ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT
CHAPTER 4: THE BUSINESS SECTOR
1. INTRODUCTION
1.1 PURPOSE OF REPORT
Chapter 4 of the Status Quo Report forms part of the Phase 3 product of the Zululand Coordinated Local Economic Development Framework project focussing specifically on the Business Sector. Whereas Chapter 1 of the report provides a general introduction to local economic development and the context for local economic, Chapters 3 to 4 of the document presents a status quo analysis of what has been identified as the key economic sectors in the Zululand District Municipality, the sectors being respectively the Tourism Sector (Chapter 2), the Agricultural Sector (Chapter 3) and the Business Sector (Chapter 4). Although the Status Quo Report is structured on a sectoral basis it is widely acknowledged that close linkages exists between the various sectors and economic development activities within each of the broad sectors. These linkages will be addressed in more detail in Phase 4 of the project, the strategy development phase.
The Business Sector Status Quo Report is aimed at providing:
an overview of current activities within the business sector and highlighting key issues impacting on the development of the sector; an evaluation of the potential for the future development of the sector; and an identification of key opportunities relating to the sector.
1.2 DEFINING THE SECTOR
The Business Sector, as defined for the purpose of this project, does not relate to any established industrial sector classification system. The Business Sector does, however, include a number of generally recognised industry sectors including commerce, manufacturing, construction, transport and mining. By establishing the Business Sector it was attempted to group all those sectors functioning on the same basic set of business principles together in order to facilitate discussion and participation. Most of these sectors are generally represented by established business organisations/associations, whereas farmers associations are in place for the agricultural sector and tourism associations for the tourism sector.
An overview is provided below of the activities included in each of the industry sectors forming part of the Business Sector.
Commerce: Including retail and wholesale sales, private sector services (e.g. medical, financial, property and others). Manufacturing: Including all types of factories, engineering works, arts and crafts and agri- processing. Construction: Including the construction of facilities, housing, infrastructure Transport: Including road freight, rail transport, air transport and public transport
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Mining: This sector is primarily focussed on the coal mining sector, although attention should also be afforded gold mining and quarries.
1.3 CONTENTS OF THE REPORT
This Chapter of the report includes four sections. The Sections following the general introduction are:
Section 2: The Business Centres: This sections considers existing business centres within the District and provides an indication of future planning relating to the establishment of Regional Service Centres. Section 3: Business Organisations and Support: Existing business organisations and business support services in Zululand is discussed. Section 4: Consider the Sectors: Each of the industry sectors forming part of the business sector is discussed in this section under three broad headings, viz. (1) an overview of the sector, (2) the competitiveness of the sector, and (3) the opportunities in the sector. The key focus is on the discussion of the competitiveness of each of the sectors.
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2. THE BUSINESS CENTRES
2.1 INTRODUCTION
At present economic development, and specifically the activities of the business sector, both formal and informal, is primarily concentrated in five urban centres within the Zululand District Municipality. Some thirteen smaller underdeveloped centres, historically established to service the agricultural sector and large concentrations of the rural population, also exist in the rural areas. Importantly, Table 2.1 below reflects that there are a total of 872 settlements in the District Municipality area. This provides an understanding of the settlement patterns within Zululand, but also illustrates the large dependence on the five major urban centres for access to commercial and social services.
TABLE 2.1: ZULULAND DISTRICT MUNICIPALITY SETTLEMENT PATTERN RURAL RURAL RURAL MUNICIPALITY URBAN SCATTERED TOTAL VILLAGE SCATTERED FARMS eDumbe 1 7 14 8 8 38 uPhongolo 1 31 43 19 1 95 Abaqulusi 2 39 4 6 15 66 Nongoma 1 290 72 - - 363 Ulundi 1 198 60 22 29 310 Zululand Total 6 565 193 55 53 872 Source: WSDP Viewer (2001) as in ZDM IDP 2002
The ZDM IDP (2002) further estimates that 80.5% of the district’s population resides in rural settlements. The majority of this population is at present totally or partly dependent on the five major centres for access to commercial and social services, again illustrating the important role that the centres fulfil in the District economy.
2.2 THE MAJOR CENTRES
2.2.1 Introduction
A total of five established urban centres exist with the Zululand District Municipality. The fact that the local government demarcation process ensured that at least one established urban centre is located in each of the local municipalities is important for the future development of the economies of each of the municipalities. The municipalities and the urban centres relating to them are:
Ulundi Municipality – Ulundi town; Nongoma Municipality – Nongoma town; uPhongola Municipality – Pongola; Abaqulusi Municipality – Vryheid; and eDumbe Municipality – Paulpietersburg.
Although each of the towns listed above has been identified as the municipal centre for the specific municipality they vary considerable in terms of size, functions and character. A brief overview of the structure and function of each of the municipal centres is provided below.
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2.2.2 Ulundi
Ulundi as a town fulfils a major administrative function in the Provincial and District context. According to Robinson (1999) this brings a “sizeable resident population with secure incomes” to the town. The town further serves as service centre for the large rural population of the Ulundi Municipality and to a lesser extent the Nongoma Municipality. At peak times it is estimated that there are 200 taxes serving the centre with more than 450 informal traders trading in the town.
Although there are a substantial number of historical and cultural attractions in the area it has been difficult to promote the town as a tourism destination for a number of reasons. Most importantly is the appearance of the town dominated by administrative and lower order commercial buildings (Robinson 1999). However, it is stated that Ulundi can be developed into a gateway for a variety of attractions in the area.
The town is undersupplied in terms of professional, business and personal services. It is reported that the lack of suitable office accommodation in the town is a constraint to the town developing its commercial potential (Robinson 1999).
2.2.3 Nongoma
Nongoma town is the only urban centre within the Nongoma Municipality which has a population of approximately 230 000 people. The population of the town itself only approximately 4 000 people. The rural landscape of the Nongoma Municipality is characterised by rural settlements of various densities. Nongoma town is home to a range of public sector and formal and informal commercial sector activities.
The general characteristic of Nongoma is that of large rural market town.
2.2.4 Pongola
Pongola is located on the N2 between Piet Retief and Richards Bay. The town has a well-developed commercial sector and CBD which straddles the N2. A comprehensive range of business in the town serves the population of the town and the commercial farming sector and rural population of the municipality, as well as the wider region and the through traffic on the N2. A key characteristic of the town centre is its orientation towards the passing traffic on the N2.
The Illovo Sugar Mill located in proximity to the town is a major employer and also one of the only major beneficiation activities currently underway in the District.
2.2.5 Vryheid
The town of Vryheid operates as a service centre for a large rural population, including areas such as eMondlo, Hlobane, and Coronation and areas further afield such as Ulundi and eDumbe. However, its economic base and reason for existence is as service centre for the primary sector activities of mining and agriculture. This economic base has, however, been eroded in recent years with the closure of major mines in Hlobane and Coronation.
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Regarding this Robinson (1999) suggests that the town “held up reasonably well after the closure of the coal mines, but in recent years it has been adversely affected by national economic conditions”. Accordingly the town has become increasingly dependent on the output achieved in a specific agricultural season.
Robinson (1999) further indicates that the town lack the “pre-conditions” for becoming a major industrial centre, i.e. it is located in a peripheral area without strategic raw materials or a metropolitan sized market. The economy of the hinterland of the town is based on (Robinson 1999):
coal production – which has declined significantly; livestock farming – which is starting to decline; timber – which is growing; and maize and tourism – which is starting to pick up momentum.
Other key issues relating to the town mentioned by Robinson (1999):
the informal sector and the lower end of the formal commercial market is growing; the town has potential strengths as a freight distribution centre; the airport has the potential and capacity to handle more landings per day; Vryheid has well established civic and business institutions; and as a commercial centre Vryheid needs to attract more national chains stores.
2.2.6 Paulpietersburg
The local economy of Paulpietersburg is based on the provision of services to the agricultural sector and the surrounding rural population. The town offers a range of commercial and social services, but retains a strong rural town character. The town further has a strong German heritage.
Major economic developments in the vicinity of the town include the Natal Spa and the Valaqua bottling plant. The Coal Line Study (1999) viewed the tourism sector as presenting a number of opportunities for economic development in Paulpietersburg. These opportunities relate to key activities such as annual paragliding events and the timber marathon, the German heritage and other eco-tourism opportunities.
2.3 OTHER BUSINESS CENTRES
Besides the municipal centres discussed above the only other urban complex of note is eMondlo which have a distinct urban character due to the historic levels of development. Other rural settlements such as Louwsburg, Magudu and Mahlabatini at present only provides rural dwellers access to basic commercial services. With this in mind the spatial development frameworks of the District and Local Municipalities as contained in the 2002 Integrated Development Plans are of strategic importance. The ZDM IDP (2002) states that the essence of the spatial development framework “is to improve accessibility to, and within the District, and to increase the range and quality of services available to communities in all settlements, so as to provide a base to encourage productive activities at all scales”.
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This is to be achieved through:
the development of the towns as service centres on which a large number of people depend for specialised services and higher order functions; and the establishment of a number of Rural Service Centres aimed at extending the range of services available to rural comities.
The table below reflects the settlements identified as possible Rural Service Centres in the 2002 Integrated Development Plans.
TABLE 2.2: TOWNS AND POTENTIAL RURAL SERVICE SYSTEM HUBS MUNICIPALITY TOWN RSS HUBS Abaqulusi Vryheid eMondlo Kambi Coronation / Mining Complex Louwsberg Gluckstadt eDumbe Paulpietersburg Frischgewaagd Luneberg Nongoma Nongoma Buxedene Mona Mahashini uPhongolo Pongola Belgrade Magudu Ulundi Ulundi Babanango Ceza Nqulwane “Ulundi 19” Source: Local Municipality IDPs as in 2002 ZDM Integrated Development Plan
The levels of existing development in the rural service centres (also called RSS Hubs) vary substantially and a specific strategy will need to be developed for the development of each of the centres. However, the intention is that each of these centres provides rural residents with access to a range of basic social and commercial services. The viability of this will depend to a large extent on the improvement of the road infrastructure as well as the appropriate planning of each centre. Other than the provision of basic social and commercial infrastructure at these nodes it may also present the opportunity for the development of higher density fully serviced low income housing and middle income housing aimed specifically at public servants employed in the rural areas.
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3. BUSINESS ORGANISATIONS AND SUPPORT
3.1 BUSINESS ORGANISATION
3.1.1 The Purpose of Business Organisations
Business organisations fulfil an important role in the development of the business sector in a specific area. The roles and functions, as well as the structure, of business organisations will differ from area to area, but services offered to members generally include:
lobbying with local and other spheres of government on key issues such as rates and taxes; providing business support and business related information to members; establishing an effective forum through which business can network; promoting and marketing the area in which the members of the organisation operates; etc.
As an example the Zululand Chamber of Commerce, a well-established business organisation operating from Empangeni, sees the following as some of the activities contributing to it achieving its vision (Zululand Chamber of Commerce Web Site 2002), viz.
