Coega anchor textile project runs aground

Posted On Friday, 23 June 2006 02:00 Published by eProp Commercial Property News
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THE Belgian Sander textiles project at the Coega industrial development zone appears to have run aground after Coega management said it had commenced negotiations with potential new tenants for the factory it had built for Sander.

 

Property-Housing-ResidentialThe R200m Sander project was hailed at its launch a year ago as the first tenant at Coega, which was struggling to find investors, and as a venture that would create 1200 much-needed jobs in Eastern Cape.

The Belgian company, led by Alex Liessens and its South African partners, had signed a 25-year lease on the now-repossessed 5000m² building built with taxpayers’ money.

The cost of construction was included in the lease costs.

Legal representatives from Coega had visited Sander in Belgium as part of attempts to “resolve the matter”, said Coega Development Company spokeswoman Vuyelwa Qinga-Vika yesterday. She could not immediately give an indication of any amounts owed.

The spokeswoman said Coega had started talking to potential new tenants in view of the Sander venture in SA “seemingly failing to reach resolution on their problems”. The Belgian company Sander International had fallen out with its South African partners, a group of individuals led by Ernest Hewitt, who was to be the head of the new venture. The reason for the dispute was not clear.

Hewitt said recently that Sander did not have the financial means to deliver the project, but this could not be confirmed.

Qinga-Vika said Coega was still talking to Sander, which was looking to revive the project. She said that, while sympathetic to the venture, Coega as the landlord had to make a business decision that served the best interests of its shareholder.

The flailing venture comes as a blow for Coega, which is being developed at a cost of more than R7bn. The government project, aimed at raising foreign direct investment, has been criticised as being motivated by politics rather than by economics.

One of the potential new tenants Coega was talking to was a local textile manufacturer looking to consolidate its Port Elizabeth-based operations under one roof, she said.

Doubt was first cast over the Sander project after its empowerment partner, ICAN, withdrew from the project shortly after its launch in May last year.

ICAN had to raise R180m to secure a 51% stake in the project, but withdrew without giving reasons.

A source outside the company said at the time that ICAN withdrew due to lack of confidence in the South African management of the venture.

Qinga-Vika said Coega had secured four investors to date, excluding Sander.

A stainless steel mill to be built by MAN Ferrostaal as part of its defence offset obligation was the largest of these.

Qinga-Vika said site preparations for the precision strip steel mill project were under way, alongside the environmental impact assessment process. Coega management is still hoping to bag the multibillion-rand Alcan aluminium smelter, which has been on the cards for several years.

An official from the Industrial Development Corporation, which would take a stake in the smelter, said this year that the only remaining hurdle was to reach agreement on the tariff at which Eskom would supply power to the electricity-intensive project.

Last modified on Wednesday, 25 June 2014 17:42

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