Power needed for investment

Daily Dispatch Editorial: The announcement last week that aluminium producer Rio Tinto Alcan was shelving plans for a multi-billion rand smelter at Coega strikes a heavy blow against promoting foreign direct investment (FDI) into South Africa. In a joint announcement on Friday, the Trade and Industry Department, the Industrial Development Corporation, Rio and Eskom blamed concerns over electricity supply as the main reason for the decision. “We acknowledge that although some progress was made in discussions regarding the supply of electricity to the Coega aluminium smelter project, it was insufficient to proceed,” the statement said. The parties said in the wake of unplanned power cuts in early 2008, they “agree that the current context regarding the supply of electricity has changed significantly”. Put another way: Eskom’s failure to guarantee a steady electricity supply to the power-intensive smelter is the main reason why the project was pulled. It means thousands of potential jobs created by the project have now been lost. We agree with Port Elizabeth regional Chamber of Commerce and Industry chief Kevin Hustler, who said that “efficient and reliable electricity supply is a critical factor in attracting industrial investment. “Eskom thus plays a crucial role in this country’s ability to attract and retain investments,” he told our sister paper, The Herald. “Investors need certainty and stability and it is essential that Eskom demonstrates that they take seriously their responsibility for providing the right conditions to attract and retain investment.” But the tacit admission by Eskom also holds wider implications for the Coega project, which at times has been plagued by a number of doubts. Although a project like the 720000-ton smelter planned for Coega would require vast amounts of electricity, it raises a question over the sustainability of other projects as well. Earlier this month a memorandum of understanding for a R75billion oil refinery at Coega was signed between government and PetroSA. The agreement which PetroSA chief Sipho Mkize claimed would provide 18500 permanent jobs was given a five-year time frame. PetroSA is now in the process of looking for partners to invest in the project. But without a guarantee from Eskom on power supply, any future plans for investment in the cash-hungry Coega industrial development zone may be in serious jeopardy. This at a time when FDI is becoming more crucial than ever before. Any multinational who pulls an investment is another setback for our country.