Forming partnerships with local government, NGO's, and the labour movement to address issues of general concern; Utilising to the advantage of small members, the vast pool of expertise present in the large companies that are established in our area; Assisting with Black Economic Empowerment through the forging of links with the predominantly black SMME's and other black business organisations. Together with other organisations attracting new business into the area
Services offered by the Zululand Chamber includes business information, certificates of origin, trade delegations, new business queries, assistance to emerging businesses through the Business Advice Centre and promoting links between emerging businesses and the formal business sector.
3.1.2 Business Organisations in Zululand
The Inyanda Chamber of Business is a business organisations with membership across the whole of KwaZulu-Natal. This Chamber is active in the Zululand area and has strong linkages specifically with the Ulundi Business Association. Membership of the Chamber is made up of small emerging businesses including Women’s Clubs as well as membership from a range of associations. Members are involved in a wide range of business, i.e. not limited to a specific sector.
On a more regional level it is interesting to note that the Zululand Chamber of Commerce, based in Empangeni, is not at all active in the Zululand District Municipality. At present only one member of the Chamber is located in the uPhongolo Municipality.
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On a local municipality level the following business organisations have been identified (see Table 3.1 below).
TABLE 3.1: BUSINESS FORUMS/ASSOCIATIONS IN THE DISTRICT MUNICIPALITY BUSINESS FORUM / ASSOCIATIONS CHAIR / CONTACT eDumbe None identified Abaqulusi Afrikaanse Handelsinstituut Mr S Pieters Chamber of Commerce Mr Geoff Smith Ulundi Ulundi Business Association Mr Sifiso Mbatha Nongoma Nongoma Business Forum Mr Jeffrey Mthetwa uPhongolo None identified
In eDumbe and uPhongolo no business organisations has been identified as yet. From initial discussions with members of the various business organisations it would not appear as if any interaction between organisations on a District level occurs. Cooperation does, however, exist between the two business organisations in the Abaqulusi Municipality.
In a Business Sector Working Group workshop held on 15 April 2003 all stakeholders supported:
the establishment of business organisations in all local municipalities; the establishment of relationships between the business organisations in the various municipalities; and the establishment of better channels of communication between the business sector and local government.
3.2 BUSINESS SUPPORT
No dedicated business development centres or similar institutions have been identified in the Zululand District Municipality. A training centre that operated in Hlobane, in the Abaqulusi Municipality, in the late 1990s has closed down. This training centre provided a wide range of skills training including literacy, garment making, curtains and draperies, catering, crèche and pre-school training, bricklaying, arc and gas welding, painting and decorating, motor and motor body repairs, spray painting, office skills, entrepreneurship and self-employment, entering the market place, management and capacity building (Robinson 1999). In 1999 the establishment of a Business Development Centre related to the Training Centre was considered.
A company based in Ulundi, ETA Consult (previously Altak and Partners), is a Ntsika accredited business support service provider. Further to this the Indonsa Arts and Crafts Centre in Ulundi, which is supported by grants from the Department of Education, and managed by the District Municipality, provides support to this specific sector.
The April 2003 Business Sector Working Group workshop suggested that two distinct forms of business support are required in the District, viz. (1) business support services and (2) business information services, e.g. where and how to access funding. It was suggested that Tourism Centre’s in each of the towns could potentially fulfil a role in the dissemination of business related information.
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3.3 FUNDING SUPPORT
Funding support for business development is discussed in more detail in Part 1 of this report.
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4. CONSIDERING THE SECTORS
4.1 INTRODUCTION
Each of the industry sectors forming part of the Business Sector is discussed in this section under three broad headings, viz.
an overview of the sector; the competitiveness of the sector; and the opportunities in the sector.
The competitiveness of each of the industry sectors is evaluated using a model developed by Porter in a book The Competitive Advantage of Nations (1990). Porter’s model, more commonly referred to as “Porter’s diamond”, was developed in an attempt to explain why specific industries perform better (is more competitive) in certain nations and why the same industries fail to make any impact in others. In his analysis of a range of industries, e.g. the watch industry in Switzerland, the motor manufacturing industry in Germany, bulk transport vehicles in Sweden, the household appliance industry in Japan, he concludes that nations develop a competitive advantage in certain industries due to the unique interaction between a number of factors or elements. The four key elements of Porter’s model are:
Factor conditions: Refers to the regions’ position in factors of production necessary to establish a competitive industry – distinction can be made between basic production factors (incl. natural resources, climate etc.) and advanced production factors (incl. labour force, knowledge, capital resources etc) Demand conditions (Markets): Specifically the nature of the home demand for the industry’s product or service is important – This includes the composition of demand, size and growth of demand and others Related and supporting industries: Refers to the presence or absence in the district or region of supplier industries and related industries that are internationally competitive. This suggests the importance of clustering. Structure of firms and rivalry: The way in which companies/businesses are created, organised, and managed and the nature of domestic rivalry. Government: Government is viewed as the 5th element impacting on competitiveness of the industry.
Porter’s competitiveness model is used for the analysis of the various sectors in the remainder of this section. As stated, Porter initially developed the model to develop a better understanding of the competitiveness of certain industries in specific nations. In the Zululand context it is used to identify areas where specific attention or even intervention is required to build stronger industry sectors. It is essentially used as an alternative to the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, as it is directly orientated towards the business environment.
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4.2 COMMERCIAL
4.2.1 Overview of the Commercial Sector
4.2.1.1 The Commercial Sector in eDumbe
The Paulpietersburg/Dumbe node is the primary commercial node within the eDumbe Municipality. A scan of the Local Economic Regeneration Study (Scott Wilson, 2001) and the eDumbe Integrated Development (Udidi, 2002) suggests that there are no major gaps in the commercial sector servicing the eDumbe Municipality. The IDP does, however, propose the establishment of rural service centres which implies the need for amongst other things decentralised commercial services which rural communities can access.
The Local Economic Regeneration Study for eDumbe provided the following breakdown of businesses within the municipality, based on a telephone directory survey.
TABLE 4.1: EXISTING BUSINESS CONCERNS – EDUMBE MUNICIPALITY (2000) TYPE OF ACTIVITY NUMBER PERCENTAGE Food & Beverage 35 23% Agricultural Products and Support 22 15% Vehicle Sales & Repairs 16 11% Government Services 11 7% Education 10 7% Financial 7 5% Religious Organisations 6 4% Clothing & Hair 6 4% Business Support 5 3% Construction 5 3% Professional Services 5 3% Accommodation 4 3% Computer & Electrical 4 3% Property 3 2% Home and Furniture 3 2% Gifts and Florists 2 1% Transport Operators 2 1% Garden & Leisure 1 1% Service Industry 1 1% Recreation 1 1% 149 100% Source: eDumbe Local Economic Regeneration Study (Scott Wilson 2001)
It is evident from the above list of primarily commercial and service sector activities that a wide range of services are available to the population of eDumbe. The fact that 15% of businesses in the Municipality is classified as providing Agricultural Products and Support confirms the important role of the town as a service centre for the agricultural sector.
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4.2.1.2 The Commercial Sector in Abaqulusi
Vryheid, the main commercial centre within the Abaqulusi Municipality, is generally viewed as a regional service centre. This is ascribed to the increasing interaction with neighbouring towns and settlements, as well as with neighbouring regions. Riel & Associates (2001) suggests that the commercial sector historically enjoyed good growth because of this. The dominance of Vryheid within the municipal economy is mentioned as one of the factors to which the underdevelopment of nodes such as eMondlo, Louwsburg and others can be ascribed.
Commercial enterprises in Vryheid are primarily locally owned interspersed with some national chain stores, specifically in the food and clothing sectors. Riel & Associates (2001) suggests that the users of the commercial centre are primarily from the Abaqulusi Municipality area, but that because of the high quality educational services available its catchment area is much wider (including Pongola, Richards Bay and Dundee). Some sources go further to suggest that Vryheid has a catchment area of in excess of one million people. In general it can be stated that Vryheid offers users a comprehensive range of services and, within the context of the Zululand District, the most comprehensive range of commercial services available.
The 2001 Economic Regeneration Study acknowledges that the health of the commercial sector is dependant on that of the larger economy. The condition of the primary sector (i.e. mining and agriculture) specifically impacts on the commercial sector in Abaqulusi. The closure of mines, together with high levels of uncertainty in the agricultural sector, is currently having a negative impact on this sector.
The possibility of developing a regional shopping centre facility in Vryheid is the one major project relating to this sector previously identified.
4.2.1.3 The Commercial Sector in Ulundi
Development in the commercial sector of the Ulundi Municipality is limited to the town of Ulundi. The retail sector is dominated by large wholesale and bulk “Cash & Carry” stores, with the most important concentration of retail activity located in the Ondini Centre of the Ulundi CBD. A range of clothing and furniture stores are located in this node, however, the trend for shops to provide almost an identical range of products is identified (Robinson Ellingson 2000).
Business and financial services is also concentrated in the Ulundi CBD. These services remains a main reason for people to visit the CBD and thus LED strategies should focus on retaining these businesses in the CBD.
The Ulundi Local Economic Development Plan (2000) identifies the following gaps in the commercial and retail sector:
retail outlets aimed at servicing the needs of the business community (e.g. stationary suppliers, photocopying etc); retail outlets catering specifically for the tourist market; and demand for recreational facilities such as cinemas, restaurants and indoor sporting facilities.
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The following table illustrates the economic activities by sector in Ulundi town (no information in this regard is available for the rest of the municipal area).
TABLE 4.2: EXISTING BUSINESS CONCERNS – ULUNDI TOWN SECTOR SECTOR NO Mining & quarrying Quarry depot 1 Manufacturing Engineering 4 Construction Building 14 Commercial General retail 17 Food 8 Furniture 6 Wholesale 4 Services Motor vehicle 14 Personal 24 Professional 17 Finance & insurance 15 Transport 3 Utility services 5 TOTAL 132 Source: From Ulundi Local Economic Development Plan, 2000 as in Ulundi IDP (Vuka 2002)
The service centre function of the town of Ulundi is evident from the above table, with the majority of businesses relating to the commercial and services sectors. In the year 2000 only four manufacturing concerns were operating from Ulundi.
4.2.1.4 The Commercial Sector in Nongoma
(Await information from Nongoma Local Economic Regeneration Study)
4.2.1.5 The Commercial Sector in uPhongola
Pongola town represents the only major concentration of business in the uPhongola Municipality. As is the case for eDumbe and Ulundi, Pongola also offers a wide range of services to the local and surrounding rural population. The table below provides an indication of the number of businesses located in the uPhongola Municipality.
TABLE 4.3: EXISTING BUSINESS CONCERNS – UPHONGOLA MUNICIPALITY (2000) TYPE OF ACTIVITY NUMBER PERCENTAGE Food & Beverage 45 18% Government Services 31 13% Vehicle Sales & Repairs 25 10% Professional Services 22 9% Agricultural Products and Support 20 8% Clothing & Hair 17 7% Construction 12 5% Financial 10 4% Education 10 4%
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TYPE OF ACTIVITY NUMBER PERCENTAGE Gifts and Florists 10 4% Home and Furniture 8 3% Religious Organisations 7 3% Accommodation 6 2% Computer & Electrical 6 2% Garden & Leisure 4 2% Service Industry 4 2% Business Support 3 1% Property 2 1% Transport Operators 2 1% Recreation 1 0% 245 100% Source: uPhongola Local Economic Regeneration Study (Scott Wilson 2001)
As is the case in eDumbe, a substantial number of businesses (20) offers agricultural products and support, this confirming the important role that the town fulfils
4.2.2 Competiveness of the Commercial Sector
4.2.2.1 Factor conditions
Established commercial centres (+): Each of the local municipalities in Zululand have an established commercial centre offering residents a wide range of commercial services, viz. Paulpietersburg, Vryheid, Ulundi, Nongoma and Pongola. The range of commercial services available includes financial institutions, retailers, wholesalers and supporting services. Of these commercial centres Vryheid offers the widest range of services and are the best established.
