THE Coega Development Corporation (CDC) has embarked on a range of complementary and innovative business activities to diversify its income streams and become more sustainable and less reliant on support from the fiscus.
The CDC operates the special economic zone (SEZ) outside Gqeberha, which is in the 22nd year of an 80-year development phase.
It has so far attracted 60 investments. The 11 new investments for the year to March 31 were despite the environment of load shedding, logistics issues, growing geopolitical tensions globally and low economic growth, and it has made Coega the best-performing SEZ in Africa in terms of new investments, said the CDC’s head of marketing, Dr Ayanda Vilakazi.
Speaking during a media tour of the facilities this week, he said that with such a long development phase, and considering the government’s fiscal constraints, the CDC had pursued a number of other options to diversify and increase its income streams and make the SEZ financially sustainable. Each of these additional activities was aligned to the operations and strategy of the SEZ in one way or another, he said.
The initiatives include buying and operating the Blue Water Bay Sunrise Hotel, operating a travel company, The Coega Travel Agency, establishing the Coega Technology and Consulting Service, the Coega Development Foundation, Coega Maritime Services – it owns a vessel and provides bunkering services – and an in-house financial institution was established called Small Business Finance Support (SBFS).
Another aspect of the diversification drive was for Coega to become an implementation agent for the government, where it does construction work for the state on infrastructure such as schools, hospitals and clinics.
In addition, the CDC gets additional income from providing SEZ consulting and development services in other African countries, such as Zimbabwe, Cameroon, Central Africa Republic and Nigeria.
The financial services company SBFS is a fully-registered financial services company, that provides funding for SMEs at Coega – funding for SMEs has traditionally been hard to get from traditional lenders.
The SBFS had funded 35 projects with a loan book in excess of R60 million. It also has the unique distinction in the financial industry of not having a single credit default.
Coega director Vincent Heynes said the financial services company had proved such a success that assessments were under way to expand it to not only deal with SMEs in the Coega SEZ, but nationally, and to possibly also broaden the services offering related products such as insurance and other credit facilities.
He said they typically provided funding to SME owners with an average turnaround time of only 2.58 days from date of application, much faster than other lenders, and cession of contract was typically used as collateral.
To provide an indication of how big the Coega SEZ is, it covers over 9 000 hectares of land, of which 5 500 is developable, and so far, only 250 hectares have been developed over the 22 years of Coega’s existence.
Some of the existing investors include DHL, PE Cold Storage, Cerebos, Discovery, Afrox, Sanitech and Lactalis.
One of the biggest investment announcements last year at Coega was by global auto group Stellantis, which said it would invest R3 billion in a green fields automotive assembly facility at the Coega SEZ.
The company, which eventually plans to produce some 50 000 vehicles annually, is scheduled to begin construction at Coega this year, and it will join other automotive assemblers in the SEZ, the Chinese car maker BAIC, and China-truck manufacturer FAW Group. BAIC had invested R3.5bn at Coega SEZ to produce cars, trucks and commercial vehicles.
Included in the expansion plans of Coega is the upgrading of the Aldo Scribante race track “to make it more exciting that Kyalami,” said Coega’s investment promotion manager, Lindokuhle Ntanti.
BUSINESS REPORT