Conflicted Limpopo agencies charged with policing a proposed Chinese-run industrial zone are not up to the task. Exhibit A: The wildly skewed operator agreement.
On 2 March 2017, an “operator agreement” was signed between the Musina-Makhado Special Economic Zone (SEZ) and a Chinese company called Shenzhen Hoimor Resources Holding Company.
The SEZ was represented by Tshepo Phetla, the then-acting chief executive of the Limpopo Economic Development Agency (LEDA), while Shenzhen Hoimor was represented by Hong Kong businessman Yat Hoi Ning.
Read Limpopo’s dirty great white elephant and Limpopo’s dirty white elephant part 2: the dodgy designation for more on Ning’s controversial background and the appointment of his company as the operator for a R40 billion coal-powered mineral processing zone.
— News24 (@News24) April 7, 2020
The operator agreement is disturbing in the way in which it mortgages responsibility for this mega-project to an unknown foreign entity.
No registration number for Shenzhen Hoimor is included in the formal document and amaBhungane was unable to trace the company.
The agreement effectively hands over control and management of a large patch of South African soil for a huge industrial project – dubbed the “metallurgical cluster” – that will have a national impact on resources, exports, pollution, and greenhouse gas emissions as well as on the local Limpopo environment, labour market and economy.
There are several specific concerns worth highlighting.
The appointment of Shenzhen Hoimor as the operator is exclusive, meaning the company cannot be displaced as long as the agreement is valid, which is 90 years with an option to extend for a further 30.
READ | Limpopo Economic Development Agency fights to retain mining stake after Chinese failure
Shenzhen Hoimor is given the responsibility to “ensure compliance with all applicable laws and regulations” – something that appears contrary to its authority, its competence and its own interests.
Indeed, the responsibilities granted to the company are wide – not least to “take complete and overall responsibility for the establishment, development, planning, control, security, operation and management of the metallurgical cluster”.
Specific responsibilities include to:
- Take overall responsibility, as the general contractor and operator, for all infrastructure projects within the metallurgical cluster.
- Assume responsibility for environmental protection initiatives, water and power supply, as well as transportation projects.
- Assume the responsibilities of a lessor and administrator of the metallurgical cluster.
- Establish and operate vocational and technical schools.
- Establish a customs bonded area and logistics and transport service platform.
- Adopt rules and regulations for businesses within the metallurgical cluster in order to promote their safe and efficient operation.
- Recommend to the SEZ board whether to approve an application by a business to locate within the metallurgical cluster.
This list underlines the almost total abrogation of responsibility within the SEZ by the South African authorities.
Oversight has been further weakened via a policy to leave decisions to small, under-resourced and conflicted provincial entities, such as the Limpopo Department of Economic Development, Environment and Tourism (LEDET) and the LEDA.
The LEDA, the “project sponsor” for the whole development, is an agency of the LEDET.
The proposed SEZ will have large national implications, suggesting it might not be appropriate for provincial institutions to be exercising oversight and control.
For instance, the LEDET has been designated the competent decision-making authority for the environmental impact assessment that will determine whether the project goes ahead.
Environment Minister Barbara Creecy has refused to get involved despite a powerful plea from the Centre for Environmental Rights which we deal with in part 4.
In other words, the LEDET will sit in judgement of a project of which its own agency is the sponsor, which the LEDET has already agreed to fund and which its political master, Premier Stan Mathabatha, has personally championed.
The LEDET is inherently conflicted given that its mandate combines economic development and the environment. For instance, its 2019/20 operational plan commits it to “ensure effective SEZ work-streams implementation”.
Economic Development MEC Thabo Mokone was a director of the LEDA when the SEZ applications and decisions were made.
In a 2019 article in the China Reform Daily, Mokone confirmed he “100% supports” the development.
“We will spare no effort to ensure that all obstacles are removed so as to ensure the success of our investment in the special economic zones,” he is quoted as saying.
The LEDET head of department, Solly Kgopong, is similarly compromised by his written and public endorsement of the SEZ project.
Will any of them stand in the way of a R40 billion Chinese juggernaut promising 21 000 jobs?
Perhaps, fortunately, there are still a number of conditions and milestones attached to the agreement.
We asked the government about these.
Were the required approvals obtained in terms of the Public Finance Management Act for the conclusion of this agreement?
Did the minister of rural development approve the lease agreement between the LEDA and Mulambwane Communal Property Association which owns the land on which the metallurgical complex will be built?
Did Shenzhen Hoimor ever provide the required road map setting out the timetable for the planning, construction, supply of infrastructure and utilities within the metallurgical cluster?
Had Shenzhen Hoimor ever delivered the required annual report to the minister of trade and industry on its financial accounts and activities as well as a business and financial plan for the next year?
Had Shenzhen Hoimor applied for South African government funding as provided for in the SEZ act?
There was no response.
Perhaps because the promised billions have not flowed in.
In a parliamentary answer on 17 October 2018, the minister of trade and industry said at that stage there were “no approved projects that received investment support from Chinese companies”.
“The DTI, LEDET and its agency, LEDA, are currently finalising technical due diligence processes with potential investment companies from China.”
More than two years later, there is still no clarity on the promised investments but the deal is still on the table.
In January this year, the minister told Parliament: “The initial investor interest was from Chinese enterprises and it is expected that more enterprises, including locally owned companies, will be encouraged to locate in the zone.”
The minister also said the environmental impact assessment for the metallurgical cluster was “currently underway and is targeted for completion in 2020″.
That will not happen without a fight – as we shall see in Part 4.
The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB Supporter to help us do more. Sign up for our newsletter to get more.