Lack of developed Rural Service Centres (-): Residents of the District are dependent on the main commercial centres for commercial services. Limited concentrations of commercial activity exist outside of the main commercial centres. Secondary service centres such as Louwsburg, eMondlo and Babanango offers limited commercial services. Through the spatial frameworks developed in the 2002 Integrated Development Planning process a number of Rural Service Centres has, however, been identified. A focus in the development of these rural centres will be the establishment of more locally orientated commercial services.
Primary Road infrastructure (+): All commercial centres have good primary road access. Pongola is located on the N2, linking Mpumalanga with the coast of KwaZulu-Natal. Paulpietersburg and Vryheid is accessed via the R33 and R44 which also serves as an alternative route between Mpumalanga and the KwaZulu-Natal coast. At present Ulundi and Nongoma is not located on a through road as a section of the R66 between Nongoma and Magudu has not been surfaced.
Secondary Road Infrastructure (-): Although primary road access to commercial centres is well- established internal road networks within each of the local municipalities can be said to be underdeveloped. Most communities access the primary roads through gravel roads and tracks. This situation specifically impacts on the Nongoma and Ulundi Municipalities, as well as the Simdlangentsha area, where the largest concentration of the rural population of the District resides.
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Lack of planning frameworks (-): Planning frameworks for the primary commercial nodes are generally available and land/space for future extension of commercial activities are available within these centres. Limitations for the expansion of the commercial sector appear to be most severe in Nongoma. Planning frameworks for Rural Service Centres as identified in the 2002 Integrated Development Planning process, guiding and coordinating commercial development in the rural centres, is generally not available.
4.2.2.2 Firm structure and strategy
Small locally owned formal businesses (+): The majority of businesses in the primary commercial centres are small and locally owned. This suggests a substantial local capacity in the commercial sector which can potentially serve as a basis for the future extension of the sector.
Large informal sector (+): A large and growing informal sector exists within the Zululand District. The sector provides an important basis for the future development of the commercial sector. Developing a better understanding of this sector, its linkages and opportunities, will therefore be important. Components of this sector includes street traders, the so-called “bakkie” industry (linking rural areas with established wholesalers), informal financial services, taverns and spaza shops.
National chains (+/-): A number of national chain stores specifically in the clothing and furniture retail and wholesale sub-sectors are established in the main commercial centres. The presence of these stores is particularly evident in Ulundi and Vryheid. The national chain stores offers an important service to the residents of the District, but the potential impact of attracting major retailers to the area, on smaller local businesses, needs to be established. This impact can potentially be either positive, in that it creates further opportunities for local entrepreneurs linking to these stores, or negative, in that it is difficult for local business to compete with established retail and wholesale chains.
4.2.2.3 Markets
Large local markets (+): The Zululand District Municipality have a total population of close to one million people which represents a substantial market for local business. Due to the location of Zululand in relation to other major provincial and regional centres, i.e. Durban, Richards Bay/Empangeni and Newcastle, the level of income leakage from the District is estimated to be low. Income leakage is, however, expected to be higher in the high income category.
Low local income levels (-): Income and employment levels in the Zululand District Municipality are notoriously low (at least 75% of households earning below R1 500 per month) with this impacting directly on the extent of opportunities in the commercial sectors. The key opportunities relating to the local market is anticipated to be in basic household goods such as food, clothing and furniture.
Regional markets (+): Some of the commercial centres in Zululand, most notably Vryheid and Pongola, serve larger regional markets falling outside of the District. In the case of Vryheid its market area extends outside of the Abaqulusi area to the west. Pongola serves a wider market to the east with people as far east as Sodwana and north to Ingwavuma, both located in the uMkhanyakude District
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Municipality, using it as a regional service centre. Due to the location of these centres it is anticipated that they will continue to fulfil the role of regional services centres serving the wider area.
Potential tourism markets (+): To date there is little evidence of the commercial sector catering specifically for the tourism market. This can partly be attributed to the low level of tourism development in the area. Once appropriate tourism development and marketing strategies are in place this situation is set to change opening up a range of opportunities for local entrepreneurs. The opportunities could include travel related services, curio shops, speciality food stores, entertainment and others.
4.2.2.4 Related and supporting services/businesses
Business associations (+/-): Business associations exists in three of the five municipalities of the District, viz. Abaqulusi with both a Chamber of Commerce and the Afrikaanse Handelsinstituut, Ulundi and Nongoma. At present there exists no district based business association, with the Zululand Chamber of Commerce only having one member within the District. The Inyanda Chamber of Commerce, which is provincially based, has a presence in the District and is linked to local business associations. In terms of business organisation a strong base, therefore, exists and appropriate approaches to a greater level of cooperation and representivity needs to be established.
Business support services (-): No dedicated business support centres in the Zululand District Municipality has been identified. A support centre that operated in Hlobane has closed down. A company based in Ulundi, ETA Consult (previously Altak and Partners), is however a Ntsika accredited business support service provider.
Access to finance (-): The availability of finance is most often mentioned as the major constraining factor in commercial development. This is also expected to be the case in Zululand.
4.2.2.5 Government
Limited involvement (+/-): Government and more specifically local government has had limited involvement in the development of the commercial sector to date. Local government can and should in future fulfil a key role in establishing an environment conducive to economic development.
Support for SMME establishment (+): Government policies support the development of Small, Medium and Micro Enterprises in all sectors of the economy, this includes business development and funding support through various programmes.
Lack guidelines for the development of the informal sector (-): No guidelines for supporting and developing the informal sector exists within the District. As this sector makes up a major part of the local economy it is essential that clear guidelines for supporting and the developing the sector is established.
Appropriate planning frameworks (-): Appropriate planning frameworks for the development of the commercial sector in rural service centres needs to be established by local municipalities.
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4.2.2.6 Synopsis: Competitiveness of the Commercial Sector
The commercial sector is well established in the towns of the District, however, is not easily accessible for the majority of the rural population. A number of potential commercial markets exist. The lack of business support services will, however, limit entry of emerging entrepreneurs into these markets. Pre- requisites for the development of the sector include the development of planning frameworks, the provision of business support and informal sector support.
4.2.3. Activities Supporting Commercial Sector Development
Two basic activities aimed at supporting the realisation of opportunities in the commercial sector have been identified, viz. the provision of business support services and guidelines for the support and development of the informal sector.
Business Support Services: Most integrated development plans and economic development studies for the district and local municipalities identify the need for the establishment of business support services (See Table 4.? below providing an indication of the types of business support projects proposed). The need for business support services is, however, not limited to a specific sector. A strategy to the establishment of business support services in the District needs to be established.
TABLE 4.4: BUSINESS SUPPORT RELATED PROJECTS PREVIOUSLY IDENTIFIED PROJECT NAME MUNICIPALITY SOURCE Hlobane Entrepreneurial Training and Support Centre Abaqulusi ZDM Investment Brochure (2002) Establish LED Office + LBSC Abaqulusi Abaqulusi IDP Skills Development Plan Abaqulusi Abaqulusi IDP Computer equipment and trainer for the Mkabayika Jama Multi- eDumbe eDumbe/uPhongola LER Study (2001) Purpose Training Centre Investigate: Small Business Hive Establishment eDumbe eDumbe IDP Establish linkages with Local Business Service Centres eDumbe eDumbe IDP SMME Support Programme uPhongola uPhongola IDP Investigation of SMME opportunities in various sector uPhongola uPhongola IDP uPhongola Procurement Policy uPhongola uPhongola IDP
Guidelines for the Support and Development of the Informal Sector: A limited understanding of the functioning of the informal sector exists within the District. It will be essential that a better understanding be established, and that clear guidelines for the development of the sector be developed. This will amongst other things ensure that formal sector initiative does not impact negatively on the informal sector.
4.2.4 Opportunities in the Commercial Sector
From a survey of the integrated development plans and economic development studies undertaken in the district the following projects relating to the commercial sector have been identified.
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TABLE 4.5: PREVIOUSLY IDENTIFIED COMMERCIAL SECTOR OPPORTUNITIES MUNICI- PROJECT NAME SOURCE PALITY Vryheid Regional Shopping Centre Abaqulusi ZDM Investment Brochure (2002) eMondlo Taxi City and Retail Outlet Abaqulusi Abaqulusi IDP Investigation: Formalisation of Market Stalls / Taxi Rank in eDumbe eDumbe/uPhongola LER Study (2001) Paulpietersburg Investigate: Commercial Sector Expansion eDumbe eDumbe IDP Periodic Market - Paulpietersburg/Dumbe eDumbe eDumbe IDP Periodic Market - Frischgewaagd/Bilanyoni eDumbe eDumbe IDP Facilitate Catering Project (Paulpietersburg/eDumbe) eDumbe eDumbe IDP Ulundi Medical Centre Ulundi ZDM Investment Brochure (2002) Taxi Rank and Informal Trader Facilities (Phase 2) Ulundi Ulundi LED Plan (2000) Fresh Produce Market in Ulundi Ulundi Ulundi LED Plan (2000) Ulundi Health Club/Gym Ulundi ZDM Investment Brochure (2002) Ulundi Entertainment Centre Ulundi ZDM Investment Brochure (2002)
The abovementioned represents specific opportunities in the commercial sector based on needs identified by local people. However, over and above these a series of more general opportunities relating to the sector should be considered. The realisation of these opportunities is, however, dependent on specific pre-conditions being met.
Commercial facilities in Rural Service Centres: The establishment of Rural Service Centres present opportunities for both formal and informal commercial development. In planning for the development of each service centre land for commercial development should be clearly demarcated in locations identified through the application of accepted planning principles. The detailed planning processes for each of the service centres should further provide prospective investors with clear indications of the type and extent of the local market to be catered for. Ithala (previously the KwaZulu Finance Corporation) would be an appropriate first stop in an attempt to identify potential investors for commercial development.
Markets and taxi ranks in all Service Centre: Appropriate markets and taxi ranks will be a basic requirement in each of the existing, or to be established, rural service centres. As the majority of the population makes use of public transport a market and taxi rank then also becomes the central point of convergence within the service centre. It is anticipated that all other services and facilities to be provided in the service centres will relate to the public transport facilities in some way.
Commercial enterprises focussed on tourism market: The commercial market related to the tourism sector is unexplored to date. Current investment in tourism suggests that this sector will in future present specific commercial opportunities, e.g. the sale of locally produced goods, the restaurant industry, travel agencies/services and others.
