Kaashifah Beukes – Acting CEO, Saldanha Bay Industrial Development Zone (SBIDZ), South Africa
Kaashifah Beukes, acting CEO of Saldanha Bay Industrial Development Zone Licencing Company SOC LTD (SBIDZ), shares the main achievements of the past five years, the value proposition SBIDZ can offer the global oil and gas industry and their ambition to build SBIDZ into a global center of excellence, and the critical importance they have placed on supporting and engaging with the local communities.
Kaashifah, could you start by sharing how the project of Saldanha Bay Industrial Development Zone (SBIDZ) started?
“In total, we will have spent close to ZAR 1 billion (USD 82 million) in developing the zone. This has been noticed within the global industry and people are excited about Saldanha Bay being an oil and gas center of excellence.”
Eight years ago, a uniquely visionary exercise by government was initiated. Local, provincial and national government jointly undertook to investigate the feasibility of developing a special economic zone in the bay of Saldanha, on the south-western coast of South Africa.
At the time, the South African National Department of Trade and Industry (the dti) had just completed their review of their industrial development zone (IDZ) programme and were putting together a new policy framework for this very specialized economic instrument – many governments use special economic zones to grow and industrialise their economies, and promote regional and international trade – and many best practices and experiences were collated. The Provincial Government, through their Department of Economic Development and Tourism (DEDAT) then initiated a project steering team with the dti and the local government to ask many hard questions about the sectors that could be looked at in order to stimulate the local economy, provide meaningful employment, and ultimately, contribute to GGP and GDP growth, all within the framework of SEZ best practices.
Having evaluated a number of sectors, there was a realization that there was a significant amount of interest within the Western Cape economy in respect to oil, gas and maritime services, including fabrication, not just in the upstream sector, but also in downstream, especially when consideration is given to the activity in regional markets and recent LNG projects. Many companies had already been establishing offices in South Africa for their African staffing, support, logistics and servicing needs. Saldanha Bay is by far the largest and deepest port (quayside draft of 23m) in South Africa, and it was relatively greenfield, so there was lots of room for development. Its superb location at the tip of Africa also meant that it could service east and west sea traffic. Lastly, the port had seen a number of rigs being serviced while en-route around the tip of Africa.
Clearly, if a SEZ was designated and a zone developed with the right enabling legislation, a significantly large deep-water port such as Saldanha Bay, with onshore infrastructure, quayside facilities, streamlined customs processes and bespoke facilities and services to its tenants and operators, as well as strong linkages with local communities, this would really grow these sectors of the economy and contribute to sustainable employment.
Two pieces of land were identified totally some 356 hectares, one within the Port of Saldanha Bay managed by the Transnet National Ports Authority (TNPA) and the other just outside the port owned by the Industrial Development Corporation (IDC), and would be linked by a bridge corridor. This was the basis of the designation sought from National Government and so it came to be that we were designated and licensed on the 31st October 2013.
We are still the only zone designated across a sea port. And with our sector-specific focus on the upstream oil, gas and marine repair, fabrication, logistics and related services industries, our value offering extends right to the water’s edge, highly prized to these industries.
What have been some of the main achievements of the past five years?
Certainly the holistic policy clarity and the support available to us from the dti-administered SEZ Fund has been a critical achievement. We have secured grant funding to complete all the required onshore bulk infrastructure (electricity, water, sanitation networks, roads, security) and a multi-use commercial facility which will house the relevant government departments, agencies and state-owned entities that deliver services within our sectors. It will also house value-added services from private firms to enhance the business experience of all tenants and customers of the zone. Our infrastructure programme is progressing well and will run until the last quarter of 2019.
Our investor-responsive approach is central to our operational ethic, and so we always knew that we had to be able to lease land to tenants and operators on a dynamic basis. So we were delighted when in mid negotiations with the IDC, they offered to sell us their land designated within the zone. This created sustainable value for our stakeholders as the land is now serviced from the SEZ Fund grant and has all zoning and environmental authorisations in place. Once a company fits the investment criteria, they are allocated serviced land on a first-come-first-served basis.
With the TNPA, our first lease is in place on their land designated in the zone. South African legislation requires us to show control of the land we are designated on and since port land cannot be sold, we needed to conclude a long-term lease with the TNPA. The first of these is now in place and we are currently in negotiations on the second. This is a milestone for all concerned as this makes us also the first SEZ in South Africa to conclude a lease with the ports authority.
The second lease will itself be quite a milestone because it will be the back-to-back agreement which affirms the Offshore Supply Base concessionaire’s, Saldehco Pty Ltd, access to our value adding Free Port customs regime and integrated location to the rest of our tenants. Over the next months we, together with Saldehco and the TNPA will be taking this offering to the market internationally. We believe that it is collective efforts such as these that will see South Africa realise its potential as an oil, gas and maritime hub for the offshore market with dedicated purpose-built infrastructure.
With such a productive first five years, what else needs to be done to realize this dream of building SBIDZ as the first port of call?
Engagement with organized labour is vital, and we are working with labour on the elements of a labor zone charter. South Africa has one of the most progressive, empowering labour laws in the world. Foreign investors – especially those who have not been to South Africa before – are sometimes a little intimidated in this respect. The charter is a way of demystifying the relationship, and will facilitate the ease of doing business for the investor, while giving labour certainty when operating within the zone.
