Ground has at last been broken on the Musina-Makhado Special Economic Zone (Mmsez), a vast industrial zone that extends across Limpopo’s northern Vhembe District encompassing multiple development sites, of which the lode star is a huge steel manufacturing cluster near Makhado set to double annual steel production in South Africa.

At a briefing on 21 September 2022, the parliamentary Portfolio Committee on Trade and Industry was told that after seven years of delays, the bulldozers have rolled on site. The audience of MPs seemed distinctly unimpressed. Perhaps in his presentation, CEO of the Mmsez SOC, Lehlogonolo Masoga, should not have breezed over the remarkable combination of gall and stealth it has taken to get to this point.  

The commencement of construction certainly heralds a new phase of a tender-fest which began when the plan to build a large smelter north of the Soutpansberg was conceived back in 2014 as a way to make the rights to the Soutpansberg coal deposits pay — precipitating a tsunami of studies by consultants hired to make the scheme appear feasible enough to pass muster. This is despite the lack of power, water, the distance to seaports, the chronic glut in steel markets, the growing risks of exploiting coal resources in the context of the climate crisis, and the collateral damage — not least to other industries — from severe environmental degradation in a Unesco Biosphere Reserve.

It’s impossible to determine how much has been spent thus far since the Sez Advisory Board, the statutory body presiding over the Department of Trade, Industry and Competition’s (DTIC) re-booted Industrial Development Zone programme has failed to meet its obligation to produce an annual report since financial year 2017-2018 (at which point, R23-million had been disbursed from the kitty — the Sez Fund — for the pre-designation feasibility studies) and the Mmsez SOC has not published results since its registration that same year.

One can only hope that the R32-million declared in the annual report of its parent, the Limpopo Economic Development Agency (Leda) for financial year 2020-2021 is the high-water mark of the spending on consultants who couldn’t get the job done.

The manoeuvring by a state-sponsored developer to circumvent its own regulatory barriers to unsound development has been quite something to witness. Leda’s February 2019 application to the Limpopo Department of Economic Development Environment and Tourism (Ledet) for “environmental authorisation for the proposed metallurgical cluster of the Musina-Makhado Sez” scoped out in full in the accompanying Scoping Report, somehow became an application only for “site establishment” of the South Site of the Mmsez, shrivelling the scope of the Environmental Impact Assessment (EIA) in relation to the scope of this latter-day Iscor and its cumulative impact. Yet opening the gates to even this Trojan horse has proved a struggle.

In his Final EIA Report issued in February 2021, Ronaldo Retief, the Environmental Assessment Practitioner (EAP) paid by the applicant, Leda, to conduct the EIA and make a recommendation, stubbornly withheld recommending authorisation. Only after he quit and his substitute, Ishmael Semenya, had “revised” the Final EIA Report, did Ledet get the recommendation it sought.

In the end, it took three years, two EAPs, a 960-page EIA padded with three dozen specialist reports and the determined violation of a complex architecture of policies, plans and laws, but on 21 February 2022, Ledet finally granted itself authorisation for land clearance for the biggest, dirtiest and thirstiest industrial development in SA history.

On 8 July 2022, the appeals brought by a host of civil society organisations — including Wits University’s Centre for Applied Legal Studies (Cals) and All Rise Attorneys; the Centre for Environmental Rights acting for groundWork, Earth Life Africa, Mejcon and Dzomo La Mupo; Natural Justice; Christo Reeders representing the Unesco Vhembe Biosphere Reserve, the EWT, several nature reserves and farming interests; Wessa and BirdLife Africa — were dismissed in one-page dispatches from MEC Thabo Mokone.

Following the announcement, Masoga crowed in the press that he was done bending over backwards for the thousands of registered interested and affected parties — the “champions of poverty” in the words of this loyal ANC cadre, and “advocates for the perpetuation of unemployment” whose egos had gotten in the way of “our people”, the “voiceless poor of Limpopo” — and “unnecessarily delayed” the R257-billion mega-project.

Leda has shrewdly avoided a repeat of this fiasco however at the subordinate North Site of the Mmsez near Musina by just pretending to have the required environmental authorisation for the advertised mining and industrial activities planned for the Musina Sez, which technically, isn’t even an Sez. It has never been gazetted as such and isn’t entitled to the dubious privileges attached to these paradise islands for business, which include slashed taxes and workers who lose the right to strike at the heavily subsidised factory gates.

