The Saldanha Bay Industrial Development Zone is an enabler of success


The Saldanha Bay Industrial Development Zone (SBIDZ) is the first special economic zone (SEZ) to be located in one of South Africa’s domestic ports – the commercial deep-water Port of Saldanha Bay. Designated as an SEZ in 2013, the SBIDZ is also the only SEZ specifically geared to cater for the needs of the maritime fabrication and repair and oil and gas industries, together with their associated support services and already boasts an impressive investment pipeline, with commitments in the region of R17 billion from 58 prospective tenants. Impressive as the numbers are, though, they don’t spell out the SBIDZ’s broader role as a catalyst for sustainable development in Saldanha Bay – a role that received a considerable boost on 19 July this year when the SBIDZ received SARS accreditation as a customs-controlled area across nearly 70% of its 356ha area.

South Africa's first free port

Designation as a customs-controlled area is significant because it allows the SBIDZ to function as a free port for minimal friction with regard to customs and operations. SBIDZ CEO Kaashifah Beukes explains: “The free port concept is fundamental to the SBIDZ because it speaks to a very dynamic and more user-friendly customs regime. It benefits all our sectors because it helps us to be much more externally focused.”

Laura Peinke, Executive: Business Development, elaborates: “Whereas users of port systems normally pay import duties or pay bonded guarantees for temporary imports, a customs control area effectively exempts them from duties because they are entering a special economic zone. More importantly, from the operational perspective, a free port is a lot more flexible in terms of ease of doing business. Normally, a company would need to pay a bonded guarantee of at least 15% VAT on whatever equipment they were importing and negotiate timelines with SARS as to how long the equipment could stay as a temporary import into South Africa. This constitutes a risk as when you negotiate a time limit for a piece of equipment, it may not always happen in the way that you have envisaged – for instance, spare parts might take longer than expected.”

Effectively, the customs control area affords a quick turnaround time that benefits both the SBIDZ’s international clients and the local companies that service them.

“We have a lot of South African companies that can actually repair, maintain and certify equipment from passing vessels from around Africa and elsewhere. A quick turnaround time is essential. The fact that companies do not need to pay a bonded guarantee means they free up cash and do not need to specify a time limitation. A piece of equipment can come in, be maintained and serviced and put back into a warehouse and the spare part in the warehouse will go straight back out to the vessel. This saves clients time and money on offshore operations and enables South African companies to put their capabilities to work and provide a good service,” says Peinke.

“We asked SARS for something that had never been done before,” adds Beukes. “We needed a lot of groundwork to establish that it could be done legally in the first place and then go through the due diligence to understand what having custom control area status actually means.”

Optimistic offshore outlook

The custom control area regime is only part of the SBIDZ’s ease-of-doing business value proposition.

“Our focus is on being responsive to our investors and tenants, which enables our commercial proposition and our sustainability,” says Beukes.

Peinke cites the SBIDZ’s back-of-quay project leasing facilities as a concrete example of responsiveness in action: “Companies bring in riser pipes to be inspected and certified. Each riser pipe weighs three to four tons and there are 75 riser pipes per project. Sometimes they need to be maintained before they can be certified. These clients need something directly back of quay, but it is a project that they might have once a year, so they do not want a long-term lease. The project-leasing facility purposively addresses that short-term requirement.”

This responsiveness goes hand in hand with an outward-looking approach to the offshore market.

“Ours is very much an offshore service offering that goes beyond the oil and gas and maritime support services value chain,” says Peinke. “Internationally, many companies recognise South African skills and capabilities in terms of manufacturing, fabrication, engineering, repairs, servicing, certification, you name it.

Looking at Tanzania alone, our pipeline includes companies that actually repair and recycle sub-sea telecommunications, sub-sea oil and gas, sub-sea mining cables and so on. It is difficult to quantify in terms of market share because we will probably struggle to find an exact model of us elsewhere.”

Shared vision of value

Rather than attempt to be everything to everybody, the SBIDZ’s vision is to develop infrastructure to maximise value.