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4.3 MANUFACTURING
4.3.1 Overview of Manufacturing Activity in the District
At present manufacturing activity within the District is low, at an estimated 11% contribution to the GGP for the area. The Zululand Regional Plan suggests that 80% of the manufacturing activity in Zululand takes place in the Abaqulusi Municipality, however, other studies suggests that manufacturing activity only contributes 5% to the total GGP of the Vryheid Magisterial District (Abaqulusi IDP 2002). Further to this it is suggested that the manufacturing industry in the Vryheid area can only be viewed as a service sector for mainly the mining and agriculture sector and is not an exporter of goods (Abaqulusi IDP). The only agri-processing of note in the District is the Illovo sugar mill in uPhongola Municipality.
Local economic development and integrated development plans make limited mention of manufacturing activities. The Ulundi Local Economic Development Plan (2000) suggests that the manufacturing sector is “dominated by small scale activities including metal work and furniture production”. For both Ulundi and Abaqulusi the agri-processing opportunities relating to niche markets linked to agricultural activities are promoted. Nearly all plans (integrated development and local economic development) prepared in the District supports a future focus on agri-processing, beneficiation and local value addition. These proposals, however, usually remain general (some of the more specific opportunities are discussed in a later section).
Despite the lack of large scale manufacturing in the District a number of interesting ventures have been, or are in the process of being, established. These activities generally relate to the raw materials and skills available in the District. The ventures include (1) arts and crafts production and marketing, (2) taxidermy, (3) mineral water and (4) charcoal manufacturing for export.
Arts and Crafts Production and Manufacturing: It is not possible to quantify the extent of the arts and craft sector, as activities in this sector are generally of an informal nature. There is, however, various attempts throughout the district to provide a more formal base for the production and marketing of arts and crafts. One such initiative in the uPhongola Municipality, is aimed at promoting job creation and income generation in three formally established Community Trusts. These Trusts are in a partnership relationship with KwaZulu Private Game Reserve and aims to produce and market needlework, candles, beadwork, crafting, weaving and leatherwork. The market for the art and craft items will be tourists visiting private lodges and camps as well as the Ithala Game Reserve. The initiative aims to create 34 jobs in the manufacturing sector (Taljaard pers com April 2003). Taxidermy: A further manufacturing industry, directly related to the tourist industry in KwaZulu- Natal, is taxidermy. A taxidermy operation in the uPhongola Municipality, focussing on the preparation of trophies for the professional hunting industry, creates some 30 jobs. The target market of this business is both international and national hunters although it would appear as if a large percentage of current business is international (Taljaard pers com April 2003). The increase in the number of upmarket game farms in the area and the establishment of a stable hunting industry in the area will set to increase such opportunities. Valpre Mineral Water: The Coal Line Study (1999) identifies the Valaqua mineral water plant located in the eDumbe Municipality as one of the “world class” manufacturing initiatives in the District. Spring water is bottled and distributed from here under the Valpre label to markets country-
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wide. In the three years leading up to 1999 production at the plant increased by 100% per annum. The Coal Line Study (1999) suggests that the complex array of linkages associated with this type of industry “… provide pointers to opportunities for enhancing economic development”. Charcoal Manufacturing and Export: This initiative exports charcoal briquettes to the barbeque market in Europe and is also identified as a “world class” manufacturing initiative by the Coal Line Study (1999). Supplies of charcoal, produced from “waste” timber, is received by the central plant located in eDumbe, from small producers operating in a 120km radius. The charcoal pieces is separated and smaller pieces are treated with a binding starch, condensed and packaged as briquettes. A Swiss based company is responsible for the marketing of the product overseas.
Other manufacturing activities in the District includes Roses’ nougat which is produced in Vryheid for Woolworths stores, a venison export plant currently being developed by KwaZulu Private Game Reserve in uPhongola and a carcass and blood meal plant to be established in Abaqulusi.
4.3.2 Competitiveness of the Manufacturing Sector in Zululand
4.3.2.1 Factor conditions
Land available for industrial development (+): Land available for industrial development is not viewed as a major constraint on the development of the sector (it is also indicated in previous sections that the majority of smaller scale manufacturing activity is conducted on farms). Industrial sites and land is generally available in Vryheid. It is estimated that 50% of the available industrial land in Vryheid is serviced. Currently the possibility of sub-dividing these sites is being considered to make it accessible and appropriate for smaller manufacturing concerns. In the Ulundi CBD development plan provision is made for the establishment of industrial sites. The location of the land, which requires access through the already congested CBD, is viewed as one constraint for manufacturing development. The land in Ulundi also forms part of the Ingonyama Trust and freehold ownership is therefore not available. As financial institutions are reluctant to finance development on Ingonyama land this places a further constraint on industrial development (Cullinan pers com April 2002).
Cost of services (+/-): From discussion with key stakeholders it does, however, appear as if the cost of municipal services within the various localities are in line with that in similar localities elsewhere. Although this is suggested to be positive the fact that the district has limited other comparative advantages in terms of location, availability of raw materials etc. this does little to attract new investment, i.e. the same is available elsewhere in areas with greater comparative advantages.
Lack of comparative advantages (-): As indicated above, the District has limited comparative advantages in terms of the manufacturing sector. Some aspects mentioned as presenting a comparative advantage includes the (1) location in relation to transport routes, the (2) location of the area in relation to the major east coast ports and Gauteng, and a (3) primary sector related to both mining and agriculture. Its location between the ports of Durban and Richards Bay and Gauteng presents opportunities but cannot be viewed as a comparative advantage as various locations such as Harrismith, Ladismith and Newcastle offers the same advantages. The availability of land for industrial development is of little benefit if it can only be offered at prices similar to that on offer in similar areas.
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Raw material availability (-/+): The primary sector, including mining and agriculture activity, provides the region with access to a limited range of raw materials. Economic regeneration studies have shown substantial opportunities, specifically in the agricultural sector, for diversifying the range of raw materials available in the District. At present the level of beneficiation undertaken within the District is limited, exceptions being the charcoal/briquette production in eDumbe, venison processing in uPhongola and the carcass and blood meal plant in Abaqulusi.
Large unskilled workforce (+/-): There is no doubt that the District has access to a large workforce, however, due to the current lack of economic activity the workforce is generally unskilled and does not present the region with a comparative advantage.
Location (+/-): As mentioned the location of the District in relation to the east coast ports presents an advantage, but this is expected to have a limited impact on attracting industrial investment to the area.
Availability of transport infrastructure and services (+): This is viewed as a comparative advantage for the District, specifically its location in relation to the Coal Line, as well as generally good road infrastructure and air transport facilities. Specifically industries dependent on rail for accessing the export market (potentially through the port of Richards Bay) will benefit from a location in towns such as Paulpietersburg, Vryheid and Ulundi.
4.3.2.2 Firm structure and strategy
Manufacturing linked to declining sectors (-): The manufacturing sector in Vryheid, where the only major concentration of manufacturing activity is located, is dependent on the mining and agricultural sectors. Both of these sectors have in recent years been in decline due to a range of factors discussed elsewhere.
World class industries (+): The Valpre Mineral Water, the charcoal production and Roses’ nougat ventures illustrates that it is possible to establish world class industries within the District. It is interesting to note that the majority of current manufacturing initiatives is dependent on the available local raw materials. This provides a clue as to the types of industries with potential in the area. These industries should be used as examples of what can be achieved within the region.
Small manufacturing concerns (-): At present the majority of manufacturing concerns are of a small scale nature, viz. engineering works, metal work, furniture production etc. These smaller concerns have limited upstream or downstream linkages and therefore contribute little to the overall growth of the economy. The establishment of larger scale manufacturing concerns or the growth of small manufacturing concerns will potentially have a snowball effect on the economy of the District.
Lack of any form of clustering (-): To date there is no indication of the development of competitive industrial clusters within the district. Industrial clustering is viewed as important as cluster formation presents both vertical and horizontal opportunities. Continued efforts should be made to identify possible clusters to be nurtured and developed in the District.
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4.3.2.3 Markets
The local market for manufactured goods (+): With a large local population the local market presents possibly the best opportunities for industrial development in the District. It is generally easier for emerging entrepreneurs to access and produce for the local market. This presents a basic opportunity for the development of an industrial sector which can grow into a globally competitive sector. Products for the local market would include basic household and consumer items such as food, beverages, clothing, textiles, footwear, furniture, building materials, appliances and others.
Access to export markets (+/-): At present limited production in the District is undertaken for the export market, the charcoal initiative being the exception. A number of potential opportunities for accessing export markets exists, but for this to be realised a number of pre-conditions exists. The pre- conditions would include the availability of capital for the establishment of appropriate production facilities, well-trained labour, effective quality control and appropriate capacity. It is important to note that production for the export market should generally not be endeavoured on until such time as a secure market for the product has been identified.
4.3.2.4 Related and supporting services/businesses
Lack of business support services (-): As noted in the discussion on the commercial sector, no dedicated business development support services exist within the District.
Access to finance (-): Although various funding sources support the establishment of new manufacturing businesses, local people generally do not understand the range of funding available or the appropriate routes for accessing the funding. Lengthy bureaucratic processes are often mentioned as one of the reasons for entrepreneurs not accessing the available funding sources.
Lack of supporting industries (-): Due to the small scale of current manufacturing activities in the District supporting industries for the establishment of a healthy manufacturing sector are severely lacking.
4.3.2.5 Government
Support for agri-industries (+): At present there exists a strong focus specifically in the Provincial Department of Economic Development and Tourism on supporting the establishment of agri-industries throughout the province. Examples of projects currently supported by the Department include traditional medicine production, bio-diesel production, small sugar mill establishment and the processing of specifically organically grown vegetables and fruit. Within government there is general acknowledgement of the importance of agri-processing in economic development in the rural areas of KwaZulu-Natal.
Support for black economic empowerment (+): Black economic empowerment and SMME establishment is promoted and supported through various government departments and institutions. This ensures that a range of resources, both institutional and financial, is available to support new business establishment and entrepreneurial development.
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4.3.2.6 Synopsis: Competitiveness of the Manufacturing Sector
This sector is underdeveloped in the District, however, a number of very competitive small industries relating to the natural resources in the District have been established (illustrating that this can be done). Lack of skills and business support services are viewed as major constraints in the development of the sector. The District does, however, have certain comparative advantages in terms of location, raw material availability and the extent of the local market.
4.3.3 Opportunities in the Manufacturing Sector
A number of manufacturing sector opportunities have to date been identified in integrated development plans and economic regeneration studies undertaken for the municipalities in the district. Table 4.? lists those opportunities identified to date.
