,1%

21,4%

Thulamela

33,9%

Greater Letaba

32,1%

Greater Giyani

34,3%

Makhado

33,9%

38,8%

22,8%

3,1%

2,7%

3,9% 4,2%

5,1%

4,7%

6,4%

39,4%

22,9%

5,9%

5,2%

5,0%

5,6%

5,5%

6,5%

38,7%

22,2%

6,1% 5,0%

Female

0,0% Male

5,0%

10,0%

Female

49.9%

50.1%

46.8%

53.2%

of the population is

MALE

FEMALE

MALE

FEMALE

Source: DEMACON ex StatsSA, 2019

33,8%

20,7%

2,1%

3,7%

10,0%

40,0%

34,7%

1,5%

55 - 59 45 - 49

37,3%

Musina

Child (0 - 14)

30,5%

Youth (15 -34)

36,8%

23,9%

44,6%

22,5%

Working Age (35 - 64)

Elderley (65+)

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.6

HIGHEST LEVEL OF EDUCATION

The highest level of education serves as a proxy of human development within an identified geographic region. The highest level of education is indicative of the diversity of potential skilled labour and assists in understanding the dynamics associated with skills development and capabilities. The level of employment also functions as an important indicator, impacting on the level of human development as well as on the disposable income that a community may have at its disposal. Figure 6.3: Highest Level of Education for the Host and Supporting Municipalities HIGHEST LEVEL OF EDUCATION FOR THE HOST AND SUPPORTING MUNICIPALITIES

MUSINA HOST MUNICIPALITY Educational Institution Attendance (20+ Years)

Makhado

47.2% attend a SECONDARY SCHOOL

23.7%

19.9%

attend an UNIVERSITY

attend an TVET

Musina Molemole

Highest Education Level 36,1% 18,5%

21,9%

Blouberg 13,5%

5,3%

4,7%

Collins Chabane No Schooling

Some Primary

Complete Primary

Some Secondary

Matric

Higher

Thulamela

MAKHADO HOST MUNICIPALITY

Greater Letaba

Educational Institution Attendance (20+ Years) Greater Giyani

38.6% attend a SECONDARY SCHOOL

24.7%

22.0%

attend an TVET

attend an UNIVERSITY

Highest Education Level 22,0%

31,7%

23,7%

13,8% 3,8%

No Schooling

Some Primary

Complete Primary

Some Secondary

Matric

5,0% Higher

No Schooling

Greater Giyani 22,4%

Greater Letaba 26,0%

17,2%

Collins Chabane 23,0%

Some Primary

26,2%

Complete Primary

4,1%

23,3%

23,4%

27,0%

29,7%

26,0%

21,9%

3,0%

4,2%

4,0%

4,3%

4,1%

5,3%

Some Secondary

3,8%

30,5%

32,1%

31,8%

31,1%

31,2%

30,0%

36,1%

31,7%

Matric

12,2%

12,0%

16,1%

11,2%

9,3%

11,4%

13,5%

13,8%

Higher

4,7%

3,6%

7,2%

3,6%

2,9%

4,9%

4,7%

5,0%

Thulamela

Blouberg

Molemole

Musina

Makhado

22,5%

23,6%

18,5%

22,0% 23,7%

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.7

OCCUPATION PROFILE AND SKILLS

Apart from the highest level of education obtained by the resident population of the host and supporting municipalities, the level of skills present in the local economy is important. The level of skills provides an indication of the extent of occupational preference and proficiency in the host and supporting minimalities and also outlines the extent to which the local labour force is adaptable to the introduction of new business and industry.

MUSINA HOST MUNICIPALITY

MAKHADO HOST MUNICIPALITY

OCCUPATION PROFILE

Skilled Occupations

ELEMENTARY OCCUPATIONS ARE MOST POPULAR

42.3%

11.8% Semi-Skilled Occupations

SERVICE WORKERS AND MARKET SALES WORKERS ARE THE SECOND MOST POPULAR

45.1%

17.1%

Low-Skilled Occupations

CRAFT AND RELATED TRADES ARE THE THIRD MOST POPULAR

42.3%

Skilled Occupations

ELEMENTARY OCCUPATIONS

MANUFACTURING LABOURERS AS A PERCENTAGE OF ALL OCCUPATIONS IN THE HOST AND SUPPORTING MINICIPALITIES

ARE MOST POPULAR

34.8%

22.2%

Molemole

1,4%

Blouberg

Semi-Skilled Occupations

SERVICE AND MARKET SALES WORKERS ARE THE SECOND MOST POPULAR

42.5%

Collins Chabane

2,8%

1,6%

15.7%

Low-Skilled Occupations

CRAFT AND RELATED TRADES ARE THE THIRD MOST POPULAR

34.8%

11.5%

15.2%

Thulamela

1,4%

Greater Letaba

2,0%

Greater Giyani

2,0%

SKILLS PER HOST AND SUPPORTING MUNICIPALITY

42,3%

45,1% 11,8%

Musina

34,8%

37,0%

34,3%

28,0%

34,0%

42,5%

39,1%

39,5%

43,8%

39,5%

22,2%

23,9%

26,2%

28,2%

Makhado

Greater Giyani

Greater Letaba

Thulamela

Skilled

Semi-Skilled

42,2%

36,0%

37,5%

41,8%

26,5%

20,4%

22,2%

Collins Chabane

Blouberg

Molemole

Makhado

Musina

2,8%

4,3%

Low-Skilled

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.8

EMPLOYMENT PROFILE AND LABOUR ABSORPTION

The occupational profile as well as level of skills in the local labour force is defined by the availability of employment opportunities in the local market. Thus it is important to consider the current employment and unemployment rate of the host and supporting economies in order to understand the extent to which the local economy is sufficiently supplying job opportunities for the youth to enter into the active labour force.

MUSINA HOST MUNICIPALITY

MAKHADO HOST MUNICIPALITY

ECONOMICALLY

ACTIVE

Population

67.4%

45.3%

32.4%

54.7%

Not-Economically Active

Economically active population refers to a person of working age 15 to 65 who are either employed or unemployed. Not economically active population refers to ages 0 to 14 and 65 and older, persons unable to work or persons engaged in educational activities or are homemakers.

Unemployed Economically Active

Employed

Economically Active

80.1%

64.4%

19.9%

Unemployed Economically Active

LABOUR ABSORPTION PROFILE LABOUR ABSORPTION RATE

AVERAGE NUMBER OF NEW ECONOMICALLY ACTIVE POPULATION PER YEAR

AVERAGE NUMBER OF NEW JOBS CREATED PER YEAR

EFFECT

Musina

55,6

1 299

203

UNDERSUPPLY OF JOBS

Makhado

30,0

4 231

517

UNDERSUPPLY OF JOBS

Greater Giyani

20,2

1 378

108

UNDERSUPPLY OF JOBS

Greater Letaba

29,1

1 139

-92

UNDERSUPPLY OF JOBS

Thulamela

24,3

5 588

647

UNDERSUPPLY OF JOBS

Collins Chabane

18,8

801

UNDERSUPPLY OF JOBS

35.6%

Employed and unemployed persons are considered to be economically active and thus is a segment of the economically active percentage.

UNEMPLOYMENT RATE OF THE HOST AND SUPPORTING MUNICIPALITIES 35,6%

46,2% 33,2%

42,8%

50,7% 33,1%

34,7%

Blouberg

23,5

-285

-194

LABOUR FORCE AND JOBS DECLINING

Molemole

32,0

-101

-173

LABOUR FORCE AND JOBS DECLINING

19,9%

Musina

Makhado

Greater Giyani

Greater Letaba

Thulamela

Collins Chabane

Blouberg

Molemole

100

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 6.4: Distribution of Employed Persons in the Host Municipalities

Source: DEMACON GIS, 2019

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.9

DWELLING TYPE

Dwelling types for the purpose of the section is focused on the variety of typologies associated with the dwelling in which households reside in the host and supporting municipalities. Dwelling typologies provide a platform from which a deeper understanding can be formulated regarding the choice and preference of dwelling in which to reside, and the associated impact and/or strain that different dwelling typologies can place on the delivery of services. Figure 6.5: Dwelling Typologies for the Host and Supporting Municipalities

MUSINA HOST MUNICIPALITY

MAKHADO HOST MUNICIPALITY

Majority of

Households Reside in a

Formal Dwelling

82.4%

8.3%

of households reside in an

9.1%

informal dwelling

Households Reside in a

Formal Dwelling

2.0%

DWELLING TYPES IN THE HOST AND SUPPORTING MUNICIPALITIES

87.4%

of households reside in an

Molemole

96,1%

Blouberg

95,7%

informal dwelling Collins Chabane

households

reside

traditional dwelling

10.3%

households

reside

80,1%

traditional dwelling

Thulamela

91,2%

Greater Letaba

91,6%

Greater Giyani

87,0%

Makhado

87,2%

Musina

82,4%

20%

40%

60%

80%

Formal Dwellings

Informal Dwellings

Traditional Dwellings

Other Dwellings

100%

102

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.10 TENURE STATUS Tenure status, which is associated with dwelling typologies, is an indication of the level of ownership of a given property by households in a specific geographic region. Ownership, as shown in the data below, seeks to provide an indication whether a household owns a property and has paid for the property, owns the property and is in the process of paying the purchasing price, are renting the property or dwelling in which they reside, or occupies the property rent-free. Figure 6.6: Tenure Typology for the Host and Supporting Municipalities

MUSINA HOST MUNICIPALITY

MAKHADO HOST MUNICIPALITY

TENURE TYPOLOGY IN THE HOST AND SUPPORTING MUNICIPALITIES

Molemole

80,1%

Blouberg

58,5%

Collins Chabane

33.1%

75.2%

of households own and have paid for the property where they reside

10.9%

5.3%

of households own but have not finished paying for the property where they reside

40.5%

6.1%

of households rent the property where they reside

75,4%

Thulamela

85,0%

Greater Letaba

73,6%

Greater Giyani

76,0%

Makhado

75,2%

Musina

33,1% 0%

15.5%

13.4%

of households occupy the property where they reside rent free

20%

40%

60%

80%

Rented

Owned (Not Paid)

Owned (Paid)

Occupied Rent-Free

100%

103

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.11 AVERAGE ANNUAL HOUSEHOLD INCOME The average annual income of households within a defined geographic region provides an indication of the level to which living standards can be achieved. In essence, the ability to generate income allows households to build disposable income, which in turn is used to purchase goods and services, service debts or invest in property or other non-consumable items. The following figure provides an indication of the average annual household income for host and supporting municipalities. It should be noted that census based household income in urban localities, and especially township markets, are generally understated and does not account for the powerful effects of informal sector activity (informal trade, backyard rentals, township business) as well as remittances. Figure 6.7: Average Annual Household Income for Host and Supporting Municipalities

MUSINA HOST MUNICIPALITY Average annual household income for all LSM groups (2019)

Average annual household income for LSM Groups 4+ (2019)

MAKHADO HOST MUNICIPALITY Average annual household income for all LSM groups (2019)

Average annual household income for LSM Groups 4+ (2019)

R68 789

R153 529

R62 642

R127 485

Average monthly household income for all LSM groups (2019)

Average monthly household income for LSM Groups 4+ (2019)

Average monthly household income for all LSM groups (2019)

Average monthly household income for LSM Groups 4+ (2019)

R5 732

R12 794

R5 220

R10 624

AVERAGE ANNUAL HOUSEHOLD INCOME IN THE HOST AND SUPPORTING MUNICIPALITIES Molemole Blouberg Collins Chabane Thulamela Greater Letaba Greater Giyani Makhado Musina

R97 729 R44 151 R80 810 R35 226 R106 739 R40 392

R128 495 R59 895 R99 972 R40 448 R98 530 R39 409 R127 485 R62 642 R153 529 R68 789

LSM 4 to 10+ Average Annual Income All LSM Average Annual Income

2.0% Indigent Households

7.0% Indigent Households

104

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 6.4: Average Annual Household Income Distribution in the Host Municipalities

Source: DEMACON GIS, 2019

105

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.12 LIVING STANDARD MEASUREMENT The LSM index is an instrument designed to profile a market in terms of a continuum of progressively more developed and sophisticated market segments. The LSM system is based on a set of marketing differentiators, which group consumers according to their standard of living, using criteria such as degree of urbanisation and ownership of assets (predominantly luxury goods). The LSM system is a wealth measure based on standard of living, rather than income alone. The market segmentation continuum is divided into ten LSM segments, where LSM 1 signifies the lowest living standard and LSM 10+ signifies the highest living standard. The LSM categories are defined and weighted in terms of the following 29 variables (refer to Table 4.1). It is important to note that the LSM system is widely applied for marketing and branding purposes Table 6.1: Living Standard Measurement (LSM) Variables 1 2 3 4 5 6 7 8

Hot running water Fridge/freezer Microwave oven Flush toilet in/outside house No domestic in household VCR Vacuum cleaner/floor polisher No cell phone in household

16 9 10 11 12 13 14 15

Less than 2 radio sets/household Traditional hut Washing machine PC in home Electric stove TV set Tumble dryer Home telephone

17 18 19 20 21 22 23 24

Hi-Fi/music centre Rural outside Built-in kitchen sink Home security service Deep freezer Water in home/plot M-net/DSTV subscription Dishwasher

25 26 27 28 29

Electricity Sewing machine DVD player 1 cell phone per household Motor vehicle in household

Essentially, the LSM index summarises the net result of market indicators discussed in preceding paragraphs. The objective is to assess whether minimum demand thresholds can be met by households within the market area sustaining the market potential, taking due cognisance of demand potential and effective competitive supply. The data shows that for all host and supporting municipalities the proportion of the households that can be classified in LSM 1 to 3 segments constitute between two thirds and three quarters of households. The Musina and Makhado host municipalities proportionally have 71.2% and 68.5% of households that form part of LSM 1 to 3 segments. The marginally section of households that form part of LSM 4 to 10+ can be attributed to the sizeable portion of households that earn a monthly income below R3 500 which in effect influences the capability of households to spend money on a wide array of goods and services.

