Grant Adlam
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KZN - Business -Better than Before 2015 - Grant Adlam

2015-12-19

KwaZulu-Natal (KZN) has historically been a key component of the South African economy.  One of nine South African provinces, the province is a prosperous and vibrant region having an advantageous location, abundant resources, effective infrastructure, stable governance, a thriving economy and an excellent lifestyle.

The KZN economy is the second largest contributor to South Africa's GDP after Gauteng. "Following global and national trends, the economy of KwaZulu-Natal is projected to have grown by 1.9 per cent last year, slightly above the national average of 1.4 per cent. Driven largely by manufacturing, finance, wholesale and retail trade, transport, tourism and other sectors, the economy of the province is expected to grow by 2.3 per cent this year and 2.7 per cent next year", reported KZN Treasury MEC Belinda Scott (Budget Vote 10 Mar 2015).

The provincial government of KZN recognises that investment is critical to the growth of the provincial economy and aims to ensure that an environment conducive for investment to thrive is created.  The common time zones, banking laws and general awareness of financial concepts are also assets in the global market place.

Premier Mchunu said, "We are happy that we are unlocking with vigour new potential areas to make this Province better than before."


Transport and Infrastructure

KZN's well-developed infrastructure includes roads, railways and telecommunications, a sophisticated commercial and financial business structure, complemented by a full spectrum of professional services.

The KZN government intends to further invest in infrastructure development initiatives in the province that will create more employment.  A key objective is to ensure that a multi modal service is provided to supply potential investors with sea, air, road, and rail and pipeline connectivity.

Of major significance to the success of the region is KZN's position on the eastern coast of South Africa on the Indian Ocean seaboard. The two ports of Durban and Richards Bay are both located on world trade routes with excellent shipping links to major global markets. 

Durban and Richards Bay ports are southern Africa's busiest in terms of handling cargo by value and bulk respectively. The ports provide a competitive advantage and effectively positions the region to increase its share of the global market.

The transport and logistics sector within KZN is a large contributor to GDP and plays a significant role in the growth of the provincial economy. Mike Schüssler of Economists.co.za reported that investment in transport equipment boosted fixed investment in KwaZulu-Natal. Statistics released in January 2015 showed that the transport equipment index rose by 24% year-on-year, the biggest increase in three years. This was mainly driven by a 71.2% surge in the purchases of ships and airplanes.


To meet the growing demands of a competitive global world, recent flagship projects in the province include the  King Shaka International Airport and Dube TradePort, which have been constructed north of the city. The Dube TradePort is a catalyst for global trade and a portal between KwaZulu-Natal and the world.

The Dube TradePort has been declared as  an Industrial Development Zone (IDZ), which is the first step to having this area declared as a Special Economic Zone (SEZ).

Dube TradePort includes an agricultural zone, perishables facility, inter-modal freight transfer facility and other commercial and retail opportunities as well as a cyber zone. A wide range of business opportunities emanate from this development, including the direct export of fresh produce, motor components, electronics, clothing and textiles.   Linkages with the Dube TradePort and the availability of agricultural land will pose significant growth opportunities to the agricultural sector. The construction of the Samsung manufacturing plant, as well as a seven -storey state-of-the-art innovation hub and an office block by Eureka Capital are recent investments at the Dube TradePort.

Current strategy proposes that an aerotropolis is developed at the site. This airport city will provide a cost-effective solution by creating a vast logistics platform, offering a significant means to expand the capacity of KwaZulu-Natal to import and export goods as well as enhancing international competitiveness and promoting job creation.


The Richards Bay Industrial Development Zone (RIBDZ)  is also set to become a SEZ. The RIBDZ has completed its master plan to guide the most efficient development and servicing of its existing land parcels and to acquire new strategically located land. This IDZ provides the Province with an ideal platform to maximise opportunities related to the ocean economy, manufacturing, beneficiation, as well as new and innovative oil and gas energy options. These opportunities will be further enhanced by the development of a dedicated container handling facility in the Port of Richards Bay, which is in advanced stages of discussion with Transnet. The RBIDZ seeks to establish a strong marine manufacturing and repair cluster targeting investors oil and gas, ship building and rig repair to create a hub in Richards Bay.


