Coega investors primed for expansion

LOGICAL CHOICE: Staff at the Digistics warehouse in Zone 1 of the Coega Industrial Development Zone (IDZ) are preparing for a future move as the company expands its operational capacity in the IDZ. Here Simphiwe Gxekwa (left) checks stock received with packer Lwazi Mduduma at the current Digistics warehouse.

Business in the Coega Industrial Development Zone (IDZ) is reaching new heights that a number of investors are planning plant expansions, while others have built current operations in such a way that there is room to ramp up production the moment demand exceeds supply, the Coega Development Corporation (CDC) said today.

To date, there are 28 investors either at operational or in construction phase in the Coega IDZ boosted by an investment pipeline of R151 billion and a deepening socio-economic impact which has seen in excess of 50 000 jobs created since inception.

"Coega's success is increasingly evident in such statistics and is a commendable achievement in light of economic challenges in South Africa and the world over the past few years," said CDC Head of Marketing and Communication, Dr Ayanda Vilakazi.

With growth on the agenda, a series of companies such as cold chain logistics facilitators, Digistics Digital Logistics, Coega Dairy and UTi Distribution have already started with plans to expand within the Coega IDZ.

"Some of the developments seen in the Coega IDZ are a function of expansion as current investors' businesses grow, stimulated by, among others, an improving economic climate and increased competitive advantage through the ‘blue sea' competitive approaches," said Christopher Mashigo, CDC Business Development Executive Manager.

"But most importantly it is investors' buy-in to Coega's value proposition and their confidence in entrenching themselves in the IDZ that is yielding positive results within the zone. As a result, we are seeing IDZ activities that not only centre on the key attraction of new investors, but growing sustainability of existing investment."

A prime example of such expansion is that of long-standing Coega IDZ investor, UTi Distribution, which needed a bigger warehouse for its operations. The building is expected to be valued at about R30 million. The company currently employs about 89 staff members.

Danie Gerber, UTi Distribution Branch Manager for Distribution, explaining part of the rationale behind the expansion, said that it had "built a strong relationship with Coega over the past five years".

"I also believe that the growth point in the Eastern Cape will be the Coega IDZ. We also have faith in the CDC – the response from senior management to any issue is what gives us confidence in Coega."

The company, which currently operates from a 2 700m² building, will be moved to a 2 800m² building currently under construction, an increase of 100m² capacity, closer to the end of this year.

"Plans are completed, all the legal details signed off and the site hand-over took place in late March so that clearing could take place," Gerber added.

The expected date for completion of the expansion will be later this year in the fourth quarter of 2014.

Another logistics investor due to expand because its operations demand more space is Digistics Digital Logistics, which has exclusive distribution contracts to supply the world's two largest fast food companies, KFC and McDonalds..

Digistics has outgrown its current 2 285m² facility in Zone 1 of the Coega IDZ – a space it has occupied for six years – in favour of a larger 4 510m² facility. Construction of the new Digistics warehouse facility is due to start at the end of May this year.

Other investors have also been planning expansion programmes as an integral part of their long-term strategic planning. To date the growth of Discovery's call centre in the Coega Business Process Outsourcing (BPO) park has been unparalleled with it employing over 500 people with plans to grow this to 700 in the future.

"Two of Coega's significant foreign investors, First Automotive Works (FAW) and Agni Steels South Africa, are planning expansion programmes in the near future, an indication of the investors' confidence in the Coega IDZ as a sustainable world class location for business growth," said Dr Vilakazi.

CLEAR VIEW: Clearing is underway on site at the new location of UTi Distribution’s future warehouse facility on Zone 1 of the Coega Industrial Development Zone.

Agni Steels SA has positioned itself to ramp up production the moment the demand for its steel billet or other steel applications exceeds demand by including space for an extra furnace on its production line.

Both FAW and DCD Wind Towers (DCD) have earmarked neighbouring sites in the Coega IDZ as potential areas for phase 2 of their developments.

For FAW this means the possible establishment of a 30 000 per annum passenger car assembly plant and for DCD possible contracts in round three of Department of Energy's Renewable Energy Independent Power Producers Programme (REIPPP).

"Powerway, which is about to open its doors in the Coega IDZ, also has its eye on an adjacent piece of land for its phase two of production," said Dr Vilakazi, following an announcement last week that the CDC had secured a R127-million investment from the Poweway/Sungrow Joint Venture (JV) in addition to the R666-million Powerway/JA Solar JV signed last year.

"Coega's growth is focused not only on attracting new investors, but also ensuring and supporting the sustainability of existing investors – so the indications from our basket of operational and coming investors is that the IDZ is the right place for business growth and long-term commitment that will provide both security, sustainability and space for growth," Dr Vilakazi said.