106

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Figure 6.8: Living Standard Measurement for Host and Supporting Municipalities

MUSINA HOST MUNICIPALITY

LIVING STANDARD MEASURE IN THE HOST AND SUPPORTING MUNICIPALITIES Molemole

LSM 1 to 3 are the most

prevalent group in the

Blouberg

Thulamela

Musina Municipality

Collins Chabane

LSM 8 to 10 are the least

Greater Letaba

prevalent

Greater Giyani

Makhado

MAKHADO HOST MUNICIPALITY

Musina 0%

LSM 1 to 3 are the most

10%

20%

30%

40%

50%

60%

80%

90%

100%

prevalent

LSM 1

75,1%

78,1%

85,1%

Greater Letaba 86,9%

78,7%

86,8%

83,7%

group in the

LSM 2

4,7%

2,0%

1,8%

1,5%

1,2%

1,9%

1,6%

1,7%

Makhado

LSM 3

1,2%

1,4%

1,3%

1,1%

0,8%

1,4%

1,1%

1,2%

LSM 4

3,4%

4,0%

2,7%

3,0%

2,4%

3,9%

3,2%

3,5%

LSM 5

4,3%

2,9%

1,7%

1,4%

1,8%

2,7%

1,5%

2,1%

LSM 6

3,4%

4,1%

2,7%

2,5%

2,4%

4,4%

2,5%

3,2%

LSM 7

2,8%

2,5%

2,1%

1,4%

1,5%

2,5%

1,5%

1,7%

LSM 8

2,0%

2,2%

1,0%

1,4%

2,1%

1,0%

1,4%

LSM 9

1,2%

1,1%

1,0%

0,6%

1,1%

0,4%

0,7%

LSM 10

1,9%

1,6%

0,6%

0,8%

1,4%

0,5%

0,8%

Municipality

LSM 8 to 10 are the least

prevalent

Musina

Makhado

Greater Giyani

Collins Chabane 87,0%

70% Thulamela

Blouberg

Molemole

107

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Map 6.5: Distribution of LSM in the Host Municipalities

Source: DEMACON GIS, 2019

108

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.13 POVERTY PROFILE OF THE HOST AND SUPPORTING MUNICIPALITIES Based on information discussed, reference can be made to the approximately poverty level of households in the host and supporting municipalities. The purpose of the information is to provide a holistic overview of the context of local communities and so provide deeper understanding of the potential impact that the proposed MMEMSEZ could have on the livelihood of communities. The following information is based on the Statistics South Africa defined Food Poverty Line (FPL). The FPL can be defined as “the amount of money that an individual will need to afford the minimum required daily energy intake”. The FPL for the Limpopo Province is estimated at R517 per person per month. Figure 6.9: Poverty Profile of the Host and Supporting Map 6.6: Poverty Profile of the Host and Supporting Municipalities Municipalities PROPORTION OF HOUSEHOLDS IN THE HOST AND SUPPORTING MUNICIPALITIES ABOVE AND BELOW THE FOOD POVERTY LINE OF THE LIMPOPO PROVINCE

Molemole

Blouberg

Thulamela

61,6% 67,4%

Musina

40,9%

68,2% 60,7%

31,8% 39,3%

67,9%

Greater Giyani

Makhado

32,6%

59,1%

Collins Chabane

Greater Letaba

38,4%

32,1%

54,4%

45,6%

39,2% Below FPL

60,8% Above FPL

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.14 BURDEN OF DISEASE PROFILE OF THE HOST AND SUPPORTING MUNICIPALITIES Burden of disease data represents information which highlights the extent to which the leading causes of pre-mature death in health districts across South Africa can be reviewed. According to the District Health Barometer (2019/20) the proportions of deaths and years of life lost (YLLs) due to four broad cause groups (Communicable diseases, HIV-related and TB, Non-communicable diseases, and injuries) were calculated for each of the 52 districts. ‘Years of life lost’ is a measure of premature mortality based on the age at death and thus highlights the causes of death that should be targeted for prevention. In line with the second South African NBD study, the West level 26 model life expectancy was selected as the standard against which YLLs are calculated. The proportion of all deaths that are amenable to healthcare were also calculated for each district. Figure 6.10: Percentage of Deaths by Broad and Leading Cause – 2012 to 2017

Source: DEMACON ex DHB, 2020

Figure 6.11: Average Percentage of People Covered by Medical Insurance 9,0

8,5

8,0

7,2

Percentage

7,0

6,0 5,0 4,0

7,3

3,0

7,0

7,4 4,8

2,0 1,0 Makhado Local Authorities

Thulamela District Average

Musina

Collins Chabane Provincial Average

Source: DEMACON ex DHB, 2020

110

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

6.15 DISCUSSION POPULATION AND HOUSEHOLDS The data shows that the host municipalities combined have nearly 674 000 people and 204 000 households residing within their borders. The Musina Local Municipality is the smaller of the two host municipalities with a total of 114 690 people compared to the 558 890 people residing in the Makhado Local Municipality. Additionally, the Musina Local Municipality also contributes a smaller proportion of households to the project area, 44 945 households in 2019 compared to the 158 555 households in the Makhado Local Municipality. When considering bordering local municipalities (supporting municipalities), the total number of people residing within the boundaries of the supporting municipalities amount to nearly 1.8 million people and slightly less than 500 000 households. The most populous of the supporting municipalities is the Thulamela Local Municipality which is home to 682 896 people and 183 286 households. The second most populous supporting municipality is the newly demarcated Collins Chabane Local Municipality which is home to 361 150 people and 97 526 households. At a national level the average household size has historically been steadily decreasing. In line with national trends, all host and supporting municipalities have experienced a continuous decrease in average household size. Exceptions include the Blouberg and Molemole supporting municipalities which have experienced no change in average household size since 2011. In relation to the size of population and households, the spatial distribution of population and households within the host municipalities is also of significance as the spatial congregation of population may provide valuable information regarding the clustering and locational preference of people. In order to show the spatial distribution and size of population, the following maps show the distribution and density of population throughout the host municipalities, and the size of population associated per different localities throughout the host municipalities.

AGE PROFILE The age profiles for the host municipalities show a proportionally large share in the 0 to 39 male and female age groups. The age profile of the Musina host municipality is typical of a mining area whereby younger age groups migrate to the area for work purposes and older age groups are steadily employed. In comparison the Makhado host municipality age profile shows a young growing population profile typical of areas undergoing moderate to high population growth due to economic opportunities. HIGHEST LEVEL OF EDUCATION The data above shows that in all host and supporting municipalities a significant portion of the population aged 20 years and older have not attained any form of formal schooling. In the Musina host municipality more than 17% of the 20+ years of age population have not attained any form of schooling as appose to the Makhado host municipality where nearly 20% of the 20+ years of age segment have not attained any schooling. For all municipalities a marginal proportion of the population have completed a matric certificate or any form of higher education. Less than 15% of the 20+ years of age segment have completed a matric certificate in the host municipalities respectively, compared to roughly 5% of the population that have attained higher education. EMPLOYMENT, OCCUPATION AND SKILLS PROFILE The data shows that in both host and supporting municipalities semi-skilled and low-skilled occupations are the most prominent amongst the 80.1% and 64.4% of economically active persons employed in the Musina and Makhado host municipalities respectively. Proportionally, semi-skilled occupations are the most prominent with on average more than 41% of employed persons employed in occupations such as service and market sales workers and craft and related occupations. The skilled section of the labour force on average accommodates more than 22% of the labour force in professional and clerking positions.

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Low-skilled occupations on average accommodates more than 36% of employees. Manufacturing labourers make-up on average 2.3% of occupations in the host and supporting municipalities. The limited manufacturing labour force would be increased through employment by the SEZ, but could also indicate that a mismatch or lack of skills exist in the host and supporting municipalities to service the SEZ labour requirements.

and formal room flatlet dwellings. The typology of the host municipalities is largely as a result of traditional authorities in the host municipality geographic regions and the prominence of backyard rental structures (formal and informal).

The Musina host municipality has the lowest unemployment rate of all host and supporting municipalities (19.9%). The Makhado host municipality has one of the highest unemployment rates – in excess of 35% of economically active population groups. Supporting municipalities also report significantly high unemployment rates – typically between 30% and 50%.

The data above shows that in the Musina host municipality property is primarily rented from private individuals or the property in which a household resides is owned and the bond fully paid. The Makhado host municipality data shows that more than 70% of households own the property on which they reside and have fully paid the bond for the property. A sizeable portion of households occupy the dwelling in which they reside rent-free. Rent-free occupation is typically associated with informal settlements and backyard dwellings where friends and family members occupy secondary dwellings at no cost.

The Musina and Makhado host municipalities have the highest labour absorption rates of all municipalities considered (i.e. 55.6% and 30% respectively). Although the Thulamela supporting municipalities shows the highest rate of new job creation per year (in excess of 600 jobs per annum), the labour absorption rate is below 25% of the potentially economically active population. All host and supporting municipalities show a under supply of employment opportunity growth in comparison to the rate of growth of the economically active segment of the population. The Blouberg and Molemole supporting municipalities indicate a nett average annual loss of economically active population and employment opportunities. The information indicates that job-seekers are migrating out of the municipalities to areas where employment opportunities could be obtained. DWELLING TYPES The data above shows that a formal house or brick structure on a separate stand is proportionally the dominant housing typology for all host and supporting municipalities. It should be noted that the Musina and Makhado host municipalities have, in comparison to supporting municipalities, a lower proportional share of formal house or brick structures. The host municipalities do, however, have proportionally high shares of traditional, house / flat / room in backyard, informal dwellings in backyard

TENURE STATUS

When considering supporting municipalities, households primarily own the property on which they reside and have fully paid the bond associated with the property. The rental market in supporting municipalities is limited as a marginal portion of households rent their property from private or public institutions. AVERAGE ANNUAL HOUSEHOLD INCOME The data above shows for all municipalities between 11% and 15% of households obtain no annual income from any sources. Similarly, for all municipalities, households that earn between R1 and R3 500 on average represents more than 60% of households per local municipality. Households that earn more than R3 500 per month on average represents only 20% of households per local municipality. For the Musina and Makhado host municipalities, 12.7% and 11.6% of households respectively earn no annual income, while households that earn between R1 and R3 500 represent 66.4% and 66.0% of households. The remaining 20.9% and 22.4% of households in the Musina and Makhado host municipalities earn an annual income above R3 500. When compared to supporting municipalities a correlation can be observed in the similarity of

112

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

household income distribution. The sizeable share of households that earn less than R3 500 per month provides an indication of the low buying power available to local communities and could indicate that the local economy primarily consists of low paying employment opportunities. Aside from the distribution of households per income categories, the average household income of local communities in the host and supporting municipalities can be viewed in relation to a weighted average annual income. The weighted income provides an indication of the average annual and monthly income of all households as well as households that fall within the LSM 4 to 10+ segment. The data shows that compared to supporting municipalities, households in the host municipalities on average earn higher annual and monthly incomes. The host municipalities average annual income for all LSM segments ranges between R60 000 and R70 000 compared to supporting municipalities where average annual household incomes range between R40 000 and R60 000.

information can be viewed alongside the average annual household income and LSM information as indicators to deduce the relative capability of households in the host and supporting municipalities to sustain livelihoods. On average between 30% and 55% of households in the host municipalities live below the food poverty line. Likewise in supporting municipalities, on average between 60% and 70% of households live below the food poverty line. The information indicates that more than half of households in all municipalities are unable to purchase sufficient quantities of food. The average annual household income as well as LSM profiles indicate that households typically earn between R5 000 and R6 000 per month and are primarily categorised as LSM 1 to 3. The information thus indicates that households have limited buying power and that money earned by households are generally spend on an array of other items and services (i.e. transport, accommodation, servicing debts, etc.) BURDEN OF DISEASE

When considering households within the LSM 4 to 10+ segments the host municipalities maintain average annual household income above those earned by households in supporting municipalities. The Thulamela supporting municipality is the only municipality where households earn annual incomes comparative to those of the host municipalities. Average annual household income in the host municipalities range between R125 000 and R155 000 per annum whilst average annual incomes for households in the send municipalities range between R80 000 and R128 000.

The burden of disease indicates the degree to which population within the host municipalities (specifically the Vhembe District) are influenced by a range of health-related impacts. The data shows the distribution of deaths per the primary cause. the information provides an indicative platform upon which key health aspects and focus areas can be identified. Burden of disease data for the Vhembe District identifies that: ✓ Age groups younger than 5 years

•

POVERTY LINE The poverty line in this instance refers to the minimum amount of money required per person per household per month to sustain the lowest threshold of calories required to survive.

•

Leading causes include diarrhoeal diseases, protein-energy malnutrition and lower respiratory infections. ✓ Age groups 5 to 14 years

• The indicator is used to provide an overview of households that cannot meet this requirement and in effect have limited to no purchasing power. The

The leading cause of death for the age cohort is characterised by communicable diseases that exclude HIV and TB and maternal, perinatal and nutritional disorders (71% of deaths).

The leading cause of death for the age cohort is characterised by communicable diseases that exclude HIV and TB and maternal,

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perinatal and nutritional disorders (71% of deaths) and HIV-related and TB (24%).

•

Leading cases include HIV?AIDS (13 to 15%), Tuberculosis (8 to 13%) and Diarrhoeal diseases (11% to 12%). ✓ Age groups 15 to 24 years

•

The leading cause of death for females are HIV-related and TB causes (31% of deaths. The leading cause of death amongst males in the age cohort are as a result of injuries (54% of deaths).

•

The leading cause of death within the age cohort includes noncommunicable diseases (36% to 42%) and HIV-related and TB (32% to 33%) causes.

•

The leading cause for death in the age cohort is non-communicable diseases (72% to 77%).

•

Leading cases affecting population in the age group include cerebrovascular disease (11% to 17%), diabetes (10% to 12%) and hypertension heart disease (9% to 12%).

proportion of households that earn no income and that form part of households living below the minimum living level (food poverty line). It should also be considered that, on average, approximately 8.5% of people in the Limpopo Province have access to a medical aid scheme. When considering the Vhembe District, the average proportion of people falls well below that provincial average (7.2%). The Musina and Makhado host communities on average have between 7.3% and 7.4% of people who are medically insured. The medical insurance deficit places a significant burden on public sector healthcare, and the capability of the healthcare system to lower the burden of disease. The Covid-19 pandemic has further influenced the healthcare system of the country, the population and its day-to-day status quo, as well as the economy’s prospects and operations. In light of the burden of disease, the virus does pose a significant risk in terms of community transmissions, the capability of local healthcare systems, demand for related social amenities and the capability of local communities to earn a living given current economic conditions and lockdown regulations. The pandemic could, depending on the duration of the virus’s influence on society, vaccine distribution and related social and economic responses, influence the demand for healthcare facilities. The implementation of the proposed MMSEZ could require strict adherence to community safety guidelines to minimize the transmission and effects of the virus should the virus still be a primary health concern when the project starts implementation. 6.16 SYNTHESIS

The preceding data indicates that HIV/AIDS and TB play a considerable role in the health and well-being of people between the ages of 25 and 64. The effect of the diseases on younger age groups is also apparent. Age groups 24 and older also heavily influenced by non-communicable diseases, especially diabetes and cerebrovascular disease (affects arteries supplying blood to the brain.