TABLE 4.6: PREVIOUSLY IDENTIFIED MANUFACTURING SECTOR OPPORTUNITIES PROJECT NAME MUNICIPALITY SOURCE "Circle of Friends" Craft Work eDumbe eDumbe/uPhongola LER Study (2001) Extension to cement brick paving enterprise uPhongola eDumbe/uPhongola LER Study (2001) Oil Seed Cluster – Oil Extraction Plant Abaqulusi Vryheid Economic Regeneration (Phase 1) Animal Feeds Factory Abaqulusi Vryheid Economic Regeneration (Phase 1) Organic Vegetable Packing and Freezing Plant Abaqulusi Vryheid Economic Regeneration (Phase 1) Maize Mill Abaqulusi Vryheid Economic Regeneration (Phase 1) Tannin Extraction Plant Abaqulusi Vryheid Economic Regeneration (Phase 1) Leather Tannery Abaqulusi Vryheid Economic Regeneration (Phase 1) Meat Processing Unit Abaqulusi Vryheid Economic Regeneration (Phase 1) Furniture Production Abaqulusi Vryheid Economic Regeneration (Phase 1) Wrought Iron, Basketry and Weaving Abaqulusi Vryheid Economic Regeneration (Phase 1) Traditional Craft Centre Abaqulusi Vryheid Economic Regeneration (Phase 1) Leather Work Centre Abaqulusi Vryheid Economic Regeneration (Phase 1) Eco Block Manufacture Abaqulusi Vryheid Economic Regeneration (Phase 1) Facilitate Waste Selling/Recycling Projects eDumbe eDumbe IDP Encourage value adding manufacturing eDumbe eDumbe IDP Industry support eDumbe eDumbe IDP School Clothing Manufacturing eDumbe eDumbe IDP Feasibility Investigation: Candle Making eDumbe eDumbe IDP Feasibility Investigation: Silk screening "home" eDumbe eDumbe IDP industries Facilitate Zama Zama Projects: Candles, brick-making, eDumbe eDumbe IDP gardens and livestock Emerald Acres Farm: Calabash Crafts eDumbe eDumbe IDP Pecan Nut Processing eDumbe Economic Rejuvenation Study for the Coal Belt Region (December 2002), Vryheid Economic Regeneration Study (Phase 1)
From the above list there appears to be a focus on two broad types of opportunities in the manufacturing sector, viz. agri-processing and arts and crafts. A comprehensive list of the type of manufacturing opportunities to be further considered in the Zululand District Municipality would include:
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Agri-Processing: Charcoal, venison and sugar production already undertaken in the district represents examples of successful agri-processing activities. Agri-processing opportunities generally promoted in the region include traditional medicines, venison production for export, leather production, and vegetable and fruit processing. The diversification of agricultural production in the District will lead to further potential for agri-processing.
Arts and Crafts: Although there is substantial activity in the arts and crafts sector this is generally of an informal nature focussed on production of objects for local home use. Opportunities exist for the diversification of the products of the district and the improvement of marketing systems that will open up new local, national and international markets. The substantial international investment in game farms in specifically the uPhongola Municipality and the focus on attracting international tourists to these areas is only one of the markets to be further explored. Other markets for arts and crafts include curio shops in national parks, curio shops in private game reserves, arts and craft centres in the District, as well as established marketing agents focussing on the national and international markets.
Timber products manufacturing: The Coal Line Study (1999) reports that attempts to produce furniture in the region have been largely unsuccessful. This is attributed to the cost of processing the timber. It is, however, suggested that opportunities relating to timber product manufacturing should continue to be investigated. Timber construction relating to specifically the tourism industry may present opportunities for local contractors in future.
Building materials manufacturing: Later sections of the report illustrate that limited, specifically low cost housing development, is currently undertaken within the District. A greater focus on benefiting from the subsidies available from the Department of Housing will present a range of opportunities in the building material manufacturing sector. Opportunities will potentially include block-making, window frame and door manufacturing and roof construction.
Clothing and textiles: Although competitive advantages for this industry is limited entrepreneurship is often the key ingredient needed for the establishment of ventures in this sector. As an example, a factory in Utrecht is producing clothing for Woolworths on a competitive basis with no apparent competitive advantages. The potential of exploiting specifically the local school clothing market should be considered.
Other specialised manufacturing: Entrepreneurs in the District are identifying manufacturing opportunities on an ongoing basis. These opportunities are often unique and products could be marketed nationally. Local support for such entrepreneurs is required to ensure that production relating to these opportunities is undertaken in the District. Mechanism to support local entrepreneurs should be developed.
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4.4 CONSTRUCTION
4.4.1 Overview of Construction the Construction Sector
4.4.1.1 Construction Activity in Zululand
A comprehensive survey of the construction industry in the District has not been conducted. However, considering general trends in this sector it is not at present viewed as a growth sector in the District. Major recent and current construction activities in the District would include:
the general residential market; major infrastructure construction, e.g. the Paris Dam and in future the construction of major roads such as the P700; the building of lodges and tourism facilities, e.g. lodges to be built at Emakhosini, Thakazulu and on private game farms; the provision of basic services to the previously disadvantaged urban and rural communities within the District municipality; the provision of low income housing to the urban and rural communities of the District; and building of municipal and public sector buildings, e.g. the offices of the District Municipality.
Low income housing projects currently underway are listed below, whereas detailed project information relating to all construction projects of the District Municipality (located within the various local municipalities) is available on the IMPI database of the District at www.zululand.org.za.
TABLE 4.7: HOUSING PROJECTS IN THE ZULULAND DISTRICT MUNICIPALITY PROJECT MUNICIPALITY STATUS NO. OF UNITS Dumbe: Paulpietersburg (Lindelani) eDumbe Near Complete 200 Paulpietersburg: Dumbe Phase 1 (Greenfields) eDumbe Near Complete 200 Paulpietersburg: Dumbe: Phase 2 eDumbe Near Complete 594 Frischgewaagd Phases 1& 2 (Paulpietersburg) eDumbe Near Complete 3094 Ncotshane Housing Project uPhongola Start up 1100 Bhekuzulu Phase 1 Abaqulusi Complete 646 Vryheid: Bhekuzulu Phase 4 Abaqulusi Complete 300 Vryheid: Bhekuzulu Abaqulusi Complete 228 Bhekuzulu Extension Phase 6 Abaqulusi Start up 1179 Coronation Housing Project Abaqulusi Start up? 225 Source: Department of Housing 2003
A number of issues to be noted regarding the above low income housing projects are:
the majority of the above projects are urban based, this despite the majority of the population of the District qualifying for housing subsidies residing in rural areas; most of the projects are nearing completion and limited new projects are currently registered on the database of the Department of Housing; and no projects are currently listed in the Nongoma or Ulundi Municipalities.
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Although the construction sector is not viewed as a future high growth sector in the District economy it is, however, a sector that can potentially have a major impact on economic development. This potential relates to the budgets available from various government programmes for the provision of facilities and infrastructure in the District. If appropriately managed this funding can make a substantial contribution to job creation, capacity building, entrepreneurship development and income generation. The government programmes currently providing substantial opportunities include:
the Housing Subsidy Scheme; the Consolidated Municipal Infrastructure Programme; Department of Water Affairs and Forestry funded water and sanitation project; the electrification programme of the Department of Minerals and Energy.
The fact that the Zululand District Municipality has been identified as a node in terms of the Integrated Rural Sustainable Development Programme of the national government suggests that it will be in a position to maximise the funding available from these sources.
Various plans on the District level will impact directly on the construction industry in Zululand. These plans include (Landman pers com 2003):
The Water Services Development Plan: This plan is 90% complete and establishes a plan for the development of water related infrastructure over the next 25 years primarily making use of DWAF and CMIP funding. The Cemeteries and Crematoria Plan: This plan has been completed. The Solid Waste Plan: A draft plan has been completed.
Other future plans to be developed include:
Electricity Development Plan; Transport Plan (with a Public Transport Focus); Community Facilities Plan; and (potentially) a Housing Plan.
4.4.1.2 Construction Firms in Zululand
An analysis of the construction firms currently registered on the IMPI system of the District Municipality is reflected in Table 4.8 below.
TABLE 4.8: CONSTRUCTION FIRMS REGISTERED ON DISTRICT DATABASE1 LOCATION OF CONSTRUCTION FIRMS NUMBER PERCENTAGE Ulundi 26 24% Abaqulusi 17 16% uPhongola 8 7% eDumbe 8 7% Nongoma 3 3% New Germany 4 4%
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LOCATION OF CONSTRUCTION FIRMS NUMBER PERCENTAGE Outside Zululand 11 10% Unknown 30 28% TOTAL 107 100% Source: IMPI 2003 (Project Management System of Zululand District Municipality)
The above suggests that the majority of construction firms in the Zululand District Municipality are Ulundi based, with a further large number being based in Abaqulusi. The above illustrates that local capacity in the construction industry does exist, however, as the majority of the firms listed are smaller emerging contractors substantial support is needed for increasing the capacity.
4.4.2 Competitiveness of the Construction Industry
4.4.2.1 Factor conditions
Availability of building materials (+): The availability of building materials is not viewed as a constraint on the development of the construction industry. The local manufacturing of building materials is rather viewed as an opportunity for economic development.
Building skills (+/-): Although some building skills have been developed in the District over time no major opportunities for the large scale skills development in the sector has emerged.
Specialised skills (-): No specialised building skills of note has been identified in the District
4.4.2.2 Firm structure and strategy
Absence of small entrepreneurs / local contractors (-): Considering only the current allocation of low income housing projects in the District it evident that a limited number of contractors / developers dominate this market. The extent to which skills development is undertaken by these developers needs to be determined.
4.4.2.3 Markets
Tourism related markets (+): Tourism is at present viewed as a key sector to be focussed on in the development of the District economy. Kick-starting the development of this sector will potentially open up a range of opportunities in the construction sector including the building of lodges, other forms of accommodation, cultural centres/villages, infrastructure development and so on. As a key focus in the development of the tourism industry will be on eco-tourism and cultural tourism it is expected that alternative construction skills, viz. timber and traditional building, will be in high demand.
Infrastructure provision markets (+): The provision of basic infrastructure, including the provision of water, sanitation, electricity and road access, is supported through the availability of substantial amounts of government funding in the form of grants. Due to the availability of funding infrastructure provision is viewed as a major opportunity for the provision of local economic development.
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Low Income Housing provision (+): Historically low income housing development has only taken place within the urban areas of the District. On a provincial level there now appears to be a greater focus on ensuring that rural communities also benefit from the Housing Subsidy Scheme, this presenting a range of opportunities for the local municipalities in Zululand.
Middle Income Housing in rural areas (+): To date no attention has been afforded the provision of middle income housing in the rural areas of Zululand. Thus, specifically public servants in the education and health sector working in the rural areas of the District is not viewed as permanent residents in these areas and travel to and from major centres. The establishment of Rural Service Centres present opportunities for the establishment of middle income housing. This is viewed as a further market for the construction sector to be explored.
Other opportunities/markets relating to the construction industry is discussed in more detail in Section 4.4.3.
4.4.2.4 Related and supporting services/businesses
Lack of skills development and training (-): As far as could be established no skills development or training centres related to the construction sector exists within the Zululand District Municipality.
Resource Mobilisation (-): Substantial resources for specifically basic infrastructure provision and housing development are available and the various local municipality integrated development plans identifies priorities in this regard. It appears, however, as if local municipalities lack the resources and capacity to mobilise the available resources for priority projects. The resources lacking includes staff dedicated and capacitated to identify and prepare business plans for accessing these resources.
