A land of riches

Wednesday, 26 May 2010 09:41

The Limpopo Province has a wealth of assets

As the Fifa World Cup draws ever nearer, South Africa and indeed Africa are viewing the occasion as a window to showcase not only its tourism ability, but also that of its overall investment potential. With the majority of this increased attention being focused on the ‘major’ provinces such as Gauteng and the Western Cape, numerous opportunities are in fact presenting themselves within the lesser recognised provinces.

One such opportunity has been that of the Limpopo region. Boasting one of the most diverse and impressive potential investment portfolios, the area has largely fallen under the radar.

While the majority of focus from an international investment standpoint has fallen on the province’s impressive mining sector, the area has come on in leaps and bounds with regard to diversifying its overall potential.

From a tourism standpoint, a combination of authentic African experiences, coupled with first-world infrastructure, have seen Limpopo underlined as a paradise for ecotourism and hospitality investments.

While the area boasts a number of world-class game reserves, and is home to some of the world’s greatest concentration of national parks, more and more potential investors are witnessing enticing opportunities upon which they will indirectly benefit.

For example, an innovative opportunity has been brought forward by the mining sector whereby old mining operations are being used for recreational and educational purposes, therefore also serving as tourist attraction points i.e. the Phalaborwa mines. It is hoped that with novel ‘two-pronged’ approaches such as these, a wider range of local as well as international investors will be enticed to develop these areas in partnership and conjunction with local communities.

From a mineral potential standpoint, few areas in the world boast the prospective reserves as that of Limpopo. The province lays claim to the widest diversity of minerals in the country, with a spectrum of more than 70 natural resources including precious metals, stones, industrial minerals and coal, harbouring both energy as well as chemical properties.

With such an abundance of potential on display, more and more opportunities for directly influenced sectors are becoming evident. With the ability to produce some of the world’s most sought-after elements in the form of platinum, coal and iron ore, the area has clearly presented opportunities reaching beyond that of merely mining conglomerates.

As global markets begin their recovery, more and more businesses are realising the potential gains in investing within ‘indirectly related’ sectors that are affecting their bottom line. The region has opened up an untapped investment opportunity for segments ‘further down the chain’.

For example, the benefits of the local and international jewellery sector directly investing in an area in which its raw materials are being extracted, constitutes a massive opportunity.

Another clear example of this would be the extraction of platinum which has presented a prospect of epic proportions, for not only manufacturers of products such as fibre optic cables, but also that of the construction and aerospace sector, whereby platinum is utilised in the fabrication of silicones.

The area will undoubtedly bear witness to a spike in investment interest over the coming months from both the local and international automotive sector, as more and more fuel cells are utilised in the generation of electric power. Being developed as an alternative to internal combustion engines in vehicles, areas such as Limpopo producing the mineral will in turn see an inevitable boost in funding from multiple sectors – and not only mining firms, which has been the case until now.

Another area claiming increasing investor attention is the coal mining potential of the province. With a state electricity provider struggling to keep up with an ever increasing demand, coupled with the Premier of Limpopo Cassel Mathale’s recently return from China’s 2010 World Coal-to-Liquid (CTL) Conference, competition within the sector will undoubtedly be rife.

In a media statement in April, Mathale said: “The ongoing massive investments in Lephalale Municipality, particularly the construction of the biggest coal-fired Medupi Power Station, the imminent establishment of a coal-to-liquid plant in the same area, and the discovery of yet another huge reserve of coal in Musina, put Limpopo on the right developmental path to meet its socio-economic goals posed by challenges of underdevelopment, unemployment and abject poverty.” With a development of such magnitude, coupled with an ever increasing call from the South African public for the national government to allow private electric providers to assist in increasing power production, the time for investors focused on the region has never been better.

With this in mind, increased investment will result, particularly for sectors with large electricity consumption levels such as that witnessed in the manufacturing and industrial realms.

With an increase in emphasis being put on areas relating to electricity production, regions such as Limpopo are fundamental investment platforms in which these business areas can aid in not only their own futures from an energy standpoint, but also the improvement of their overall net profit.

Those in doubt of such potential need only to look at the recent statement by Mathale: “Limpopo, having a major share of these coal deposits in our country, is ready to be utilised for the development, eradication of poverty, access to energy (including electricity); and to take South Africa, sub-Saharan Africa and the rest of the African continent to a more diversified trajectory of economic growth and development.”

One of the lesser focused upon areas – but one of Limpopo’s economic strengths – is that of manufacturing. Harbouring a wealth of mineral and agricultural resources, as well as its proximity to growing consumer markets in the rest of the sub-continent, Limpopo offers multiple investment platforms. An area sure to see a positive shift in capital outlay will be that of manufacturing and utilisation of magnesium oxide, cement, lime-based products, and granite.

While sectors such as these in the past have been saturated with investor interest with only one of the elements as its main focus, more and more opportunities are presenting themselves for a diversified investment base.

With close to 10 economic development clusters having been identified for immediate expansion, coupled with abundant factory space and a sound support infrastructure already in place, investors may very well be teaming up in order to make better use of facilities and extraction points, as well as to boost overall capital for further and more in-depth expansion within the area.

With the onset of a global market crisis has come the re-evaluation of the way in which business sectors invest their capital.

No longer are industries looking at merely obvious direct investment opportunities, but more and more are focusing on secondary opportunities that will ultimately affect their profit margins further down the line.

The Limpopo Province serves as a perfect opportunity to implement this mindset, and will undoubtedly be better off for it.

With increasing incentives, continued development and advancement of all the people living in the province, analysts are predicting increasingly bullish investment approaches moving into 2011 – something that will undoubtedly boost the province to a long deserved superior status.

Adam Currie

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