The following provides a concise overview of Chapter 5 in order to outline the key salient characteristics and trends of the Musina and Makhado host municipalities.

The lack of protein and resulting diarrhoea is a key cause of death amongst younger age groups, especially children younger than 5 years of age. The lack of sufficient nutritional and protein related illnesses can be attributed to low livelihood standards in the host communities – considering the sizeable

✓ The Musina Local Municipality is the smaller of the two host municipalities with a total of 114 690 people compared to the 558 890 people residing in the Makhado Local Municipality.

POPULATION AND HOUSEHOLDS

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✓ the Musina Local Municipality also contributes a smaller proportion of households to the project area, 44 945 households in 2019 compared to the 158 555 households in the Makhado Local Municipality. AGE PROFILE ✓ The age profile of the Musina host municipality is typical of a mining area whereby younger age groups migrate to the area for work purposes and older age groups are steadily employed. ✓ The Makhado host municipality age profile shows a young growing population profile typical of areas undergoing moderate to high population growth due to economic opportunities. HIGHEST LEVEL OF EDUCATION ✓ In all host and supporting municipalities a significant portion of the population aged 20 years and older have not attained any form of formal schooling. ✓ A marginal proportion of the population have completed a matric certificate or any form of higher education. DWELLING TYPES ✓ Formal houses or brick structures on separate stands are proportionally the dominant housing typology for host and supporting municipalities. ✓ The host municipalities do, however, have proportionally high shares of traditional, house / flat / room in backyard, informal dwellings in backyard and formal room flatlet dwellings.

TENURE STATUS ✓ In the Musina host municipality property is primarily rented from private individuals or the property in which a household resides is owned and the bond fully paid. ✓ The Makhado host municipality data shows that the majority of households own the property on which they reside and have fully paid the bond for the property. AVERAGE ANNUAL HOUSEHOLD INCOME ✓ Average annual household income for all LSM groups in the host municipalities are: • Musina host municipality ‒ Annual: R68 789 ‒ Monthly: R5 732 • Makhado host municipality ‒ Annual: R62 642 ‒ Monthly: R5 220 ✓ Average annual household income for LSM 4 to 10+ groups in the host municipalities are: • Musina host municipality ‒ Annual: R153 529 ‒ Monthly: R12 794 • Makhado host municipality ‒ Annual: R127 485 ‒ Monthly: R10 624

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LIVING STANDARD MEASUREMENT ✓ Households in the LSM 1 to 3 categories are the most prominent in both host and supporting municipalities. Proportionally, households in the LSM 1 to 3 range make up more than 80% of households. POVERTY PROFILE ✓ On average 30% to 55% of households in the Musina and Makhado host municipalities live below the food poverty line.

✓ The Covifd-19 pandemic, depending on its duration and continued influence on society could require strict measures to ensure that transmission during implementation of the project is minimized. The possibility of increased demand for healthcare services could impact on the quality and capability of local healthcare providers to address healthcare related issues. ✓ Data suggests that communities in the Limpopo Province, Vhembe District and host communities have limited access to healthcare insurance. Data shows that less than 8% of people in the Vhembe District have access to a medical aid. The data suggests a high dependence on public healthcare systems.

✓ On average 60% to 70% of households in supporting municipalities live below the food poverty line. BURDEN OF DISEASE ✓

The burden of disease profile of the host communities show that different age cohorts are affected differently by primary causes of death.

✓ Younger age groups, especially children between the ages of 0 and 14 are affected by communicable diseases that exclude HIV and TB and maternal, perinatal and nutritional disorders. The diseases are primarily as a result of nutritional deficiencies, respiratory illnesses and diarrheal related diseases. ✓ Age groups younger than 64 are influenced by HIV/AIDS and TB related illnesses. Older generations tend show a higher prevalence of non-communicable diseases. An identifier amongst younger male population is the risk of death due to injury. ✓ Age groups older than 64 are primarily affected by non-communicable diseases, especially diabetes, hypertension and diseases affecting blood flow to the brain.

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SOCIO-ECONOMIC IMPACT ASSESSMENT

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7 SOCIO-ECONOMIC IMPACT ASSESSMENT 7.1

INTRODUCTION

Chapter 7 of the report is focused on providing details regarding the potential socio-economic impact that the proposed MMEMSEZ could have on the local and regional economy as well as communities residing in the host and supporting municipalities. The economic impact analysis is based on measuring impacts from a quantitative and qualitative perspective.

✓ a quantitative analysis of the impact of the construction and operational phase of the MMEMSEZ, ✓ an analysis of other quantifiable impacts, and ✓ a qualitative analysis of the impact of the construction and operational phase of the MMEMSEZ. The following sections provide a concise overview of the socio-economic impact assessment in terms of:

Quantitative analysis focuses on determining economic relationships between the construction and operational phases of a specific project within the broader economy and how monetary flows could be impacted on due to the presence of a new economic input. Qualitative analysis will more directly focus on the impact of construction and operational phase impacts by measuring identified impacts based on an index that stipulates the significance of the impact factor and outlines a detailed description and mitigation measure where necessary. The differentiation in impact approaches allows for diverse and robust impact analysis that considers a variety of impact factors on the basis of, not only measurable outputs, but decision-making matrixes that associate and link quantitative research with qualitative outcomes. In order to functionally consider the socio-economic impact of the proposed SEZ, due consideration must be given to the background and proposals associated with the SEZ. The background as well as detailed description of proposed operations, supporting industries and services, as well as output, expected outputs and employment requirements are outlined in Chapter 2 of the report. Where necessary, reference is made to the detailed information and statistics outlined in Chapter 2. The remainder of the Chapter is focused on: ✓ an analysis of the industrial location factors that influence the choice, functionality and sustainability of industrial development,

7.2

Industrial Location Factors

Quantitative Impact Analysis

Other Quantifiable Impacts Analysis

Qualitative Impact Analysis

Synthesis

INDUSTRIAL LOCATION FACTORS AND BUILDING BLOCKS

In the context of the MMEMSEZ it is necessary to consider the factors that could influence the sustainability of the development as well as locational factors that should be considered when establishing an industrial related development.

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Diagram 7.1: Building Blocks for Sustainable Development

The building blocks for sustainable development include: ✓ Land and the space economy – considering the availability of resources and bulk infrastructure, the potential to expand proposed operations in the future, the extent and stability of not only the business environment but the supply of utilities and property markets. ✓ Labour and demographic profiles – considering the availability of labour and the extent to which the local labour force has sufficient skills to support proposed operations, the degree to which local demographic trends change and shape the local community profile and the livelihoods of local communities. ✓ Capital investment – considering the potential for capital formation through operations and the leveraging of investment, the effectiveness of operations to sustain capital growth and encourage local value chain development, and the expansion capacity of the local economy to accommodate new businesses. ✓ Entrepreneurship growth – considering the local and international competitiveness of the national economy and local operations, the potential to ensure job creation and labour force work ethic and the growth of human capital through social investment. The following diagram provides a graphic representation of the key factor inputs for sustainable development.

Source: DEMACON, 2019

In addition to considering the sustainability factors necessary to ensure long-term viability of a project, other factors can also be reviewed. The sustainable building blocks consider the local and broader economic, social, spatial and financial elements, but location factors specific to the context of industrial development are important to identify industrial activities that are located in different socio-economic and spatial localities.

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Industrial location factors can be reviewed based on two variables, the first being traditional and the second contemporary. Traditional location factors consider the positioning of an industrial development in regard to its proximity to resources, accessibility to markets, the potential to agglomerate and the availability of logistical infrastructure. Contemporary location factors consider the availability of utilities and the easy and stability of accessing these services, the proximity of industry to secondary functions, the availability and proximity of industry to labour resources and the availability of financial incentives. The following provides an overview and description of industrial location factors. Table 7.1: Summary and Description of Industrial Location Factors Economic Base

Description

Traditional Industrial Location Factors Proximity to natural resources and natural resources as the primary product. Natural resources are processed (beneficiated) to Market create final and intermediate products. Products created as a result of input from different Agglomeration industries located within proximity to each other (clustering industrial activities). Activity located based on its demand for logistics Logistics as its primary consideration – connectivity and movement dependent. Contemporary Location Factors Resources

Electricity (Utility) Orientation Amenity Orientation Labour Incentives Source: DEMACON, 2019

Industry’s location based on the accessibility of utilities such as water and electricity. Industry’s location based on its secondary function – adding value to quality of life, research and development, etc. Cheap, reliable or stable labour Financial incentives.

Based on the information above it becomes apparent that the MMEMSEZ is traditionally positioned in regard to: ✓ its proximity to natural resources whereby many of the input resources required to operate the SEZ are primarily found in the northern mining belt, ✓ the potential to create an agglomerated economic node through the development of multiple supportive metallurgical activities within the SEZ, and ✓ the proximity to major logistical routes and inland border trade areas such as the N1 highway, Beitbridge and Pont Drift Border Posts and the railway line between Beitbridge and Gauteng and Nelspruit / Matsulu. The SEZ is also contemporarily positioned in regard to: ✓ its amenity orientation whereby the SEZ could generate significant changes to the quality of life of local communities in the Musina and Makhado area, ✓ the availability of labour is prominent but could be influenced by mismatched labour force skills, and ✓ the financial incentive proposition of the SEZ additionally assists with the attractiveness of the SEZ. The positioning of the MMEMSEZ as a metallurgical cluster also provides significant benefits but, in order to be successful a number of key elements such as infrastructure and support structures are required. In order to become a successful metallurgical cluster, the following elements are quired: ✓ ✓ ✓ ✓

Core firms, Specialised support, Soft infrastructure, and Hard infrastructure.

The following diagram provides an overview of a successful cluster composition.

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Diagram 7.2: Composition of a Successful Cluster Hard Infrastructure: Power, Water, Roads, Airports, Rail, Ports

Soft Infrastructure: Universities, Local Government, Technikons, Unions, Industry Associations, Schools

Specialised Support: Skills, Finance, Suppliers, Research and Development, Professional Services

receipts) between various units. The relationship between the initial spending and the total effects generated by the spending is known as the multiplier effect (X + N) of a sector, or more generally as the impact of a sector on the economy as a whole. Impacts are measured in terms of the following: ✓ Business sales refers to the value of business sales (turnover) generated in the economy as a result of the mine. ✓ GGP refers to the value of all final goods and services produced during a one-year period within the boundaries of a specific area as a result of the mine. ✓ Total employment reflects the number of additional jobs created by economic growth due to the mine. Note that the public costs of attracting these employment opportunities, as well as the quality thereof, are not necessarily reflected.

Core Firms: Exporters

The following diagram conceptually illustrates the economic impact that the proposed MMEMSEZ has on the wider economy in terms of additional GGP. Diagram 7.3: Economic Impact of the Development

Source: DEMACON, 2019

7.3

QUANTITATIVE IMPACT ASSESSMENT

The following section is focused on providing an indication of the potential economic impacts (direct, indirect and induced) that could result from the construction and operational phase of the MMEMSEZ. The section firstly focuses on identification of the multiplier effect that the MMEMSEZ could have as a result of construction and operational activities. The section then focusses on identification of the input variables that define the baseline from which quantitative impacts are derived, and lastly illustrates the potential impact that could be generated. 7.3.1

DEFINING ECONOMIC IMPACT AND THE MULTIPLIER EFFECT

The input-output model depicts economic relationships between different components of an economy by identifying monetary flows (expenditures,

Source: DEMACON, 2019

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The impact result due to a change in output is measured through national multipliers. The multiplier effect refers to the increase in final income arising from any new injection of demand and the opposite is also true with a withdrawal of demand will lead to a downward multiplier effect. The following is evident for manufacturing of iron and steel products within the Limpopo Province. ✓ Output/Sales: For every R1 million in final demand from metallurgical production there is R1.99 million downstream variation in output/sales generated across the entire economy. ✓ Labour Remuneration: Salaries and wages within the metallurgical manufacturing sector are on average higher than those in the nonferrous manufacturing sectors. As a result, the economy wide impact is higher as workers earn more and can spend more money on goods and services than those in other non-ferrous production sectors. For every R1 million variation in final demand, labour remuneration either loses or gains R348 000. ✓ Employment: A total of 3 employment opportunities are created within the formal and informal sectors across the entire economy due to a R1 million variation in metallurgical demand. The reverse is also true, with a loss in 3 employment opportunities across the economy if there is a R1 million decrease in metallurgical demand. To summarise the multiplier effect of a metallurgical cluster on the economy, the following diagram is provided. Diagram 7.4: Multiplier Effect of a Metallurgical Manufacturing Industry

7.3.2

DEFINING CONSTRUCTION AND OPERATIONAL PHASE INPUT VARIABLES

The following is focused on defining the key input variables to the quantitative impact model. In order to fully understand the context within which the economic multiplier influences economy wide impacts, the core input variables (i.e. construction phase capital investment and potential monetary output from operations of the SEZ) must be defined. The following provides an overview of the construction phase capital investment and operational phase business sales value. Diagram 7.5: Construction and Operational Phase Quantitative Impact Input Variables

Construction Phase

Operational Phase

Capital Investment R287.6 billion

Annual Business Sales R435.5 billion

Total Employment 53 800 Jobs (47 694 Local Market Employees) Source: DEMACON ex IX Engineers and MCC – Internal Master Planning, 2019

It is evident from Diagram 7.5 that a capital investment amount of R287.6 billion could be injected to implement the MMEMSEZ. The diagram further illustrates that annual business sales of the MMEMSEZ could achieve R435.5 billion and that a total of 53 800 jobs (47 694 employees sourced from the local market) could be created at full operational capacity.

Source: DEMACON ex Quantec South Africa (South African Reserve Bank), 2019

It should be noted that the capital investment and annual business sales values are expressed in US Dollar format. A Rand value is calculated by making use of an annual average US Dollar / South African Rand exchange rate between August 2018 and August 2019. The US Dollar / South African Rand exchange rate used is R14.29.

