2015
Nkangala Steel and Metal Fabrication Hub
Feasibility – Phase 4 draft document
Prepared for:
NKANGALA DISTRICT MUNICIPALITY
Prepared by:
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Contents
Section 1: Introduction .............................................................................................................................. 6
1.1
Introduction .................................................................................................................................. 6
1.2
Methodology................................................................................................................................. 6
1.3
Report Outline............................................................................................................................... 7
Section 2: Legislative Overview ................................................................................................................. 8
2.1
Introduction .................................................................................................................................. 8
2.2
National Policies ............................................................................................................................ 8
2.3
Provincial and District Policies .................................................................................................... 10
Section 3: Economic Analysis ................................................................................................................... 13
3.1
Introduction ................................................................................................................................ 13
3.2
Economic Sectors ........................................................................................................................ 13
3.3
Production Structure and Growth .............................................................................................. 15
3.4
Sectoral Employment .................................................................................................................. 16
3.5
Manufacturing Sector ................................................................................................................. 18
Section 4: Metals Market and Market Trends ......................................................................................... 28
4.1
Introduction ................................................................................................................................ 28
4.2
Stainless Steel ............................................................................................................................. 28
4.3
Carbon Steel ................................................................................................................................ 34
4.4
Aluminium ................................................................................................................................... 37
4.5
Product Development and Equipment ....................................................................................... 42
4.6
Welding School ........................................................................................................................... 46
4.7
Metals Manufacturing Research and Development Centre ....................................................... 47
4.8
Middelburg Metals Manufacturing Cluster ................................................................................ 48
4.9
Location Assessment................................................................................................................... 49
Section 5: Industrial Market Demand ...................................................................................................... 54
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
5.1
Introduction ................................................................................................................................ 54
5.2
National Industrial Property Performance.................................................................................. 54
5.3
Property Market and Economy ................................................................................................... 54
5.4
Industrial Market Trend .............................................................................................................. 56
5.5
Local Municipality Development Focus Points ........................................................................... 58
5.6
Industrial Market Demand .......................................................................................................... 59
Section 6: Financial Assessment .............................................................................................................. 64
6.1
Introduction ................................................................................................................................ 64
6.2
Construction................................................................................................................................ 64
6.3
Operational Expenditure............................................................................................................. 65
6.4
Projected Income ........................................................................................................................ 66
6.5
Cash Flow Statement .................................................................................................................. 67
Section 7: Economic Impact Assessment ................................................................................................. 69
7.1
General Assumptions .................................................................................................................. 70
7.2
Estimated Impact during Construction ....................................................................................... 71
Section 8: Risk Assessment ...................................................................................................................... 73
8.1
Introduction ................................................................................................................................ 73
8.2
Economic Risks ............................................................................................................................ 75
8.3
Environmental Risks .................................................................................................................... 76
Section 9: Incentive Scheme .................................................................................................................... 77
9.1
Introduction ................................................................................................................................ 77
9.2
Incentive Package ....................................................................................................................... 77
9.3
Eligibility Criteria ......................................................................................................................... 77
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figures
Figure 3.1: Annual GVA Growth Rate, 2003 – 2013 .................................................................................... 15
Figure 3.2: Sectoral GVA, 2013 ................................................................................................................... 16
Figure 3.3: Employment Growth, 2003 – 2013 ........................................................................................... 17
Figure 3.4: Sectoral Employment ................................................................................................................ 17
Figure 3.5: Manufacturing Sector GVA Growth, 2003 – 2013 .................................................................... 18
Figure 3.6: Contribution to Nkangala DM Manufacturing Sector GVA, 2013 ............................................. 19
Figure 3.7: Manufacturing Sector Breakdown, 2013 .................................................................................. 19
Figure 3.8: Nkangala DM Main Industries Growth, 2003 – 2013 ............................................................... 20
Figure 3.9: Steve Tshwete LM Main Industries Growth, 2003 – 2013........................................................ 21
Figure 3.10: Metal Manufacturing in Nkangala DM, 2013 ......................................................................... 21
Figure 3.11: Manufacturing Sector Employment Growth 2003 – 2013...................................................... 23
Figure 3.12: District Manufacturing Sector Employment Contribution...................................................... 23
Figure 3.13: Breakdown of Manufacturing Sector Employment ................................................................ 24
Figure 3.14: Nkangala DM Prominent Industry Employment Growth, 2003 – 2013 .................................. 24
Figure 3.15: Steve Tshwete LM Prominent Industry Employment Growth, 2003 – 2013 .......................... 25
Figure 3.16: Metal Manufacturing Employment in Nkangala DM .............................................................. 25
Figure 5.1: Transport, storage and communications sector performance, 2003 -2013 ............................. 56
Tables
Table 2.1: Industrial Areas per District Municipality .................................................................................. 11
Table 2.2: Nkangala District Industrial Areas .............................................................................................. 11
Table 3.1: Sector Review ............................................................................................................................. 14
Table 3.2: Location Quotient Interpretation............................................................................................... 22
Table 3.4: Municipal Comparison ............................................................................................................... 26
Table 3.5: Major Exports ............................................................................................................................. 27
Table 4.1: Aluminium Fabricators ............................................................................................................... 41
Table 4.2: Evaluation Grading System ........................................................................................................ 52
Table 4.3: Site Evaluation Matrix ................................................................................................................ 52
Table 4.4: Weighted Success Factors, 2015 ................................................................................................ 53
Table 5.1: Construction Costs ..................................................................................................................... 64
Table 5.2: Funding Structure....................................................................................................................... 65
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Table 5.3: Operational Expenditure (R’000) ............................................................................................... 66
Table 5.4: Projected Income (R’000)........................................................................................................... 66
Table 5.5: Cash Flow Statement (R’000) ..................................................................................................... 67
Table 5.6: Funding ....................................................................................................................................... 68
Maps
Map 2:1: Industrial Areas in Steve Tshwete LM ......................................................................................... 12
Map 4:1: Available Industrial Land in Steve Tshwete ................................................................................. 51
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Section 1: Introduction
1.1 Introduction
Urban-Econ was appointed by the Nkangala District Municipality in reaction to a request for a proposal
from Nkangala District Municipality to conduct a feasibility study for the establishment of the
Mpumalanga Steel and Metal Fabrication Hub.
Purpose: To undertake focused market research to determine the economic viability
of establishing a Steel and Metal Fabrication Hub in Nkangala District Municipality
1.2 Methodology
This project will be done in 3 phases as seen in the Diagram below.
Diagram 1.1: Project Methodology
1. Pre-Feasibility
Market Assessment
Preliminary
Viability
Component
Preferred Location Identification
2. Feasibility
Component
Analysis
Project Description
Technical Viability
Market Analysis
Economic Viability
Financial Analysis
Impact Assessment
Risk Assessment
3. Business Plan
Project Description
Market Study
Compilation
Regulatory
Requirements
Financial Information
Technical Viability
Funding Structure
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
1.3 Report Outline
The remainder of this report will be structured as follows:

Section 1 – Legislative Overview

Section 2 – Economic Analysis

Section 3 – Socio-Economic Profile

Section 4 – Market Trends and Indicators

Section 5 – Market Demand

Section 6 – Financial Assessment

Section 7 – Impact Assessment

Section 8 – Risk Assessment
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Section 2: Legislative Overview
2.1 Introduction
There are a number of important National, Provincial and Local policies that guides development in
South Africa. It is important to take note of these policies when planning new developments. This
section will examine the key aspects of the most important pieces of legislation and policies.
2.2 National Policies
2.2.1 National Development Plan (NDP) 2030
The National Development Plan is tailored on reducing poverty and the inequality gap. Furthermore,
much attention is given to young people in endowing them with economic opportunities, better
education, entrepreneurial training and opportunities to participate in community development
programmes and promoting gender equality. According to the NDP, the proportion of households with a
monthly income that is below R419 per person (in 2009 prices) must be reduced from 39% to 0% and
the Gini coefficient, which is a measure for inequality, must be reduced from 0.69 to 0.6. In order to
combat unemployment, a 5% annual growth in the economy must be attained on average. In order to
attain this annual growth rate, there are propositions that have been made which includes support for
small businesses through improved coordination of development finance institutions, relevant agencies
and public and private incubators.
2.2.2 The New Growth Path
The South African government employed three official economic programmes during the 1994-2009
periods, namely; the Reconstruction and Development Programme (RDP), the Growth Employment and
Redistribution Programme (GEAR) and the Accelerated and Shared Growth Initiative of South Africa
(AsgiSA). These programmes were implemented in order to increase the economic growth rate, reduce
the unemployment rate and inequality. With the failure of this programmes, the government introduced
the fourth programme, the New Growth Path (NGP) on 23 November 2010. The New Growth Path (NGP)
is intended to increase economic growth to sustainable annual rates between 6% and 7%. The
sustainable annual growth rate is meant to create about five million more jobs by 2020, thereby
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
reducing the unemployment rate by 15%. There are measures that have been developed to support
long-term competitiveness; enterprise development is one of those measures.
2.2.3 Industrial Policy Action Plan (IPAP) 2013/14 – 2014/15
The Industrial Policy Action Plan is one of the integrated instruments aimed at growing the economy and
job creation. The Department of Trade and Industry launched a revised three year IPAP aimed at
growing and expanding the industrial base of South Africa which is built on the National Industrial
Framework. This plan seeks to assist and has demonstrated good success in the following economic
sectors, namely; automotive, clothing, textiles, leather and footwear. Furthermore this policy seeks to
contribute meaningfully to the following three sectoral clusters of the economy:

Sectors specialising in metal fabrication, capital and transport equipment, green and energy
saving industries and agro-processing

Expands on the sectors which were identified in the first IPAP, namely automotive and
components, medium and heavy vehicles, plastic, pharmaceuticals and chemicals, clothing,
textiles, footwear and leather, bio-fuels, paper, pulp and furniture, creative and cultural
industries and Business Process Services

The third cluster concentrates on sectors with the potential for long term development, namely;
nuclear, advanced materials, aerospace and defence electro-technical and ICT sectors.
This plan also introduces the new Manufacturing Competitiveness Enhancement Programme (MCEP)
which is aimed at developing investment confidence in the manufacturing sector and to improve the
competitiveness of labour intensive and value-adding manufacturing sectors which are adversely
affected by economic shocks such as currency instability and global economic depression. The new IPAP
identifies Special Economic Zones (SEZs) in order to sustain long term industrial and economic
development and to facilitate the development of new industrial regions and also equipping the existing
ones.
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
2.3 Provincial and District Policies
2.3.1 Mpumalanga Economic Growth and Development Path (MEGDP)
Key sectors for job creation in Mpumalanga:

Agriculture

Manufacturing

Infrastructure

Mining
The Province is targeting to create 47 000 jobs in the next ten years in the manufacturing sector. In
order to reach this goal, the following constraints should firstly be addressed: poor infrastructure
development, difficulty in acquiring funding for development and the non-availability of required skills.
The key areas for intervention to facilitate growth and job creation in the manufacturing sector
according to the MEGDP are as follows:
•
Target sectors that ensure beneficiation
•
Enhance skills development, especially in the areas of engineering, artisan, business and project
management.
•
Recruit technology and skills from outside our borders as beneficiation require high level skills
and technology
•
Invest in industrial infrastructure to encourage enterprise development
•
Provide comprehensive support to SMME development
•
Partner with the Department of Science and Technology and other institutions, such as the
institutions of higher learning, to research areas of the economy which can benefit
communities.
2.3.2 Nkangala Spatial Development Framework

Principle 1: To achieve a sustainable equilibrium between urbanisation, biodiversity
conservation, industry, mining, agriculture, forestry and tourism related activities within the
District, by way of effective management of land uses and environmental resources.