“There are multiple sectors in the Port of Saldanha. It’s not just the IDZ. it’s not just oil and gas and maritime. We have a massive port with a huge amount of space – so how do we and our stakeholders plan together to maximise this potential? This is really where we come in as a role player on the property side. This includes project-leasing facilities, the offshore supply base, long-term lease areas, office facilities, research and development centres, and that is really where we then come in as a role player on the property side,” says Peinke.

“By maximising the value of the port environment, we are developing into one seamless zone and port where a client can bring in any vessel or project and have the necessary back-of-quay support.”

Socio-economic transformation

“We work with many government departments and the private sector to enable inclusive development and socio-economic transformation in the region. As a catalyst and facilitator, we help inform and unlock opportunities in potential markets that would see a thriving Saldanha Bay," says Peinke.

An important part of the SBIDZ’s ground-breaking journey has been the development of good stakeholder relationships and partnerships.

The first of its kind leasing agreements with the Transnet National Ports Authority came on the back of diligent work over nearly 6 years.

“We have learnt a lot along the way, and there is a lot we can do to enable other relationships with other government departments so that economic development actually takes place,” says Peinke.

“We are committed to making the whole of Saldanha Bay a success,” adds Beukes. “The first step is getting a successful zone, the next step is ripple effect on the broader community and the broader economy.”

Skills pipeline

Skills development is a critical focus of the SBIDZ. Investors need to know that local companies have the skills capacity to integrate into their supply chains. Building an eco-system for local procurement from a low skills base to facilitate enterprise and contractor development in parallel with ongoing infrastructure development has been a learning curve in itself.

As Patrick Lakabane, Executive: Development Programmes explains, “In 2013, we were highly surprised by just how far removed skills levels were from requirements.

In terms of skills development, start building capabilities from Grade 9, and then build further capabilities to ensure that they could articulate into our various apprenticeship programmes.

To appreciate the magnitude of the task, consider our investment pipeline and the type of companies we are going to attract into the zone as tenants: for them, international accreditation, qualifications, standards and benchmarking are non negotiable because of the strict health, safety and quality principles in the industries.

We have set skills development as a KPI and have trained 520 learners over a spectrum of skills since 2013.”

As much as skills development is a challenge, it is also an opportunity. “Because we do not get funded for skills development directly, we need to have the role players in that eco-system playing their part and bringing their value to bear.

For example, the SETAs are key funding partners but in order to raise financing from them, you need to put down a bona fide project that they can support and fund.

For the business case to be feasible, you need the people – the communities of Saldanha Bay and training service providers – so a big part of the work is making sure that those relationships and networks are there and that trust is built up over time,” explains Beukes.

The immediate impact of the SBIDZ’s skills development drive can best be gauged on some of the success stories. “In 2013 we had an opportunity to place 30 learners at Armscor in Simonstown, but we could only find seven that met the criteria. But for those who made it, there are now internationally qualified welding inspectors in Saldanha community. These are skills that used to be imported because of the stringent compliance requirements,” says Lakabane.

In terms of skills development, SBIDZ enjoys a unique relationship with the community. “We have a community skills and training committee that meets on a monthly basis to consult with the community on how to put together programmes that matter to people and businesses,” says Lakabane.

Strategic innovation

Beyond the immediate needs of for the industry of today, the longevity and sustainability of the zone demands a long-term innovation strategy.

The long-term strategic vision includes using part of the zone’s undeveloped land for an innovation campus.

“Knowing where the offshore and maritime industry is going as a whole, we need to be ahead of the curve,” says Beukes. “The trend is for oil and gas to be found in deeper waters. If offshore oil and gas exploration does happen in Africa, you need to have the technology to unlock those fields in a responsible way.

This is where an innovation campus on our land would fit in. We will not necessarily be the operators – we just want to partner somebody in that venture.”

Beukes insists that the feasibility of the innovation campus rests on the extent to which it links up with the local community. “We have been consistent in our messaging and following through on what we say and do. We are here for the long haul, we know that we are going to make a change to the economy and society of Saldanha, and we would like it to be a positive one for everybody involved.”