KZN has a well-developed freeway system linking roads to national highways.   Many of which are currently being upgraded to accommodate the increasing traffic and to counter congestion challenges. Future plans include improving the Durban-Free State-Gauteng logistics and transport corridor, expansion of the ports as well as lowering port tariffs. The plans for a huge dug-out port on the site of the old international airport, to expand the city port capacity, will become a major boost to investment in the province.

An inland dry port at Cato Ridge is also proposed, which will be an asset to the Durban-Gauteng transport corridor. The development of the Keystone Light Industrial and Logistics Park on the N2 Corridor between eThekwini and Msunduzi, valued at more than R 6 Billion has received all its development approvals and is now moving to construction. Mr Price has stated work on their new primary distribution centre in this precinct.



Rich Resources

KZN's sub-tropical climate, excellent annual rainfall and some of the most fertile land in the country makes the province the national leader in several agricultural products. Although KZN covers a small portion of South Africa's land area, a significant percentage of the country's small-scale farmers are based here. The midlands area between Pietermaritzburg and the Drakensberg has a concentration of vegetable, dairy and stock-farms. The KZN coastal belt yields sugar cane, wood, oranges, bananas, mangoes and other tropical fruit.

Forestry in the areas around Vryheid, Eshowe, Richmond, Harding and Ngome is another major source of income. Key forestry companies operating within KZN include Mondi, Merensky, NCT Forestry Co-operative Limited and Sappi.

Agriculture is a labour-intensive sector, which is especially relevant in a provincial context of high unemployment. 

In order to promote growth, the identification of crops and the creation of opportunities for SMME agribusiness prospects are of importance.   In particular, sugarcane and the sugar industries are perceived to have the potential for growth and employment especially in rural areas.
The sugar and timber industries have the capacity to provide up to 2 000 megawatts new renewable energy. In addition, the sugar industry is ready to undertake major alterations and expansions to their mills to also produce vast quantities of ethanol.

A new emerging economic opportunity in the province is marine aquaculture (mariculture); this untested field is another example of the diversity of untapped marine related resources in the province.


KZN's mineral sands and coal mines are a small economic sector underpinned by companies such as Richards Bay Minerals and Petmin. A current focus on the mining value chain is expected to play a key role in the country's industrialisation programme. The aim of the programme is to drive economic growth through increased beneficiation of minerals. The government is playing a vital role in encouraging the growth of smaller entrepreneurs by offering incentives to large mining companies using services and products of smaller companies at the upstream stages of the value chain.

The KwaZulu-Natal coastline has seen the recent commencement of offshore oil and gas exploration, with seismic  investigation stretching from Port Shepstone to Kosi Bay.

MARITIME INDUSTRY
Of note is that the maritime industry in KZN straddles numerous sectors (freight and logistics, ancillary maritime support services, tourism and leisure, marine energy, and fishing, aquaculture and mariculture. The KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs has taken the initiative to develop an 'Integrated Maritime Industry Strategy' as a strategic development tool for the province.

The Maritime Vessel Construction and Repair (MVC&R) sector, also known as the ship building industry, is vast and fast evolving.  Durban boasts the largest and busiest ship repair facility on the South African coast and one of the most efficient in the southern hemisphere. The firms of Elgin Brown & Hamer, Southern African Shipyards and Dormac Marine each have their own fully equipped repair quays including heavy cranes and machine shops to handle almost any job. The boat building and repair  industry presents opportunities for economic growth and job creation, given its labour intensity, strong  backward linkages to industries such as steel manufacturing, as well as skills development


Local and international shipping lines such as Grindrod under the banners of Island View Shipping and Unicorn Shipping, Submarine and Mediterranean Shipping Company are major seafaring companies.

In addition, there are many substantial, well-managed private road transport companies handling all types of freight. Of note increased road freight is being driven by the increase in the transport of consumer goods destined for neighbouring countries in the southern African region through KZN and other provinces of South Africa.

Manufacturing

After Gauteng, KZN's diversified manufacturing sector is the second largest in the country with nearly a third of South Africa's manufactured exports produced in the province. Large, globally competitive manufacturers operate in the province in industries involving automobiles and automobile parts, forestry products, petro-chemicals, food and beverages, steelworks metals as well as clothing and textiles. These manufacturers are represented by Arcelor Mittal, MacDonald Holdings, BHP Billiton, Hulamin, Safal Steel, Tata Steel, Sappi, Mondi, Foskor, Engen and Unilever, which are of some of the major contributors to the economy of the province.