Principle 7: To concentrate industrial and agro-processing activities at the higher order nodes
in the District where industrial infrastructure is available.
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As far as industrial activity is concerned, the existing industrial areas in Steve Tshwete (Columbus Steel)
and Emalahleni (Highveld Steel) should be maintained and enhanced through service maintenance and
upgrading programmes. These industrial areas would be the main focus areas for heavy industries and
manufacturing.
Table 2.2.1: Industrial Areas per District Municipality
Ehlanzeni DM
Gert Sibande DM
Nkangala DM
Mpumalanga
Developed Erven
726
830
1,200
2,756
Undeveloped Erven
252
243
494
989
Total Erven
978
1,073
1,694
3745
1,789
2,338
3401
7,528
474
98
790
1,362
2,263
2,436
4,191
8,869
Projected 2032 Demand for Land
552
1,209
1,538
3299
Deficit/Surplus (Ha)
-78
-1,111
-748
-1,937
Developed Erven (Ha)
Undeveloped Erven (Ha)
Total Area (Ha)
(Source: Nkangala SDF, 2014)
Table 2.2: Nkangala District Industrial Areas
Victor
Dr JS
Emakhazeni
Emalahleni
Steve
Thembisile
Khanye
Moroka LM
LM
LM
Tshwete
Hani LM
LM
LM
Developed Erven
75
27
20
279
444
43
Undeveloped Erven
33
2
29
591
121
30
Total Erven
108
29
49
870
565
73
Developed Erven (Ha)
117
30
40
1,273
1,906
35
Undeveloped Erven (Ha)
28
3
26
124
584
10
Total Area (Ha)
145
33
66
1,397
2,490
45
Projected 2032 Demand
89
54
17
1,002
366
25
-61
-51
9
-878
219
-15
for Land
Deficit/Surplus (Ha)
(Source: Nkangala SDF, 2014)
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Map 2:1: Industrial Areas in Steve Tshwete LM
(Source: Nkangala SDF, 2014)
2.3.3 Industry participants
Chrome-alloy and steel manufacturers in the Emalahleni and Middelburg area:

Middelburg Ferrochrome (Samancor Chrome plant)

Ferrometals (Samancor Chrome plant in Emalahleni)

Ervaz – producing steel and vanadium bearing slag in Emalahleni

Columbus Steel – producing stainless steel flat products in Middelburg

Thos Begbie Holdings (Middelburg) – beneficiation

Assmang – ferro-chrome smelter in Machadodorp
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Section 3: Economic Analysis
3.1 Introduction
The purpose of this section is to provide an updated Economic Profile using the latest economic data
available, and additional economic techniques were utilised in order to add value to the previous profile.
This provides an overview of the current economic situation, in Steve Tshwete LM. This overview
incorporates sectoral performances and composition as well as overall growth performance in the
economy.
During this chapter the economic performance of Steve Tshwete LM will be evaluated by making use of
secondary data obtained from the Quantec Resource Database and Statistics SA. In order to determine
the value and performance of the various economic sectors, growth rates were calculated in terms of
expansion or contraction of the economy in terms of GVA values. In addition to this, various other
techniques were used to analyse the economy of Steve Tshwete LM, by using the given data and the
various techniques will be explained in detail in the designated sections.
The economic performance of a region can be measured by Gross Value Added (GVA) in terms of,
factors such as production activities. The GVA can be used to provide an oversight of the region’s
economy, in this case the economy of Steve Tshwete LM. In addition it can provide insight into the
structural composition of the economy as well as the growth rate of production. This allows us to
identify the comparative advantages for the given region, to determine the vulnerability (concentration)
of the economy and the overall welfare of the community.
3.2 Economic Sectors
The salient features of the economic conditions in the various local areas are discussed in this
subsection. In order to facilitate a situation whereby the individual economic activities throughout the
District can be measured, a standardized classification is utilised. The following sub-section offers a
delineation of the various economic sectors as per the Standard Industrial Classification (SIC).
The main categories of the South African Standard Classification of all Economic Activities (SIC) of 1993
(CSS, 1993) are utilized for this purpose. A total of 9 sectors are distinguished. A frequently asked
question for example, relates to, into which sector tourism falls. The tourism generally spans across the
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economic sectors, ranging from accommodation and catering (SIC no: 6410 and SIC no: 6420) retail and
wholesale (SIC no: 61221 and SIC no: 6220), manufacturing (e.g. of arts and craft – SIC no: 39299),
business services and social services. Activities such as sport are included under the community services’
sector under SIC no: 9641. The 9 economic sectors are defined as follows:
Table 3.1: Sector Review
Sector
Description
Agriculture
The agriculture sector incorporates establishment and activities that are primarily engaged
in farming activities, but also includes establishments focusing on commercial hunting and
game propagation and forestry, logging and fishing.
Mining
This sector includes the extracting, beneficiating of minerals occurring naturally, including
solids, liquids and crude petroleum and gases. It also includes underground and surface
mines, quarries and the operation of oil and gas wells and all supplemental activities for
dressing and beneficiating for ores and other crude materials.
Manufacturing
This sector is broadly defined as the physical or chemical transformation of materials or
compounds into new products and can be classified into 10 sub-groups.
Utilities
This sector includes the supply of electricity, gas and hot water, the production, collection
and distribution of electricity, the manufacture of gas and distribution of gaseous fuels
through mains, supply of steam, and the collection, purification and distribution of water.
Construction
This sector includes the site preparation, building of complete constructions or parts
thereof, civil engineering, building installation, building completion and the renting of
construction or demolition equipment with operators.
Trade
The trade sector entails wholesale and commission trade, retail trade, repair of personal
household goods, sales, maintenance and repair of motor vehicles and motor cycles, hotels,
restaurants, bars, canteens, camping sites and other provision of short-stay accommodation
Transport, storage
Transport as an economic sector refers to activities concerned with land transport, railway
and
transport, water transport and transport via pipelines, air transport, activities of travel
communication
agencies, post and telecommunication, courier activities, as well as storage and warehousing
activities.
Financial
and
business services
This sector includes inter alia financial intermediation, insurance, and pension funding, real
estate activities, renting or transport equipment, computer and related activities, research
and development, legal, accounting, bookkeeping and auditing activities, architectural,
engineering and other technical activities and business activities not classified elsewhere.
Social, community
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This sector includes public administration and defence activities, activities of government,
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Sector
and
Description
government
services
government departments and agencies, education, public and private, health and social
work, sewage and refuge disposal, sanitation and similar activities, activities of membership
organisations, recreational, cultural and sporting activities, washing and dry-cleaning of
textiles and fur products, hairdressing and other beauty treatment, funeral and related
activities.
3.3 Production Structure and Growth
This subsection provides an overview of the production structure, growth performance and Industry
Classification System in order to identify the most important economic sectors in the study area. The
Gross Value Added product of three areas of reference is utilised to provide an indication of the
economic performance of the relevant study area.
Gross Value Added (GVA) is defined as the difference between output and intermediate
consumption for any given sector/industry. That is the difference between the value of goods
and services produced and the cost of raw materials and other inputs which are used up in
production.
Figure 3.1 indicates the yearly GVA growth rate between 2003 and 2013 in Mpumalanga, Nkangala DM
and Steve Tshwete LM.
Figure 3.1: Annual GVA Growth Rate, 2003 – 2013
6%
4%
2%
0%
-2%
-4%
-6%
Mpumalanga
Nkangala
Steve Tshwete
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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From the Figure it is evident that the levels of GVA growth has not returned to the levels it was before
the 2008/2009 slump; the average annual growth rate in Steve Tshwete between 2003 and 2008 was an
estimated 4%, compared to the average annual growth rate after 2009 of 1%.
Figure 3.2 illustrates the contribution each sector makes to the local economy (in terms of GVA) of Steve
Tshwete LM. From the Figure it is evident that the mining sector contributes the most to the local
economy (25%), followed by the manufacturing sector (21%).
Figure 3.2: Sectoral GVA, 2013
30%
25%
25%
21%
20%
15%
10%
5%
0%
Steve Tshwete
Nkangala
Mpumalanga
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
3.4 Sectoral Employment
Figure 3.3 indicates the formal employment growth in Mpumalanga, Nkangala DM and Steve Tshwete
LM. Employment has recovered somewhat in Steve Tshwete LM from the slump where there was 4%
decline in employment growth but since 2010, employment growth has been consistently only 2%,
which is somewhat lower that the employment growth of the District.
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Figure 3.3: Employment Growth, 2003 – 2013
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
2%
2%
2%
-4%
Mpumalanga
Nkangala
Steve Tshwete
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
Figure 3.4 indicates the sectoral employment for Nkangala DM and Steve Tshwete LM. The
manufacturing sector employs only 11% of workers in Steve Tshwete LM. The sectors that contribute
significantly to local employment include the mining sector (22%), the trade sector (14%) and the
manufacturing and finance sectors (11%). It is important to note that due to industrialisation, the
manufacturing sector is less labour intensive compared to other economic sectors.
Figure 3.4: Sectoral Employment
22%
25%
20%
15%
10%
5%
14%
10%
11%
11%
4%
5%
3%
0%
Nkangala
Steve Tshwete
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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10%
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
3.5 Manufacturing Sector
This subsection analyses the manufacturing sector in more detail in terms of production structure and
employment. From the previous subsection it is evident that the manufacturing sector in Steve Tshwete
contributes significantly to the local economy. This subsection will analyse the growth in the
manufacturing sector and an analysis of the different manufacturing subsectors with a focus on metal,
metal products, machinery and equipment manufacturing.
3.5.1 Production Structure and Growth
Figure 3.5 below indicates the 10 year GVA growth in the manufacturing sector in Mpumalanga,
Nkangala DM and Steve Tshwete LM. From the Figure it is evident that growth in the manufacturing
sector has decreased considerably since 2007. The sector did show some improvement between 2009
and 2010 where growth increased to 8% before again declining to negative growth of 4% between 2011
and 2012.
Figure 3.5: Manufacturing Sector GVA Growth, 2003 – 2013
15%
8%
10%
5%
0%
-4%
-5%
-10%
-15%
-20%
Mpumalanga
Nkangala
Steve Tshwete
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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The manufacturing sector growth rate of the Figure 3.6: Contribution to
Manufacturing Sector GVA, 2013
District and the Local Municipality is remarkably
Nkangala
DM
similar, which indicates that the manufacturing
sector in Steve Tshwete LM is a significant sector
not only on a local municipal level but also on a
Victor Khanye
7% 8%
3%
9%
Emalahleni
District level (see Figure 3.6.)
Steve Tshwete
26%
Emakhazeni
47%
Thembisile Hani
Dr JS Moroka
Figure 3.7 below indicates the contribution made
to the local manufacturing sector’s GVA by each
manufacturing subsector.
(Source: Quantec Research Database & Urban-Econ
Calculations, 2013)
It is evident that the three main manufacturing industries in Nkangala DM and in Steve Tshwete LM are
the food and beverage manufacturing sector, petroleum products, chemicals, rubber and plastic
manufacturing sector and the metals, metal products, machinery and equipment manufacturing sector.
The metal products, machinery and equipment manufacturing sector in Steve Tshwete LM contribute
57% to the GVA of the local manufacturing sector.
Figure 3.7: Manufacturing Sector Breakdown, 2013
Furniture and other manufacturing
Transport equipment
Radio, TV, instruments, watches and clocks
Electrical machinery and apparatus
Metals, metal products, machinery and equipment
57%
Other non-metal mineral products
Petroleum products, chemicals, rubber and plastic
Wood, paper, publishing and printing
Textiles, clothing and leather goods
Food, beverages and tobacco
0%
Nkangala
10%
20%
30%
Steve Tshwete
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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40%
50%
60%
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figure 3.8 indicates the annual growth rate (2003 to 2013) of the three main manufacturing sectors as
mentioned above for Nkangala District. There has been a significant decline in growth between 2007
and 2010 in the metals manufacturing sector, but since 2011 this subsector’s growth has been steadily
increasing annually which could indicate that this industry is on the recovery path.
Figure 3.8: Nkangala DM Main Industries Growth, 2003 – 2013
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
Food, beverages and tobacco
Petroleum products, chemicals, rubber and plastic
Metals, metal products, machinery and equipment
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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Figure 3.9 indicates the annual growth rate (2003 to 2013) of the three main manufacturing sectors as
mentioned above for Steve Tshwete LM. There has been a significant decline in growth between 2007
and 2010 in the metals manufacturing sector, but since 2010 this subsector’s growth has been steadily
increasing annually which could indicate that this local industry is on the recovery path.
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Figure 3.9: Steve Tshwete LM Main Industries Growth, 2003 – 2013
20%
10%
0%
-10%
-20%
-30%
Food, beverages and tobacco
Petroleum products, chemicals, rubber and plastic
Metals, metal products, machinery and equipment
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
Again, the similar growth rates between Figure 3.10: Metal Manufacturing in Nkangala DM, 2013
the District manufacturing subsectors and
that of Steve Tshwete LM are evident. As
2%
5% 4%
2%
Victor Khanye
Emalahleni
seen in the Figure to the right, the metals
manufacturing sector in Steve Tshwete LM
Steve Tshwete
31%
contribute significantly to this subsector on
56%
Emakhazeni
Thembisile Hani
a District level.
Dr JS Moroka
(Source: Quantec Research Database & Urban-Econ
Calculations, 2013)
3.5.2 Comparative Advantage
To have a comparative advantage means that this economy has the ability to render or produce a
product or service more effectively and efficiently, than its counterparts. The element that determines
the comparative advantage of a region is the Location Quotient (LQ) this is used mainly to determine the
levels of concentration within the study area. The industry groups that dominate a specific area will have
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
a higher LQ and vice versa. The calculation used to determine the Location Quotient (LQ) in this analysis
is as follows:
𝐿𝑄 =
% (𝐿𝑜𝑐𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑖𝑛 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦⁄𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑐𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡)
%(𝑷𝒓𝒐𝒗𝒊𝒏𝒄𝒊𝒂𝒍 𝑬𝒎𝒑𝒍𝒐𝒚𝒎𝒆𝒏𝒕 𝒊𝒏 𝑰𝒏𝒅𝒖𝒔𝒕𝒓𝒚⁄𝑻𝒐𝒕𝒂𝒍 𝑷𝒓𝒐𝒗𝒊𝒏𝒄𝒊𝒂𝒍 𝑬𝒎𝒑𝒍𝒐𝒚𝒎𝒆𝒏𝒕)
Table 3.2: Location Quotient Interpretation
LQ
Label
Interpretation
Less than 0.75
Low
Local needs are not being met by the resident sector. The region is importing goods and
services in this particular sector.
0.75 – 1.24
Medium
Most of local needs are being met by the resident sector. The region is both importing
and exporting goods and services in the sector.
1.24 – 5.00
High
The sector is serving needs beyond the sector, exporting goods and services from this
sector.
More than 5.00
Very High
This is an indication of a very high level of local dependence on a sector, typically a
“single-industry” community.
Table 3.3: Comparative Advantage - Steve Tshwete LM
LQ
Interpretation
Agriculture
0.84
Medium
Mining and quarrying
1.68
High
Manufacturing
1.36
High
Utilities
2.35
High
Construction
1.30
High
Trade and Accommodation
0.89
Medium
Transport and Storage
1.10
Medium
Finance and Business Services
0.84
Medium
Community Services
0.76
Medium
Government Services
0.63
Low
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
3.5.3 Employment
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figure 3.11 indicates the growth rate for employment in the manufacturing sector between 2003 and
2013. Since 2008, employment in the Province, District and Local Municipality in this sector has been
steadily increasing.
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figure 3.11: Manufacturing Sector Employment Growth 2003 – 2013
15%
10%
5%
0%
-5%
-10%
-15%
Mpumalanga
Nkangala
Steve Tshwete
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
The similar growth rates between the District Figure 3.12: District
Employment Contribution
and Local Municipality
indicate the
Manufacturing
Sector
prominence of the local manufacturing sector.
The Figure to the right indicate that the
manufacturing sector in Steve Tshwete LM
significantly contribute to the employment of
the manufacturing sector of the District.
Victor Khanye
10% 8%
Emalahleni
11%
3%
Steve Tshwete
24%
45%
Emakhazeni
Thembisile Hani
Dr JS Moroka
(Source: Quantec Research Database & Urban-Econ
Calculations, 2013)
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figure 3.13 indicates the employment contribution of the manufacturing subsectors to the sector as a
whole. In Steve Tshwete LM, the metals, metal products, machinery and equipment contributes 57% to
the employment of the manufacturing sector.
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figure 3.13: Breakdown of Manufacturing Sector Employment
Furniture and other manufacturing
Transport equipment
Radio, TV, instruments, watches and clocks
Electrical machinery and apparatus
57%
Metals, metal products, machinery and equipment
Other non-metal mineral products
Petroleum products, chemicals, rubber and plastic
Wood, paper, publishing and printing
Textiles, clothing and leather goods
Food, beverages and tobacco
0%
10%
Steve Tshwete
20%
30%
40%
50%
60%
Nkangala
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
The Figure below indicates the employment growth in the prominent industries of Nkangala DM. From
the Figure it is evident that employment in all three prominent industries has shown significant growth
since 2009.
Figure 3.14: Nkangala DM Prominent Industry Employment Growth, 2003 – 2013
20%
15%
10%
5%
0%
-5%
-10%
Food, beverages and tobacco
Petroleum products, chemicals, rubber and plastic
Metals, metal products, machinery and equipment
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Figure 3.15 illustrates the employment growth in the three prominent industries in Steve Tshwete LM.
These three sectors have shown significant growth in employment since 2009 and growth rates are very
similar to that of the District.
Figure 3.15: Steve Tshwete LM Prominent Industry Employment Growth, 2003 – 2013
20%
15%
10%
5%
0%
-5%
-10%
-15%
Food, beverages and tobacco
Petroleum products, chemicals, rubber and plastic
Metals, metal products, machinery and equipment
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
The similar growth rates between the Figure 3.16: Metal Manufacturing Employment in
Nkangala DM
District and Local Municipality indicate the
prominence
of
manufacturing
the
sector
local
in
4%
metal
terms
of
2%
8%
Victor Khanye
6%
Emalahleni
employment contribution. The Figure to
the
right
Steve Tshwete
indicates that the metal
27%
manufacturing sector in Steve Tshwete
LM
significantly
contribute
to
Emakhazeni
53%
Thembisile Hani
the
Dr JS Moroka
employment of the manufacturing sector
of the District.
(Source:
Quantec
Calculations, 2013)
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Research
Database
&
Urban-Econ
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
3.5.4 Gauteng Manufacturing Sector
The Metropolitan Municipality in Gauteng has a very prominent manufacturing sector of which the
metals manufacturing subsector contributes significantly, especially in areas such as Boksburg and
Kathlehong. The Table below compares the size of the local manufacturing sector as well as
employment.
From the Table below it is evident that Ekurhuleni Metropolitan Municipality has a much larger
manufacturing sector that that of Steve Tshwete LM but Steve Tshwete LM’s manufacturing sector is
much more focused on metal and metals product manufacturing compared to Ekurhuleni Metropolitan
Municipality, even though this subsection is significantly larger than that of Steve Tshwete LM. Steve
Tshwete LM has a slightly higher comparative advantage for metal manufacturing than Ekurhuleni
Metropolitan Municipality.
Table 3.3: Municipal Comparison
Steve Tshwete
Ekurhuleni Metropolitan
LM
Municipality
1,990 (21%)
42 582 (27%)
1,134 (57%)
11,896 (28%)
Manufacturing Contribution to Employment (Number)
5,548 (11%)
142,314 (19%)
Metals Manufacturing Contribution to Employment (Number)
3,182 (57%)
53,125 (37%)
Comparative Advantage of Manufacturing Sector (with reference to
1.36 (High)
1.43 (High)
2.51 (High)
1.67 (High)
Manufacturing Sector Contribution to Economy (R millions, constant
2005 prices)
Metals Manufacturing Contribution to Economy
(R millions, constant 2005 prices)
respective Province)
Comparative Advantage of Metals Manufacturing Sector (with reference
to respective Province)
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
The Table below indicates the major exports of the Nkangala District and the Ekurhuleni Metropolitan
Municipality
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Table 3.4: Major Exports
Ekurhuleni Metropolitan Municipality
Nkangala District Municipality