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7.3.3

CONSTRUCTION AND OPERATIONAL PHASE IMPACTS

Based on previous information, the following provides an overview of the potential socio-economic impacts (direct, indirect and induced) that could result from the construction and operation of the MMEMSEZ. The analysis firstly provides an indication of the input variables and assumptions. It is important to note that construction phase impacts are once-off and not sustained annual impacts as appose to operational phase impacts that are sustained annual impacts as a result of the full operation / maturity of the project. Figure 7.1: Quantitative Socio- Economic Impact During Construction and Operational Phase of the MMEMSEZ CONSTRUCTION PHASE IMPACTS

OPERATIONAL PHASE IMPACTS

CAPITAL INVESTMENT

ANNUAL BUSINESS SALES

± R 287.6 billion

± R 435.5 billion

ADDITIONAL BUSINESS SALES Direct Impact

R411,4 billion

Indirect Impact

R61,9 billion

ADDITIONAL BUSINESS SALES Induced Impact

R100,4 billion

Total Impact

R573,7 billion

ADDITIONAL GGP Indirect Impact

R26,8 billion

Induced Impact

R44,6 billion

Total Impact

R195,4 billion

ADDITIONAL EMPLOYMENT Direct Impact

492 651 jobs

R623,1 billion

Indirect Impact

R93,7 billion

Induced Impact

R152,0 billion

Total Impact

R868,8 billion

ADDITIONAL GGP

Direct Impact

R124,0 billion

Direct Impact

R187,8 billion

Indirect Impact

R40,5 billion

Induced Impact

R67,5 billion

Total Impact

R295,9 billion

ADDITIONAL EMPLOYMENT Indirect Impact

107 011 jobs

Induced Impact

239 103 jobs

Total Impact

838 765 jobs

Direct Impact

746 111 jobs

Indirect Impact

162 066 jobs

Induced Impact

362 117 jobs

Total Impact

1 270 294 jobs

Source: DEMACON Market Studies Quantitative Impact Model, 2019

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TOTAL IMPACT OF THE CONSTRUCTION AND OPERATIONAL PHASES The following illustrates that the total capital expenditure during the construction phase and operational phase could create the following impacts, which includes direct, indirect and induced effects. Figure 7.2: Total Socio-Economic Impact during the Construction and Operational Phase of the MMEMSEZ Thermal Power Plant Coal Washery Energy Generation Coking Plant Heat Recovery Power Generation High Vanadium Steel Manganese Steel

CAPITAL INVESTMENT ± R 287.6 billion

Metallurgical Plant

CONSTRUCTION PHASE

Ferromanganese Steel

ADDITIONAL BUSINESS SALES

R573.7 billion

Silicon-Manganese Steel

ADDITIONAL GGP

R195.4 billion

Stainless Steel

ADDITIONAL EMPLOYMENT

838 765

Ferrochrome Steel Vanadium-Titanium Magnetite Cement Supporting Industries

Refractories Lime EMSEZ Administrative Centre Visitors Lodge and Conservation Area

ANNUAL BUSINESS SALES ± R 435.5 billion

Supporting Services

OPERATIONAL PHASE

Logistics Centre

ADDITIONAL BUSINESS SALES

R868.8 billion

Bonded Area

ADDITIONAL GGP

R295.9 billion

Machinery Zone

ADDITIONAL EMPLOYMENT

1 270 294

Processing Zone Fuel and Gas Storage Facilities Bulk Infrastructure and Waster Management

Domestic Waste Site Process and Sewerage Treatment Industrial and Domestic Waste

Source: DEMACON Economic Impact Model, 2019 Note: The economy wide impact includes the direct, indirect and induced impacts

A direct impact in additional employment during the construction phase would be created due to highly specialised expertise required. These jobs will move to the local economy. Alternatively, a direct impact in additional employment created during the operational phase due to the increased employment opportunities created in the down-stream market value chain.

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7.4

OTHER QUANTITATIVE IMPACT ANALYSIS

Based on the extent and size of the MMEMSEZ, the range of impacts that could be generated by the SEZ is expansive. As a result, a number of key impacts have been identified that should be considered alongside the quantitative impact of the initial investment and operation of the SEZ.

The following provides an indication of the potential PAYE and UIF revenue that could be generated by employees of the MMEMSEZ if employees were employed in 2019. Table 7.2: Estimated Impact of MMEMSEZ Employee Income Tax Revenue Executive Positions

Other quantifiable impacts that have been identified for analysis include: ✓ The impact of direct employment created by the SEZ on the tax revenue of South Africa, and ✓ The impact of the SEZ on the local tourism industry. The range of impacts identified for further analysis are discussed in greater detail by the following sections. 7.4.1

MMEMSEZ EMPLOYEES IMPACT ON INCOME TAX REVENUE

The direct employment generated by the MMEMSEZ (i.e. 53 800 jobs) could have a substantial impact on the additional revenue generated by the South African Revenue Service (SARS) through taxes on employee renumeration. The following section seeks to identify the extent of the impact that could be generated through employee renumeration taxation (i.e. Pay as You Earn – PAYE and Unemployment Insurance Fund - UIF). In order to determine the potential impact that could be generated, the following assumptions have been applied: ✓ Assumed monthly employee income per employment type:

• • •

Executive positions – R25 000 per month Professional positions – R15 000 per month

Professional Positions

General Labour Positions

Employee Structure Number of Employees

6 994

4 842

41 964

Gross Monthly Renumeration (per Employee)

R25 000.00

R15 000.00

R8 000.00

Gross Monthly Renumeration (All Employees)

R174 850 000

R72 630 000

R335 712 000

R4 009.33

R1 515.00

R255.00

R148.72

R80.00

R4 158.05

R1 663.72

R335.00

R336 495 048

R88 027 560

R128 409 840

R12 481 772

R8 641 227

R40 285 440

R348 976 820

R96 668 787

R168 695 280

Employee Renumeration

Personal Income Tax PAYE (per Employee) UIF (per Employee) Total Monthly Personal Income Tax (per Employee) Total Tax Contribution Total PAYE (Annual) Total UIF (Annual) Total Income Tax Revenue (Annual)

Total Income Tax All Employees (Annual)

R614 340 887

Source: DEMACON Market Studies, 2019

Table 7.2 shows that, when considering the assumptions stated previously, the total employee renumeration income tax that could be generated amounts to R614.3 million.

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Approximately R552.9 million income tax could be generated by MMEMSEZ employees through PAYE taxation, whilst R61.4 million could be generated through the Unemployment Insurance Fund (UIF) taxation. 7.4.2

Map 7.1: Distribution of Tourist Facilities in a ±30 km Radius of the MMEMSEZ

IMPACT OF THE MMEMSEZ ON THE LOCAL TOURISM INDUSTRY

The MMEMSEZ is situated in the bushveld region of South Africa which is largely known for game farm and hunting tourism, lodges and safaris and resorts. The immediate area (i.e. 30 km radius from the SEZ) is primarily rural in nature, dominated by farms and wilderness areas. The inclusion of a heavy industrial node the scale of the MMEMSEZ impacts on the natural environment and by extension tourism activities. Tourism facilities located close to the MMEMSEZ (i.e. ± 30 km radius) consist of hunting and game lodges, game safaris, guesthouses and resorts (outlined in the table below). Approximately 7 tourist facilities can be found in close proximity to the SEZ. Table 7.3: Short-Stay Accommodation Within a 30 km Radius of the MMEMSEZ Tourist Facility Name African Extreme Safari

Facility Type Safari Lodge

Aloe Inn Lodge

Lodge

Greater Kuduland Lodges

Lodge

Mashovhela Lodge

Lodge

The Ultimate Guesthouse

Guesthouse

Tokwe Safaris

Safari Lodge

Tshipise, A Forever Resort

Resort

Total Beds Source: DEMACON Market Studies ex GoLimpopo, 2019

Number of Beds

471 530

Table 7.3 and map 7.1 show that approximately 530 beds are available for short-stay accommodation in the immediate surrounds of the MMEMSEZ.

Source: DEMACON GIS, 2019

The Domestic Tourism Survey (2018) identifies a number of key facts about tourist activity in the Limpopo Province: ✓ 82.9% of tourists travelling to the Limpopo Province reside within the province for up to 1 week, ✓ LSM 8 to 10 groups are more likely to reside longer in the province than LSM 1 to 4 groups, ✓ The majority of tourists travelling to the Limpopo Province originate from the Gauteng Province (84.7%), ✓ ± 20 000 overnight trips are made to the Limpopo Province for leisure, holiday or vacation purposes (i.e. overnight trips with a stay of between 1 to 7 nights). ✓ On average tourist facilities in the province make approximately R1 152 income per night of stay. When considering the information provided as well as assuming that tourist facilities within a ±30 km radius of the MMEMSEZ have a 100% occupancy

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rate per month and only domestic tourists are taken into consideration, tourist facilities have the potential to generate in excess of R56.86 million per year (excluding deductions etc.). Additionally, the tourism industry as a whole in the Musina and Makhado Host Municipalities can be reviewed in terms of the catering and accommodation sector and the GVA output of the sector. the following table illustrates key information regarding the sector for the host municipalities. Table 7.4: Catering and Accommodation Sector Size and Contribution to the Host Municipalities Economic Output Item

Musina Local Municipality

Catering and Accommodation Sector GVA (R/million Current R74.98 Prices) Average Annual Growth Rate 2.7% Contribution to Total Economic 1.4% Output Source: DEMACON Market Studies ex StatsSA, 2019

Makhado Local Municipality R194.96 0.6% 0.9%

Table 7.4 shows that in total, the catering and accommodation sectors contribute R269.9 million to the economies of the host municipalities. The sector can be viewed as a marginal role-player in the broader extent of the economy, but the sector shows continued positive growth since 2008.

Revenue potential from leisure tourists would be diminished even though business tourism may supplement some of the revenue lost – business tourists typically have shorter number of bed nights as appose to leisure tourists. 7.5

QUALITATIVE IMPACT ASSESSMENT

The following section is focused on outlining the qualitative impact assessment of the MMEMSEZ. The purpose of this assessment is to: ✓ outline potential impacts that may arise from the project’s implementation during the construction and operational phase, ✓ assess the identified impacts based on a scientific methodology in order to outline the extent, scale, magnitude, probability and significance of each impact, and ✓ to identify potential mitigation measures that can be implemented to minimize the severity of negative impacts and encourage greater output from positive impacts. The section outlines key considerations with regard to the socio-economic impacts associated with special economic zones and the potential spill-over effects derived from SEZ’s. the information serves as a basis to understanding the potential effects that SEZ’s have on local communities, the economy and value-chains.

By considering the information discussed, it becomes apparent that the tourism industry in the immediate vicinity of the MMEMSEZ and broader host municipality economy is a continually growing and sustainable industry.

Lastly the section outlines the identified potential impacts associated with the construction and operational phases of the SEZ. The section outlines potential mitigation measures to ensure that impacts generate positive outcomes to the local community and economy.

The inclusion of the MMEMSEZ within the natural environment could influence the desirability of leisure tourists to visit local establishments – especially establishments in close proximity to the MMEMSEZ.

7.5.1

Although leisure tourists may be negatively affected by the MMEMSEZ, business tourism may increase. Overnight business trips to the Limpopo Province are limited whilst day trips represent 3.97% of all day trips. Thus, due to the business environment of the SEZ, trips to and from the SEZ may increase from not only domestic but foreign business tourists.

SOCIO-ECONOMIC IMPACT CONSIDERATIONS

SPECIAL ECONOMIC ZONE PERFORMANCE AND SPILL-OVER EFFECTS The purpose of SEZ’s provide a clear and concise directive for stimulating economic growth across numerous platforms and systems. Although SEZ’s offer opportune environment within which to function and thrive, various factors influence the performance of SEZ’s to achieve intended outcomes.

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According to the Competitive Industries and Innovation Program3 the drivers of SEZ performance is multi-faceted and cannot be considered inside a vacuum. The success of an SEZ is influenced not only by the operational activities within the SEZ, but also by external factors in the local operating environment, regional and national economies, policy environments and global trends. The following provides an overview of assumed influential factors that impact on the success of SEZ’s. Diagram 7.6: Drivers of SEZ Performance (Conceptual Framework) Growth in Surrounding Area

SEZ Performance

SEZ Programme

SEZ Characteristics

Contextual Factors

Incentives Package Fiscal and non-fiscal

Maturity Size Operator Location Industry focus Infrastructure Services offered

National and Regional Institutional quality Rule of law Access to markets Income level Human capital Population density

Requirements Investment requirement Ownership requirement Program Characteristics Independence of regulator Time of program establishment

Source: DEMACON ex World Bank, 2019

The SEZ programme refers to the set-up and design of SEZ programmes and the extent which the programme is beneficial to both the investor and local economy. The extent to which incentives and requirements for operations and investment contribute to fluid construction and operations 3

are essential in allowing the SEZ to establish and mature. Other factors such as the political climate in which the SEZ programme was devised can influence perceptions and investment potential as well. The characteristics of an SEZ, meaning the age of operations, the operator in charge of the SEZ, location in the local and broader national geography, economic industry on which the SEZ operation focus, availability and quality of infrastructure, the size and layout of the SEZ and accessibility to local and external markets, influence not only the extent to which investment is promised, but the operational efficiency of participants. In essence, the contextual economic focus coupled with inner workings and day-to-day activities impact on the perception of return on investment of participants and the willingness to invest in such a scheme. Lastly the contextual factors related to political and administrative functions of a country and the availability and context of potential job seekers and surrounding communities are essential. The potential of local human capital markets and the potential of human capital to contribute and function as part of proposed operations influence the outlook on productivity and willingness to participate. The study undertaken by the World bank has shown that local and national context matter when considering success factors. It is generally found that the dynamism of a country’s economy correlates to the dynamics of an SEZ whereby SEZ’s generally do not diversify outside the context of the broader national economy’s diversity. It was also found that SEZ’s typically located in poorer communities with ease of access to a major/national node or urban centre prosper due to connectivity to dynamic markets. Countries that have shown industrialisation also tend to provide a better platform for SEZ’s to thrive. Research also noted that in developing country’s incentive packages such as type of operator; tax exemptions; or sundry subsidies largely do not influence the success of zones.

World Bank, Special Economic Zones: An Operational Review of Their Impacts, 2017

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Spill over effects of an SEZ do provide influence in local communities by means of economic prosperity and opportunities. It has been found that, generally the zone of influence for an SEZ becomes nominal at a 50 km radius.

attracting both domestic and foreign direct investment. The establishment of SEZ’s also function as a decentralisation tool for industrial development in order to limit the overburdening of existing developed industrial regions of the country.

Additionally, the establishment of new knowledge zones, meaning the generation of knowledge specific to the operations of an SEZ, can be problematic if these knowledge zones do not already exist.

Additionally, SEZ’s provide a basis for industrial upgrades and technology advancement to spur local production capabilities and broaden existing value chains beyond the existing manufacturing value chain.

Knowledge spill-over from an SEZ does not necessarily extend beyond the SEZ’s local sphere of influence and so cannot be viewed to extensively contribute to knowledge and skills development within the national context.

