Rewards and risks for power plant development

Posted On Friday, 13 January 2012 02:00 Published by eProp Commercial Property News
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The prospect of having a nuclear power station built in your back yard is not appealing, it is not surprising that residents of the Kouga area in the Eastern Cape are opposing the idea.

EskomThe prospect of having a nuclear power station built in your back yard is not appealing. It isn’t surprising that residents of the Kouga area in the Eastern Cape (think Jeffrey’s Bay, St Francis Bay and Oyster Bay) are loudly opposing the idea after nearby Thyspunt was named the preferred site for SA’s next nuclear plant in a series of environmental impact assessments.

But the development could also hold economic benefits for the area, which has been experiencing business shut-downs and economic lethargy, says Glen Büchner of tains Estate, a property developer that works in the region.

There is no doubt that a power station would bring a short-term boom in economic activity and employment. Kouga might consider the example of Lephalale in Limpopo, where the construction of Eskom’s Medupi power station has been under way since 2007.

Lephalale municipal manager Maria Cocquyt says the effect on the local economy has been positive. “A lot of materials are sourced from local suppliers, and shopping malls have sprung up as a result of the population increase,” she says.

There are 14005 skilled and unskilled workers at Medupi. Eskom has built 995 houses and bought 321 (an investment of R2,3bn) and has spent R697m on local procurement contracts.

According to a case study by Fountains Estate, new industrial and commercial developments have sprung up in Lephalale, with business opportunities for supporting technical services, and property prices have more than doubled.

But such an influx doesn’t come without its problems. Initially Lephalale couldn’t cope. Cocquyt says water and electricity infrastructure was inadequate. This was addressed by investing in bulk infrastructure and sewerage by the municipality, with help from Eskom.

Upgrading of Lephalale’s electricity network is still under way, and the internal road leading to the power station needs to be widened to ease congestion.

However, the real worry is that in the longer term, the boom might leave in its wake a town with rising unemployment, diminishing markets and falling property values.

Cocquyt says the future economy of Lephalale will be kept afloat with new mining exploration. She says a prerequisite for the granting of licences is that mining companies must invest in sustainable development for the future of the town. Such programmes include supporting local entrepreneurs.

How can Kouga learn from the Medupi experience, if a power station is erected there?

A delegation of Kouga’s business leaders has suggested that a tiny percentage (about 2%) of the total investment in the power station be ringfenced for investment in regional projects.

The group sat down with the municipality to identify a list of municipal work that needs funding. It has also asked other local bodies which projects are critical but not on the municipality’s radar screen.

The thinking is that about R3bn should be invested. The money should go towards the establishment of not only roads that are directly linked to the power station but also the infrastructure of the wider area: further roads, sewerage, water and electricity. Some should be set aside for community upliftment.

Since these projects extend further than the infrastructure for the power station, it is hoped they will promote regional economic growth. “It would be fantastic if we could get some compensation for putting this power station in our back yard, so to speak,” says Büchner.

Eskom was not able to comment on this proposal.

The argument seems rational, considering the state of existing infrastructure in the area, which is “collapsing”, Büchner says. “The municipality has a budget of about R500000, and the collection rate of revenue is only about 79%.” What little is available for capital projects and maintenance is spent inefficiently, he says.

To avoid mismanagement of additional funds, Büchner says, projects should ideally be run in collaboration with Eskom and local business.

But those opposed to the development have a different idea of economic gain. Thyspunt Alliance spokesman Trudi Malan says the real economic value of the area lies in its biodiversity and Khoisan heritage: “The tourism value of this area would have more and longer-lasting economic benefits.”

 

Last modified on Monday, 28 October 2013 17:24

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