Machinery and mechanical appliances (27%)

Mineral Products (55%)

Base Metals (16%)

Base Metals (22%)

Precious stones and metals (19%)

Iron and Steel (28%)

Iron and Steel (93%)

Articles of iron and steel (38%)

Copper and articles thereof (18%)
Iron and Steel

Ferrous waste of scrap (22%)

Ferro Alloys (73%)
Exports

Flat rolled iron (16%)

Angles and shapes of non-alloy

Angles and shapes of non-alloy steel or iron (11%)
Overall Exports
Base Metal Exports
(Source: Quantec Research Database & Urban-Econ Calculations, 2013)
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steel or iron (16%)
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Section 4: Metals Market and Market Trends
4.1 Introduction
This section will examine three metal markets; the stainless steel market, the carbon steel market and
the aluminium market. The production process, market structure and role-players as well as the main
fabrication products from each metal will be discussed.
4.2 Stainless Steel
Stainless steel is an alloy of iron with chromium, carbon, nickel, silicon and manganese. Amounts of
these elements vary for different properties i.e. increased amounts of chromium gives an increased
resistance to corrosion. Stainless steel benefits are:

Corrosion resistance

Strength-to-weight advantage

Fire and heat resistance

Impact resistance

Hygiene

Long term value

Ease of fabrication

Aesthetic appearance
Because of the stainless steel corrosion character, its uses are vast in different sectors as indicated
below:

Domestic: cutlery, sinks, washing machine drums, microwave oven liners, razor blades

Architectural: cladding, handrails, door and window fittings, structural sections, reinforcement
bar, lighting columns, lintels, masonry supports

Transport: exhaust systems, car trim/grillers, raid tankers, ship containers, ships chemical
tankers, refuse vehicles