According to the SEZ Advisory Board4, the proper implementation of SEZ’s could unlock the country’s economic fortunes over the medium to long-term by:

Key outcomes to note of the World Bank study: ✓ Older and well-established SEZ’s tend grow at a slower average annual economic pace tan newly established or young SEZ’s, ✓ Over time SEZ become more established and lose to a large extent economic dynamism which impacts on the long-term economic performance which steadily declines and requires interventions, ✓ SEZ economic performance directly correlates with the physical size of an SEZ operational area which influences growth potential, ✓ SEZ’s located further away from the main economic nodes of a country tend to influence the dynamism of the SEZ thus impacting on the agglomeration and inter-connectivity of markets and economic drivers. ✓ In emerging economies, data analysis shows that SEZ with a low technology component is more successful than highly technology driven SEZ’s. ✓ The nature of SEZ operators (public or private) do not have a significant influence on investment. A dependency is formed with the broader policy and political context of a country which in turn influences operators. IMPACT OF SPECIAL ECONOMIC ZONES IN SOUTH AFRICA

✓ Increasing the flow of domestic and foreign direct investment, ✓ Develop, strengthen and deepen key domestic value chains, and ✓ Increase the volume and diversity of exports. The potential diversification and attraction of investment to SEZ’s in South Africa can be reviewed by means of the distribution of investment by entities per industrial sector in SEZ’s. The data shows that investment is primarily concentrated in the automotive and energy sectors of SEZ’s. Investment into other industrial sectors such as logistics, electronics and metals and steel are limited but do allow for continued diversification of product offerings. Apart from the diversification of industrial activity in South Africa, SEZ’s have also generated sizable contributions to employment in the country. Since inception of the IDZ programme 71 966 employment opportunities have been generated by SEZ’s. Approximately 14% of employment opportunities are direct impacts meaning that SEZ’s employ more than 9 700 workers while 86% of employment opportunities have been generated indirectly by means of construction undertakings and the provision of other services.

The implementation of special economic zones in South Africa is directed towards industrial agglomeration and cluster development by means of 4

SEZ Advisory Board Special Report, 2017

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Figure 7.3: Proportional Distribution of Investment into Special Economic Zones per Industrial Sector (2015/16)

Automotive 31,0%

Electronics 4,0% Logistics 5,0%

Metals and Steel 3,0% Oceans Economy 2,0%

Energy 43,0%

Chemicals 7,0%

For informed decision making it is necessary to assess all legal requirements and clearly defined criteria in order to accurately determine the significance of the predicted impact or benefit on the surrounding social environment. The nature or status of the impact is determined by the conditions of the environment prior to construction and operation. A discussion on the status of the impact will include a description of what causes the effect, what will be affected and how it will be affected. The status of the impact can be described as negative, positive or neutral. The following provides an outline and overview of the methodological elements described above. The outline and overview forms part of the overall qualitative impact assessment and is compiled into a singular feature which outlines the identified impact, its assessment based on the methodological elements and potential mitigation measures that can be considered. Table 7.5: Status of the Impact

Source: DEMACON ex SEZ Advisory Board, 2019

7.5.2

QUALITATIVE IMPACT ASSESSMENT METHODOLOGY

The evaluation of impacts is conducted in terms of the criteria detailed in Table 7.4 to Table 7.10. The various socio-economic impacts and benefits of this project is discussed in terms of the status, extent, duration, probability, and magnitude of the impact. Finally, an accumulative impact and significance rating is applied to rate each identified impact in terms of its overall magnitude and significance (Table 7.11 and 7.12). In order to adequately assess and evaluate the impacts and benefits associated with the project it was necessary to develop a methodology that would scientifically achieve this and reduce the subjectivity involved in making such evaluations.

DESCRIPTION

RATING

A benefit to the environment

Positive

No cost or benefit to the environment

Neutral

A cost to the environment.

QUANTITATIVE RATING

Negative

Table 7.6: Extent of the Impact DESCRIPTION Site Specific; Occurs within the site boundary. Local; Extends beyond the site boundary; extending only as far as local community or urban area Provincial / Regional; Extends far beyond the site boundary; Widespread effect National i.e. South Africa

RATING

QUANTITATIVE RATING

Low Medium - Low Medium Medium High

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Across International Borders

Very High

Table 7.7: Duration of the Impact DESCRIPTION Immediate (less than a year) Short term (1-5 years) Medium term (6-15 years)

RATING

QUANTITATIVE RATING

DESCRIPTION

RATING

Where the impact affects the environment in such a way that neutral, cultural and social functions and processes continue albeit in a modified way

Medium

Where the impact affects the environment in such a way that neutral, cultural and social functions and processes are altered to the extent that it will temporarily cease

Medium High

Where the impact affects the environment in such a way that neutral, cultural and social functions and processes are altered to the extent that it will permanently cease

Very High / Don’t Know

QUANTITATIVE RATING

Low Medium - Low Medium

Long term (the impact will cease after the Medium operational life of the project) High Permanent (no mitigation measures of natural process will reduce the impact Very High after construction) Note: The Duration of the impact refers to the time scale of the impact or benefit

Note: The magnitude of severity of the impact is indicated

Table 7.8: Magnitude of the Impact DESCRIPTION

Where the aspect will have no impact on the environment

Where the impact affects the environment in such a way that neutral, cultural and social functions and processes are not affected Where the impact affects the environment in such a way that neutral, cultural and social functions and processes are slightly affected

RATING

None

Low

Medium - Low

QUANTITATIVE RATING

Table 7.9: Probability of the Impact DESCRIPTION Impact will not occur

RATING None

The possibility of the impact materialising is low as a result of design, historic experience or implementation of adequate mitigation measures

Improbable

There is a possibility that the impact will occur

Low probability

The impact may occur

Medium Probability

It is expected that the impact will occur; Chance of occurrence. Impact will occur regardless of any prevention measures

QUANTITATIVE RATING

Highly Probable Definite

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Note: The probability of the impact describes the likelihood of the impact actually occurring

Table 7.10: Cumulative Impact DESCRIPTION

RATING

QUANTITATIVE RATING

The net effect is the same as the single Negligible development The impact of two developments of a similar nature is less than twice the impact of a single development. This implies it is Marginal better to place the two developments in the same environment rather than in separate environments. The impact of two developments is more than twice the impact of two single developments. This implies that it is better Compounding to split the two developments into separate environments Note: The impact of the development is considered together with additional developments of the same or similar nature and magnitude

Table 7.11: Impact Significance Rating DESCRIPTION The impact has no impact, or the impact is unknown The impact does not have a direct influence on the decision to develop the area

RATING

QUANTITATIVE RATING

IMPACT

No Impact

Negligible

DESCRIPTION

RATING

QUANTITATIVE RATING

The impact will have a direct influence on the decision to develop but there are means of mitigating the impact although these may be difficult as well as expensive

Medium to High

46 – 60

Where the impact must have an influence on the decision to proceed to develop in the area

High

IMPACT

Above

Note: The impact magnitude and significance rating are utilised to rate each identified impact in terms of its overall magnitude and significance

7.5.3

IMPACT ASSESSMENT

The qualitative impact assessment considers potential impacts generated by the MMEMSEZ during the construction and operational phase of the project. The intent is to identify most likely socio-economic impacts, the extent, significance and magnitude of the identified impacts, and potential mitigation measures. The qualitative socio-economic impact assessment is outlined in the following tables.

Up to Low

The impact has an influence, but the impact can be mitigated

Low to Medium

16 – 30

The impact could influence the decision to develop in the area unless it is effectively mitigated

Medium

31 – 45

Negative / Positive

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OVERVIEW OF CONSTRUCTION AND OPERATIONAL PHASE QUALITATIVE IMPACTS The following sub-section provides a Diagram 7.7: Core Themes of the Qualitative Impact Analysis broad and concise overview of potential impacts that could arise from the MMEMSEZ during the construction and operational phase. The purpose is to Local / Regional outline the basis and extent of potential Economy impacts so as to guide further detailed analysis. Detailed revision and analysis of the potential impacts are discussed in Property subsequent sections. Market The extent of potential impacts as a result of the construction and operation of the SEZ is diverse and across multiple core themes (refer to Diagram 7.7 and Figure 7.4). The core themes under which potential qualitative impacts are identified consist of: ✓ Impacts on the local and/or regional economy, ✓ Impacts on local communities, ✓ Impacts on the local burden of disease, ✓ Impacts on the local labour force, ✓ Impacts on the natural environment, ✓ Impacts on local infrastructure and utility services, and ✓ Impacts on the local property market.

Local Communities

Qualitative Impact Themes

Infrastructure and Utilities

Natural Environment

Burden of Disease

Labour Force

Figure 7.4, in conjunction with Diagram 7.7 provide a concise overview of qualitative impacts identified. Detailed analysis of impacts is provided in Tables 7.11 and 7.12. The outcome of the qualitative analysis has been presented, described and tested with key stakeholders during two master plan workshops held the 13th of June 2019 and the 15th to 17th of July 2019.

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Figure 7.4: Summary of Construction and Operational Phase Qualitative Impacts Local / Regional Economy

•

CONSTRUCTION PHASE IMPACTS

•

Labour Force

Increased demand for products and services from local businesses (e.g. retail, entertainment, accommodation, construction, etc)

•

Opportunity to expand local businesses through production, capacity and sales (e.g. construction, manufacturing, retail, etc.) or the establishment of new businesses

•

Local construction sector value chain limitations – supply side constraints

•

Local Communities

Short- to medium-term employment opportunities (Job creation across the skills spectrum)

Localised labour supply side constraint (in terms of quantity and quality of requisite skills)

Local labour supply side constraints to be met through “importation” of labour

Infrastructure and Utilities

•

Natural Environment

•

Temporary increase of household income

•

In-flux of employment seekers

•

Increased risk that social ills could materialise

•

Relocation of affected communities

Partial loss of areas visual appeal and amenity value, in particular for tourism and accommodation activities

Increased pressure hard infrastructure (e.g. roads, electricity, etc.) – increased maintenance burden and new investment

Increased daily loads on the local transportation network to transport labour to and from the site (home to work and work to home commute)

Increased pressure on soft infrastructure (e.g. social amenities and services) - increased maintenance burden and new investment Property Market

•

Impact on local property markets, i.e. diminished amenity value and increased property value

Impact of air, noise and soil quality on existing economic activities

•

Increased prospect of informal settlements

Introduction of industrial activities to natural environment

•

Increased demand for various land uses

•

Increased pressure on local healthcare sector

Burden of Disease

•

Increased burden of disease

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Local / Regional Economy

• • •

OPERATIONAL PHASE IMPACTS

• • • •

Sustained demand for products and services from local businesses (e.g. retail, entertainment, accommodation, construction, etc) Local businesses supply side constraints to fulfil increased demand for products and services

Labour Force

•

Opportunities to expand local business base through production, capacity, and sales (e.g. construction, manufacturing, retail, etc.) or the establishment of new businesses

•

Opportunity to develop backward and forward linking industries for the manufacturing sector, i.e. inputs to the manufacturing sector and sale of intermediate and final products

•

Localised labour supply side constraint (in terms of quantity and quality of requisite skills)

• •

Sustained pressure hard infrastructure (e.g. roads, electricity, etc.) – increased maintenance burden and new investment Increased daily loads on the local transportation network to transport labour to and from the site (home to work and work to home commute)

Local labour supply side constraints to be mitigated through targeted skills development of local communities Local labour supply side constraints to be mitigated through targeted skills development of local communities

Diversification of the regional economy Opportunity to attract additional foreign and domestic investment to the local economy Linkages to national SIP projects and areas Local Communities

•

Medium-term employment opportunities (Job creation across the skills spectrum) – includes direct, indirect and induced impacts as a result of the SEZ’s operation.

Infrastructure and Utilities

Natural Environment

• •

Partial loss of areas visual appeal and amenity value, in particular for tourism and accommodation activities Impact of air, noise and soil quality on existing economic activities

Property Market

• • •

•

In-flux of employment seekers

•

Sustained risk that social ills could materialise

•

Social investment by the SEZ into local communities

•

Impact on local property markets, i.e. diminished amenity value and increased property value Sustained demand for new development (i.e. residential, retail, etc.) State revenue potential through additional rates and taxes (to address inter alia infrastructure supply and maintenance demand) Increased prospect of informal settlements Speculative pricing activity in nearby towns can be expected

Burden of Disease

•

Increased burden of disease

•

Increased pressure on local healthcare sector

•

Increased access to improved healthcare

Source: DEMACON, 2019

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QUALITIVE CONSTRUCTION PHASE IMPACTS Table 7.12: Qualitative Construction Phase Impacts

Local construction sector value chain limitations – supply side constraints

The construction phase of the SEZ requires inputs in the form of materials, equipment, labour, etc. The local construction industry value chain may be limited in the supply of materials, equipment, labour etc, i.e. the local construction industry may have supply side constraints. Procurement of inputs necessary to complete the construction phase may have to be sourced from beyond the local economy (example: Gauteng)

Opportunity to expand local businesses through production, capacity and sales (e.g. construction, manufacturing, retail, etc.) or the establishment of new businesses

Increased economic activity in the local economy during the construction phase of the SEZ could provide an opportunity to expand the local business base. The local business base could expand because of an increased need for production, capacity and sales (e.g. construction, manufacturing, retail, etc.). The increased demand could also generate the opportunity to establish new businesses.

Significance

An increase in people and companies engaged with construction during the construction phase may increase the demand for goods and services from local businesses. The increase in demand may increase localised economic output for the duration of the construction period as a result of more goods and services sold.

Probability

Increased demand for products and services from local businesses (e.g. retail, entertainment, accommodation, construction, etc)

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

35 Medium

20 Low - Medium

45 Medium

Mitigation Measures

Ensure that procurement from local businesses are prioritised during the construction phase in order to enhance local economic development.

Encourage value chain development between local construction industry orientated businesses and established suppliers.

Ensure that procurement from local businesses are prioritised during the construction phase in order to enhance local economic development.

Impact Significance Post Mitigation

Medium-High

Low - Medium

High

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Localised labour supply side constraint (in terms of quantity and quality of requisite skills)

Local labour supply side constraints to be met through “importation” of labour

Employment in elementary occupations such as construction in the host municipalities account for between 0.7% and 1.2% of labour thus indicating that a potential mismatch may exist between local labour and SEZ construction requirements.

Due to a localised labour supply side constraint during the construction phase, the temporary import of several levels of skilled labour to the area to complete construction activities may be required

Significance

Construction activities would provide new employment opportunities in the local economy and in effect contribute toward household livelihoods.

Probability

Short- to medium-term employment opportunities (Job creation across the skills spectrum)

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

45 Medium

28 Low - Medium

Mitigation Measures

Local labour should be prioritised for available employment opportunities. A coordination effort should be undertaken between contractors and local community representatives to ensure beneficial opportunities for local communities as well as ensure efficient construction operations.

