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Coega signs R11bn deal with Chinese car maker
(from Business Report by Roy Cokayne on August 19,2016)


The Coega Development Corporation (CDC) has signed a historic R11 billion investment deal with the Beijing Automobile International Corporation (BAIC) from China for the establishment of a completely knocked down (CKD) vehicle manufacturing plant in the Coega Industrial Development Zone (IDZ).

The signing follows BAIC committing in December to invest R11bn in a manufacturing plant in South Africa.

The BAIC investment is an outcome of the Forum on China-Africa Co-operation (FOCAC) held in Johannesburg in December, where President Jacob Zuma and Chinese President Xi Jinping signed 26 bilateral agreements valued at about R100bn.

The investment in the plant will be funded largely by BAIC and the Industrial Development Corporation (IDC).

It was previously estimated that 10 000 direct and indirect jobs would be created by the investment.

The department of trade and industry yesterday described the deal as the biggest automotive investment in Africa in the last 40 years.

Trade and Industry Minister Rob Davies said the investment was significant and deepened South Africa's economic relationship with China.

"The investment is strategic and is a major project in terms of our bilateral relationship and a key project supported by the inter-ministerial committee on investment," he said.

Davies added that the project positioned the Eastern Cape as an automotive hub and had the potential of deepening the component supply chain, job creation and economic development.

Mandla Mpangase, a spokesman for the IDC, confirmed to Business Report earlier this year that the first phase development of the plant would create a facility with a capacity to produce between 40 000 and 50 000 units a year, with the plant's capacity doubling in the second phase.

Mpangase said the partners were looking to commence with the construction of the plant towards the end of this year or the beginning of next year.

The IDC has previously indicated that it will be taking a between 20 percent and 35 percent shareholding in the venture. The main shareholders at that stage in the venture were the IDC and BAIC South Africa.

Mpangase said the cost to the IDC of its shareholding in the project would be determined by "the bankable feasibility study".

He said they were looking at a number of vehicle platforms in the plant, with the models produced earmarked for South Africa and the rest of Africa, with BAIC planning to enter the South African market this year with completely built up imports.

"We're looking at potentially sedans and SUVs," he said. Ebrahim Patel, the Minister of Economic Development, said in his budget vote speech in Parliament earlier this year that if the proposed establishment of a vehicle manufacturing plant by BAIC met the feasibility study criteria, it would be the first new light passenger assembly plant to be built in the country in more than 40 years.

The CDC is the operator of the 11 500-hectare Coega IDZ, which is strategically located adjacent to the deep water Port of Ngqura and a few kilometres away from the Port Elizabeth port and its container, car, break-bulk and bulk terminals.

It also has easy access to rail, road, air and sea network because it is linked to all major in land road transport routes.

The CDC has in the last four years has attracted investments with a combined of R31.93bn through the signing of deals with 54 new investors.

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