South African Business 2020 edition

SPECIAL FEATURE An

SPECIAL FEATURE An economic overview of South Africa Three small rural towns in a remote part of South Africa’s dry north-west are the sites of the very latest in technology, and could hold the key to boosting growth in the South African economy. By John Young The Northern Cape towns of Carnarvon, Aggeneys and Keimoes are not the first places where analyses of economic growth in South Africa normally begin – but there is good reason to look carefully at what is going on in this dry and remote region. Carnarvon, just north of the N1, is best known for dorper sheep, low hills and wind pumps but this has changed since the Square Kilometre Array project chose the area for the erection of the very latest in radio telescope technology. A multi-national project of awesome potential, construction on the project will run to hundreds of millions of euros and is already sparking interest in technical subjects in schools of the Northern Cape and at South Africa’s newest university, Sol Plaatje University, in Kimberley. About 300km north-west, the tallest structure in South Africa (taller than the Ponti City tower in Johannesburg) has been erected near Keimoes between Upington and Kakamas. Keimoes is not entirely unfamiliar with fame: the area’s sultanas are world famous and Orange River Wine Cellars does important work on the banks of the Orange River, but the scale of the nearby solar thermal project is vast, and the technology is significant. Khi Solar One (pictured on this page) is a joint venture between Spanish form Abengoa Solar, the Industrial Development Corporation (IDC) and the Khi Community Trust. Concentrated solar power is a more expensive method of generating power from the sun than photovoltaic (PV) systems but the potential for storage is greater. While the Northern Cape is the national leader in solar power, the Eastern Cape has attracted more than half of the wind power projects in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The effect of the introduction of renewable energy into the South African energy market has been noted at a macro level in several ways, but now it is SOUTH AFRICAN BUSINESS 2020 14

SPECIAL FEATURE showing at micro level as well. An announcement by infrastructure development group Raubex in October 2019 that it was experiencing strong growth because of contract work related to renewable energy was just one indicator of a massive shift that is starting to happen. For several years, South Africa’s construction and engineering companies have been stressed, with many commentators blaming a lack of infrastructure investment from central government and stateowned enterprises for this state of affairs. Renewable energy may well offer the route back to profitability. Aggeneys is a about 240km west of Keimoes, and close to Springbok. It’s always been a mining town and is the base for the Black Mountain project which produces copper, lead and zinc, with silver as a by-product. Vedanta Zinc International has launched a project nearby which will deliver 600 000 tons of zinc annually once phase three is complete. It is the biggest current mining project in South Africa, having attracted 0-million in investment so far. There is a possibility of a new smelter and refinery being built to service this digitally advanced mine. Agriculture and tourism Basing economic growth on a devaluing currency is not always the best long-term method of boosting economic growth, but high-value agricultural exports and increased numbers of highspending international tourists hold some promise for helping to get the South African economy back on a growth path. Horticulture in particular is seen as holding great potential not only for increased earnings, but for creating jobs. The same holds true for tourism. StatsSA reported that the tourism sector created 31 752 net new jobs in 2017 and Wandile Sihlobo of Agbiz has written about how every hectare of blueberries planted needs 2.64 workers. When assessing South Africa’s prospects and suggesting solutions, the country’s history of economic and social exclusion and current unemployment figures must be part of the equation. Another new area that holds great potential for the South African economy is the Oceans Economy. South Africa has 3 000km of coastline and the extent of the country’s territorial waters is greater than its land size. And yet the country does not have a merchant marine fleet and only scrapes the surface in terms of the percentage of repair and maintenance of boats and oil rigs which could potentially bring work to its ports. What is also called the Blue Economy has enormous potential for economic growth and concomitant job creation. National government wants to see the Oceans Economy contribute a R177-billion to gross domestic product by 2033. This is part of the National Development Plan (NDP). National strategy on the Oceans Economy is also aligned with Operation Phakisa, a plan that targets sectors that can best achieve quick returns in terms of growth and job creation. The four target areas within the maritime strategy are: aquaculture; offshore oil and gas; marine protection and governance; marine transport and manufacturing. Transnet National Ports Authority is spending heavily on upgrading the nation’s ports. One statistic illustrates the potential: South Africa does maintenance on only 5% of the 13 000 vessels that use its ports, and services 4-5% of the approximately 130 rigs that pass along the coast each year. Large quantities of oil are transported around the Cape Point every year: 32.2% of West Africa’s oil and 23.7% of oil emanating from the Middle East. Traditional strengths Great mineral wealth has underpinned the South African economy ever since the first diamond was stumbled upon in 1867. Gold was found soon after and that industry effectively saw to it that South Africa became an industrialised nation. Now those gold mines are tapering off in production volumes, but coal, iron ore and platinum reserves are impressively large. The grains of the central regions of the country, together with the fruits and vegetables of Mpumalanga and Limpopo, the wines and grapes of the Western Cape and the sheep and mohair of the Eastern Cape, all contribute to a diverse and vibrant agricultural sector. There 15 SOUTH AFRICAN BUSINESS 2020