In order to prevent a mismatch of skills during the construction phase could focus on creating programmes that undertake either: ✓ Generic skills training, ✓ Targeted training in specific skills, ✓ Targeted training for specific skills shortages, or ✓ Training in firm-specific skills in/by companies

Impact Significance Post Mitigation

High

Low - Medium

Pro-active skills mismatch prevention could focus on training of employed and unemployed persons through skills development programmes targeting specific sectors at TVET and other colleges.

24 Low - Medium

In order to prevent the import of labour due to insufficient skills in the local labour force, focus should be given to skills training in the local community. Employment during the construction phase should also be focused on local procurement as far as possible.

Low

Additionally, should the import of labour from outside the current labour pool be necessary, the focus should be temporary imports until such time that the local labour force has sufficient skills to undertake construction activities.

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Increased pressure hard infrastructure (e.g. roads, electricity, etc.) – increased maintenance burden and new investment

The sudden increase in people, primarily contractors undertaking construction and local job seekers, would place added pressure on existing road and rail infrastructure and so increase the need for periodic maintenance and/or upgrades.

Significance

Probability

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

Mitigation Measures

Impact Significance Post Mitigation

Ensure continuous maintenance of the primary transport routes and railway networks in order to provide fully functional and efficient travelling between origin locations and the SEZ.

40 Medium

The sudden increase also places added pressure on existing bulk services and so increase the need for maintenance or service provision expansion.

Due consideration could be given to the implementation of temporary shuttling services between contractor housing locations and the development site. The shuttling service would assist in minimizing contractor movement between origin and destination areas.

Low

Proper planning in regard to the accessing of essential services for the construction of the SEZ should be undertaken. Research into other sources of existing services should be undertaken in order to provide alternative measures for accessing services. Establish working hours that would assist with mitigating local community impacts and ensure operational efficiency.

Increased daily loads on the local transportation network to transport labour to and from the site (home to work and work to home commute)

Due to construction activities, labour is transported to and from the construction site, i.e. from home to work and vice versa. The daily movement of construction workers and related activities increases the load on the local transport network – influencing travel times and congestion.

Avoid heavy trucks during peak traffic hours.

28 Low - Medium

The provision of adequate and strategically positioned traffic warning signs.

Low

Roads used for construction purposes should be maintained. Construction movement activities should be mitigated to ensure that construction efforts do not influence surrounding property owner operations.

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Due to the availability of jobs during the construction phase, income generated by households could increase. Temporary increase of household income

Increased pressure on soft infrastructure (e.g. social amenities and services) - increased maintenance burden and new investment

It should be noted that the increase of household income would be temporary (i.e. short to medium term – 1 to 10 years – during the construction phase).

Social facilities and amenities (e.g. healthcare, policing, postal services, etc) demand could be influenced by an increase of people in the area during the construction phase. This could create demand for the provision of additional facilities and amenities and therefore influence the public fiscus.

Significance

Probability

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

45 Medium

28 Low - Medium

The prospect of employment opportunities in the Musina-Makhado area would attract potential labour force participants from the broader area as well as from bordering supporting municipalities.

In-flux of employment seekers

Migrants may also originate from nearby Zimbabwe and Botswana. Cross-border migrants could consist of legal and illegal opportunity seekers and may impact on the sourcing of labour from local domestic markets due to the less expensive nature of foreign workers. In the event that labour must be sourced from outside the local area, these migrants could be viewed as temporary.

Mitigation Measures

By procuring local communities for employment, a rise in household income would be created and directly affect the livelihood of local communities. The procurement of local labourers would be dependent on the availability of necessary skills.

Impact Significance Post Mitigation

Medium - High

Local authorities in conjunction with the SEZ should undertake appropriate studies to determine the possible extent of demand generated during the construction phase for social services. Low - Medium Sufficient knowledge regarding potential shortfalls could allow for the implementation of additional services for accommodate shortterm demand as well as function as mitigation measures for medium- to long-term demand.

To mitigate the effects of large-scale inmigration to the project are, necessary planning and research should be undertaken.

35 Medium

A local migration plan undertaken by local government and the SEZ should be done in order to project and identify the potential size of migration to the area, potential locations for settlement and the additional strain placed on the local economy, services and infrastructure.

Medium

The migration plan should be done in conjunction to spatial planning policies of local government in order to ensure sustainable and efficient spatial remedies and objectives.

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Significance

Probability

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

Relocation of affected communities

60 Medium - High

The relocation of communities impact on existing livelihoods and sense of community and inadvertently requires additional capital expenditure to relocate communities and to provide the level of livelihood previously held.

Impact Significance Post Mitigation

In order to ensure that people are not worse off after the relocation an authority approved process needs to be established with the stakeholders, which will involve establishing their current needs and expectations.

To some degree households reside within the project site and would require relocation to another area in order for construction activities to be undertaken. Communities that reside within the potential zone of pollution (noise and air) would also require relocation.

Mitigation Measures

On the basis of this information an ongoing development plan should be established, which ensures that people's quality of life is equal and or better than before the resettlement. Economic upliftment needs to be an important focus of such plan.

Low - Medium

The implementation of the plan should be the responsibility of both the SEZ and LEDA and should be independently audited. Continued consultation and negotiation with the relocated communities is needed. A plan to monitor and evaluate people's living conditions and to address unforeseen problems should be set up.

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Significance

Probability

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

Data indicates that working-age groups (i.e. 15 to 64 year old population) are disproportionately affected by HIV/AIDS. Likewise, working-age men are also more likely to succumb to injuries such as accidental threats to breathing and road injuries.

Increased burden of disease

The risk of injury could increase above that of the local community average due to construction activities. The risk of injury could lead to a range of health impacts and require specialised treatment. Due consideration should also be afforded to Covid-19 in the sense that the persistent nature of the virus could lead to a long-term healthcare crisis. The longevity of the virus within communities and the transmission thereof due to population movement in and out of the host communities is a critical risk factor.

Impact Significance Post Mitigation

The construction period of the MMSEZ is expected to take some time and therefore the probability for increased transmission of communicable diseases is probable.

Considering the preceding, the construction of the proposed MMSEZ could lead to the influx of job seekers, contractors and foreign nationals. The influx of population to the host community could contribute to an increase of the local burden of disease. The increase of job-seekers and contractors could raise the potential to transmit communicable diseases such as TB, HIV/AIDS, meningitis and respiratory infections.

Mitigation Measures

The potential for injury related risks is heightened due to the injury prone nature of the construction industry.

36 Medium

Similarly, job-seekers not employed during the construction phase could form part of the segment of population living below the minimum living level – these population groups experience the effects of diseases related to malnutrition and unhygienic living conditions.

Medium

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Significance

Probability

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

The potential to increases the local burden of disease influences the possibility of similarly increases the prospect of overburdening local healthcare resources.

Increased pressure on local healthcare sector

Data suggests that the availability of healthcare beds are limited in the Vhembe District. On average, approximately 76.5% of hospital beds in the district are used. Data shows that the average number of beds per 10 000 people in the district is 12.9. The District is therefore ranked 38th out of 52 district zones. The preceding shows that a limited number of hospital beds are available in the local healthcare system.

36 Medium

Additionally, contractors undertaking construction of the SEZ may also, due to bad behaviour, influence community safety through inappropriate actions.

Construction agencies should also ensure that compliance with minimum health and safety standards are maintained during the construction period.

Medium

Local health facilities should also seek to enhance education programmes regarding primary localised diseases. Demand for healthcare facilities should be continuous monitored to assess whether local capacity is sufficient to serve growing communities – especially during periods of high population influx.

An influx of population either employed or looking for employment, may lead to increased crime activity. Opportunity seekers that do not acquire employment may turn to crime and in turn influence local community safety. The introduction of persons outside the local labour market (i.e. sourcing from other provinces for instance) could introduce a criminal element.

Impact Significance Post Mitigation

To ensure the stability of local healthcare infrastructure, developers, government and local healthcare should engage to consider necessary systems, processes and consignments that can be put in place to minimize overburden potential. Especially considering workplace related injuries.

The burdened healthcare system could be exacerbated due to increased community transmission of prevalent diseases, especially Covid-19. The healthcare system could also be influenced by injury related risks.

Increased risk that social ills could materialise

Mitigation Measures

Working hours should be kept to day-light hours.

18 Low - Medium

Appointment of security services at the construction site. Implement necessary health and safety standards and procedures.

Low - Medium

Ensure local law enforcement monitors local communities for increased crime related to the construction of the SEZ.

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Partial loss of areas visual appeal and amenity value, in particular for tourism and accommodation activities

Introduction of industrial activities to natural environment

Impact of air, noise and soil quality on existing economic activities

Significance

Probability

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

The construction of industrial activities would create long-term changes to the natural environment of the proposed development site.

Economic activities such as tourism and agriculture could be affected due to increased air, noise and soil quality impacts generated during the construction phase of the project. The attractiveness of economic opportunities for tourism and/or agriculture may be influenced due to limited demand and less desirable tourist conditions as well as limiting productive agricultural land.

Impact Significance Post Mitigation

In order to minimize the effects of visual appeal loss, design initiatives could seek to create a buffer zone between the border of the project site and surrounding areas in order to distance undesirable viewpoints from onlookers.

The construction phase and related activities could partially influence the area’s visual appeal and amenity value (in particular for tourism and accommodation activities). The impact could influence tourist facility and accommodation attractiveness and therefore influence revenue generation capacity and employment opportunities generated by the afore mentioned tourist facilities and accommodation.

Mitigation Measures

60 Medium - High

Natural environmental features such as trees could be utilised to maximise visual appeal from major transport routes and other viewpoints.

Medium - High

Other measures may include: ✓ Careful attention must be given to the siting and design of all buildings. ✓ Screening vegetations should be used wherever possible. ✓ Temporary roads and construction sites must be clearly demarcated and rehabilitated.

55 Medium - High

40 Medium

As a result of constructing the MusinaMakhado SEZ, natural environment will be lost and replaced by industrial activities. Medium - High The design of the SEZ should seek to incorporate green spaces as part of the project area. Considerations for mitigating the effects of pollution generated by the SEZ would be to keep the SEZ aligned to the carbon emissions tax implemented by the South African Government. Medium Additionally, all plant and equipment should be kept in good working condition. Traffic flow and movement should be planned for efficiency in order to minimise vehicle pollution.

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Increased demand for various land uses

Increased prospect of informal settlements

The construction of the SEZ may lead to increased demand to develop land uses such as residential, retail and commercial activities in expectation of future demand once operations start.

The attraction of job-seekers to the local economy may increase the demand for residential opportunities and the prospect of locating in an informal settlement or informal backyard dwelling. The increased demand could lead to the expansion of existing informal settlements in the local economy or could create new informal settlements close to existing economic nodes or the construction area.

Significance

The construction phase of the SEZ could spur property market activity in nearby towns, construction activities could potentially diminish the amenity value of adjacent farms.

Probability

Impact on local property markets, i.e. diminished amenity value and increased property value

Status of Impact

Magnitude

Impact Description

Duration

Impact

Extent

Impact Significance Prior to Mitigation

50 Medium - High

32 Medium

44 Medium

Mitigation Measures

Impact Significance Post Mitigation

The undertaking of construction activities is expected to impact on surrounding property amenity value. It is essential that construction efforts do not influence the environmental or working environment of local farms.

Medium

Perceived future demand for land uses due to the construction of the SEZ and eventual operation would influence the undertaking of developmental activities in the Musina and Makhado area. It is essential that coordination between the SEZ and local authorities be undertaken to ensure that appropriate developmental activities are undertaken that compliment and service the SEZ.

Medium – High

Due to the prospect of employment opportunities, in-migration to the area is expected. In-migration may lead to an oversupply of labour and opportunity seekers not employed may remain in the area to capitalise on other opportunities.

Medium

It is thus essential that forward planning by the SEZ and local authorities be undertaken to minimize the effects of informal settlement establishment either close to the SEZ or in major towns such as Musina and Makhado.

Source: DEMACON, 2019

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

QUALITIVE OPERATIONAL PHASE IMPACTS

Local businesses supply side constraints to fulfil increased demand for products and services

Opportunities to expand local business base through production, capacity, and sales (e.g. construction, manufacturing, retail, etc.) or the establishment of new businesses

Due to an increase in population, manufacturing activities and other economic sector growth, demand for products and services may initially not be fulfilled by the existing business community.

Significance

Probability

Sustained demand for products and services from local businesses (e.g. retail, entertainment, accommodation, construction, etc)

The sustained operations and operational revenue of the mine and the resulting direct, indirect and induced impacts generate continuous demand for products and services in the local economy. The sustained demand could enhance the growth of opportunities for local businesses to expand or new businesses to be established.

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Table 7.13: Qualitative Operational Phase Impacts

55 Medium - High

50 Medium - High

Over time the local business environment may grow to accommodate the new level of demand generated. The number of local businesses as well as the output generated by these businesses may increase due to growing and sustained demand. The growth of local businesses as well as newly established businesses could increase the economic output of the local and regional economy and in effect spur growth.

45 Medium

MITIGATION MEASURE

Ensure that procurement from local businesses are prioritised during the operational phase in order to enhance local economic development.

Impact Significance Post Mitigation

High

Should local business not be able to sufficient supply the SEZ, businesses in the broader area should be identified as potential suppliers. This will allow for greater economic development beyond that of the host municipalities. Low - Medium Pro-active planning should be undertaken to identify potential growth catalysts for the local economy to service demand. Additionally, an investor friendly and conducive local business environment should be created to accommodate new development.

Ensure that procurement from local businesses are prioritised during the construction phase in order to enhance local economic development.

High

145

Opportunity to develop backward and forward linking industries for the manufacturing sector, i.e. inputs to the manufacturing sector and sale of intermediate and final products

Due to the specific nature of the Musina-Makhado SEZ, further downstream value-chain business growth could be achieved. The refinement of semi-finished output from the SEZ could be undertaken in a range of final outputs specific to the construction, vehicle, appliance, etc manufacturing sectors.

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

33 Medium

MITIGATION MEASURE

Impact Significance Post Mitigation

Possible supporting industries could be identified throughout the Limpopo, Mpumalanga Gauteng and North-West Provinces that could potentially form part of down-stream value additions. High Wider economic region regions such as the Western Cape, Eastern Cape and KwaZuluNatal can also undergo business identification, but measures for sufficient linkages should be put in place. The operation of SEZ activities in the metallurgical manufacturing sector could provide the opportunity for diversification of the local economy beyond its current form.

Diversification of the regional economy

The addition of specialised manufacturing activities in the SEZ provides for the diversification of the regional and local economies and subtracts from the dependence on one or two major economic sectors for economic growth.

