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Coega smelter hangs in the balance

Posted On Monday, 19 January 2004 02:00 Published by eProp Commercial Property News
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Government and several parastatals made their biggest sales pitch yet last week when they met representatives of Canadian aluminium group Alcan in an effort to sell SA as the destination for a 2,2bn aluminium smelter at Coega in Eastern Cape.

EskomBut SA was left with no guarantees that the project would go ahead.

Trade and industry department director-general Alistair Ruiters and top officials from Eskom, the Industrial Development Corporation (IDC), the National Ports Authority and the Coega Development Company met representatives from Alcan and Pechiney on Thursday and Friday last week.

Uncertainty around the project, which promises substantial economic benefits for the country, is also set to revive the debate around the viability of government's multibillion-rand investment in Coega.

The trade and industry department was not available to comment at the weekend, but Eskom, the IDC and Coega said the foreign representatives made no commitments and indicated no time frame for the decision to be made.

The project was one of several Alcan and Pechiney officials were reconsidering worldwide, following last year's merger between the two companies.

A deal was believed to be close to finalisation between government and Pechiney when the merger scuppered progress.

With less certainty now than ever that SA would secure the project, construction continues apace at the Coega industrial development zone.

It was planned as an industrial estate that would enable dutyfree production for export, and provide transport routes, facilities and services tailored to exportorientated industries.

The objective of the zone is to increase foreign exchange earnings, generate sustainable local and foreign direct investment, create employment, and encourage skills and technology transfer.

Coega's management was hoping to attract several other investors. But none of the other investments on the horizon were anywhere near the value of the aluminium smelter.

"There is a big question hanging over Coega now," said Reg Rumney of BusinessMap at the weekend.

"Coega must have an anchor tenant to succeed."

Rumney said, however, that the Coega development was a "purely political" project not driven by economics. Eskom, which was erecting electricity infrastructure dedicated to the smelter, said it would not slow down or stop construction until there was more certainty about the future of the project.

"We have a contract with Pechiney and would be in breach of the contract if we were to stop," said Eskom spokesman Fanie Zulu yesterday.

Zulu said the meeting was successful, having dealt comprehensively with issues such as pricing and capacity.

Eskom and the IDC have each committed to taking a 12,5% stake in the project.

The mooted aluminium project would represent the largest single foreign direct investment in SA to date.

Government and parastatals have been working to secure the deal for more than two years.

Government said it had pulled out all the stops to secure the investment and as part of the effort had committed to granting Pechiney a R606m tax relief concession.

Last modified on Thursday, 26 June 2014 19:16

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