Chemical/Pharmaceutical: pressure vessels, process piping

Oil and Gas: Platform accommodation, cable trays, subsea pipelines

Medical: surgical instruments, surgical implants, MRI scanners

Food and drink: catering equipment, brewing, distilling, food processing

Water: water and sewage treatment, water tubing, hot water tanks, cans

General: springs, fasteners (bolts, nuts and washers), wire
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4.2.1 Stainless Steel Production Process
Melting
Forming
•Raw Materials : iron ore, chromium, silicon, nickel, carbon, nitrogen, and manganese
•Raw materials are melted together in a furnace
•Then the molten steel is cast into semi finished forms (blooms, billets, slabs, rods and tube
rounds
•Beginning with hot rolling, in which the steel is heated and passed through huge rolls
•Blooms and billets are formed into bar and wire, while slabs are formed into plate, strip, and
sheet
•Annealing is a heat treatment in which the steel is heated and cooled under controlled
conditions to relieve internal stresses and soften the metal
Annealing •Annealing causes a scale or build-up to form on the steel
•Common methods, pickling, uses a nitric-hydrofluoric acid bath to descale the steel
•Electrocleaning, an electric current is applied to the surface using a cathode and phosphoric
Descaling acid, and the scale is removed.
Cutting
Finishing
•Cutting operations are usually necessary to obtain the desired blank shape or size to trim the
part to final size.
•Mechanical cutting various methods: straight shearing, circle shearing, blanking, nibbling
•A smooth surface as obtained by polishing also provides better corrosion resistance.
•Surface finishes are the result of processes used in fabricating the various forms or are the
result of further processing
•As a dull finishing, bright finishing, highly reflective finish, mirror finish, tumbling, wet etching,
surface dulling
•After the stainless steel in its various forms are packed and shipped to the fabricator or end
user, a variety of other processes are needed.
•Further shaping is accomplished using a variety of methods such as roll forming, press
forming, forging, press drawing, and extrusion.
Fabricator •Additional heat treating (annealing), machining, and cleaning processes are also often
required
•Welding is the most common method of joining stainless steel
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4.2.2 Producers
Columbus Stainless (Pty) Ltd is a vertically integrated producer of stainless steel flat products. Columbus
has a wide range of products in Austenitic, Ferritic, Utility and Duplex grades produced in Middelburg.
Columbus exports some of their production and also deal with end users.
Location: Middelburg in Mpumalanga
4.2.3 Stockists and Distributors
Metal fabrication is a broad term referring to any process that cuts, shapes or moulds metal material
into a final product. These players in the market stock and process steel products to certain grades
according to customer specifications or demand and distribute. Stockists can add finishing to the steel as
required by the specific market or extrude the metal to form customised cylindrical items such as pipes
and wires. The value added steel products are normally intermediates products. Stockists also import
some of their stock.
Distributors order plates and coils of metal in different grades according to different uses for the metals.
This allows end users to buy stock already in their required metal grades for their different final
products fabrications.
a. Euro Steel
Euro steel is the stockist and distributor of stainless steel, aluminium and special steels (carbon steel).
The company process metals and make them available in various commercial forms. Euro steel stocks
the full range of stainless steel and aluminium flat and long products and distribute an extensive range
of standard and customised extruded aluminium products including aluminium architectural systems
and hardware.
Products produced are: sheet, plate, coil, tread Plate, decorative finishes, ornamental tubing, pipes, BSP
Fittings, buttweld fittings, flanges, valves
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b. Stalcor
Stalcor is a stockists and suppliers of an extensive range of steel products in various Duplex, Austenitic
and Ferritic grades sheet, coil and plates, all sourced locally and abroad.
Products: stainless steel welded and seamless pipes, stainless steel long products to name a few.
Location: Germiston, Cape Town and Durban. It is an official distributor for Columbus Stainless
c. Macsteel VRN
Macsteel VRN is a supplier of stainless steels and aluminium. Service centres are located in Roodekop
and Germiston. The two centres are carbon and stainless steel service centres. They use plasma, laser
cutting and flame services equipment, off which all is controlled by a computer numerically controlled
machine and computer design programs offering, decoiling, rolling, bending, drilling, guillotining and
polishing.
Products: Aluminium, Armour Plate, Bright Bar, Carbon Steel Tube and Pipe, Fencing, Fluid Control
Systems, Freestock, General Purpose Steels, Hot Rolled Steel Products, Palisade Fencing, Pressure Vessel
Steels, Structural Steels, Tool and Die Steels, Wear and Abrasion Steels, Wear Resistant Accessories
d. Pure Stainless Steel Manufacturer
The company is a stockist of a wide range of stainless steel and carbon steel products. They offer cutting
and bending services where Stainless Steel is cut to any shape or size by selecting guillotine, laser or
plasma cutting. Stainless Steel is also bent to any profile to suit customer requirements.
Location: Workshop is located in Nigel, Gauteng
e. NDE Stainless Steel
NDE is the distributer and stockist of stainless steel and Aluminium products. NDE specialises on stocking
and not fabrication of metals on site.
Location: Johannesburg, Cape Town, Durban, Port Elizabeth. Outlets with stockholdings: Germiston,
Pretoria
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Products: Flat Products, Sections, Heat Exchanger and Process Tubing, Ornamental Tubing, Large Bore
Light Wall Pipes, Large Bore Light Wall Fittings, Nominal Bore Pipes, Nominal Bore Buttweld Fittings, BSP
Fittings, High Pressure Fittings, Ball Valves, Flanges, Hygiene Tubing and fittings
4.2.4 Fabricators and End Users
Fabricators use various techniques to mould, cut and shape metal into final products. End users are the
firms that produce the final product using steel. These firms do not change the components of the steel
but order required specification of steel from their distributors. Normally, the end user welds and
shapes the steel to form their required products. Many fabricators are exporters of the final products
they produce.
a. Steel Image
Steel Image specialises in the fabrication, design and installation of stainless steel balustrades and is
situated in Mbombela, Middelburg, Ermelo and Emalahleni.
Material needed for manufacturing: stainless steel metal
Manufacturing process: stainless steel railing is shaped, cut and bended into different shapes and sizes
according to the purpose for which the metal will be used.
b. Duratrend
Duratrend specialises on design, manufacturing and installations of balustrades. Custom designs are
stainless steel tables, bar counter and any other general stainless steel accessories for indoor and
outdoor use. Duratrend is based in Mbombela, Emalahleni and Middleburg
Material used in production: Stainless steel bars
c. Franke Kitchen Systems
Franke is the distributor and manufacturer of sanitary products and sinks. The factory is based in
Durban, and the sales offices based in Cape Town, Durban and Midrand. Products: sinks, kitchen
solutions, waste bins
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Material required in production of sinks: stainless steel
Other manufacturing methods: Precision laser cutting equipment, deep drawing pressing and robotic
welding is used in the manufacturing of commercial products.
d. Mexan Products
Mexan Products is a specialist in stainless steel fabrications in machinery manufacturing. Mexan
manufactures washing-, filling- and handling equipment in the food-, beverage- and chemical industries.
All machines are manufactured with high grade stainless steel. The facility is located in Pinetown, KZN.
Products: Washing Machines, Filling Machines, Mechanical Handling
e. AEM Automotive Exhaust Manufacturers
AEM SA are manufacturers of stainless steel exhaust systems, for national and international clients.
Location: Grayville, KZN
f.
Coastal Manufacturing CC
Coastal Manufacturing is a stainless steel fabricator, manufacturing a range of sanitary ware and
drainage systems. They also manufacture various other stainless steel plumbing and architectural
products as per client requirements.
Manufactured products according to client specifications: Counter Worktops, Wall Shelving, Wall
Benches, Wall Protection Angles, Door Protection Plates, Mixing Tanks, and Dispensing Tanks.
Location: Durban
g. LHL Engineering
LHL Engineering does all types of fabrications, using various grades of steel. LHL Engineering facilitates
cutting, bending and rolling with a 120 ton press, rolls able to hand 25mm plate and a 3 metre guillotine.
Products: Austenitic stainless steel storage tank for food or chemical industry; stainless steel pressure
vessels for wood glue industry
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Machinery: Plasma arc cutting machine, line welder - maximum width, press brake (promecam),
powered rolls, double nip rolls, pyramid rolls, cropping machines, plate knuckling machine, dadial arm
drilling machines, tube bending, hydraulic jacks
h. Jaguar Stainless Steel Tube & Pipe
Jaguar Stainless Steel Tube & Pipe specialises in manufacturing stainless steel tubes and pipes for pulp
and paper, food and beverages, structural and architectural, petrochemical, automotive and general
use. Services offered: nominal bore pipe, "dairy" (or "hygienic") tube, sugar tube (SQ28) and a value
added services, bending, pickling and passivating, polishing and specialised manufacturing.
Location: Germiston
Products: Stainless steel - architectural tube, structural tube, spiral tube, automotive tube, heat
exchanger tube, sugar tube, hygienic/dairy tube
i.
Sheffield Manufacturing
Sheffield manufacturing has two divisions: Citiware stainless steel and Longlife Exhaust. Citiware
specialises in the manufacturing of stainless steel holloware and catering equipment. The company
sources steel mainly from Columbus Stainless Steel. Location: Citiware is based in Durban.
j.
Styria Stainless Steel Fabricators
Styria is a stainless steel fabricator.
Products: Stainless steel tanks, pressure vessels, columns,
autoclaves, ducts, chutes and other “containment” equipment.
Location: Wadeville, Gauteng
4.3 Carbon Steel
Carbon steel is an alloy consisting of iron and carbon. Several other elements are allowed in carbon
steel, with low maximum percentages. These elements are manganese, silicon, and copper. There are
four types of carbon steel based on the amount of carbon present in the alloy. Lower carbon steels are
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softer and more easily formed, and steels with higher carbon content are harder and stronger, but less
ductile, and they become more difficult to machine and weld.

Low Carbon Steel: Also known as mild steel, it is a low-cost material that is easy to shape. While
not as hard as higher-carbon steels, carburizing can increase its surface hardness. Products
include

Medium Carbon Steel: Medium carbon steel is ductile and strong, with long-wearing properties.
Products include

High Carbon Steel: It is very strong and holds shape memory well, making it ideal for springs and
wire.

