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DURBAN Southern Industrial Basin

Posted On Friday, 06 July 2001 03:01 Published by
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Community expectations and uncertainty challenge industry
Community expectations and uncertainty challenge industry
The South Durban Industrial Basin (SIB), which the unicity has identified as a key economic area in need of "a strong regeneration thrust", is dying.
Violent strike action in May at the Engen oil refinery there did little to boost confidence in a zone dotted with empty factories and warehouses.
Die-hard industries in Mobeni and Jacobs say they are battling to raise capital to grow. Banks and businesses say uncertainties that weigh heavily on business confidence in the area hinge on the longstanding war between industry and the surrounding communities.

It's not clear, either, whether national government intends developing the basin as SA's petrochemical hub, which would mean investment by refineries and secondary industries. Businesses are also under pressure to conform to stringent environmental standards in the already heavily polluted area. Government has yet to announce future sulphur dioxide levels for fuels and these could make further investment necessary.
Durban Chamber of Commerce CE Jeya Wilson says key global industries such as petrochemicals, pulp & paper and the motor industry are well represented in the area - a fact remarked on by the Monitor Report, an economic study carried out by international consultants headed by Michael Porter of Harvard University for the Durban unicity. "It follows that the establishment of an Industrial development zone in the basin is critical," Wilson says. "This would also take into account investment in the adjacent port and create jobs. However, unless key industries are supported, this can't happen."
She adds that the community needs to form the third corner of the triangle with government and business and an "us and them" mentality needs to be eradicated.
"Business cannot be seen only as profit-hungry and communities cannot lose their right to object to injustices, but we have to realise that we're in this together. If we don't get key projects off the ground, we'll go into slow degeneration, if not accelerate decline."
The Monitor Report is more direct: if Durban continues on its current path it will slide into real economic crisis within the next 10 years. At least 40 000 jobs have been lost over the past four years and at least half of all remaining manufacturing positions are at serious risk. The report estimates that without intervention, more than 100 000 manufacturing jobs could be lost over 10 years. Already, the city's annual economic growth is less than 1% if you exclude food and Industrial chemicals, the only sectors still growing marginally.
Several big tourism projects are on the cards, but they are not enough.
The Monitor Report puts Durban's unemployment at 46%, substantially higher than the official rate of 26,5%. Unofficial statistics suggest that unemployment in the Wentworth and Merebank communities bordering the southern Industrial basin are as high as 60%.
For many of these people, a month's temporary work during Engen's five-week annual maintenance shutdown was the only chance they would get all year to earn a wage. Engen outsourced the maintenance to contractors, who employed local workers. But a dispute over take-home pay (after Revenue tightened up on taxation) resulted in the workers downing tools for two-and-a-half of the five weeks. Engen eventually paid a further R1,7m to sort out the pay problem, but there had been violence, injuries and arrests. The company also had to scale down the maintenance project by 30% and lost R1,5m/day for the delay in starting up the refinery again.
Much of the anger at Engen arose from perceptions that the refinery "owed" jobs to members of the community who had worked there temporarily for up to 10 years. The number of temporary workers quadrupled to 4 000 for the maintenance period, says Engen communications manager Barbara Manson, but this number could not be employed permanently.
Engen's extensive corporate social investment programme may have aggravated, rather than soothed, emotions in the surrounding communities. In addition to joining other SIB industries such as Sapref and Mondi in creating the South Durban Training, Evaluation & Recruitment Centre, which trains skilled artisans, Engen's own training centre turns out at least 100 graduates a year.
"In a way, we have raised an expectation that we will provide our graduates with jobs. However, there are more graduates than jobs, leading to something of a crisis of expectations," Manson says.
Engen has a high profile as a target. Not only is it one of the top two employers in the area and the producer of 15% of SA's petroleum products, it has also spoken out about issues such as education and health care, she says. "We have dared to engage the community and, in so doing, exposed our underbelly, making ourselves extremely vulnerable."
But it is not the only company using the contract system. All over SA, construction and engineering companies, already working at less than 60% of capacity in a difficult business climate, can afford only a small core of specialist permanent staff. The rest are employed on short-term contracts through labour brokers to cut down administration costs.
The maintenance contractors say the resentment that hit Engen so hard could be a serious impediment to delivering other key projects on time and within budget. This could repel international investors. Engen, for example, is Malaysian-owned. Sapref, the refinery jointly owned by Shell and BP, represents Dutch and British investment, while Japanese manufacturer Toyota is looking to expand its interest in the Prospecton plant .
The high risk of delays would also harm the prospects of critical local projects such as the mooted relocation of Durban's airport to La Mercy on the north coast. Such a relocation would release quality Industrial land not only for new industry, but for a multimillion-rand dugout harbour that could transform Durban into a highly efficient container-cum-petrochemical handling port.
KwaZulu-Natal MEC for economic development Michael Mabuyakhulu says a decision on the La Mercy airport is due before year-end. "However, investment cannot just be linked to a piece of land," he says. "Investment must also be fundamentally joined to opportunities that are linked to trade agreements, ideas and innovations suited to our context. Such opportunities, ideas and innovations are rooted in a culture of investor confidence and excitement."
Though all is now quiet at Engen, within the southern Industrial basin community support remains the missing ingredient for attracting investors

Publisher: Financial Mail
Source: Shirley Jones
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