The Durban South Basin is a key manufacturing and industrial zone of the city, contributing 30% of Durban's Gross Domestic Product and providing 10% of the country's manufacturing jobs.

KwaZulu-Natal's textiles and clothing sector continues to be an important employer. Two international safety-footwear firms operate out of Pinetown: Beier Industries and Bata Industrials.

Pietermaritzburg is also known as a centre for carpet manufacture, with Belgotex Floorcoverings having the largest facility in the southern hemisphere at 155 000 square metres. The KwaZulu-Natal Clothing and Textile Cluster (KZNCTC) have established a Sector Business Support Centre in Newcastle, aimed at regenerating the area's clothing and textile industry.

Major automotive companies including Toyota, MAN Truck and Bus SA, Volvo Trucks and Bell Equipment operate in the province, with many secondary suppliers providing individual components or raw materials to the manufacturers of components or sub-assemblies for motor assembly plants.

MAN Truck & Bus South Africa recently converted its  Pinetown assembly plant to solar power. The complete truck and bus-chassis assembly plant is now capable of operating entirely off solar energy and is not only the first 100 percent carbon-neutral truck production site in Africa, but also within MAN's global production network.


KZN provides nearly a third of South Africa's plastics demands. The industry uses 150 000 tons of polymer a year and consists mainly of SME enterprises plastics still remain cost-effective products and a vital component in the packaging industry. The chemical industry is well developed with numerous SME enterprises along the value chain. The sectors that enjoy substantial investments into the chemical industry are paint, agricultural chemicals, plastics and synthetic resins.

New opportunities exist in the fields of renewable energy and "green" products.

Tourism
KZN attributes including sunshine and a relaxed lifestyle offer an unmatchable combination of assets. The province is the market leader for domestic tourism in South Africa, as well as is number two in term of international tourism.  KZN has great accommodation facilities, excellent beaches, game parks with the big five and splendid mountains. KZN boasts two World Heritage Sites - the iSimangaliso Wetland Park and the uKhahlamba Drakensberg Park.

The scenic and majestic Drakensberg Mountains remain a powerful drawcard for tourists.
A detailed feasibility and environment impact  study for a cable car is about to get under way. The location proposed is in Mnweni Valley near the Royal Natal National Park and the summit station would be in Lesotho. The cable length would be three kilometres.

The impact of KZN's popularity as a tourism  destination is evident in the investment in land transport equipment. Bus purchases have  increased by 33.3% as tour companies upgrade their fleets to cater for an increasing number of tourists visiting KZN (KwaZulu-Natal Investment Monitor January 2015).


ECONOMIC NODES

The cosmopolitan city of Durban and surrounding towns form the eThekwini Metropolitan Municipality, which is the economic powerhouse of the province. The GDP generated ranks eThekwini as the second largest economic centre behind Johannesburg in South Africa. Durban's bustling harbour has led to the pulsating city being described as the economic hub of KZN and a gateway to Africa.


Durban's showcase International Convention Centre Durban is one of eThekwini's most successful economic catalysts. The ICC, Arena and adjacent Durban Exhibition Centre form The Inkosi Albert Luthuli International Convention Complex, which is the core of the region's burgeoning business tourism industry. The annual Tourism Indaba serves as an awesome reminder to event planners of just how well the province hosts events.

Delegates and tourists enjoy the proximity of several of Durban's attractions to the ICC and hotels.  Apart from warm tropical beaches, there are beautiful parks and gardens, world-class shopping centres, casinos and restaurants. Many hotels are currently being upgraded to cater for the ongoing demand including the Hilton Durban and the historic Royal Hotel Durban, which was recently purchased by the Coastlands Hotel Group.
Durban's central beachfront upgrade has transformed Durban's renowned beachfront into a feature of which the city can be justly proud. The promenade provides kilometres of uninterrupted sea views, restaurants and other amenities to the benefit of all. Visitors to the beachfront will be greeted by the sight of walkers, joggers, bikers, football or beach volleyball as well as fisherman, surfers and swimmers. Landscaping has played an important role in Durban's beachfront upgrade and involves protecting and re-establishing the beach dunes by adding and preserving plant life, both on the dunes and along the promenade. uShaka Marine World, Africa's largest marine theme park spans 15 hectares of prime beach front, combines meaningful marine research, with fun-filled activities.
Ongoing discussion around the Point  Development and Vetches Beach precinct continues with recent plans being unveiled for a new international beachfront and canal side shopping mall and a 5 star international beachfront hotel. 