4.4.2.5 Government
Integrated development planning (+): The integrated development planning process in which the District and all local municipalities are engaged in is a legislative requirement in terms of the Municipal Systems Act. It is anticipated that these plans will over the medium term provide strategic direction to the development activities in local municipalities and that an important outcome of this will be increased activity in the construction sector, specifically focussing on the core function of local municipalities relating to service provision.
Support for basic service provision and housing (+): Government is providing substantial support, both financial and institutional, for basic infrastructure and housing provision. This presents a major opportunity for the development of the construction sector specifically, and for local economic development in general.
Procurement policy (+): The District Municipality has a comprehensive affirmative procurement policy in place. The District also pro-actively supports capacity building aimed at involving local contractors in development projects. As far as could be established such a procurement policy is not in place in the local municipalities in the District.
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4.4.2.6 Synopsis: Competitiveness of the Construction Sector
Due to the high levels of poverty the District is attracting substantial government funding for the development of basic infrastructure (ISRDS node). This presents an important basis for the development of the construction industry. The extent of government funding it attracts can and should, however, be increased, specifically in terms of the Housing Subsidy Scheme. Future expansion of other sectors (specifically tourism, manufacturing and commerce) will impact positively on the sector. Skills development capacity is essential (entrepreneurial + technical).
4.4.3 Opportunities in the Construction Sector
A range of opportunities in the construction sector has been discussed in previous sections. This section provides a brief summary of more specific opportunities that have been identified to date.
Private Sector Facilities Development: Development in the majority of other sectors requires support from the construction sector. Examples of facilities required in the District identified through other local economic development initiatives include:
a truck stop in Vryheid; a garage and information complex at Ulundi “19”; office accommodation in Ulundi; a regional shopping centre in Vryheid;
Public Sector Facilities Development: A key development strategy of the Zululand District Municipality and the various local municipalities is the establishment of a Rural Service System. The various Rural Service System Hubs is identified in the Section 2.3 above. The Rural Service Centres is intended to provide rural communities with access to a range of government, social and commercial services. In order to do this infrastructure and facilities such as multi-purpose community centres needs to be developed, this presents opportunities in the construction sector.
Low Income Housing Development: As indicated, to date low income housing provision has been focussed in urban centres within the District. This focus is set to change to also provide rural communities with access to the housing subsidies of the Department of Housing. This extension of the focus provide a range of opportunities for the establishment of building material manufacturers and small scale building and construction contractors. Importantly, the management and implementation approach to low income housing projects will determine the impact thereof on entrepreneurship development, skills development, job creation and income generation.
Middle Income Housing Development: The lack of appropriate middle income housing in all areas of the District presents an opportunity in the construction sector.
Road and infrastructure construction: Funding for construction programmes is made available through various government programmes, including the Consolidated Municipal Infrastructure Programme, Department of Water Affairs and Forestry funded water and sanitation project, the
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electrification programme of the Department of Minerals and Energy and road construction and maintenance projects of the Department of Transport. As is the case with low income housing the management and implementation approach to these projects will determine the impact thereof on entrepreneurship development, skills development, job creation and income generation. The IMPI project management system of the District Municipality provides detailed information on the current status of existing projects. Integrated development plans of the various municipalities further indicate the priority projects in the urban and rural areas.
Tourism related construction projects: A number of major tourism development projects in the District have already been identified. Funding for some of these projects, such as the eMakhosini project in Ulundi, has already been secured. Other planned developments such as ThakaZulu and tourism initiatives around the Paris Dam are still in the process of mobilising funding. Discussions with the Manager of KwaZulu Private Game Reserves, currently investing substantial funding in infrastructure and lodge development, revealed that overseas investors are making use of local building contractors for the construction of multi-million rand lodges in the uPhongola area (Potter pers com 2003). This approach should be commended and supported on a District level.
Agriculture related construction projects: Through specifically the Land Redistribution for Agricultural Development Programme of the Department of Land Affairs and the Department of Agriculture and Environmental Affairs funding for agricultural development is available. Opportunities specifically for irrigation projects are currently under investigation and should this be found to be feasible will present opportunities in the construction sector.
4.5 TRANSPORT
4.5.1 Overview of the Transport Infrastructure and Sector in the District
The Coal Line Study (Robinson 1999) undertook a detailed analysis of the transport infrastructure and the transport sector in the District. A brief overview is provided here of the key transport infrastructure serving the district as presented in this study.
4.5.1.1 Road Transport Infrastructure
Firstly the study identified the Coal Line Corridor as a route of national significance as one of five road links between Gauteng and KwaZulu-Natal. Comparatively the distances of the five main routes are as illustrated in the table below:
TABLE 4.9: SIGNIFICANT LINKAGES BETWEEN GAUTENG AND THE COAST ROUTE DISTANCE MAIN COMPONENT 1 Johannesburg – Durban 578km N3 (not in ZDM) 2 Johannesburg – Standerton – Newcastle – Ladysmith – Durban 610km (not in ZDM) 3 Johannesburg – Vrede – Newcastle – Vryheid – Richards Bay 640km (in ZDM) 4 Johannesburg – Piet Retief – Pongola – Richards Bay 638km N2 (in ZDM) 5 Johannesburg – Piet Retief – Vryheid – Richards 657km (in ZDM) Source: Robinson & Associates 1999
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Within the Zululand District Municipality key road infrastructure includes:
the N2 stretching from Piet Retief through Pongola south towards Richards Bay; the R33 entering Zululand north of Paulpietersburg, passes through Vryheid and links up to Dundee (associated with the Coal Line Corridor); the R34 entering Zululand to the west of Vryheid, passes through Vryheid and links up to Melmoth in the south (associated with the Coal Line Corridor); the R66 linking Ulundi with the R34 stretching northwards through Pongola; P700 linking Ulundi with the Umfolozi Nature Reserve; (Vryheid – Louwsburg – Magudu)
Robinson & Associates (1999) makes the important observation that the roads associated with the Coal Line Corridor “traverse broken and hilly terrain in place, making the route unsuitable for heavy vehicles”. This observation is illustrated by the experience of Valaqua located seven kilometres to the north of Paulpietersburg who freight their products to Durban via Pongola. Although this route is 50 kilometres longer than the Vryheid-Melmoth route it apparently takes four hours less.
4.5.1.2 Rail Infrastructure
The Coal Line, which started operations in 1976, links 44 coal mines in Mpumalanga to the bulk export port of Richards Bay. The line runs from Witbank through Piet Retief, Paulpietersburg, Vryheid East, Ulundi to Richards Bay. Although initially designed to convey 21 million tons of coal exports per annum the route was upgraded in 1989 and in 1997 it conveyed 62 million tons of coal to Richards Bay (Robinson 1999). This was expected to increase to 70 million tons by the year 2000. Importantly, the Coal Line Study notes that the 200 truck dedicated coal trains (of which there are 23 per day) “do not stop at stations within the corridor except to changes crews. All these trains return empty”.
Further to this it was found that there is approximately 17 general freight trains on the line, transporting 30 000 tons of goods to Richards Bay, including fero-chrome, granite, chrome, steel and timber. Although most of the freight is loaded north of Zululand substantial amounts of timber is loaded in the eDumbe and Vryheid areas. The trains are reported to return with approximately 10 000 tons of goods (Robinson 1999).
4.5.1.3 Air Transport Infrastructure
Two airports of note is located in the District Municipality, viz. the Ulundi Airport and the Vryheid Airport.
The Ulundi Airport is licensed and considered to be a regional airport. The airport consists of two bituminous runways, a taxiway, apron, three large hanger, a terminal building and associated parking garages (Crous Wolff Associates 2000). Two daily scheduled flights (in and out) is catered for on weekdays on the Ulundi-Durban-Pietermaritzburg route. The airport also caters for numerous un- scheduled flights associated with provincial government, tourism and business.
The Vryheid airport was built to Civil Aviation standards and has a tar and gravel runway. Robinson (1999) reports that it is no longer a licensed airport as scheduled flights to Vryheid was discontinued in the mid-1980s partly because of a change in the operating company and partly because of the closure
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of major coal mines in the Vryheid area. The municipal parks department maintains the airport. In 1999 on average four private flights landed at the airport daily.
It should further be noted that a private investor, KwaZulu Private Game Farms, has recently established a compacted earth and gravel runway in the Magudu area of the uPhongola Municipality. This facility will be able to handle freight planes such as a Hercules and up to 20 seater passenger planes. The facility is currently also being utilised by neighbouring game farms (Potter and Taljaard pers com 2003).
4.5.1.4 The Transport Industry
Within the broad transport industry in the Zululand District Municipality distinction can be made between various sub-sectors, viz. road freight transport, public road transport, air transport and rail freight transport. In terms of the “informal” sector stakeholders also identitify the so-called “bakkie” industry responsible for the transport of goods from distributors/wholesalers to a range of retailers located in the rural areas. Each of these sub-sectors is discussed in brief below.
Road Freight Transport: The Abaqulusi IDP (2002) suggests that the road freight industry has experienced substantial growth in recent years, the growth relating primarily to the timber industry. In Abaqulusi there is an estimated 15 road transport related business, whereas approximately seven such business focussing on the timber transport industry is located in eDumbe. The Coal Line Study (1999) identifies a “mosaic … in relation to the flow of goods and services” in the region. The two dominant patterns are raw materials taken out of the area and neighbouring areas to be processed elsewhere and a flow of consumer goods into the area. Raw materials extracted from the region includes: timber – from areas around Vryheid, Paulpietersburg and Vryheid; maize – from the Vryheid area; cattle – from the Vryheid-Ulundi area; sugar cane – from uPhongola; and coal – from several smaller mines.
Road Transport: Public transport in the District as a whole is dominated by the mini-bus taxi industry. As an example it is estimated that approximately 190 taxis were operating in the Ulundi Municipality in 2000 (Robinson Ellingson 2000). Although a number of bus companies also operates in the area this is suggested to make up a relatively small portion of the public transport sector. Robinson & Associates (1999) distinguishes between five distinct movement patterns of people in the Coal Line corridor area, viz.
business people moving in the corridor and to areas outside of the corridor; people coming to do business at various places along the corridor from metropolitan areas and neighbouring regions; daily commuting from rural areas to smaller urban centres and larger towns for work and to gain access to commercial and social services; daily influx of public sector workers into provincial, regional and local government offices in Ulundi from Melmoth, Vryheid and other areas; and tourists, both international and domestic, travelling by coaches or in smaller vehicles to destinations such as the battlefield, sites of historic, cultural and eco-tourism significance.
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Rail Transport: See Section 4.5.1.2
Air Transport: See Section 4.5.1.3
“Bakkie” industry: The so-called “Bakkie” industry is responsible for the transport of goods from key nodes such as Vryheid and Ulundi, and the wholesalers located in these nodes to smaller and rural commercial ventures. It is suggested that the “bakkie” industry is an important link in the distribution of goods throughout the Zululand area, however, as no studies in this regard has been undertaken this is difficult to quantify.
4.5.2 The Competitiveness of the Transport Industry
4.5.2.1 Factor conditions
Availability of primary infrastructure networks (+): As previously illustrated the District has access to a good primary road infrastructure network linking all the municipal centres. The only substantial missing link is the untarred section of the road linking Nongoma to Pongola.