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With nothing but a self-awarded authorisation for a container yard and a vegetable market in hand, the Mmsez has secured the release of R600-million (of R2.9-billion) for the bulk infrastructure for the North Site, and in April awarded the R200-million tender to build the internal roads to Tshiamiso Trading 135 Pty Ltd, a company that was found guilty in the Polokwane high court last year of having committed tender fraud for a road construction contract in Tzaneen local municipality. Twenty locals have been employed.

Still, the windfalls for the likes of Tshiamiso are just scraps. In its pitch in support of the 2015 application for Sez designation, the DTIC quoted a sum of R1.2-billion for internal bulk services at the South Site against a projected contribution to GDP of R58.9-billion cumulatively over 20 years.

The 2019 Internal Masterplan revised that cost estimate to R40.1-billion, to be split between the SOC and the zone’s operator. The further cost to the SA fiscus of developing the external infrastructure to supply the zone was calculated to be R56-billion, excluding the so-called Musina Dam — a Cahora Basa for the Limpopo River, from which 90% of the zone’s vast water needs are supposed to be met.

This renders the returns on the country’s investment negative before the cost of debt or the monstrous externalised costs are accounted for. Imagine this happening in the private sector: shareholders foolishly vote in favour of a high-risk, low-return acquisition that the directors reckon will cost R1.2-billion, which turns out to cost R100-billion, without provision for interest and a critical dependency — water.

It is tempting to just dismiss the whole thing as fatuous. Certainly, no one can watch the sponsored promos on YouTube without snorting — one video actually features robots polishing the flat-screen TVs of the delighted inhabitants of the “smart city” relaxing in their skyscraper apartments adjacent to the noxious industrial zone. Except that China shares the motive, has the means and has agreed to back the Mmsez under the Framework Agreement between the DTIC and China’s National Development and Reform Commission on Production Capacity Cooperation.

A raft of MOUs was signed at the 2017 Forum on China-Africa Capacity Co-operation with heavyweight Chinese parastatals. Too little is disclosed to be certain, but they appear to be limited to the construction phase of the Mmsez. This makes sense considering that China is the world’s biggest steel exporter, frequently accused of dumping tons of its unwanted steel output on global markets, including South Africa, and that capacity cooperation is a policy to absorb over-capacity in China’s domestic manufacturing and construction industries: “Cooperation” typically takes the form of loans in exchange for contracts for its firms to develop the production capacity for the borrower, not add to its own.

That there is in fact no foreign steel maker wanting to make steel in Makhado to sell to buyers somewhere would explain the complete sham of grappling with the crippling power supply issues connected with the manufacturing of the metal dubbed “congealed energy” and on a colossal scale.

A dedicated 4,600MW coal-fired power plant that was to have been built in phases by PowerChina has been scrapped, according to glib statements issued by Masoga, in favour of a 1,000MW solar plant — despite the fact that solar power was rejected as not viable in the Energy Impact Assessment undertaken for the EIA.

At the groundbreaking ceremony held at the North Site in June this year, a deal with an Australian company was also announced to develop a “large-scale coal-to-hydrogen project” to produce what was incredulously referred to as “green hydrogen” for electricity generation to supplement the power supplied from what will be the biggest solar farm on the African continent.

In his latest comments in Limpopo Business, a government mouthpiece, the beleaguered CEO professes to being “humbled by the resilience of our Chinese investors in the metallurgical complex” who have not been deterred by the hold up in delivering his end of the bargain — environmental regulatory approvals.

No one else should be grateful for their patience however, considering that they are prima facie not investors but contractors, who will win contracts to build a white elephant under the opaque terms of loans that South Africa will have to repay on top of all the other costs of slapping up a chain of coal-guzzling furnaces on the edge of the nine new coal pits of the Soutpansberg for the benefit of MC Mining (formerly Coal of Africa), the two-bit Aussie-listed mining house bankrolled by the Industrial Development Corporation which holds the rights to the Soutpansberg coalfields.

As the 20 locals employed by Tshiamiso wield picks in the dirt at the Mmsez North Site, a new era of tender fraud perpetrated under the cloak of the DTIC’s failing industrial policy has dawned. The Musina-Makhado Sez is the biggest, but it is only one of 11 Sezs designated since the policy was adopted in 2014. Only five are operational, all of them are loss-making and none would survive without ongoing hand-outs.

Eight more are in the pipeline.

Eight. DM