Currently, an integrated rapid public transport system is under construction in the Durban   and Pinetown areas. The project involves road and rail in order to provide for better public transport. The goal of GO!Durban  is to have a positive effect on the economic structure of Durban  in order to improve tourism, provide additional job opportunities and maintain sustainable development.


The  newly The scenic Umhlanga Ridge area is burgeoning under the rapid development of new hotels, office parks, luxury homes and apartments as well as medical facilities. The Gateway Theatre of Shopping is a huge asset to this region. First National Bank recently opened its new regional headquarters Acacia House on the ridge. "The commitment by FirstRand to invest in the City's sustainable economic development has been commendable and the City is confident that the presence of the architecturally appealing building in Umhlanga will enhance the beauty of this fast-growing Umhlanga precinct," said  MEC Mike Mabuyakhulu at the official opening ceremony.

And Further Afield
The upper south coast road passes through the residential areas of Amanzimtoti, Scottburgh and Umtentweni, which according to Andrew Golding, chief executive officer of the Pam Golding Property group are showing an increase in interest. The Music City South Africa development  proposed in the Ugu District,  has the potential of being one of the largest game changers in the tourism sector in KZN.

On the north coast Cornubia is designed to provide for KwaZulu-Natal's largest mixed-use, mixed income, fully-integrated human settlement. The J.T. Ross Cornubia Industrial and Business Estate has already attracted investments by  Afrox and Bidvest and is set to gain further momentum due to its advantageous location.

The  Sibaya node has also recently been opened for development by Tongaat Hulett. This new development will  be made-up of residential units, an office park, hotels, conference and entertainment facilities and social amenities, such as  educational institutions and recreational components.

In addition, the Blythedale Beach Development, has been revived after successfully resolving a protracted dispute between the developers and land claimants.


In uThungulu, developments in the uMhlathuze region include:
• Pro-Star Export Paints (PTY) Ltd  paint production plant with an investment value of R16 million creating approximately 50 construction jobs and 50 permanent jobs.
• SPS Manufacturing (PTY) Ltd a pipe manufacturing business with an investment value of R300 million creating approximately 110 construction jobs and 87 permanent jobs.
• RB Energy Services (PTY) Ltd is going to establish a facility for assembling, repackaging and distribution of plant manufacturing machinery and equipment with an investment value of R20 million creating approximately 25 construction jobs and 20 permanent jobs.


Substantial progress has been made with proposals for the establishment of an ethanol plant in the Makhathini area, which will contribute to energy needs.

In Amajuba, some old coal mines are being reopened to meet South Africa's power stations' demand for the fuel. This will have a knock on effect of regenerating the economy of this region.
Good progress has been to establish beneficiation plants at Ngagane just south of Newcastle and
Colenso.

Great Lifestyle

The excellent KZN climate allows many sport and leisure opportunities and a range of business opportunities has grown to meet the demand of these markets.  A current provincial strategy focuses on ensuring that world class events are attracted to KwaZulu-Natal, which reinforces our passion for sport, art and culture.  The Moses Mabhida Stadium is undeniably a defining landmark of Durban's skyline. The stadium is not only a tourist attraction in its own right, but also the centrepiece of the King's Park Sporting Precinct. Currently the eThekwini Municipality is preparing to bid for the 2022 Commonwealth Games.

Famous international sporting events hosted in the province include the Comrades Marathon, the Duzi Canoe Marathon, the Mr Price Pro Surfing Competition, the Midmar Mile (the world's largest inland ultra-swim), Vodacom July Handicap Horse Racing (along with its trendy fashions), the Amashova and Tour Durban cycle races as well as test matches in rugby, cricket and soccer attract spectators and interest globally.

Growing Further


A major theme is that of developing synergy between the more and less developed sectors of the local economy and between the public and private sectors.  In addition, the government of KZN budget plans include various projects for much needed public infrastructure delivery including housing, schools and health facilities. These programmes not only improve services but will benefit local suppliers and boost the construction sector enormously as well as have potential for investors..


KwaZulu-Natal is well placed for moving vigorously into the future with and welcomes you to participate in the region's growth and contribute to making the province "better than before".

Grant Adlam
grant@topbusiness.co.za
www.topbusiness.co.za




KZN - Business -Better than Before 2015 - Grant Adlam

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