By John Young
In January 2024 President Cyril Ramaphosa was on hand to oversee the first goods leave South Africa from the Port of Durban under the African Continental Free Trade Area (AfCFTA), the agreement whereby most African countries will trade with one another with greater freedom. Unlike other continents where intra-continental trade has boosted economic growth, exports between African countries is at about 16%. Asia is 55%, North America 49% and the EU 63%.
The first steps in a move by national government to partner with the private sector in boosting efficiency at ports were taken in 2022: deals were signed at the Port of Durban and at Richards Bay.
In 2023, these first steps became a giant leap when International Container Terminal Services Inc (ICTSI), a Philippines-based port operator, was announced as the preferred partner for a joint venture (JV) to run the Durban Container Terminal with Transnet. Getting the deal over the line might take longer as logistics giant Maersk has lodged objections over the process.
ICTSI operates in 20 countries and employs more than 11 000 people. Transnet will hold 50% plus one share in the JV for 25 years, with an option to extend to 30 years. From the initial list of 17 potential partners, ICTSA was eventually chosen from a shortlist of six. Part of the plan for Durban Container Terminal Pier 2 is to increase traffic in such a way that it will be able to increase its handling capacity from the present 2.9-million TEUs (two-million 20-foot equivalent units) to 11-million TEUs by 2032.
The 2022 deal involving a 15-year concession for the loading of grain at one of Durban’s agricultural terminals was won by Afgri, one of South Africa’s biggest agricultural firms. Afgri will deal with the operation and maintenance of all landside operations, and the deal includes a similar arrangement at East London. The other two terminals in Durban are operated by SA Bulk Terminals and Bidvest Bulk Terminals.
At the event, pictured below, President Ramaphosa commented, “Industrial development is core to Africa’s integration. It builds Africa’s productive capacities, adds greater value to our products and diversifies trade beyond the traditional commodities. We have already seen the potential of greater cross-border collaboration.
“South African automotive companies source leather car seats from a factory in Lesotho employing close to a thousand workers and wiring harnesses from Botswana at two plants employing several thousand workers.” He further noted that copper wire is sourced from Zambia, rubber from Cote d’Ivoire, Nigeria, Malawi, Ghana and Cameroon, and steering wheel components from Tunisia.
Ramaphosa’s attendance at another event signalled that there is sincere interest in the upgrading of logistics infrastructure. The President returned to Durban in April 2024 to officially launch the Newlyn PX Bayhead rail terminal. The multimodal hub will handle, store and make possible the loading and movement of many kinds of cargo, including containers. The facility is adjacent to the Port of Durban.
KwaZulu-Natal’s two big original equipment manufacturers (OEMs), Toyota South Africa and Bell Equipment, are among the province’s biggest exporters. From its factory south of Durban Toyota exported 71 014 Hilux vehicles in 2023, to go with the 37 382 units of the same model that it sold locally.
About 40% of Bell Equipment’s South African turnover is accounted for by exports, which are sent to more than 80 countries. The company has a large plant in Richards Bay as well as a facility in Germany. Bell was the first winner, in 2019, of the Exporter of the Year Awards for capital equipment manufacturers offered by the South African Capital Equipment Export Council (SACEEC).
In 2023, Bell launched a new division, Bell Heavy Industries. Project engineering and contract manufacturing will be the focus of the division, which builds on seven decades of experience in complex engineering, heavy fabrication, and machining for its own range of material handling equipment.
In 2024, the company welcomed a new Group CEO. Having previously worked at the company his grandfather Irvine Bell founded in 1954, Ashley Bell co-founded Matriarch Equipment with his brother, Justin Bell, in 2009, and continued to act as a director of Bell from 2015. One of the first tasks of the new CEO was to announce that a new Bell Motor Grader would be manufactured at the Richards Bay plant from 2025.
Energy plans
The Provincial Government of KwaZulu-Natal has created a KZN Energy War Room. Over and above the interventions into energy efficiency of government buildings and investments in things like solar panels, and plans to continue rolling out electricity connections to previously unserviced households, the administration intends turning Richards Bay into an energy hub.
This ambition received a boost in 2023 with the decision by the National Energy Regulator of South Africa to approve Eskom’s application to build a 3 000MW gas power station at Richards Bay.
Battery storage has made a debut in the province as well. South Korean firm Hyosung Heavy Industries has signed on to implement the Eskom project to create a battery energy storage system, in this instance in the uMgungundlovu District Municipality.
In 2023, Premier Nomusa Dube-Ncube said that, in addition to the R97-billion Eskom project, the following facilities would be established at the deepsea port:
- Mabasa Energy and Fuels, R10-billion
- NFE BGE Gas Supply, R25-billion
- Phakwe RBGP, R34-billion
An earlier announcement on the energy front by President Ramaphosa that private investors could generate up to 100MW without having to go through a tangled web of licence procedures was a boon for the province’s larger companies. The likes of Sappi and Mondi produce great quantities of biomass waste and all of the province’s sugar producers are potentially generators of electricity.
Many of them already are producing power for their own use, now they can sell it to the grid.
The signing of a long-term contract for energy supply by Eskom and South32 for its Hillside Aluminium smelter was another very welcome step in the energy field. The deal expires in 2031.
In the oil and gas sector, the big issue of SAPREF, South Africa’s largest crude oil refinery which suspended operations in 2022, has been solved in the sense that the Central Energy Fund has purchased it. However, whether it will return to refining oil is an open question.
Conducive environment
The province’s existing infrastructure, good soils and fine weather provide a solid base for a varied economy. KwaZulu-Natal has significant capacity in heavy and light manufacturing, agro-processing and mineral beneficiation, all of which is supported by South Africa’s two busiest ports (Richards Bay and Durban), the country’s most active highway (the N3), a modern international airport and pipelines that carry liquids of all types to and from the economic powerhouse of the country around Johannesburg in the interior.
Mondi and Sappi, two global giants in forestry, paper and packaging, have a significant presence in KwaZulu-Natal.
Tourism is a key sector in the KwaZulu-Natal economy and provides livelihoods to many thousands of families in urban and rural areas. The closing of borders brought real hardship to many areas.
A number of flights have been resumed to King Shaka International Airport by the likes of Turkish Airlines and a new flight has been inaugurated by SA Airlink, connecting the province to Zimbabwe.
The provincial government is working on an investment pipeline, through the Special Economic Zones (SEZs), of R22-billion. The SEZs at Richards Bay and King Shaka International Airport (the Dube TradePort) are key components of the strategy and are now well-established nodes of investment.
Milestones have been reached in the plan for creating further SEZs to focus on leather and textiles. A business case has been completed by units within the provincial government and land at Ezakheni (Ladysmith) in the uThukela District has been identified and secured. Dube TradePort will be the SEZ operator and R780-million in investments has been pledged by companies keen to relocate to the SEZ.
To spread the benefits of the SEZ, the concept of “The Textile Belt” will be followed. The corridor approach will leverage comparative advantages of various regions in the clothing and textile value chain.
Read the 2024/25 edition of KwaZulu-Natal Business eBook here:
KwaZulu-Natal Business 2024-25