Locational benefit for transport industry (+): In terms of major national and provincial transport corridors the District is well located with access to the N2 and the alternative routes linking the east coast ports of KwaZulu-Natal with Gauteng.
New road infrastructure (+): Plans are in place and, as far as could be established, funding allocated for the upgrading of the two “missing links” in the District, viz. the P700 between Ulundi and the Hluhluwe Game Reserve and the untarred section between Nongoma and Pongola.
Underdeveloped secondary infrastructure networks (+/-): Although a number of rural communities have difficulty accessing municipal centre the Department of Transport continue to take responsibility for the maintenance and upgrading of rural roads.
Congestion on specific sections (-): Investigations previously undertaken suggests that industries transporting goods from the Paulpietersburg and Vryheid to the coast generally prefer to do this over Pongola as the section of the R34 between Melmoth-Eshowe experience congestion which causes substantial time delays. This will in the longer term not only impact on freight transport, but also on other traffic passing through the region.
Lack of facilities (specifically for trucks) (-): Most studies suggest that lack of specifically truck stop facilities on the R33 (Paulpietersburg to Vryheid) and R34 (Vryheid to Ulundi) detract from the use of this route by road freight companies. Proposals for the establishment of such facilities in the Vryheid and Ulundi areas have previously been considered.
Overloading of trucks (-): The overloading of bulk freight transport trucks on the routes in Zululand is said to be substantial. This overloading impacts on the quality of road infrastructure.
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4.5.2.2 Firm structure and strategy
Bulk freight industry in eDumbe/Abaqulusi growing (+): Indications are that there has been substantial growth in the road freight transport industry in eDumbe and Abaqulusi. A total of 15 transport related businesses exist in Abaqulusi and there is an estimated seven transport businesses in eDumbe. Raw materials transported by these businesses include timber, maize, cattle, sugar cane (uPhongola) and coal from the smaller mines in the area. The number of transport businesses in the area suggests the development of a sector cluster which may benefit from greater levels of cooperation.
Established sector focussed on timber industry (+/-): The timber industry made a substantial contribution to the establishment of the transport industry. As future growth in the timber industry will be limited it is not envisaged that there will be substantial growth in the industry is not expected.
Strong informal component of transport industry (+/-): Both the taxi and the “bakkie” industry fulfil an important role in respectively the movement of people and the movement of goods in the area. These industries can be viewed as part of the informal sector of the economy. Approaches to supporting and strengthening these industries need to be considered. Specifically the impact of the re- capitalisation process on the local taxi industry needs to be considered.
4.5.2.3 Markets
The Public Transport Market (+/-): In the absence of other modes of transport it is envisaged that the taxi industry will continue to benefit from the transport of people between rural locations and urban centres. This is an established market, however, substantial growth in this market sector is not envisaged.
The Bulk Freight Market (+/-): At present production in the primary sector is stagnant and major growth is not expected in the short to medium term (with the possible exception of the mining industry). Therefore, although a strong market for bulk freight services has been established, major growth in this sector is not envisaged. Increased activity in the manufacturing may create further opportunities relating to this market.
The Tourism Transport Market (+): Depending on the extent of growth in the tourism sector opportunities in the tourism transport sector could be opened up. Opportunities relating to the tourism transport sector could include:
the transport of large tour groups in buses; the transport of smaller groups for day excursions which would suit the mini-bus taxi industry; specialised game viewing vehicles; general vehicle rentals; and others.
Further to the above, the airports in the District , both Ulundi and Vryheid, could benefit substantially from increased tourist activity in the District and the proposed upgrading of the P700 between Ulundi and the Hluhluwe-Umfolozi Game Reserve.
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4.5.2.4 Related and supporting services/businesses
Growth in other economic sectors (?): Growth in the transport sector is substantially dependent on growth in the agriculture, mining and manufacturing sectors. Without these industries limited opportunities for growth in the transport sector exists.
Lack of facilities for trucks (-): The absence of suitable truck stops on major routes through the area has previously been discussed.
4.5.2.5 Government
Focus on improving road access (+): Provincial and local government are committed to the upgrading of the primary road network, i.e. the P700 and the R66.
4.5.2.6 Synopsis: Competitiveness of the Transport Sector
At present the District does not benefit substantially from the well developed primary transport infrastructure (rail, road, air). The alternative routes offered by the District should be further developed and marketed. Approaches to supporting the “informal” transport sector should be investigated. As is the case for the construction sector, this sector will benefit from development in the tourism, manufacturing and commercial sector.
4.5.3 Opportunities in the Transport Industry
Rural Road Upgrading and Maintenance: The Department of Transport continue to take responsibility for the upgrading and maintenance of rural roads. The upgrading of rural roads will continue to establish better linkages between settlements, rural nodes and municipal centres, this increasing access to economic opportunities. At the same time rural road construction creates much needed job opportunities. Through the innovative rural road maintenance programme of the Department further job opportunities are created and entrepreneurs are developed in the rural areas. To maximise the impact of these programmes of the Department of Transport there continues to be a need for greater coordination between the integrated development planning processes of local municipalities and the planning undertaken by the Department (the Department is currently guided in its planning by Rural Road Transport Forums whose activities are not always integrated with that of the municipalities). It is essential that prioritisation of road upgrading and maintenance projects is also guided by economic development priorities.
Ulundi “19”: The proposed petrol filling station and information centre is viewed as a lead project impacting on both the transport and tourism sector in the District. This strategically located development will increase the attractiveness of this alternative route between Gauteng and the KwaZulu-Natal coast. It will also provide an opportunity for informing people passing through the area of the attractions which the area has to offer.
Vryheid Truck Stop: The need for establishing a stop-over point for trucks in the Vryheid area has been identified in various planning studies. The viability of such an opportunity needs to be further investigated.
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Transport Opportunities relating to Tourism Sector: See Section 4.5.2.3.
Transport Opportunities relating to Manufacturing Sector: See Section 4.5.2.3
4.6 MINING
4.6.1 Overview of the Mining Sector
4.6.1.1 Coal Mining in the National Context
In 2001 world coal production increased by 5.4%. However, Prevost (2002) notes that in the South African context coal production (saleable quality) decreased slightly by 0.6 Mt to 223.5 Mt. Production output improved and decreased in various coalfields and in this regard it is interesting to note that the production of the Vryheid coalfields increased by 54.1%2 whereas the output of the Nongoma coalfield decreased by 13.6%. Of the saleable coal production in South Africa some 88% was supplied by mines controlled by the five larger mining groups, viz. Ingwe (Biliton), Anglo Coal, Sasol, Eyesizwe and Kumba Resources. Of the total (run-of-mine) production Mpumalanga’s output was 83% of total South African production, followed by the Free State with 9%, Limpopo with 7%, and the remaining 1% by KwaZulu- Natal. These figures provides a clear context of the extent of coal mining currently underway in KwaZulu-Natal.
Importantly for the Zululand District is the fact that some 65.9 Mt of coal, representing more than 90% of South African exports, was exported through the Richards Bay Coal Terminal (transported on the Zululand Coal Line) during 2001, this being 1.4Mt less than the previous year. It is suggested that due to the slump in coal prices experienced in the year the three major exporters of coal decreased output and exports (Prevost 2002).
The average price per ton for South African export coal was R245 per ton. Other prices of relevance were R292 per ton for anthracite, R449 per ton for bituminous low ash coal and R244 per ton bituminous steam coal. Compared to the previous years this represents increase of R92/t, R106/t and R86/t respectively (Prevost 2002).
The domestic market for coal was 152.2Mt, translating into a value of R9 565 billion. Domestic markets for coal in 2001 included the electricity sector (89Mt at R51/t), the synthetic fuels sector (48Mtat R64/t) and the industrial sector (6Mt at R112/t). Prices of bituminous coal on the local market increase by10.7% in 2001, whereas that of anthracite rose by 26.5% (Prevost 2002).
Again, important in the Zululand context is that the price of anthracite on both the local and export market is improving. South African output in terms of quality and volumes is also set to increase as a result of higher production and new mines coming on line in 2002 (Prevost 2002).
Prevost (2002) summarises the outlook for the potential entry of empowerment groups and small mines into the coal industry as follows:
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“Some understanding have been reached between the large coal producers and the newcomers in the industry in South Africa, especially in the area of exports and sharing of infrastructure. There could also be co-operation amongst companies in the task of determining the national coal reserve. Negotiations with companies to release unused reserves to economic empowerment companies have been more successful thus far, as some of the main producers decided to divest themselves of their non-essential reserve blocks.”
4.6.1.2 Coal Mining in the District Context
Coal mining historically provided a major impetus into the local economy of Northern KwaZulu-Natal. However, over the past 15 years a number of mines in the area ceased operation impacting negatively on the regional economy. The Abaqulusi Municipality was particularly affected by the closure of the Coronation and Hlobane mines in 1997 and 1998 respectively.
According to Robinson and Associates (1999) the two remaining mines in the area, owned by Duiker, produce about 0.5 million tons per year. These mines also fulfil an important role in handling the output from a number of smaller mines. Zululand Anthracite, a mine owned by Ingwe, is located some 50 kilometres from Ulundi. In 1999 it was reported that this mine experienced considerable security problems. Urban Econ (2002) identifies the following “Operating and Developing Coal Mines” in the Zululand District, viz. Hlobane Colliery, Heritage Colliery, Vryheid Coronation Colliery, Natal Anthracite Colliery and Nyembe Colliery. The Nongoma Municipality listed KwaZiphethe and E-Sinkonkonko mines as being inactive, whereas the eDumbe Municipality indicated that the Longridge mine in its area is inactive. Map 10 contained in Annexure D reflects the mines currently listed on the Geographical Information System of the Zululand District Municipality.
A paper prepared by Mr Rod Whyte (2003), a consulting geologist active in the Vryheid area for a number of years, provides an understanding of the coal mining industry in northern KwaZulu-Natal. He notes that coal mining has been undertaken in the area since the late 19th century, but that the coal reserves has been largely depleted. Only a few mines in the area are therefore still in full production. Historically the full range of coal, from high volatile bituminous through coking and lean bituminous, to anthracitic coals, has been mined in northern KwaZulu-Natal.
Whyte (2003) distinguishes between a number of coal fields (or subsidiary basins) in northern KwaZulu- Natal, viz. the Klip River Coalfield (Newcastle/Dundee area); Utrecht Coalfield; Vryheid Coalfield; Zululand Coalfield (Nongoma area); Somkele/Msebe.
The so-called Vryheid and Zululand Coalfields listed above are located in the Zululand District Municipality area. The Vryheid Coalfield stretches from west of Vryheid in a broad band to the east of Louwsburg and is further divided by Whyte (2003) into the Zuinguin Mountain area, the Hlobane/Matshongololo area, the Thabankulu/Enyati Mountain area and the Ngwibi Mountain area.
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The Zululand Coalfied starts to the north of Nongoma town and stretches in a broad band to the south. Portions of the eDumbe Municipality is further included into the Utrecht Coalfield.
