A decision not to proceed with the planned $1,6bn aluminium smelter project in the Coega industrial development zone (IDZ) could 'seriously hamper' the development of the zone, according to an environmental impact assessment carried out by the Council for Scientific and Industrial Research (CSIR).

The document, which is before government, gives a broad thumbs up to the smelter project, suggesting there will be 'no negative impacts of high significance, provided that all mitigation measures are applied effectively'.

French aluminium pioneer Pechiney is in charge of the project, and is expected to take a final decision on whether to go ahead once the SA authorities have concluded their scrutiny of the assessment, and once other investors have signed up.

The CSIR study suggests that if the Pechiney project were to be cancelled, this will not necessarily stop the development of the Coega IDZ.

However, there will be a significant fallout from 'the loss of positive social and economic impacts associated with securing Pechiney as an anchor tenant for the IDZ.

'Secondary developments in the IDZ will be slowed and international investors and developers may lose confidence in the potential of the IDZ, which could seriously hamper the zone in achieving its objectives. '

There will also be a delay in job creation and skills development 'especially if there should be a drop in investor confidence'.

The report notes that if other projects replace the smelter, these, too, will have a negative effect on the environment.

It suggests the investment will not only provide the Coega IDZ with an anchor tenant, but will be a 'vote of confidence' and induce further investment inflows.

The report looks at both local and general effects on the environment by the Coega smelter.

It says generation of power for the smelter will result in an increase of about 4% in Eskom's atmospheric emissions, and an increase of about 2% in total carbon dioxide emissions.

The effect of fluoride emissions on goats within the Coega IDZ boundary will be of 'low significance' and the effect on tourism at the nearby Addo national park is judged to be 'insignificant due to the distance of the smelter from the park'.

However, the report is inconclusive on the effect of the smelter on two rare butterfly species in the IDZ, aloeides clarki and lepidochrysops bacchus.

The report suggests total expenditure on the smelter will be just over $2bn in the construction period from 2003 to 2005.

'This expenditure consists of 1,042bn of direct investment, of which approximately 53% will consist of imported goods; and a further $1,054bn of indirect investment and financial reserves and debt financing costs.'

The sale of aluminium will generate $510m a year, and boost SA's balance of payments.

'However, this will be reduced by imports and capital outflow as a result of repayment of international debt and remittances such as dividends'.