52 Medium - High

The encouragement and facilitation of new businesses that either support or adds value to SEZ operations will allow for economic growth and the increase of employment opportunities.

High

The encouragement of new business development could be facilitated by means of incubators and local government initiatives in collaboration with the SEZ.

Opportunity to attract additional foreign and domestic investment to the Musina-Makhado area

Investment by businesses locally and foreign would enhance the growth and development of the local economy.

50 Medium - High

The SEZ has procured foreign direct investment as part of the start-up of the project. Further FDI could be facilitated through the successful implementation of planned initial projects.

High

Buy-in from local established and new metallurgical operators could also be facilitated in order to drive completion and expansion of the SEZ.

146

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The Strategic Infrastructure Projects otherwise known as SIPs as part of the national Infrastructure Plan seeks to unlock economic opportunities through infrastructure investment.

Linkages to national SIP projects and areas

The Musina-Makhado SEZ is well positioned in regard to the SIP1 and SIP 17. SIP 1 is focused on unlocking the northern mineral belt while SIP 17 seeks regional integration between South Africa and other SADC nations through logistics corridors.

Operations at the SEZ will generate direct, indirect and induced job creation at the mine and economy wide. Especially considering the opportunity for employment growth throughout the value-chain.

Impact Significance Post Mitigation

Because of the SIP 1 focus to promote and unlock mineral resources in the northern mining belt, the SEZ is strategically positioned to form part of the mineral beneficiation value chain.

The SEZ should seek to obtain project specific raw material inputs from multiple service providers in order to encourage cross-platform growth of the mining industry.

High

High Appropriate linkages with road and rail corridors should be facilitated to allow for the effective movement of cargo between the origin and destination areas.

The SEZ is positioned to form part of the beneficiation value-chain of the mining sector of the northern mining belt, whilst also being strategically positioned along the N1 highway corridor. Medium-term employment opportunities (Job creation across the skills spectrum) – includes direct, indirect and induced impacts as a result of the SEZ’s operation.

MITIGATION MEASURE

Cross border trade and export of products could be enhanced by the N1 highway corridor and linkages to major ports.

50 Medium - High

Local should be prioritised for available employment opportunities. A coordination effort should be undertaken between contractors and local community representatives to ensure beneficial opportunities for local communities as well as ensure efficient construction operations.

High

147

Localised labour supply side constraint (in terms of quantity and quality of requisite skills)

Local labour supply side constraints to be mitigated through targeted skills development of local communities

Employment in elementary occupations such as manufacturing labourers in the host municipalities account for between 2.5% and 4.1% of skilled labour thus indicating that a potential mismatch may exist between local labour and SEZ operational requirements.

Increase of skilled labour to undertake operations at the SEZ.

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

28 Low - Medium

40 Medium

MITIGATION MEASURE

In order to prevent a mismatch of skills during the operation phase could focus on creating programmes that undertake either: ✓ Generic skills training, ✓ Targeted training in specific skills, ✓ Targeted training for specific skills shortages, or ✓ Training in firm-specific skills in/by companies Pro-active skills mismatch prevention could focus on training of employed and unemployed persons through skills development programmes targeting specific sectors at TVET and other colleges.

Impact Significance Post Mitigation

Low - Medium

The SEZ, in conjunction with local authorities and the Limpopo Eco-Industrial Park, could facilitate industry specific skills development through training facilities. It increase in skills would be beneficial to down-stream value addition, the manufacturing of the province and country as a whole and the encouragement of new business development.

Medium - High

148

Local labour supply side constraints to be mitigated through targeted skills development of local communities

Sustained pressure hard infrastructure (e.g. roads, electricity, etc.) – increased maintenance burden and new investment

Due to the limited availability of skilled labour necessary to undertake operational efforts, the import of skilled labour to the area to undertake operation activities may be required. According to the Internal Master Plan (August 2019), on average 11% of employed persons at the SEZ are to be sourced from the Chinese labour market. Thus imposing a minor import of labour to the local economy.

The operation of the SEZ would create sustained attraction of job-seekers. Additionally, day-to-day operations by the SEZ would also increase the use of infrastructure (e.g. roads, rail, etc) The increase of workers employed at the SEZ would continue to place strain on local service delivery infrastructure to accommodate population, household and business growth.

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MITIGATION MEASURE

Impact Significance Post Mitigation

In order to prevent the import of labour due to insufficient skills in the local labour force, focus should be given to skills training in the local community.

55 Medium - High

Employment during the operational phase should also be focused on local procurement as far as possible. Skills mentorship programmes could be initiated to allow for local labourers to gain necessary skills during training and obtain employment in the SEZ.

Low - Medium

55 Medium - High

Sustained pressure on existing infrastructure would require continuous maintenance and upkeep, especially roads frequented by heavy vehicles.

Medium-High

149

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MITIGATION MEASURE

Impact Significance Post Mitigation

Establish working hours that would assist with mitigating local community impacts and ensure operational efficiency.

Increased daily loads on the local transportation network to transport labour to and from the site (home to work and work to home commute)

Sustained increase of household income during the operational phase of the project

The operation of the SEZ increases the daily load that local transport infrastructure supports when labour moves to and from (and vice versa) their home and work. Increased daily loads could influence localised traffic and business peak and off-peak hours – therefore impacting on revenue generation.

The operation of the mine creates direct, indirect and induced employment opportunities throughout the economy. As a result of these employment opportunities, household incomes are increased – i.e. livelihood improvements. The impact may last the duration of the operation of the SEZ, unless downsizing is to occur – where households that may have had a steady monthly income may lose this income.

Avoid heavy trucks during peak traffic hours.

36 Medium

The provision of adequate and strategically positioned traffic warning signs.

Low - Medium

Roads used for day-to-day operations should be maintained. Day-to-day operation movement patterns should be mitigated to ensure that construction efforts do not influence surrounding property owner operations.

45 Medium

By procuring local communities for employment, a rise in household income would be created and directly affect the livelihood of local communities.

High

Increased consumer spending will also benefit local businesses and encourage business development and growth.

150

Sustained pressure on soft infrastructure (e.g. social amenities and services) - increased maintenance burden and new investment

Social facilities and amenities (e.g., healthcare, policing, postal services, etc) demand could rise because of an influx of employment seekers and the improved livelihoods of households that benefitted as a result of the direct, indirect or induced impact of the mine’s operation.

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

28 Low - Medium

The prospect of employment opportunities in the Musina-Makhado area would attract potential labour force participants from the broader area as well as from bordering supporting municipalities.

In-flux of employment seekers

Migrants may also originate from nearby Zimbabwe and Botswana. Cross-border migrants could consist of legal and illegal opportunity seekers and may impact on the sourcing of labour from local domestic markets due to the less expensive nature of foreign workers. Due skills limitation in the local area, skilled labour imports from other domestic or international markets are possible.

MITIGATION MEASURE

Impact Significance Post Mitigation

Local authorities in conjunction with the SEZ should undertake appropriate studies to determine the possible extent of demand generated during the construction phase for social services. Low - Medium Sufficient knowledge regarding potential short-falls could allow for the implementation of additional services for accommodate shortterm demand as well as function as mitigation measures for medium- to long-term demand.

To mitigate the effects of large-scale inmigration to the project are, necessary planning and research should be undertaken.

40 Medium

Medium

The migration plan should be done in conjunction to spatial planning policies of local government in order to ensure sustainable and efficient spatial remedies and objectives.

151

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

The increase of job-seekers and employees of the MMSEZ could raise the potential to transmit communicable diseases such as TB, HIV/AIDS, meningitis and respiratory infections. The risk of injury could increase above that of the local community average due to the high-risk nature of industries that will operate in the MMSEZ. The risk of injury could lead to a range of health impacts and require specialised treatment. Due consideration should also be afforded to Covid-19 in the sense that the persistent nature of the virus could lead to a long-term healthcare crisis. The longevity of the virus within communities and the transmission thereof due to population movement in and out of the host communities is a critical risk factor.

Impact Significance Post Mitigation

The operational period of the MMSEZ would continuously attract job-seekers over and above the already employed labour force of the project.

During the operational phase of the MMSEZ project more than 50 000 people are expected to be employed. Besides the local labour market increase, an influx of job-seekers is also likely - further contributing to a rise in local population. The increase in population and anticipated in-migration can actively drive an increase of the local burden of disease.

Burden of disease

MITIGATION MEASURE

The persistent growth of population and potential increase of dependency ratios could lead to a continued increase of the burden of disease. The risk of injury related deaths and healthcare further requires careful consideration.

40 Medium

Key mitigation measures include: ✓ The implementation of awareness/ education campaigns targeting prominent diseases such as HIV/AIDS, TB, and malnutrition ✓ Ensure ease of access to relevant information and condoms for construction workers ✓ Collaborate with local healthcare facilities, public and private, to consider potential measures and systems that can be implemented to enable access to appropriate testing and treatment ✓ The SEZ development should be accompanied by concomitated social investment in healthcare, education and housing which would create certain supply side improvements also in terms of medical/healthcare facilities.

Medium

152

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Increased pressure on local healthcare sector

Impact Significance Post Mitigation

Rapidly growing communities could increase the local burden of disease and could further burden and overwhelm local healthcare resources. Data suggests that the availability of healthcare beds are limited in the Vhembe District. On average, approximately 76.5% of hospital beds in the district are used. Data shows that the average number of beds per 10 000 people in the district is 12.9. The District is therefore ranked 38th out of 52 district zones.

MITIGATION MEASURE

40 Medium

Industries in the MMSEZ should ensure that compliance with minimum health and safety standards are maintained during the operational phase of the project.

Medium

Local health facilities should also seek to enhance education programmes regarding prevalent localised diseases. Demand for healthcare facilities should be continuously monitored to assess whether local capacity is sufficient to serve growing communities – especially during periods of high population influx.

153

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Data shows that between 7% and 8% of people within the host communities of the SEZ have access to medical insurance.

Improved Access to Healthcare

Employment opportunities created by the MMSEZ directly, or as a result of indirect or induced economic effects, provide households with increased household incomes. Consequently household livelihoods are improved and therefore a broader spectrum of goods and services can be accessed.

36 Medium

An influx of population either employed or looking for employment, may lead to increased crime activity.

The introduction of persons outside the local labour market (i.e. sourcing from other provinces for instance) could introduce a criminal element.

Proactive identification of development opportunities for healthcare facilities should be undertaken by the MMSEZ or government. Investment packages that could entice developers to invest in such a development should be compiled and advertised.

Medium

Employee access to medical schemes should be considered by MMSEZ employers in order to enhance community health.

Increased job opportunities throughout the economy could drive community growth and therefore increase demand for healthcare facilities.

Opportunity seekers that do not acquire employment may turn to crime and in turn influence local community safety.

Impact Significance Post Mitigation

Demand for healthcare facilities should be continuously monitored to assess whether local capacity is sufficient to serve growing communities.

An increased number of households will be in a position to afford improved healthcare.

Sustained risk that social ills could materialise

MITIGATION MEASURE

Working hours should be kept to day-light hours.

18 Low - Medium

Appointment of security services at the construction site. Implement necessary health and safety standards and procedures.

Low - Medium

Ensure local law enforcement monitors local communities for increased crime related to the construction of the SEZ.

154

Social investment by the SEZ into local communities

Partial loss of areas visual appeal and amenity value, in particular for tourism and accommodation activities

Due to the potential stimulus that the Musina-Makhado SEZ could generate in the local, regional and national economy, social investment by the SEZ into local communities is necessary to ensure long-term sustainability of the SEZ and local communities.

The impact would most likely influence the tourism industry (including accommodation) whereby a lower visual appeal or amenity value could limit tourists visiting the area and by effect limit the revenue generated by the sector. The abundance of game farms and leisure activities adjacent and close to the Musina-Makhado SEZ could impact on the desirability of these tourist destinations. The loss of visual appeal coupled with potential pollution and heavy traffic flow are factors impacting on tourism activities.

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MITIGATION MEASURE

Impact Significance Post Mitigation

The SEZ, due to its proximity to local communities and strategic location could actively contribute to the social-economic development of local communities.

50 Medium - High

The design of community investment plans could generate opportunities to improve local community livelihoods and encourage socioeconomic development.

High

Community investment could be focused on education, skills development, the assistance of vulnerable and indigent communities, infrastructure investment and social services investment. In order to minimize the effects of visual appeal loss, design initiatives could seek to create a buffer zone between the border of the project site and surrounding areas in order to distance undesirable viewpoints from onlookers. Natural environmental features such as trees could be utilised to maximise visual appeal from major transport routes and other viewpoints.

55 Medium - High

Other measures may include: ✓ Landscaping of all cut slopes should be undertaken. ✓ Transport corridors should be planned so that they have as small a visual impact as possible, e.g. the pipeline and conveyor structure should be combined. ✓ Careful attention must be given to the siting and design of all buildings. ✓ Screening vegetations should be used wherever possible. ✓ In cooperation with local tourism agencies and operators, the SEZ should seek to appropriately plan and identify

Medium

155

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MITIGATION MEASURE

Impact Significance Post Mitigation

the extent of impacts and create a longterm mitigation strategy. As a result of the manufacturing nature of the SEZ the production of air, ground and noise pollution is high. Impact of air, noise and soil quality on existing economic activities

The operation of the SEZ would also be one of the single greatest carbon emissions contributors in the country thus negatively affecting the country’s commitment to lower carbon emissions.

Impact on local property markets, i.e. diminished amenity value and increased property value

Local property markets could be impacted. Whereas SEZ activity could spur property market activity in nearby towns, the industrial nature of the SEZ could potentially diminish the amenity value of adjacent farms.

Sustained demand for new development (i.e. residential, retail, etc.)

Due to the increased livelihoods of households as a result of the direct, indirect and induced impacts of the operation of the SEZ, increased demand for land uses such as retail, entertainment, etc. can occur. The influx of population to the area could also drive demand growth.

65 High

50 Medium - High

36 Medium

Considerations for mitigating the effects of pollution generated by the SEZ would be to keep the SEZ aligned to the carbon emissions tax implemented by the South African Government. Medium - High Additionally, all plant and equipment should be kept in good working condition. Traffic flow and movement should be planned for efficiency in order to minimise vehicle pollution.

The heavy industrial nature of operations at the SEZ, coupled with potential air pollution, is expected to diminish the amenity value of surrounding properties. Screening and related buffers could be put in place to minimize impacts.

Low - Medium

Operation of the SEZ and in-migration to the Musina-Makhado area will create increased demand for multiple land uses, i.e. residential, retail, business and industrial. It is essential that coordination between the SEZ and local authorities be undertaken to ensure that appropriate developmental activities are undertaken that compliment and service the SEZ.

