Massive new economic development zone in the Western Cape – with a R21 billion investor pipeline
The Freeport Saldanha Industrial Development Zone has an anticipated R21 billion investment pipeline which is being realised through the historic signing of the Memorandum of Understanding (MOU) between the entity and Sasol.
Western Cape Premier Alan Winde and Finance and Economic Opportunities MEC Mireille Wenger welcomed a partnership announced Wednesday (19 October) between Sasol and ArcelorMittal SA to produce sustainable fuels and chemicals, as well as green steel development, through supporting the establishment of a green hydrogen (GH2) hub in Saldanha Bay.
“The Western Cape Government (WCG) applauds the partnership between these two giants of industry and further welcomes the signing of the Memorandum of Understanding between Sasol and the SBIDZ, which will bring exciting energy capabilities and commercial opportunities to the province,” the local government said.
“This will go a long way in promoting the fiscal independence of the entity while further making use of the significant infrastructure developments that have taken place at the Freeport to date,” said Cayla Murray, MPP – DA Western Cape spokesperson on Finance, Economic Opportunities and Tourism.
Earlier this week, Sasol and ArcelorMittal launched a carbon capture, ‘green steel’ plan. During the launch, an MoU was further signed between Freeport Saldanha and Sasol to collaborate on the establishment of a green hydrogen hub.
It was further revealed that the entity is conducting a feasibility study to locate this project on their land, said Murray. “Sasol and ArcelorMittal South Africa will further be studying the use and offsetting of each other’s emissions, with the goal of achieving net zero carbon emissions by 2050.”
The two industrialists are studying how to use the approximately 1.5 million tonnes of CO2 generated from the Vanderbijlpark Works a year. This CO2 would then be transported to Sasolburg and Ekandustria to replace the use of natural gas, said Murray.
“The green economy is an exciting arena with enormous potential. It is essential that we not only recognise its potential but that we also continue to make use of the resources available to us while positioning our province as the green tech hub of Africa.”
The instability of South Africa’s energy supply and the doubtful sustainability of an ageing fleet of power stations has created a perfect storm necessitating the move away from Eskom and coal-reliant power to securing alternative energy options, said Brent Townes, commercial property chief operating officer for Lew Geffen Sotheby’s International Realty in Cape Town.
He said organisations like Freeport Saldanha are paving the way to support investors to set up manufacturing facilities in energy transition technologies and further attract energy investments to the Western Cape region.
“It’s become imperative that consumers have alternative options which, albeit at a higher cost initially, assures them not only of a reliable energy supply but also a much-reduced carbon footprint.
“And, with building owners facing an Eskom application at NERSA for a 32% price escalation for 2022/23, alternative energy sources are likely become cost-efficient sooner rather than later – especially as the increase in the cost per kilowatt during the winter months will result in a double whammy as municipalities pass their inefficiencies on as well.”
He said that landlords can mitigate this risk by installing separate meters or even installing solar systems, but ultimately that in itself won’t halt the rapidly increasing cost spiral in the overall business environment
“At the end of the day, the government’s change of heart from their deep reluctance to move away from coal-fired power has almost come too late as the transition is a lengthy process.
“The planning cycle of any such project takes up to 24 months in consultation with all role players before the tender process can begin and then follows the design process, the construction phase, the commissioning phase and so on.”
He cited “the disastrous Medupi project” which was commissioned in 2007 and initially expected to take six years to complete, but Unit 1’s completion was then extended to 2017 and, to date, it’s already R11 billion over budget and far from finished and Kusile has a similar timeline.
“Over and above the fact that these stations would be fed coal from surrounding mines and thereby deepening the carbon footprint, both still require considerable corrective work on design faults which are estimated at R28 billion.”
Margeaux Dawe, commerical property practitioner for the group said: “What’s become patently clear is that, with bureaucracy further hampering efforts on government’s part to introduce new energy sources and technologies, assistance from outside sources is essential to getting alternative and cleaner energy up and running.
“And it’s been heartening to see that this has been forthcoming from a number of countries, including Germany, Japan, China and the US, all of whom are keen not only to invest, but also to share their knowledge and experience.”
Dawe noted that the timeline for these investors to secure land, erect solar and wind power generation systems and then commission them would be considerably shorter than if initiated by the local government.
“Their only potential hurdle would be establishing and securing connections to private consumers and the City of Cape Town – although they are far more proactive than Eskom.”
Freeport Saldanha is the first South African Freeport which is a special economic zone and customs-controlled area within a port dedicated to the Energy and Maritime sector, said Lew Geffen Sotheby’s International Realty.
And, via the creation of the IDZ, Freeport Saldanha has been positioned as an energy hub through which to enable the energy transition as well as initiate the unlocking of the ocean economy.
Situated just 170km from Cape Town and 137km from Koeberg, Freeport Saldanha is a deep-water port with shipping lane capacity and a well-laid-out bonded development node with good road infrastructure, the realty group said.
“With the IDZ being perfectly positioned to be leveraged to deliver, they are now actively seeking suppliers of alternative energy and for their supply chains to reside within the IDZ and its surrounding areas,” said Townes.
“Their turnkey approach underpinned by incentives will hopefully attract both local and international investment and expertise in this sector and we are excited to be working with them to bring this critical project to fruition.”
Dawe said that the group has 356ha of open space for energy transition supply chains such as cleaner fuels, gas, green hydrogen and renewables and marine repair, fabrication, logistics and related servicing.
Construction of one warehouse unit has already been completed with multiple smaller units in the pipeline and there are numerous tracts of vacant land available for tenants wanting spec builds.
“The European Union is setting up Border Carbon Tax so vital that South Africa is on board, fully committed to the transformation and willing to go big if we hope to compete in this arena,” said Dawe.
Read: Sasol partners with ArcelorMittal to develop a green hydrogen hub in South Africa
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