But labour is only one part of our holistic “ease of doing business” approach; we in fact have an “Ease of Doing Business” operational unit and it concentrates on unlocking what our industries and investors really need from the zone. They’ve done in-depth benchmarking and in-person visits to zones and ports all around the world. Potential investors have been surveyed as to what attracts them to South Africa, what concerns them, and what they would need to support their value proposition. We have been fortunate that a number of international hubs such as those in Singapore, Western Australia, the UAE, Aberdeen, and Houston, have been so willing to share information and expertise. This has allowed us to specifically address investor needs and lobby local, provincial and national government and agencies around strategic interpretation of policy and practice to best suit industry. It also helps us plan better, as we make sure that we keep a key question in mind: “How does the IDZ build something with an eye to the future, so that what is built today does not stymie future investment?”
With that in mind, we have earmarked a portion of land towards an Innovation Campus. All successful hubs around the world have centers of excellence, incorporating a combination of specialized training from universities, private sector investment, public sector support, as well as both foreign and local industry expertise. The Campus aims to be a world-class on-site R&D and learning center for our sectors, and it will enable knowledge and technology transfers between zone occupants and the surrounding communities of students and businesses.
Following the volatility in oil price, the global oil and gas industry is ever more competitive. How will SBIDZ compete against other international service hubs?
It is important to note that the zone is not competing against the world’s best maritime hubs, but are competing as South Africa on the African continent. Offering the Ease of Doing Business and the enabling environment, the SBIDZ has a very strong value proposition.
What makes the business case even stronger is that, consciously, the business case is not built on any domestic upstream activity. South Africa does have upstream potential but in the meantime, the zone is focused on the reality, which is that there is a need for a service hub in Africa, and companies are looking for a secure place to do business, store, service and transport their equipment.
In total, we will have spent close to ZAR 1 billion (USD 82 million) in developing the zone. This has been noticed within the global industry and people are excited about Saldanha Bay being an oil and gas center of excellence.
We are definitely also not competing with other domestic ports of South Africa. The goal is to build additional economic hubs for South Africa, not to relocate business from other parts of the country. Many of the companies currently present in Cape Town do not exclusively cater to the oil and gas or maritime sectors. So they may establish a new maritime or oil and gas branch in Saldanha Bay while retaining their presence in Cape Town or other South African ports.
What profile of companies will you be looking to attract to SBIDZ?
Being sector-specific certainly makes profiling investors easier. We have been able to designate specific type of activities as well as provide the targeted enabling infrastructure to address the needs of operations like offshore supply, logistics, LPG and LNG projects.
The business model is also based on competition. The zone wishes to grow the industry with healthy competition, and is looking to avoid having one major anchor tenant. Naturally, large companies will create their own value chain, but we have seen from examples globally, that having a diverse ecosystem, with both large corporates and smaller companies represented, can really contribute to a symbiotic, competitive and resilient environment.
As a country, South Africa has been experiencing some political instability. How do you anticipate this to affect future developments at SBIDZ?
At just over 20 years into the “new” South Africa, the changes we see are testament to the robustness of our constitutional democracy.
Notwithstanding that, oil and gas in our context is mostly a global and dollar-based industry. The global industry faces its own challenges and dynamics independent of the local economy. Our investors operate mainly outside of the South African market.
Furthermore, companies in the oil and gas industry are not easily affected. After all, they work in some of the most remote and risky parts of the world. In this light, South Africa is definitely a very attractive location. It is all about dealing with the industry needs and dynamics.
How does SBIDZ ensure that it will include and benefit local communities in its projects?
From the beginning, even before designation, we made sure to engage with the local communities to discuss the idea of the zone, and specifically to address the key issues of skills and enterprise development in order to improve the prospects of localizing as much as possible the opportunities which the zone could generate. This is hugely important because the biggest challenge, and risk, is not so much failing to attract sufficient investment, but failing to generate the economic activity, job creation and wealth that needs to be seen by the local community.
For this reason, there has been conscientious community engagement throughout the entire project – for the simple reason that if there is not active engagement the community will have less chance of benefitting.
We have a fully operational skills development unit to facilitate training in local areas through external organizations as well as an enterprise development unit which has developed a number of partnerships with various business leaders and associations to facilitate enterprise development. To date, we have facilitated the training of some 520 persons annually from the local community since 2014, with already some evidence of life-changing impact. Two former students are now welding inspectors themselves, and many others have been headhunted by the private sector.
What is unique about Saldanha Bay is that 90 percent of employment is generated by around ten companies. This means that it is relatively easy to communicate with business leaders to kick start any training or enterprise development programs.
Grow-Net is another potential success story to highlight. This is an online portal being established to support integrated enterprise and supplier development. It brings together small and medium enterprises (SMEs) and large corporates on an efficient, transparent and easy-to-use platform, so that both parties access available suppliers, and share opportunities such as commercial tenders and business support services to name a few. This initiative is co-funded by the dti and DEDAT. This is really important because it facilitates linkages with the local communities.
Over the next five years, the success of the zone will be measured not only by GDP growth and jobs but also in the sense of pride, ownership, and fulfilment that the local community reaps.
A final message?
The philosophy has never been one of “build it and it will come”. The organization has always been driven by a socio-economic empowering vision of Saldanha Bay’s future, with a realistic understanding of what it will take and how long it will take to get there. We have embraced this with vigorous purpose from the onset, and five years on, are still intent upon achieving that future.