Whyte (2003) indicates that in the Utrecht field coal was exploited at Dumbe near Paulpietersburg as early as 1889. Coal production in the Vryheid Coalfield was initiated in the Hlobane and Zuinguin Mountain area since 1898, with coal being mind at the Hlobane Colliery continuously for more than 100 years before the closure of the mine in 1999.
The Vryheid Coalfield: The Vryheid Coalfield was previously a large coal producer, but Whyte (2003) states that the coal is now largely worked out. Historically the large mines in the area, Hlobane and Vryheid Coronation, produced Coking coal. Natal Amonium, NAC and several others produced anthracite. According to Whyte (2003) a few small remnants of anthracite are still being exploited. The low phosphorous content of coal in certain areas (relating to the “Gus Seam”) “encourages exploitation for metallurgical uses”.
The Zululand Coalfield: The coal found in the Zululand Coalfield is high grade metallurgical anthracite. Whyte (2003) states that the Zululand Coalfield is the largest national producer of anthracite, but that this coalfield is controlled by one major company, compared to the multitude of companies in the other coalfields.
Whyte (2003) concludes his paper with a statement on the future potential of coal mining in the area which reads as follows: “There are still mining opportunities available for small to medium sized operators in the coalfield, in areas which large companies discarded as being uneconomical. The profitability will be dependent on the cost of mining and rehabilitation, coal quality, marketability and export opportunities. A large pool of skills still exists”
4.6.1.3 Current Mining Activities in the District3
The following mining activities of note in the District have been identified by Whyte (pers com 2003): Current mining of the remnant pillars in the old Hlobane Mine for coking quality coal by a local company Planned mining at the Little Hlobane area if proved to be economically viable Brockwell mine 15 kilometres south of Paulpietersburg mined for lean/bituminous anthracite by a local entrepreneur Two shafts (one coking/lean coal and the other anthracite) being mined at the Ami Colliery by a local entrepreneur The coal in the Zululand coalfield is almost wholly owned by Ingwe who are successfully operating the Zululand Anthracite Collieries (ZAC) A 25 million ton coal reserve at Somkele is being developed by AfriOre A further coal reserve of 40 million ton near Nongoma may be considered for mining in the near future (infrastructure problems needs to be resolved. The Klipwal gold mine in the uPhongola Municipality is being mined successfully by an Australian company Dolorite quarries are in existence in Abaqulusi and Nongoma.
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4.6.1.4 Possible Future Mining Operations
Over and above the current mining activities Whyte (pers com 2003) identifies the following potential mining operations in the District:
Capital Coal, who owns the bulk of the coal reserves in the Abaqulusi area, is in liquidation and the company assets will be sold off by auction. A new black empowerment company, Leeuw Bros. has bought the old Anglo Coal reserves and may buy the Capital Coal reserves and assets which include mining equipment, a washing plant, adits for access into the coal reserve and a rail siding at Sikame. This is viewed as a potentially promising development. The Thabankulu Mountain contains reserves of coal which has been dormant for years. The reserves are owned by Richards Bay Minerals who regard the coal as a strategic reserve. According to Whyte these reserves can sustain a relatively large mining operation. Various other reserves in the Vryheid area is currently considered for exploitation by private individuals.
4.6.1.5 Key Issues to be Considered Relating to the Mining Sector
Key issues relating to the mining sector in the District to be considered include (Whyte pers com 2003):
The potential for large scale mining by corporations in the District is over, however, sufficient coal is still available in the area to support several successful small mines. The coal reserves in the area is generally in thin seams, thus requiring scraper mining, which makes it labour intensive. The coal is generally anthracitic with a large proportion having a low phosphorus content. This makes it sought after by the metallurgical industry. A large pool of mining expertise among all population groups still exists in the Vryheid area. A key issue in developing the mines will be the identification of markets – “no markets, no mine” Washing facilities are necessary for a large proportion of the remaining reserves. Washing is part of beneficiation process before the coal can be sold. Existing plants are both being utilised. Illegal mining is considered to be a problem in the area; and there exists a local demand for coal in winter.
4.6.2 Competitivess of the of the Mining Sector in the District
4.6.2.1 Factor conditions
Skills in mining sector (+): With more than a century of coal mining in northern KwaZulu-Natal substantial local capacity has been developed and established. It is accepted that substantial parts of this capacity would have been lost to the region after the closure of the key mines in the past decade, however, enough capacity would have remained in the area to support attempts aimed at reviving the sector. According to Whyte (pers com 2003) these skills exists among all groupings in the Abaqulusi area.
Existing coal deposits (+/-): It is evident from Whyte’s (2003) paper that the geological conditions in both the Vryheid and Nongoma areas hamper mining activity, specifically that of large scale mining. He
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states that “… the whole of the KwaZulu-Natal coalfield has been extensively intruded by a number of Dolerite Sills and Dykes, which have had a major effect on the structure of the coalfield and the rank of coal found within the coalfield”. However, despite this detracting from the viability of large scale mining this presents opportunities for small scale mining operations. It is further understood from discussion that reference to the depletion of coal in the Vryheid coal field specifically refers to the depletion of coal that can be mined on a large scale.
Transport infrastructure for coal export (+): The coal fields in Vryheid and Zululand is strategically located in terms of the Coal Line (railway line for the transport of coal). Road transport distances to the rail network can be minimised and the cost of transport from Zululand to the port of Richards Bay should also be substantially less compared to coal mined elsewhere. This provides the coal mines in Zululand with a comparative advantage. Location will however not be a comparative advantage should the focus be on the mining of coal for the South African metallurgical industry.
Security (-): From interviews conducted for the 1999 Coal Line Study it was evident that the security of mine personnel in remote rural locations was an issue of concern.
4.6.2.2 Firm structure and strategy
Ownership of mining rights (-): Although an analysis of mining rights in the Vryheid and Zululand Coal Fields has not been undertaken it is evident that large portions of the mining rights in the areas is still owned by the major mining companies previously active in the area. Efforts to establish a strong small scale mining industry in the area will be hampered by access to mining rights in the area. New legislation, providing for mining rights to revert back to the State, may however reduce this on the establishment of small mines.
Large scale mining not viable (+/-): Opportunities for future large scale mining in the District is limited, but not non-existent. This obviously presents a limitation for the development of the industry in the area, however, this also presents the area with the unique opportunity for focussing on the establishment of small scale mines.
Illegal mining operations (+/-): According to industry stakeholders there is a proliferation of illegal mining activity in the area. Local people continue to mine disused or closed mines without appropriate equipment, skills and resources. In doing this the illegal miners put their general health and even their lives at risk. The existence of illegal mining operations, however, illustrates that there are people who can derive an income from the industry on an informal basis and who are already to some extent skilled in the industry. The challenge for the formalisation of these activities will be to achieve formalisation without reducing the income of illegal miners and without pushing these persons out of the industry.
4.6.2.3 Markets
Local demand for coal in winter (+): It is reported that a local demand for coal for energy purposes exists within the winter months in Zululand. The potential of these markets and the best possible approaches to establishing these markets should be further investigated.
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Stable export market (+): Two issues currently impact on the viability of accessing the export market for coal, viz. the downward trend in the price of coal (although 2001 saw some recovery) and loss of international market share to the United States and China. However, the growth in the international production of coal illustrates that opportunities still exists if quality coal can be delivered at the right prices and quantities.
Domestic markets for coal (+/-): The domestic market is still the major market for coal mined in this country, however, the price per ton achieved on the local market is substantially lower than that on the export market (the 2001 price for Anthracite on the domestic market was R168 per ton compared to the R292 per ton achieved on the export market). Further to this, the location of mines in Northern KwaZulu-Natal may make it less viable to deliver to the domestic market. Substantial local markets for metallurgical quality coal which is found in the District do, however, exist.
4.6.2.4 Related and supporting services/businesses
Support services for mining industry (+): Although the majority of support services for the mining industry had to either close down or identify new local markets for their services it is assumed that the core skills and expertise needed to support a revival of the mining industry is still available.
Marketing of coal (-): An important requirement for the establishment of small scale mining activities in the area will be the ability of these mines to market their product. Small scale miners will lack both the expertise and the capacity to achieve this on their own. Possible approaches to marketing the coal produced by small scale miners need to be identified.
Mine rehabilitation (+/-): Mine rehabilitation is now enforced by new mining legislation and new mines established are required to submit rehabilitation plans when applying for mineral rights. In the past mines were opened and closed without much attention being afforded rehabilitation. If funding for the rehabilitation of now defunct mines can be secured this in itself presents a major opportunity for local and district job creation.
4.6.2.5 Government
Support for the establishment of small mining sector (+): The government and specifically the Department of Minerals and Energy acknowledges that the small scale mining sector requires support specifically through the pre-feasibility and feasibility stages of a mining project. For this purpose a National Steering Committee of Service Providers to the Small Scale Mining Industry (NSC) has been established. Various government departments and government institutions such as Khula Enterprise Finance, the Industrial Development Corporation, and Ntsika Enterprise Promotion, and the CSIR is represented. In order to support activities on a local level the Department promotes the establishment of Regional Small Scale Mining Committees. Various national, provincial and local government departments are to be represented on these committees. The Regional Committee “is intended to serve as the agent to identify the exact nature and problems created by each specific, illegal and/or sub- optimal small-scale mining operation in the region, and explore avenues through which these problems can be addressed. These committees will also constitute the capacity which will receive applications for assistance in developing greenfield projects” (DME 2003).
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ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT
Mining legislation (+/-): A strong regulatory framework for the establishment and operation of mines exists within South Africa. Although this should be viewed as positive this regulatory framework also impacts negatively on the ability of potential small scale miners to obtain access to the industry. The Department of Minerals and Energy is, however, fully aware of this and does provide support to small scale miners in this regard.
Environmental legislation (+/-): Although a positive development in the South African mining sector environmental legislation also makes it more difficult for small scale miners to obtain access to the industry. A key requirement of the Mineral and Petroleum Resources Bill is that the holder of a prospecting right, mining right or mining permit must make financial provision for rehabilitation as prescribed I the regulations (Swart, undated).
4.6.2.6 Synopsis: Competitiveness of the Mining Sector
Although it is not financially viable for major corporates to mine existing coal reserves considerable opportunity for small scale mining still exists (in both Abaqulusi and Nongoma). The area has an exceptionally strong mining skills base in all communities that can be utilised. Central to the success of small scale mining activities will be to gain access to markets (i.e. a marketing strategy). Potential markets have already been identified.
4.6.3 Opportunities in the Mining Sector
As indicated in previous sections the key opportunity in the mining sector is the establishment of small scale coal mines. Small scale coal mines can, however, range considerably in size. In order to place the opportunity in context a small scale mine can be described as a scraper mine producing 6 000 tonnes of coal per month. A mine such as this will cost between R1million and R3million to establish depending on the extent of infrastructure already available at the mine. Between 80 to 100 people will be employed for underground work in such a small scale mine. Above ground job opportunities will also be established (Whyte pers com 2003). An environmental management plan (EMP) for such a mining operation will cost anything up to R200 000 to prepare.
Various opportunities relating to the mining activity will also potentially be established. These opportunities include:
Mine rehabilitation Engineering support Equipment maintenance and support Preparing EMPs
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