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Growth in demand will be key to sustaining revitalisation of industrial parks

ENGINEERING NEWS / 18 OCTOBER 2019 - 11.22 / MARLENY ARNOLDI

The 12 industrial parks that have been renovated and form part of the Department of Trade, Industry and Competition’s (DTIC’s) Industrial Parks Revitalisation Programme (IPRP) currently employ 65 000 people, says DTI regional industrial development chief director Stieneke Jensma.

In addition to the main objective of creating jobs, the programme is geared towards promoting industrialisation and transformation, accelerating economic growth, attracting investment and establishing black industrialists in the parks.

Established to revitalise State-owned industrial parks across the country, in line with the DTIC’s economic transformation initiatives, the IPRP tries to ensure that all regions – and enterprises that are based there – are participating meaningfully in the mainstream economy.

Then Trade and Industry Minister Dr Rob Davies said in April that the department had forged strategic partnerships to ensure that the programme was implemented on a national scale, working with provincial governments, their agencies and municipalities.

Davies described the programme as a developmental initiative with the objective of decentralising industrialisation and improving the industrial capacity of rural and township economies.

Jensma notes that the industrial parks are especially effective in terms of reducing inequality: “The programme touches on the part of society that has been ignored and areas where industrialisation is not happening”.

The parks are all located in rural areas and townships, enabling people to seek work closer to where they are based, instead of having to use various modes of public transport to get to work in the cities.

Phased Approach

The IPRP was launched in 2016 by the then Department of Trade and Industry. The parks involved have been renovated to the tune of about R511-million to date.

Jensma explains that the revitalisation is part of the IPRP Phase 1, which envisions the revitalisation of 27 parks. The DTIC is undertaking the infrastructure-intensive revitalisation process in five phases, as enough funding becomes available.

Phase 1 entails installing security infrastructure, such as fencing, streetlighting, boom gates, surveillance cameras and high-mast lights.

The industrial parks that have received Phase 1 upgrades are Vulindlela, Komani and Dimbaza, in the Eastern Cape; Isithebe, in KwaZulu-Natal; Phuthaditjhaba and Botshabelo, in the Free State; Babelegi, Garunkuwa and Bodirelo, in the North West; Seshego and Nkowankowa, in Limpopo; and Ekandustria, in Mpumalanga.

The parks that are yet to receive Phase 1 upgrades are Fort Jackson and Butterworth, in the Eastern Cape; Houtweg and Mosselbay, in the Western Cape; Orlando, Eldorado, Pennyville and Winterveldt, in Gauteng; Kathu and Upington, in the Northern Cape; Thohoyandou, in Limpopo; Kabhokweni and Sivabuswa, in Mpumalanga; and Ezakheni and Madadeni, in KwaZulu-Natal.

Phase 2 entails installing infrastructure for regulatory requirements, including waste management, landfill-site establishment, water treatment plants, fire safety systems and renewable energy.

Phase 3 involves assisting parks with their engineering designs and road rehabilitation, and constructing new roads and sewage treatment plants. Phase 4 will focus on upgrading electrical infrastructure and building new top/main structures, while Phase 5 entails the clustering of factories in the parks.

“Currently, there are factories situated next to each other that do not match, which we will restructure. Each park also has a distinct strength – for example, agriprocessing, whereby resources can be set up so that factories or businesses can benefit from economies of scale,” explains Jensma, adding that Phase 5 is continuously planned for or implemented throughout the prior phases.

She says each park has its own extension plan, set out by the relevant provincial government or the provincial government agency that owns the park. However, Jensma highlights that the DTIC tries to promote uniformity in the parks’ standard operation features to ensure efficiency and consistent quality management.

The DTIC initiated a Resource Efficiency and Cleaner Production programme, which is mandated to optimise the use of water and energy, thereby improving competitiveness of the businesses in the industrial parks.

The DTIC expects to start with Phase 2 by the end of the year or early next year, with Phase 3 expected to start later next year.

Park Productivity

Launching the upgraded Phuthaditjhaba industrial park earlier this year, Free State Development Corporation CEO Ikraam Osman said the upgrades would have a positive impact on the park and surrounding areas by attracting more investors.

The park was built in 1979, hosting 296 factories that manufacture textiles and clothing, paper bags, furniture, leather goods, and aluminium and glass products. Osman added that the park’s occupancy rate stood at 66% and the corporation expected the figure to improve, following the revitalisation.

The Seshego industrial park was upgraded at a cost of more than R35-million, when Limpopo province was attracting investment for the Musina-Makhado Special Economic Zone for the expansion of the province’s industrial base.

The province will expand manufacturing capacity, scaling up upstream and downstream value-chain integration in various industries. This will, ultimately, enhance competitiveness in the provincial economy.

“We expect the revitalisation process of the park to have positive spin-offs within and outside the park. As more factories come to set up operations inside the park and investors realise that security infrastructure has been upgraded, more job opportunities will be created for . . . communities,” said Greater Tzaneen mayor Maripe Mangena at the time of the launch.

The mayor added that small enterprises and cooperatives operating in various parts of the municipality were expected to benefit from the value chains as manufacturing inside the park increases.

The DTIC confirmed in a Parliamentary reply in July that an exercise was under way to obtain a list of the new businesses that had invested in the industrial parks since the IPRP started.

Jensma tells Engineering News that the IPRP has helped the parks retain tenants that were on the verge of leaving, owing to a lack of infrastructure. “For the nearby townships, this is bread on the table.”

She estimates that each of the 65 000 employees support, on average, five dependants and, therefore, the IPRP has contributed to the wellbeing of more than 320 000 people across the country.

Jensma highlights that the jobs created by the industrial parks help to alleviate crime, which is a big problem in rural areas and townships. The parks also often provide services for the nearby townships, which would not have normally been available, such as water supply and a fire response service.

The industrial parks also offer favourable rental rates, making them increasingly attractive options for investors, with multinational companies, such as Néstle and Whirlpool, having established factories in some of the smaller industrial parks, she adds. In turn, these businesses have programmes to include local small enterprises in the area.

Success Factors

Consultancy Cova Advisory joint MD Duane Newman says industrial parks are one of the ways through which government can support businesses and keep their cost base down.

Although industrial parks are helpful in assisting business through government subsidies on buildings or land, as well as tax incentives in some cases, he doubts whether the 12 upgraded industrial parks have managed to create 65 000 permanent jobs.

“The reality is that there is no panacea for job creation. Ultimately, government’s biggest role in job creation is creating markets – but that is also where government policy has failed to date.”

Newman says government has offered big tenders and awarded big contracts, but localisation has been poor, and localised manufacturing is the biggest job creator.

Therefore, as government is a major buyer of goods and services, the DTIC has to enforce proper localisation and not just a layer of black economic empowerment.

Newman believes that the industrial parks will keep on missing out on their potential until government creates more of a market for the goods that are manufactured there.

The manufacturing industry is declining because there needs to be a market, he emphasises.

Newman suggests that government provide more designation on government tenders, forcing its entities to buy local – not just buying from a local supplier but from a local manufacturing business.

Nevertheless, he supports the thinking behind the industrial parks, saying they help to retain people in rural areas, particularly amid overpopulated urban areas, and he hopes that the industrial parks will not become white elephants, and that the businesses in the parks will become sustainable with government support in the form of subsidies.

Newman emphasises the importance of keeping the upgraded parks of the IPRP properly maintained: “The parks . . . fell into disuse because they were not properly maintained, and the department had to step in to fix them. Going forward, it is vital that the parks are maintained to prevent another destitute state.”

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