High

156

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

Increased revenue generated by local authorities can assist with improved service delivery in local communities and allow for the implementation of programmes, initiatives and projects that could support local economic development parallel to and in support of the SEZ.

44 Medium

Increased prospect of informal settlements

Likewise, employees of the SEZ or beneficiaries of an indirect or induced employment opportunity locate to an informal settlement or informal backyard dwelling due to low costs.

Spatial planning by local authorities should also be undertaken to identify appropriate locations for development so as to ensure sustainable and efficient urban growth in line with SEZ requirements.

High

Effective forward planning would enable sufficient bulk services planning. Effective service delivery coupled with new development initiatives could actively contribute to the rates base of the host municipalities and enhance revenue generation.

The increased revenue can also be applied to ensure maintenance of transport and utilities infrastructure.

Existing informal settlements could expand or new settlements could be established due to an influx of jobseekers to the local economy who cannot find employment.

Impact Significance Post Mitigation

The local authorities of Musina and Makhado should streamline the town planning application process in order to encourage new developers to undertake construction activities.

The construction of new developments in local nodes, close to the SEZ and in other communities contribute toward the revenue base of the local authority within which the development takes place. State revenue potential through additional rates and taxes (to address inter alia infrastructure supply and maintenance demand)

MITIGATION MEASURE

36 Medium

Medium

157

Significance

Probability

Status of Impact

Magnitude

Specific Impact and Description

Duration

Theme

Extent

Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

MITIGATION MEASURE

Impact Significance Post Mitigation

Due to increased demand for new developmental activity, existing property market values may increase. Speculative pricing activity in nearby towns can be expected

Quality new developments in the Musina and Makhado towns may spur increased property prices.

36 Medium

Local authorities should provide guidance, in conjunction with the SEZ, to property developers in order to create sustainable developments that are not in conflict with SEZ proposals and beneficial to local property markets.

High

Source: DEMACON, 2019

7.6

SYNTHESIS

The following provides a concise overview of Chapter 6 in order to outline the key socio-economic impacts associated with the Musina-Makhado SEZ. PROPOSED MUSINA-MAKHADO SEZ ✓ The Musina-Makhado SEZ is located between the towns of Musina and Makhado along the N1 Highway on 8 farms totalling 8 048 hectares in extent. ✓ The metallurgical cluster is positioned to beneficiate metals from raw materials and is inclusive of up- and down-stream supporting activities. ✓ The operations of the Musina-Makhado SEZ include: • A power plant, • Coke plant, • Ferro-chrome plant, • Ferro-manganese plant,

• • • • • • •

Pig iron plant, Carbon steel plant, Stainless steel plant, Lime plant, Silicon-manganese plant, Metal-silicon plant, and Calcium carbide plant.

✓ Supporting operations include: • Staff accommodation, • Business activities, • Retail activities, and • Intermodal facilities. QUANTATIVE IMPACT ASSESSMENT ✓ Quantitative impacts have been based on an input-output model. ✓ Outcomes of the model shows that:

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•

Construction Phase ‒ Additional Business Sales = R573.7 billion ‒ Additional GGP = R195.4 billion ‒ Additional Employment = 838 765 jobs Operational Phase ‒ Additional Business Sales = R868.8 billion ‒ Additional GGP = R295.9 billion ‒ Additional Employment = 1 270 294 jobs QUALATIVE IMPACT ASSESSMENT

✓ The chapter shows that a multitude of impacts could be generated through the construction and operation of the SEZ. The most profound impacts are generated in the local economy by means of business development, down-stream value adds and skills development , whilst impacts on local communities include increased opportunities for employment, increased household incomes and livelihoods and skills development and opportunities for entrepreneurship. Increased household income could enable households to access a wider range of healthcare opportunities. ✓ Negative aspects could include increased movement and transportation activities, decreased property value of adjacent farmers, significant in-migration, and the growth of informal settlements. The burden of disease in local communities could be increased due to an influx of population.

159

CONCLUSION

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8 CONCLUSION 8.1

INTRODUCTION

The chapter provides a synthesis of the Musina-Makhado socio-economic impact assessment and provides a high-level overview of key outcomes. 8.2 8.2.1

The Limpopo Province contributes only 7.3% to the total manufacturing output of the country and is one of the lowest manufacturing employing provinces. The renumeration of employees in the manufacturing sector for 2018 was more than R20 000 nationally, which is significantly higher than the average for Limpopo, the Vhembe District and Musina and Makhado local municipalities.

ANALYSIS OVERVIEW LOCATION ANALYSIS OVERVIEW

The Musina town has been identified as a rural service centre by the Draft National Spatial Development Framework (2018). The Makhado town is identified as an urban growth point which acts as a support location to rural services centres and surrounding communities.

Metallurgy in South Africa is well-established and produces products in the metals and ferro-alloys industries. South Africa is one of the top ferrochromium producers in the world and has had stable steel production over the past 10-years.

In the context of the Limpopo Province, the towns have been identified as provincial growth points due to their locality to the N1 highway primary corridor and diversified socio-economic service infrastructure. The Musina municipality is also home to the proposed Limpopo Eco-Industrial Park (or Musina SEZ).

South Africa primarily exports to China. In recent years Chinese demand for steel and ferro-alloys has decreased and global over-supply is ever present due to the magnitude of Chinese metal producers. A global market downturn in recent years as well as slowing local demand has seen diminished output by local producers

Property trends indicate that home owner stability is more prominent in the Musina town than Makhado because of the high number of residential properties to purchase in Makhado. Development activity, especially residential development is sporadic and demand dependent, whilst nonresidential development show greater stability historically.

Currently, 10 special economic zones are designated in South Africa of which 5 are currently operational, with other SEZ’s in various stages of implementation.

8.2.2

The Makhado Local Municipality contributes nearly half of the GVA output of the Vhembe District compared to 10% contribution by the Musina Local Municipality.

MANUFACTURING ANALYSIS

AND

METALLURGICAL

SECTOR

The manufacturing sector in South Africa is one of the primary economic growth, contributing and employing sectors in the country. Manufacturing activity is largely concentrated in the metropolitan regions of the country and gravitate towards special economic zones. The manufacturing sector as a whole has steadily been decreasing since 2008 and has shed output and employment.

8.2.3

ECONOMIC PROFILE

For the Musina and Makhado Local Municipalities economic sectors such as: wholesale and retail trade; mining and quarrying; general government; and financial and business services are most prominent. Employment in

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

both municipalities is largely dependent on the agricultural, retail and community services sectors. 8.2.4

DEMOGRPAHIC PROFILE

The Musina and Makhado municipalities host more than 670 000 people and 200 000 households. Local residents primarily reside in formal dwellings whilst an abundance of informal and traditional dwellings also exist. Households in the Musina municipality primarily rent the property on which they reside as oppose the Makhado municipality where households generally own the property on which they reside. Average annual household income in the Musina Municipality is on average higher than the Makhado Municipality. For All LSM groups the average annual household income in the Musina municipality is R68 789 compared to R 62 642 in the Makhado municipality. More than 80% of households in the Musina and Makhado municipalities can be categorised as LSM 1 to 3. 8.3 8.3.1

SOCIO-ECONOMIC IMPACT OVERVIEW QUANTATIVE AND QUALATIVE IMPACT OVERVIEW

The relatively small size of the manufacturing sector in the Limpopo Province poses an opportunity by the Musina-Makhado SEZ to create local, national, provincial and socio-economic gains. The SEZ and its intended operations are positioned to play a substantial role in the growth and diversification of the economy (local, regional and national) by introducing mineral beneficiation in the metals and ferro-alloys industries (an industry that is limited in the province). The SEZ is set to become the first operational special economic zone in the province and is positioned to agglomerate supportive and down-stream industries into the local, regional and international markets. The SEZ is positioned to create considerable economic and social impacts. The proposed operations of the SEZ could, through leveraging of the economic multiplier effect, potentially create up to 4.4 jobs for every R1

million capital invested. In addition to the estimated 52 000 on-site employment opportunities to be created by the SEZ, approximately 838 000 new employment opportunities could be created during the entire construction phase (10 year-period) and up to 1.2 million new operational phase jobs created and sustained (at maturity and full capacity). The additional business sales that could be created by the SEZ during construction phase of the project amounts to more than R573 billion whilst the operational phase additional sales created and sustained could account for more than R868 billion. Additional GGP created during the construction phase (10-year period) could amount to more than R195 billion and during the operational phase a total of approximately R295 billion additional GGP could be created and sustained annually. Aside from the direct impact generated by capital and operational expenditures, various local socio-economic impacts could be created. Its common cause that nearby communities are tribal in nature and that skills levels are low. The labour requirements of the SEZ in general and those of its future operators in particular, need to be timeously identified to ensure optimal alignment by local training and recruitment initiatives – and to minimise the need for imported labour. The magnitude of capital investment anticipated could potentially create considerable demand and supply side impacts. The fairly rapid nature of the scale of investment planned over a fairly focused timeframe will create considerable demand and supply side pressures. Proper planning will be required to ensure that labour force settlement and associated community development takes place in a structured manner and that demand side responses are timeously implemented in a phased manner – including but not limited to land for human settlement, formal housing initiatives and associated development of ancillary facilities such as retail, recreation, healthcare, education, banking, policing, etc. The increased livelihoods of local communities also affect the demand for socio-economic services. The increased spending potential of local communities allow for the growth in demand for additional services and directly influences the growth of new businesses. It should be noted that although a significant number of employment opportunities could be generated, these opportunities are not instantaneous but progressive over

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

time. Independent studies indicate that the sphere of influence generated by a SEZ diminishes as the distance from the SEZ core increases. Agglomeration of economic activities in support of the SEZ would augment the impact created by the SEZ. The influx of labour to the area is set to stimulate various demand and supply side impacts. The prospect of job opportunities would fuel considerable inmigration to the area, thereby creating a myriad of impacts on economic infrastructure, including hard as well as soft infrastructure. Hard infrastructure includes road, rail, water sanitation, electricity. Soft infrastructure includes the full spectrum of social facilities and amenities including but not limited to hospitals, police stations, libraries, home affairs offices, community halls, post offices, cemeteries, schools and creches, sports facilities, active and passive recreational spaces, resources centres. Well-structured supply side responses need to be in place to ensure orderly development - the SEZ development will be accompanied by extensive infrastructure upgrades and investments. As with any large scale development, there is a risk that social ills could materialise. – informal settlements, sex workers, STD’s, communicable diseases, HIV/AIDS, TB, crime. Proper planning for orderly human settlement could mitigate the likelihood of these risks materialising. The area reveals a particular burden on diseased, characterised by the following: ✓ Age groups younger than 5 years

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The leading cause of death for the age cohort is characterised by communicable diseases that exclude HIV and TB and maternal, perinatal and nutritional disorders (71% of deaths).

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Leading causes include diarrhoeal diseases, protein-energy malnutrition and lower respiratory infections. ✓ Age groups 5 to 14 years

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The leading cause of death for the age cohort is characterised by communicable diseases that exclude HIV and TB and maternal, perinatal and nutritional disorders (71% of deaths) and HIV-related and TB (24%). Leading cases include HIV?AIDS (13 to 15%), Tuberculosis (8 to 13%) and Diarrhoeal diseases (11% to 12%).

✓ Age groups 15 to 24 years

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The leading cause of death for females are HIV-related and TB causes (31% of deaths. The leading cause of death amongst males in the age cohort are as a result of injuries (54% of deaths).

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The leading cause of death within the age cohort includes noncommunicable diseases (36% to 42%) and HIV-related and TB (32% to 33%) causes.

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The leading cause for death in the age cohort is non-communicable diseases (72% to 77%).

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Leading cases affecting population in the age group include cerebrovascular disease (11% to 17%), diabetes (10% to 12%) and hypertension heart disease (9% to 12%).

On average, approximately 8.5% of people in the Limpopo Province have access to a medical aid scheme. When considering the Vhembe District, the average proportion of people falls well below that provincial average (7.2%). The Musina and Makhado host communities on average have between 7.3% and 7.4% of people who are medically insured. The medical insurance deficit places a burden on public sector healthcare, and the capability of the healthcare system to lower the burden of disease. In light of the burden of disease, the Covid-19 virus does pose a risk in terms of community transmissions, the capability of local healthcare systems, demand for related social amenities and the capability of local communities to earn a living given current economic conditions and lockdown regulations. Local property markets could be impacted. Whereas SEZ activity could spur property market activity in nearby towns, the industrial nature of the SEZ could potentially diminish the amenity value of adjacent farms. Property

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Musina-Makhado Energy And Metallurgy Special Economic Zone – June 2021

owners adjacent to the SEZ could experience a decrease of market value while new developments in local towns could spur property values. The construction and operation of the SEZ is likely to promote business and economic development in the local economy. The considerable additional job creation is set to create increased levels of disposable income and associated increases in buying power which, in turn, could create further downstream benefits in various value chains including retail, wholesale, education, healthcare, insurance, banking, real estate, recreation, travelling, export and imports, etc. – and associated rates and taxes. The extent to which these benefits are likely to materialise will, however, hinge on the model adopted. If domestic labour legislation is waved and labour is imported en masse (as has happened elsewhere in Africa where large industrial developments have been driven by not only by foreign investors and foreign developers) these benefits will, in all likelihood, not materialise to the same extent. Contract procurement for professional services as well as all labour procurement contracts would have to be managed with extreme care. The development of resource and labour requirement plans, well in advance could ensure optimal alignment between skills requirements and domestic skills supply. Lessons from elsewhere in Africa furthermore indicates that overcoming the language barrier would be a noteworthy challenge. Considerable effort would have to made by the foreign investors/developers to ensure alignment with the dominant domestic language profile.

use of foreign labour should be limited. Particular care should be taken during the operational phase to ensure that economic benefits are not eroded over time by systematically deteriorating environmental conditions – especially towards the end-of-life phase of mining and industrial plants. Proper decommissioning and rehabilitation plans should be timeously formulated. Stringent ongoing monitoring, evaluation and adjustment will be advisable.

Procurement of services and labour from the South African market would greatly enhance economic (and social) spin-off effects of the SEZ. Where gaps in the domestic economy might exist in terms of specialised supply side expertise, new business development and skills transfer should be of utmost importance. As far as possible, down-stream beneficiation and value adding of raw materials should be encouraged to prevent the export of “cheap”, un-beneficiated raw materials, only to be re-imported in an expensive, beneficiated state. An onerous skills development burden should be imposed on the foreign operator to ensure compliance with local labour and related legislation. Skills development and empowerment across the spectrum of South African communities, including minority groups, should be actively promoted. The

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