“A lot of the representatives on the community skills and training committee realise that this opportunity has passed their generation by – it has got to be for their nephews, nieces, children and grandchildren. It’s a hard thing to accept for people who have most likely struggled their whole lives, but for them to want to contribute nonetheless just goes to show how much that accountable partnership means to the community.”

Municipal mojo

Another illustration of how the SBIDZ effects change beyond its boundary is the galvanising effect the zone has had on the local municipality.

“Over the past few years we have certainly had close collaboration with the Saldanha Bay Municipality. Recently, we completed a joint study on the economic framework of the municipality. We modelled the economy there at a local level and then we overlaid the IDZ on it to see what effects the IDZ would have as well as the effect of any shocks like another drought.

“That kind of exercise enables local authorities to understand the real effect of the IDZ on the economy so that they can act pre-emptively. For example, as the zone develops and people’s incomes improve, the area will need a lot more schools of a higher calibre. So the municipality also needs a project pipeline – if they are on the back foot when the need arrives in, say, 2025, people will be unhappy.

“ Now the municipality is going to use that modelling to craft a Vision 2050, looking at what could Saldanha look like in 2050. They are currently concluding the terms of reference for that.”

As the SBIDZ develops, the local authorities’ perception of the zone itself has undergone a shift. Beukes says, “For the past few years, we have been installing infrastructure, putting in servitudes and so on, and there was nothing especially compelling to look at. Now the access complex and tenant buildings are rising up from the ground, so it looks much more impressive. Not long ago we had all of the councillors on a site visit. After going through the whole site, one councillor remarked in the bus that we are changing Saldanha Bay into a metro. They were initially apprehensive but then they understood that it’s something to aspire to.”

Warming to her theme, Beukes continues: “We can act as facilitator or catalyst. Many criticise municipalities for not thinking innovatively to solve problems, but here they are re-looking at the old steadfast interpretations of their mandate.

“One of the things they are concentrating on is how to make a positive impact on the early childhood development space. This synchronises with our youth development efforts, so that there is a continuum of education from the early childhood development phase right through to higher education and employment.

“As stakeholders, we are all applying ourselves to specific problems, and that makes the zone and surrounding towns a lot more sustainable.”

Meaningful impact

The billions of rands in investment commitments attracted by the SBIDZ have deservedly made media headlines, but for Beukes, the true meaning of the project lies in the impact it has on local business.

“One of our first tenants is a local company called West Coast Corrosion Protection. They have a capex value of just under R20 million. They are trying to employ 35 people and intend to employ another 25. Now R20 million capex is quite small in the bigger scheme of things, but it is the meaning behind the story that is important. Here you have a local company that wants to grow its business, and the IDZ is supporting it through contractor development so that it has the skills capacity to be compliant as well as contributing to that capex by building the top structure for them through the SEZ funding programme. This is exactly what the SEZ programme as a whole is supposed to be about. We offer competitive rentals because we want to be an enabler and a facilitator, not a landlord. We are developing the zone on that frame, to be an enabling environment for business to take root and to take hold of.

“Of course we are very proud of the monetary value of the pipeline, but we’re even more proud of the diversity in the value chain, ranging from local companies to international companies, black-owned companies and women-owned companies.”

“It is also the further linkages that add value,” adds Peinke. “It is the fact that West Coast Corrosion Protection do a lot of corrosion protection for a local fabricator from the West Coast area, and they are most likely going to be providing corrosion protection services for the tanks on two of our tenants’ buildings.

“ On the one hand, those opportunities may not have come across their desk before, so to speak, but at the same time our other tenants are saying how terrific it is to be able to find a local service provider that meets their requirements and standards.

“Now they are set up for the future – when we start construction, we will build the tanks and they can do the corrosion protection.

“Beyond the West Coast, they have been doing projects in Simonstown and the Port of Cape Town. They have just been down in Mossel Bay going through some scope of work there. So it is very much about taking literally a 100% start-up from the West Coast and actually also getting them to grow bigger and play a role in the greater economy.”

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