Very High Carbon Steel: Its high carbon content makes it an extremely strong
material. Due to its brittleness, this grade requires special handling.
The most commonly used carbon steel has a medium carbon content; uses of carbon steel in this
category include structural steel to build buildings and bridges. It is also used for parts in consumer
products like automobiles, refrigerators and washing machines. Ships use medium-carbon steel as a
structural component. High-carbon steel is hard but brittle and less easily worked. The uses of carbon
steel in this category are typically for manufacturing purposes. This type of carbon steel is often used to
create springs and high-strength wires. The increased hardness makes this category of steel ideal for
cutting tools, punches, dies and industrial knives.
4.3.1 Producers
a. Arcelor Mittal
Producer of flat carbon, Arcelor Mittal South Africa’s steel operations comprise four major facilities,
which produce both flat and long steel products. The flat steel operations are at Vanderbijlpark and
Saldanha. Newcastle and Vereeniging operations produce the long steel products and export 50% of
their production. Newcastle Works and Vereeniging Works produce carbon steel.
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b. Evraz Highveld Steel and Vanadium
Evraz Highveld provides a number of service facilities to its divisions; most are centralised at the iron
and steel works but, where necessary, the divisions have their own. At the iron and steel works there is
a central repair workshop with machine tools where much of the maintenance work is done. Evraz
Highveld's transport department controls about 300 vehicles, including heavy mobile equipment and a
locomotive fleet of nine. Evraz produces billets, booms and slabs of steel.
4.3.2 Stockists and Distributors
Stockists include Euro Steel, Stalcor and Macsteel VRN as was mentioned in the stainless steel section.
Additional stockists include:
a. Aveng Trident Steel
Aveng Trident Steel is an Aveng Group company with our main operation centrally situated in Roodekop,
Germiston with additional facilities in Alrode, Durban, Port Elizabeth, Rosslyn and Cape Town. They are
stockists of special steels, which include carbon steel which they process and distribute, mainly to
construction and automotive sectors.
Manufacturing equipment and technology/techniques used for fabrication processes: Plate drilling;
profile cutting; gas; plasma and laser, Blanking press Service Centre: cold saw; punching; drilling and
scribing, Coil processing cut-to-length; slitting; multi strand blanking; edge dressing and guillotining
Products: structural rounds, plates, sheets, flats squares, hexagons
4.3.3 Fabrication and End Users
Fabrication specialists include Macsteel VRN and LHL Engineering as was mentioned in the stainless steel
section.
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4.4 Aluminium
Total alumina production is the quantity of aluminium oxide trihydrate produced in a defined period and
expressed as 100%, nominal aluminium oxide (Al2O3) equivalent, irrespective of further processing.
Total alumina production figures have two components, that to be used for the production of aluminium
(metallurgical grade alumina) and that to be used for any other purpose (chemical grade alumina)
(World Aluminium, 2015).
4.4.1 Production Process
•Clay is washed off and bauxite passes through a grinder
•Alumina, or aluminium oxide, is extracted from the bauxite
Grinding
Refining
•Refining process uses hot solution of caustic soda and lime
•The mixture is heated and filtered, and the remaining alumina is dried to a white powder.
•The result is liquid aluminium, which can now be tapped from the cells.
•Three raw materials are needed to make aluminium - aluminium oxide, electricity and carbon.
Refineme • Electricity is run between a negative cathode and a positive anode, both made of carbon.
nt process •The anode reacts with the oxygen in the alumina and forms CO2.
Refineme
nt
process
•The liquid aluminium is cast into extrusion ingots, sheet ingots or foundry alloys, all depending on
what it will be used for. The aluminium is transformed into different products.
•The extrusion technique has almost unlimited possibilities for design and offers countless application
opportunities. In the extrusion process, the aluminium ingot is heated and pressed through a shaped
Extrusions tool called a die.
Rolling
Primary
foundry
alloys
•Aluminium is very ductile
•Process Sheet ingots are used to make rolled products, such as plates, strip and foil.
•Foil can be rolled from 60 cm to 2-6 mm, and final foil product can be as thin as 0.006 mm.
•Aluminium foundry alloys are cast in different shapes. The metal will be remelted again and made
into, for example, wheel rims or other car parts. The content in foundry alloys can be customized to
fit their further use.
•Aluminium can be recycled over and ovewithout losing any of aluminiums natural qualities are.
•The recycled product may be the same as the original product, or it can become something
Recycling completely different.
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4.4.2 Producers
a. BHP Billiton
BHP Billiton is the only primary aluminium producer in South Africa. BHP Billiton has a portfolio of assets
in three stages of the primary aluminium value chain: mining bauxite, refining bauxite into alumina and
smelting alumina into aluminium metal ns is one of the world's largest integrated producers with
operations in South America, Southern Africa and Australia.
Location: two smelters in Richards Bay, KZN
4.4.3 Stockists and Distributors
Stockists and distributors include Stalcor and NDE Stainless steel, additional stockists include:
a. Zimalco
Zimalco is the largest manufacturer of secondary aluminium products. Products: aluminium foundry
alloys, powders, master alloys and deoxidants. The company also produces materials specific to a
particular customer's needs.
Location: Benoni, near Johannesburg.
b. Hulamin Extrusions
Hulamin Extrusions is an aluminium extruder. Hulamin offers extruded aluminium profiles and semimanufactured components in a range of anodised and powder coated finishes. In 2012, Hulamin
entered into a ground-breaking agreement with Bevcan to supply aluminium coil for the manufacture of
aluminium-bodied beverage cans. This move is in line with the global trend of replacing tin-plated steel
beverage cans with full aluminium cans. The all-aluminium can is popular worldwide and has become
increasingly more attractive than steel, owing to its lightweight, corrosion-resistant features, its low cost
of recycling as well as its ability to be cooled rapidly. In addition, aluminium has lower raw material and
transport costs and better printing qualities. Aluminium cans are also one of the most successfully
recycled packaging products internationally.
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Location: Operating out of plants in Johannesburg and Pietermaritzburg, with a regional office in Cape
Town
Processes: Anodising and powder coating, Die manufacturing, Fabrication
c. Alustock
Alustock is a stockist and distributor of aluminium semi-products. The company offers retail aluminium
extrusions or profiles as well as related software to suit customer specific requirements.
Products: aluminium sheets, aluminium profiles and aluminium bars. As the first independent stockist, it
was Alustock’s mission to promote and develop the use of architectural aluminium systems in the
building industry.
Location: Johannesburg, Pretoria and Mbombela
d. Aluminium Extruders SA
Aluminium Extruders import 6063, 6061 and 6005 alloy billet from Malaysia. Process: When containers
arrive at the extrusions plant, the billet is offloaded and placed in allocated areas. Billet is then cut into
appropriate lengths to accommodate the press selected for the size, length and quantity of the profile to
be extruded.
Equipment: Consisting of a 2 extrusion press plant, an anodizing plant, semi-automated powder coating
line, recycling plant, four stockists and a window manufacturing workshop
Product: Aluminium Extruders is now extruding profiles used to manufacture several window systems,
patio doors, folding doors, showers, partitions, louvers and also customers own designs
Locations: Durban
e. Extrusion World
Extrusion World sells aluminium extrusions to aluminium window and door fabricators.
Location: East London, Bloemfontein, Johannesburg, Windhoek, George, Mosselbay, Brackenfell, Port
Elizabeth
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f.
Wispeco Aluminium
Wispeco is an aluminium extrusion company and offers mill finish; powder coated and anodised
aluminium extrusions for various applications in a variety of industries including: Building and
Construction, Transport, Energy, Agricultural, General Engineering, Automotive and others.
The
company consists of four main operating units – Billet Casting, Aluminium Extrusion (with in-house die
manufacturing), Surface Finishing and Aluminium Systems Development.
Wispeco Aluminium has its own re-melting facilities where recycled aluminium is melted and cast into
billets for extrusion.
More than half of the aluminium used in the manufacturing of Wispeco’s
extrusions is recycled aluminium.
g. Conway
Conway sell aluminium extrusion profiles, glass and hardware of various Crealco aluminium systems to
aluminium and glass fabricators that assemble aluminium windows, sliding/pivot/hinged/stack doors,
shop fronts, curtain walls, garage doors, showers, etc. and install them into new buildings and
renovation projects. The company also stock and sell various standard aluminium profiles like angles,
flats, tubes, bars, channels, signage profiles and many more for other aluminium users.
Location: Pretoria, Randburg, Cape Town, Mbombela, Limpopo, Edenvale, Port Elizabeth, Durban
4.4.4 Fabrication and End Users
Fabrication specialists include Macsteel VRN and:
a. Nampak Bevcan
Nampack Bevcan is a can manufacturing division of Nampak. Nampak Bevcan is in the process of
converting from steel to aluminium beverage can manufacturing which will further increase the range of
beverages that can be put in a can these include wine, milk based products and even mineral water.
Location: manufacturing plants are in Johannesburg, Pretoria, Cape Town, Durban and Angola
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b. Atlantic Glass and Aluminium
Atlantic Glass and Aluminium are Aluminium fabricators
Products: Shop fronts, Hinged & Pivot Doors, Side Hung Windows, Top Hung Windows, Sliding Windows,
Sliding Doors, Folding Doors, Frameless Sliding, Stacking Glass Doors, Balustrades, Curtain Walls,
Hulabond Cladding
Location: Cape Town, Queensburgh
There are a very large number of aluminium fabricators within South Africa; the following table only
highlights a few of them. Annexure A will have a list of all metal manufacturers.
Table 4.1: Aluminium Fabricators
Aluminium Fabricators
Location
Aluart Fabrication cc
Queensburgh, Cape Town
Almex Aluminium Distributors cc
Kuils River, Cape Peninsula
Skillfull 180 (Pty)Ltd
Goodwood, Cape Peninsula,
Absolutions
Brackenfell, Cape Peninsula
Glass Bugs
Kempton Park, East Rand
Gausstech (Pty)Ltd
Silverton, Pretoria
Alufacture
Cape Town
Alucad Designs cc
White River, Mpumalanga
JL Aluminium
Milnerton, Cape Town
Blue Disa Training 353 cc
Koedoespoort, Pretoria
ECL Services Africa Engeneering
Richards Bay
Linpress cc
East Rand, Gauteng
Progress of Empangeni
Empangeni, KZN
Combined Aluminium Fabrications
Edenvale, Gauteng
Scorpio Aluminium and Glass cc
Somerset West, Cape Peninsula
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4.5 Product Development and Equipment
The first phase of the steel and metal fabrication hub will focus on stainless steel components. This is a
result of market demand and external factors such as the proposed carbon steel plant which still does
not have a final location and the low demand for steel in the local market. The products that has been
identified as stainless steel products which has a local demand and is not being produces in any
meaningful quantity. These products are:

Kitchen Cabinets

Stainless Steel Domestic Water Piping

Pressed Sinks

Automotive multi-plate gaskets for OEM’s

Cutlery

PAL Rings

Cookware
The following sub-sections will examine the process of producing the products and what equipment is
needed.
4.5.1 Kitchen Cabinets
Cabinets are normally made from 18-gauge steel which are brought in coils or in sheets of different
sizes. Coil is put into a machine to die-cut to required size for smaller cabinet components. The larger
cabinet components are cut to required size from sheets of steel. Stronger parts of the cabinets that act
as supporting parts are made by folding the steel a number of times to the desired thickness depending
to the strength required and pounding hammered to form thick parts.
The parts are painted using electrostatic process. Electrostatic painting is a process where paint and the
steel component are given negative and a positive charge through an aluminium wire between the paint
gun and Component. The gun then sprays paint evenly then the components are heated.
The components are then welded together. A common method of welding used is spot welding which is
a process that applies great pressure and electric current to seam pieces of metal together.
The cabinet is then assembled together. The drawer slide mechanisms are often brought in from the
specialty manufacturer.
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Equipment: Paint gun, Electrostatic paint spay gun, spot welding machine
4.5.2 Pressed Sinks
Deep draw process: Sinks are made by pressing flat sheet of stainless steel into a die to stretch the
sheet, forming different shapes and the depth of the sink. This is called a deep draw process. A single
draw does not allow for deeper sinks because steel becomes thinner as it is being drawn over a die.
Therefore, multiple steps of deep draw are required, called draw reductions. The deeper the sink, the
more reductions are required.
Annealing: To accomplish the desired depth with fewer draw reductions, annealing process is used
which prevents the stainless steel from thinning out while being stretches by heating the piece. Heat
exposure is minimized to control grain growth and surface scaling.
Hand fabrication: Fabricated sinks allow for intricate designs by welding joints together then apply a
molten filter material for seamless joining of the sink sides and corners.
Equipment: Annealing Furnace, dies, forming press, welding tools
4.5.3 Cutlery Manufacturing
Stainless steel coils are cut into sheets. The outside contour or each sheet is cut into blanks.
Rolling: The blanks are graded to the desired thickness and shape. Blanks are first rolled crosswise, then
lengthwise and trimmed to outline. Each piece is in a rough form of a utensil.
Annealing: Between operations, blanks pass through the furnace to make the metal softer for the
following machine operations such as stamping or pressing
Cutting bowl outline: press removes the excess metal and style the shape of the bawl
Pattern: Each pattern has unique hardened steel dies for the patterns on the front and back of the
utensil. The pattern dies are set on stamping press then the piece is placed under the press for pattern
embossing. Clipping presses then remove the surplus metal around the outline.
Special steps:
Knives: To make the hollow handle for a knife, two strips of metal are formed according to a certain
shape, they are soldered together, buffed and polished until the seam is no longer visible. The blade and
handle are permanently joined by means of powerful cement, which bonds with great strength and
durability.
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Spoons: After the pattern is stamped, the bowls are formed with a press machine with dies
Forks: After the fork is cut to outline, the fork is pierced and tined. The tines are pierced before the
pattern is embossed.
Buffing and sand polishing: The utensils are then buffed, polished and inspected.
Equipment: dies, press, annealing furnace
4.5.4 Cookware Manufacturing Process
Cookware is manufactured by deep drawing process from stainless steel blanks. The blanks are placed in
a press which then forms the desired shape of a cookware by applying pressure. Cookware
manufacturers combine stainless steel layers with other metal layers such as carbon steel, aluminium or
copper to improve heat conductivity of cookware; generally the layers are added at the bottom of the
cookware. The process is called bonding or cladding which occurs before the layers are put under a
press to form a shape. The products are then described as two-ply, three-ply, three-ply/bottom clad or
five-ply and so forth depending the manufacturers specifications and cookware characteristics.
After drawing the shape, the cookware is then trimmed, cleaned, polished and pierced for handle
attachment. The handles are then attached to the product using a press machine. Handles are
manufactured by stamping process which transforms flat metal sheets into various shapes.
Equipment: Deep drawing press, rollers, trimmers, polishing equipment
4.5.5 Stainless Steel Domestic Water Piping
Two stages: Forming the tubular shape and welding.
Forming the tubular shape: Pipes are manufactured using two methods, continuous-mill process and
press-brake or batch production process. Small diameter pipes are generally made using the continuous
welding process from coil of strip with the correct required thickness and width to produce the correct
size. The coiled steel is fed into the series of rollers while it is gradually formed into a tubular shape as it
progressed through the rolls.
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Welding: The edges are welded together by an automatic machine. The welding processes used are
tungsten inert gas (TIG) welding process or laser welding process.
After welding the pipe is put through an in-line annealing furnace to restore the steel original internal
structure.
The pipe then goes through mechanical straightening to fix any distortions that may have occurred
during the process. The common method of straightening is cross rolls straightening which produces a
straight pipe with a circular cross section.
The pipe sample is finally tested to meet the metallurgical specifications; it is cut to required length and
pickled in acid solution to clean the steel.
Equipment: Rollers, TIG welding machine, laser welding machine, in-line annealing furnace
4.5.6 Automotive multi-plate head gaskets for OEM's
Multi-plate head gaskets can have three to five layers of steel depending on the desired thickness.
Stainless steel coils are punched using a stamp. The two punched steel coils are sandwiched into two
coils of fibre plates. The fibre plates may be replaced by rubber and other preferred heat resistant
product. Other layers of steel may be inserted in the inner gasket to meet the thickness specification
and the level of strength required. The sandwiched metal then goes through calendaring line. A
Calendar line is a series of hard pressure rollers to smooth the surface and give the thickness size as
desired by the manufacture. Calendaring lines produces formats of various sizes. The formats are then
cut according to the profile of the corresponding tool using a stamp or die. Various cutting may be used
such as laser cutting, water jet cutting. This results to the desired gasket profile. The gaskets are then
pressed to get a specific thickness.
Impregnation: The gasket is put into a silicone bath to fill in the fibre material for correct sealing
function of the head gasket.
Static oven curing: The gaskets are treated into high temperature ovens to ensure that the silicone bath
process has been correctly achieved.
Silk-screen printing: The gaskets are sealed on the surface by silicone.
Curing: cylinder head gaskets are treated again in dynamic oven then packaged. The processes may
slightly vary depending on manufacturers preferences on technique to follow.
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Equipment: cutting equipment, coating material, heating process equipment
4.5.7 Stainless Steel Container for a Catalytic Converter
Multi point welding of stainless steel is used to manufacture the honeycomb structure for catalytic
converter. Corrugated and flat stainless steel is used. The process begins with large coils of steel which
are cut into precise width. The cut blanks go through a series of rollers to form a tubular shape of a
desired diameter. The metals are then formed into a spiral shape. The electric discharges are used to
join the contact points for the flat sheet and the corrugated sheet.
Equipment: rollers, welding equipment
4.6 Welding School
The Southern African Institute of Welding (SAIW) proposed a satellite facility in Middelburg
Mpumalanga. It would also bring the Institute nearer to a significant portion of its client base and
contribute to achieving the plan of making the Institute a more widely representative body. SAIW
believes the Mpumalanga region is a growth point for the future and is already an important region for
the metals, power generation, coal to fuel and mining industries.
The project would provide training for more than 600 persons a year from inception and in little over
five years the number of trainees can conservatively be expected to rise to more than a 1000. The
number of new jobs created will be relatively small initially but over time the staff will increase to 15 to
20 persons.
A building area of 5400m2 is required. Buildings include:

a 30 bay welder training school,

a 20 person demonstration area,

5 x 25 seater classrooms,

a practical NDT laboratory,

a metallurgical test laboratory, and

a 100-seater auditorium as well as the required supporting facilities.
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The facility will require an Eskom supply of 11 kV to a site substation and the monthly electrical
consumption is expected to be in the range 10 to 15 000 kWh. The water requirement is expected to be
100 to 150 kL per month.
The welding training centre might have to be phased as it would require an initial investment of
approximately R100 million, including equipment costs of R25 million.
4.7 Metals Manufacturing Research and Development Centre
The concept involves developing a core technology capability in mining and minerals engineering,
including downstream fabrication technology, underpinned by a design capability. Countries or regions
that have strategic mining and minerals processing capabilities have sought to develop faculties
dedicated towards mining and minerals processing engineering. Similar developments have been seen
locally at other universities in South Africa, and these could provide an avenue for a development
partnership. It is, though, important that ownership be vested locally within the University of
Mpumalanga – that is, the Faculty of Mining and Minerals Engineering is proposed as a satellite campus
of the Mbombela-based University of Mpumalanga. The University must therefore lead the
development of this initiative, in partnership with enabling organisations that will support the
development of infrastructure and technical facilities.
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4.8 Middelburg Metals Manufacturing Cluster
The Middleburg Metals Manufacturing Innovation Cluster is one of the most developed in terms of
innovation capability, mainly driven by large minerals processing companies and opportunities to
beneficiate locally produced high-value metals. This has led to a number of companies locating in the
Middleburg area involved in metals manufacturing. These include metal casting companies, or
foundries, and fabricators of metal structures. The former has led to the establishment of the
Mpumalanga Tooling Initiative, a spin-off of the National Tooling Initiative supported by DTI.
Notwithstanding, this positive industrial environment for metals manufacturing, there has been a low
responsiveness in the development of public funded R&D and education capabilities, aside from skills
development institutions at FET and lower university levels. The Middleburg Stainless Initiative, which
has led to the establishment of the Middleburg Stainless Steel Incubator, is one of few initiatives to
support the high potential for extending the metals value chain in the area. However, the low levels of
R&D and technology transfer capacity limits the expansion into OEM and global supply chains, the latter
providing real opportunities for localisation of manufactured products against contractual obligations of
the OEMs operating in Mpumalanga as well as in Gauteng.
The large companies are involved in the production of value added metals, and cannot provide high
technology manufacturing support to the SME base. This presents a major gap in the innovation system
that needs to be urgently addressed as part of the Province’s industrialisation plan (Mpumalanga
Industrial Plan Draft, 2015).
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Diagram 4.1: Middelburg Metal Manufacturing Cluster
(Source: Mpumalanga Industrial Plan Draft, 2015)
4.9 Location Assessment
A location assessment is necessary to determine the most suitable location for the Steel and Metal
Fabrication Hub. This assessment will examine Emalahleni LM and Steve Tshwete LM as the two
potential areas. A decision will be made and a more in-depth analysis of the preferred location will be
developed.
4.9.1 Industrial Areas of Emalahleni LM and Steve Tshwete LM
Table 4.1 illustrates the currently developed industrial land, undeveloped industrial land as well as an
estimated demand for industrial land over the next 17 years.
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Table 4.1: Emalahleni LM and Steve Tshwete LM Industrial Areas
Emalahleni LM
Steve Tshwete LM
Developed Erven
279
444
Undeveloped Erven
591
121
Total Erven
870
565
1,273
1,906
124
584
Total Area (Ha)
1,397
2,490
Projected 2032 Demand for Land
1,002
366
Deficit/Surplus (Ha)
-878
219
Developed Erven (Ha)
Undeveloped Erven (Ha)
(Source: Nkangala SDF, 2014)
Emalahleni LM currently has a very large manufacturing sector, the demand for industrial land will
increase significantly over the next 20 years and in effect the municipality will have a deficit of industrial
land of almost 900 ha by 2032. The location of available land in Emalahleni is not ideal from a
development perspective and is widely dispersed in the municipality.
Steve Tshwete LM also has a very large manufacturing sector and the municipality has a large amount of
land earmarked for industrial development along the N4; this location is more suitable for development
with regards to accessibility and logistics than the sites available in Emalahleni LM. There are currently
approximately 600 ha of land available for industrial development. With a predicted surplus of 200 ha by
2032 for industrial land, Steve Tshwete LM is a more suitable location for the Metal and Steel
Manufacturing Hub. The location of the MSI will further enhance the local cluster development and
beneficiation potential. There is a large portion of industrial land available next to the N4 route that is
earmarked for development. Map 4.1 illustrates the location of the available industrial land.
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Map 4:1: Available Industrial Land in Steve Tshwete
(Source: Nkangala DM SDF, 2014)
The available land is ideal from an accessibility and logistics perspective. A site evaluation will be form
part of the next sub-section.
4.9.2 Site Evaluation
The site assessment model is pragmatic and is based on the assignment of values to various location
factors. Firstly, the site is evaluated on a five-point scale, with five representing the highest attainable
grade. Secondly, the factors are adjusted according to an established multiplier which indicates the level
of importance of the specific factor. The guidelines for grading are provided in Table 4.2.
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Table 4.2: Evaluation Grading System
Score
Description
1
Poor
2
Fair
3
Adequate
4
Good
5
Excellent
Table 4.3 illustrates the site assessment matrix. The matrix provides the success factor and rating for
each factor.
Table 4.3: Site Evaluation Matrix
Success Factor
Description
Rating
1. Traffic Volume - Indicates the number of vehicles
The site currently enjoys relatively high volumes
4
passing the site during the day distinguishing between
with of traffic along the R35 heading into
light and heavy vehicles. Traffic volumes should not be
Middelburg. There is no direct access from the N4.
so high that it affects the ability to enter the site or
that it deteriorate the road surfaces.
2. Accessibility - Indicates the level of access from the
The site is located on a major route R35 with
surrounding suburbs and transient traffic. If the site is
transient traffic from the north and south.
4
located on a major route with a high level of transient
traffic and adequate access to the surrounding
suburbs a score of 3 (adequate) or higher is provided.
3. Visibility - Indicates the level of visual exposure the
The development site is adjacent to the R35 which
development attains from passing traffic. If the view
provides the site with excellent visibility. The site is
of the site is obstructed by any large features a grade
also visible from the N4 national route.
5
of 3 (adequate) or less is assigned. If the site enjoys
high visibility a score of 5 (excellent) is assigned.
4. Appeal of the Site - Indicates the suitability and
The site appeals to the transient market travelling
aesthetic appeal of the site. A site adjacent to a
on the R35 as it is easily accessible. The site is
highway off-ramp or regional route is most ideal and
suited for industrial development as it will be able
attain a value of 4 (good) or more whilst a grade of 3
to accommodate light and heavy vehicles.
(adequate) or less is assigned to sites that are not
located in a commercial/industrial area.
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6. Size and Potential Growth of the Area - A grade of
The site is located on the R35 heading in to
4 (good) or more is assigned to sites that are located
Middelburg. The estimated the area has more than
on major routes and corridors based on the
500 ha of industrial development land earmarked
importance of the route. A grade of less than 3
for development. It is located on a major busy road
(adequate) is reflected if the site is located in a quiet
and adjacent to the N4.
5
suburban area with less passing traffic.
Weighted success factors are illustrated in Table 4.4. A specific weight is attributed to each success
factor according to its importance for the viable development of Metal and Steel Fabrication Hub. Each
success feature will be adjusted according to its multiplier (weight) to ultimately produce a site suitable
percentile.
Table 4.4: Weighted Success Factors, 2015
Factor
Grade
Multiplier
Weighted Total
1. Traffic Volume
4
3
12
2. Accessibility
4
5
20
3. Visibility
5
3
15
5. Appeal of the Site
4
4
16
6. Size and Potential Growth of the Area
5
5
25
Rating
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Section 5: Industrial Market Demand
5.1 Introduction
Property market is seen as a lucrative investment opportunity which provides consistent returns for
investors. Investors in warehousing facilities on industrial nodes adjacent to ports/production
facilities/airports generally expect consistent returns because of high demand for the space and if they
secure the correct tenants with long-term leases.
5.2 National Industrial Property Performance
Commercial development property growth and investment in South Africa’s is mainly focused in 3 major
cities; Johannesburg, Cape Town and Durban. South African Mapping publishes the Samco report
(2014/15) confirmed that Durban has created reputation for having outstanding industrial property
opportunities. The stretch of seaside areas from Durban, through Tongaat, to Richards Bay is becoming
one of the stronger industrial sectors in South Africa due to its logistics ability created by its biggest port
in Southern Africa.
5.3 Property Market and Economy
In order to provide a directive for informed forecasts in the property market it is important to
acknowledge the apparent relationship that exists between particular macro-economic variables and
sectors and various urban property markets. These variables include: GDP growth, interest rates and CPI
inflation rates.
The overall performance of relevant economic sectors serves as a proxy for the subsequent performance
of each applicable property market. Diagram 5.1 outlines the relationship between the performance of
the economy and the property market.
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Diagram 5.1: The Economy and the Property Market
Macro-Economic




Production
Inflation
Interest Rate
Exchange Rate
Sectoral Performance
Property Market
Trade & Accommodation
Retail, Wholesale & Accommodation
Business & Finance
Offices and Business Related Tourism
Transport, storage and
communication
Warehousing & Distribution
Manufacturing
Industrial
Other
Other
Personal Consumption
Expenditure (Final Demand)
Source: Urban-Econ, 2011
(Source: Urban-Econ)
Table 5.1: Current Summary of Market Indicators
Indicator
Movement
GDP Growth
Impact on the Property Market
Economic activity in the manufacturing sector and mining sector
th
(4 Quarter
has reflected positive growth for the fourth quarter. Continued
2014)
growth will increase demand for properties in these sectors as
business will want to expand. 2014 4Q = 4.1%q/q (2.0%y/y)
Interest Rate
The South African Reserve Bank kept the repo rate stable after the
increase in 2014. The lower inflation rate is a positive sign for
interest rates and could remain stable for the rest of the year.
Inflation
(CPI)
Rate
The relief in the fuel price has reduced strain on consumer
(March
inflation. The Transport index has shown a significant reduction
2015)
while the food and beverage index has shown a slight decrease as
well. Current CPI 3.9% y/y
5.3.1 Key economic developments
The following points should be noted when analysing the recent performance of the economy:

Economic activity in the manufacturing industry reflected positive growth of 9,5 per cent due to
higher production in the petroleum, chemical products, rubber and plastic products division; the
basic iron and steel, non-ferrous metal products, metal products and machinery division; and
the motor vehicles, parts and accessories and other transport equipment division;
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
Economic activity in mining and quarrying reflected positive growth of 15,2 per cent due to
higher production in the mining of ‘other’ metal ores (including platinum) and ‘other’ mining
and quarrying (including diamonds);

The growth in finance, real estate and business services was due to increases in activities in the
financial markets and banking;

The growth in the agriculture, forestry and fishing industry was due to higher production in
horticulture and animal products; and

The wholesale, retail and motor trade; catering and accommodation industry reflected negative
growth of 0,3 per cent due to decreases in turnover in most trade divisions.
5.4 Industrial Market Trend
Transport, storage and communications sector can be used as a tool to measure warehousing property
market. Figure 5.1 below indicates the sector performance from 2003 to 2013.
Figure 5.17: Transport, storage and communications sector performance, 2003 -2013
14,0%
12,0%
10,0%
8,0%
6,0%
4,0%
2,0%
0,0%
2003
2004
2005
2006
Mpumalanga
2007
2008
2009
Nkangala DM
2010
2011
2012
2013
Steve Tshwete LM
(Source: Quantec data, 2013 and Urban-Econ calculations, 2015)
The warehousing and storage sector indicates a long term downward trend over 10 year period.
Mpumalanga and Nkangala DM had a growth rate of 1.8% and Steve Tshwete LM growth of 1.7% in
2013. Drastic decline from 2008/2009 shows an impact of economic condition as the specific time
period. The average annual growth rates indicates slight changes from year to year however, average
growth rate for a ten year period indicates that since 2003, there has been significant growth in the
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industry with Mpumalanga (4%), Nkangala (5%) and Steve Tshwete (8%). This means that warehousing
and storage facilities have been in demand in the past 10 years.
Figure 5.2 below indicates the performance in manufacturing sector for the past 10 years. Poor
manufacturing sector performance is a threat to industrial property rentals. Positive performance in
manufacturing sector implies that industrial property is in demand, rented property or new
developments. We therefore use manufacturing growth to measure industrial property trends.
Figure 5.2: Manufacturing sector performance, 2003 -2013
15,0%
10,0%
5,0%
0,0%
-5,0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-10,0%
-15,0%
-20,0%
Mpumalanga
Nkangala DM
Steve Tshwete LM
(Source: Quantec data, 2013 and Urban-Econ calculations, 2015)
Manufacturing sector experienced its lowest points of performance in 2009 as an effect of the global
financial crisis. Nkangala and Steve Tshwete experienced a slump in 2012 which resulted to average
growth rate of -2.9% and -3.6% respectively. The growth rate slightly picked up in 2013 with rates of 1.1
for Nkangala DM and 1.2% for Steve Tshwete LM. Mpumalanga experienced a decline in growth of 0.4%.
5.4.1 Available rental space
The decision to buy or rent an operating space is dependent on number of factors such as the ease to
move to a bigger space when the operations need to change; and management and maintenance of the
property is dealt by an external entity. For this project, we are looking at rental space in order to
accommodate the operations of the projects as it grows and be able to move until a desired
development is reached.
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The available space for the project at hand is measured by available rental space in Middleburg and its
surrounding areas which are Vaalbank, Eastdene and Aerorand neighbouring areas.
Floor size in m2
Rent per month
Rent per m2
Middleburg
1 200
R 57 600
R48.0
Middleburg
1 410
R 67 000
R47.5
Middleburg
1 000
R 32 083
R32.1
Aerorand
390
R 27 250
R69.9
Eastdene
985
R 39 900
R40.5
Vaalbank
1 800
R 65 000
R36.1
Facility location
(Source: Property24 rentals and Urban-Econ calculations)
Currently there are 6 available rental industrial facilities. In Middleburg there are 3 facilities which range
from floor size of 1000m2 to 1410m2. The cost ranges from R32 per m2 to R48 per m2. Aerorand is the
most expensive location to rent with a monthly rent of R69.9 per m2.
5.5 Local Municipality Development Focus Points
The Spartial Development Framework (SDF) is a planning tool that indicates future areas for expansion
of industrial, business and community activities with priority projects. The Steve Tshwete SDF has
identified Middleburg as the primary node and the largest commercial centre in the municipal area. SDT
identifies primary nodes in Steve Tshwete as: Middleburg central business district and Hendrina central
business district. Secondary activity nodes are: Twin City and Eastdene nodes in Cowen Ntuli Street and
Middleburg Mall and eMhlusi Mall
Middleburg spatial development framework main structuring elements:
1. Regional road network - The N4 regional route runs from east to west of Middleburg while N11
traverses from north to south. Major economic activity takes place in these routes and Middleburg
has the advantage to maximize on its ability to better transport goods and easier business
connection.
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2. Cowen Ntuli Street - Cowen Ntuli Street has the main activity in Middleburg where businesses and
other economic activities are located.
SDF proposed that the street should be extended to
accommodate the planned future developments.
3. Middleburg Central Business District - The district comprise of retail developments, business offices,
government buildings and municipal offices. Activity taking place in this node is crucial in the
development of town.
4. Industrial Development - Industrial areas located on the south-east of town play a significant role in
the economy of Middleburg and Municipality. The SDF proposes the land south of the industrial to be
maintained for the long term plan of developing industrial facilities on the area to N4 freeway.
5. Mining - The SDF stresses that the area on the south-west of Middleburg town is rich in coal reserves
and the area must be preserved for future mining.
5.6 Industrial Market Demand
This subsection gives an overview of the factors that have an impact on the demand for industrial space
which include:

Employment in the industrial and transport sector

Employment growth in the industrial and transport sector

Industrial parameter
5.6.1 Gross Value Added (GVA) in the Industrial and Transport Sector
Table 5.2 indicates the present and estimated GVA in the industrial and transport sector. The industrial
sector contributes R7,1 billion to the industrial and transport sector at present. In the industrial sector,
the categories that contribute the most are metal products, machinery and equipment (57%) and food,
beverage and tobacco (10%).
Table 5.2: Industrial and Transport GVA Contribution
Category
2015
2020
2025
Industrial Sector (R’million)
Food, beverages and tobacco
584
735
925
Textiles, clothing and leather goods
122
148
180
Wood and paper
218
236
254
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Petroleum/chemicals/rubber/plastic
406
574
813
Other non-metal mineral products
419
491
576
Metal products, machinery and equipment
3422
4104
4923
Electrical machinery and apparatus
226
311
428
Radio, TV, instruments, watches and clocks
103
149
214
Transport equipment
286
402
563
Furniture and other manufacturing
236
265
298
6,022
7,414
9,174
Sub Total
Transport & Storage Sector
Transport and Storage
1,158
1,607
2,113
Sub Total
1,158
1,607
2,113
Total
7,179
9,022
11,286
(Source: Urban-Econ Industrial Demand Model, 2015)
5.6.2 GVA Growth in the Industrial and Transport Sector
Table 5.3 indicates the growth rates for the various categories in the industrial sector. The industrial
sector has an average growth rate of 4.8% and the categories with the highest growth rates are
transport equipment (7.0%), petroleum/chemicals/rubber/plastic (7.2%) as seen in Table 5.3. The
transport and storage sector has an estimated growth of 5.6%.
Table 5.3: Industrial and Transport Growth Rates, 2014
Category
2015
Industrial Sector
Food, beverages and tobacco
4,7%
Textiles, clothing and leather goods
4,0%
Wood and paper; publishing and printing
1,6%
Petroleum/chemicals/rubber/plastic
7,2%
Other non-metal mineral products
3,2%
Metal products, machinery and equipment
3,7%
Electrical machinery and apparatus
6,6%
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Radio, TV, instruments, watches and clocks
7,6%
Transport equipment
7,0%
Furniture and other manufacturing
2,3%
Average growth
4.8%
Transport & Storage Sector
Transport & Storage
5.6%
(Source: Urban-Econ Industrial Demand Model, 2015)
5.6.3 Industrial Parameter
To determine the effective demand of industrial space an industrial parameter must be applied to the
current GVA contribution of each sub-sector. The industrial parameter therefore relates the demand for
floor space for each sub-sector of manufacturing in relation to the economic performance of that subsector.
Category
Parameter
Industrial Sector
Food, beverages and tobacco
150.0 m2
Textiles, clothing and leather goods
150.0 m2
Wood and paper
220.0 m2
Petroleum, chemicals, rubber and plastic
220.0 m2
Other non-metal mineral products
220.0 m2
Metal products, machinery, equipment
220.0 m2
Electrical machinery and apparatus
150.0 m2
Radio, TV and instruments
100.0 m2
Transport equipment
220.0 m2
Furniture and other manufacturing
150.0 m2
Transport & Storage Sector
Transport and storage
(Source: Urban-Econ Industrial Demand Model, 2015)
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Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
5.6.4 Effective Demand
The total demand for industrial space in the market area is given in Table 5.4. The current demand for
industrial space is estimated to be 1,462,160 m2 and demand is estimated to increase to 2,286,906 m2 by
2025.
Table 5.4: Effective Demand
2014
Category
m2
2020
ha
2025
m2
ha
m2
ha
Industrial Sector
Food, beverages and tobacco
79817
8,0
87525
8,8
110211
11,0
16970
1,7
18341
1,8
22275
2,2
46521
4,7
47975
4,8
51810
5,2
77642
7,8
89222
8,9
126303
12,6
86402
8,6
92089
9,2
107998
10,8
699994
70,0
752817
75,3
902978
90,3
29814
3,0
33874
3,4
46609
4,7
Radio, TV and instruments
8920
0,9
10322
1,0
14869
1,5
Transport equipment
55037
5,5
63005
6,3
88344
8,8
33842
3,4
35439
3,5
39768
4,0
1,134,959
113,5
1,230,609
123,1
1,511,166
151,1
Textiles, clothing and leather
goods
Wood and paper
Petroleum, chemicals, rubber
and plastic
Other non-metal mineral
products
Metal products, machinery,
equipment
Electrical machinery and
apparatus
Furniture and other
manufacturing
Sub Total
Transport & Storage Sector
Transport and Storage
231,551
23,2
321,459
32,1
422,531
42,3
Sub Total
231,551
23,2
321,459
32,1
422,531
42,3
1,462,160
146,2
1,832,625
183,3
2,286,906
228,7
TOTAL
(Source: Urban-Econ Industrial Demand Model, 2015)
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The estimated demand for industrial space is approximately 146,2 ha and is expected to increase to
228,7 ha by 2025. This represents an increase of 82,5 ha over the next decade. This additional growth
will definitely be enough to sustain a development in the form of a steel and metal fabrication hub.
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Section 6: Financial Assessment
6.1 Introduction
This Section analysis the potential financial viability of the Steel and Metal Fabrication Hub by making
use of the following tools:

Construction costs

Operational expenditures

Income Statement

Cash Flow Statement
The following assumptions are made:

Price of construction for stainless steel fabrication purposes is R 8,000/m2

Price of construction for carbon steel fabrication purposes is R 16,000/m2

Total capital costs will be 70% grant funding and 30% loans

Municipal land will be provided

The development will be done in two phases, phase 1 consists of developing the hub for
stainless steel products (year 1 to 5) and phase 2 develops the carbon steel hub (from year 6).
6.2 Construction
The Table below indicates the cost during construction for based on size requirements (m2) for different
stainless steel products. The cost estimations also include a 2,000 m2 facility for carbon steel products.
Table 6.1: Construction Costs
Estimated Size (m2)
Cost
Kitchen Cabinets
500
R 4,000,000
Catalytic Converters
500
R 4,000,000
Cutlery, Cookware
400
R 3,200,000
Pressed Sinks
400
R 3,200,000
Automotive multi-plate head gaskets for OEM's
200
R 1,600,000
Stainless steel domestic water piping
100
R 800,000
Product
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Estimated Size (m2)
Cost
PAL rings for SASOL filters
100
R 800,000
Welding/Training Centre
1000
R 8,000,000
Research and Development Centre
1000
R 8,000,000
Additional Stainless Steel
400
R 3,200,000
2,000
R 32,000,000
Product
Carbon Steel
Equipment Cost
R15,000,000
Total
6,600
R 83,800,000
As stated in the assumptions, the development funding will consist of grant funding (70%) and a loan
(30%). The Table below indicates the respective loan and grant funding amounts according to the
different phases of development.
Table 6.2: Funding Structure
Size (m2)
Grant
Loan
Total
Phase 1
4,600
R36,260,000
R15,540,000
R51,800,000
Phase 2
2,000
R22,400,000
R9,600,000
R32,000,000
Total Develoment Cost
R 83,800,000
6.3 Operational Expenditure
The Hub will operate as a property which is rented to different producers. The operational expenditure
will thus consist of maintenance costs and a management fee that is calculated to be 8% of rental fees.
Tenants are responsible for the payment of water and electricity.
It is assumed that maintenance costs will increase by 5.6% per annum.
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Table 6.3: Operational Expenditure (R’000)
Management
Fee
Maintenance
Total Operating
Expenditure
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
-
-
265
291
321
506
557
612
673
741
815
896
986
1,085
1,193
-
-
15
16
17
35
37
40
42
44
47
49
52
55
58
-
-
280
307
337
541
594
652
715
785
862
946
1,038
1,140
1,251
6.4 Projected Income
The Table below indicates the project income for the Hub based on the assumption that the rental income is R55/m 2 and that rental income will
increase by 10% per annum.
Table 6.4: Projected Income (R’000)
Year
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
-
3,312
3,643
4,008
6,325
6,957
7,653
8,418
9,260
10,186
11,205
12,325
13,558
14,914
-
3,312
3,643
4,008
6,325
6,957
7,653
8,418
9,260
10,186
11,205
12,325
13,558
14,914
1&2
Rental
Income
Total
Income
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
6.5 Cash Flow Statement
Table 6.5: Cash Flow Statement (R’000)
Year 1
Balance
Brought
Year 2
Year 3
-
-
-1,763
Grant
36,260
-
-
Loan
15,540
-
Management Fee
-
Maintenance
Year 4
913
Year 5
Year 6
Year 7
Year 8
Year 9
Year
Year
Year
Year
Year
Year
10
11
12
13
14
15
1,132
1,372
2,110
2,527
2,986
3,492
4,048
4,659
5,332
6,072
6,887
-
22,400
-
-
-
-
-
-
-
-
-
-
-
-
9,600
-
-
-
-
-
-
-
-
-
-
-
264
291
320
505
55
612
673
740
814
896
986
1,084
1,193
-
-
15
15
16
35
37
39
41
44
46
49
52
55
58
Total Expenses
-
-
279
307
337
541
594
651
715
785
861
945
1,038
1,139
1,251
Gross Income
-
-
3,312
3,643
4,007
6,324
6,957
7,653
8,418
9,260
10,186
11,204
12,325
13,558
14,913
Profit Before Tax
-
-
3,032
3,335
3,670
5,783
6,363
7,001
7,703
8,475
9,324
10,259
11,287
12,418
13,662
Forward
CAPEX
OPEX
FINANCING & NET CASH FLOW
Finance
15,540
Repayment
-
Overdraft
Gross Income
-
Less Tax (28%)
-
Nett Income
-
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9,600
-1,763
-1,763
-1,763
-1,763
-2,852
-2,852
-2,852
-2,852
-2,852
-2,852
-2,852
-2,852
-2,852
-2,852
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-1,763
1,268
1,572
1,906
2,930
3,510
4,148
4,850
5,622
6,471
7,406
8,434
9,565
10,809
355
440
533
820
982
1,161
1,358
1,574
1,812
2,073
2,361
2,678
3 ,026
913
1,132
1,372
2,110
2,527
2,986
3,492
4,048
4,659
5,332
6,072
6,887
7,782
-1,763
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
The phased approach to development, together with a 70% grant and 30% loan of the total
development costs, results in an IRR of 12%.
The Table below provides a brief summary of how the IRR change depending on the funding model that
is used.
Table 6.6: Funding
Grant Funding (% of total cost)
Loan (% of total cost)
IRR (%)
50%
50%
1%
60%
40%
6%
70%
30%
12%
80%
20%
20%
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Section 7: Economic Impact Assessment
Economic impact assessment deals with the evaluation of potential impacts of the proposed truck stop
on the economic environment. It analyses potential changes in production output, Gross Value Added
and employment during construction and operational phases of the project.
The following sections provide the assumptions of inputs used in the modelling exercise, the results of
the assessment and interpretation thereof in the context of the economic profile presented earlier in
the report. All prices used during the modelling exercise are for 2014 unless specified otherwise.
The analysis focuses on the changes that could be expected in the local economy and broader regional
community. This can best be estimated by using a technique called the Social Accounting Matrix (SAM)
modelling. The SAM model translates the anticipated structural change in the economy which will occur
as a result of the proposed development into direct, indirect and induced effects in the local economy.
This technique is a generally accepted approach in an attempt to understand and quantify the potential
effects of an exogenous change in the economy. There are various measures, which can determine the
impact of such actions on the local residents, and these include the following:

Impact on employment numbers, i.e. the number of additional jobs created or jobs lost because
of the change in the economic growth of the local economy. This is the most popular measure of
economic impact, because it is easier to comprehend than large, abstract Rand figures.

Value added (which is normally equivalent to Gross Value Added (GVA) is a broader impact of
the full income effect. This measure essentially reflects the sum of wage income and corporate
profit generated in the area.

The impact on Business Output (also referred to as production) is the broadest measure of
economic activity, as it generates the largest numbers. It includes the gross level of business
revenue, which pays for cost of materials and cost of labour, as well as generating net business
income profits.
The net economic impact is usually viewed as the expansion or contraction of an area’s economy,
resulting from changes in (i.e., opening, closing, expansion or contraction of) a facility, project or
programme. The following impacts can usually be quantified:
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
Direct impact: the direct impact is calculated from macro-economic aggregates, occurring as a
direct result of the project. The initial impact on GDP for example is taken from the financial
information and equals the value added generated by a specific scenario,

Indirect impact: indirect impacts are calculated from the activities of suppliers through
application of the model. For purposes of this study, indirect suppliers include those industries
who deliver goods and services to the activity under discussion (first round suppliers) including
suppliers who on their part deliver goods and services to the first mentioned indirect suppliers,

Induced impacts: the impacts are on goods and services demanded due to the project.
Examples include the income of employees and shareholders of the project, as well as the
income arising through the backward linkages of this, spending in the economy. The impact is
sometimes confused with the forward linkages of a project.
7.1 General Assumptions
To embark on the modelling process of the impacts of the proposed construction of Steel and Metal
Fabrication Hub, a number of assumptions with regard to the model and data were made. The
assumptions were as follows:

The CAPEX and OPEX figures reflect the real situation accurately enough for the purpose of the
impact assessment,

The impact assessment assumes that the proposed development concept is financially viable,
and both, private and public companies will be involved in its realisation,

Production activities in the economy are grouped in homogeneous sectors,

The mutual interdependence of sectors is expressed in meaningful input factors,

Each sector’s inputs are a function of the specific sector’s production, comparative advantage,
and location,

The production by different sectors is equal to the sum of the production of separate sectors

The technical coefficients of the SAM model remain constant for the period over which forecast
projection is made.
A number of assumptions with regards to the data was made, these include;

Cost estimates are projected from actual figures derived from similar developments
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
No cost adjustments for price increase were allowed in the estimations

Contingency of 10% for cost adjustments and additional expenses is included

Labour component of the Project Execution Estimated at 35% of the cost

All values in the model are expressed as 2014 constant prices
7.2 Estimated Impact during Construction
The construction of the Steel and Metal Fabrication Hub will generate activities such as site
development, building construction, the installation of machinery and equipment, infrastructure
development, as well as other expenses related to the construction. This would have a possible impact
on the local and regional economies, as the demand for products and services used in construction will
increase, leading to the generation of new business output. The details of this impact on the economy
under analysis are provided in Table 7.1.
Table 7.1: Impact during Construction Phase 1 (2012 Prices)
Production
(Business Output)
GVA
Employment
Direct
Indirect
Induced
Total
R83 800 000
Construction
R111 454 000
R37 710 000
R232 964 000
R21 369 000
192
R40 224 000
332
R15 922 000
105
R77 515 000
629
(Source: Urban-Econ SAM model, 2015)
As indicated in Table 7.1, through the direct impact, the proposed project will generate R83.8 million
(2014 prices) of new business output, over the 12-month period of construction. However, through the
spin-off effects arising from the increased demand, for goods and services of sectors supporting the
construction of the Steel and Metal Fabrication Hub, the production in the country, particularly in the
Mpumalanga province will increase by an additional R111.5 million, in 2014 prices.
In total, the construction of the Steel and Metal Fabrication will increase the business
output by R233 million in 2014 prices during the construction period.
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Along with the increase in the business output, the GVA in the region will also grow. It is estimated that
through the direct impacts, the construction of the Steel and Metal Fabrication Hub will increase the
local regions’ GVA by R21.4 million in 2014 prices. In addition, through the indirect and induced effects,
the proposed project will generate an additional R56.2 million of value-added, most of which will be
created within the Mpumalanga province due to its diversity of economic activities.
In total, the construction of the Steel and Metal Fabrication Hub will generate about R77.52
million in GVA in 2014 prices during the construction period.
All of the economic activities arising from the project will lead to the creation of new jobs and
subsequent increase in household consumption expenditure. The construction of the Steel and Metal
Fabrication Hub will create 192 direct jobs for the construction workers and professionals involved in
the development. At the same time, the development will support 332 jobs, through the indirect effects,
and 105 through the induced impacts.
In total, the construction of the Steel and Metal Fabrication Hub will support 629
employment opportunities during the construction period.
The operational phase in case of the Steel and Metal Fabrication Hub is a management fee, and each
business/occupant will be responsible for their own operational expenditure. The impact of the
operational phase will thus be determined by each of the businesses that form part of the hub and can
therefore not be calculated at this stage.
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Section 8: Risk Assessment
8.1 Introduction
There are four processes involved in risk assessment and management; risk identification, risk
quantification, mitigation and control and monitoring. Figure 10.5 illustrates the risk assessment and
management procedures.
Figure 10.5: Risk Assessment and Risk Management
Risk Identification
Risk Assessment
Risk Quantification
Risk Management
Mitigation and Control
Monitoring
(Source: Development Bank of Southern Africa, 2004)
8.1.1 Risk Identification
Risk identification is arguably the most important step in the process as a risk cannot be managed if it is
not identified. There are two approach method is used; macro and micro approach.

Macro-identification concern the identification of major risk sources, the consequences of which
may have a very significant negative financial impact on the project, and

Micro-identification aims to identify sub-risks within the major risk class, such activity being
pivotal to physical risk management or risk control objectives.
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8.1.2 Risk Quantification
When quantifying risk one needs to consider the likelihood of an event occurring within a certain
timeframe. There is no single best method to quantify risk. Much depends on the type of business,
process or project being considered. Also consideration needs to be given to the availability of data.
There are both quantitative and qualitative techniques to quantify risk. A combination of the two
methods could also be considered.
Qualitative Techniques:

A risk self-assessment process which captures participants views on the potential likelihood and
impact of future events using either descriptive or numerical scales

Use of interviews or workshop to quantify risk exposures
Quantitative Techniques:

Benchmarking – a collaborative process among a group of entities, benchmarking focuses on
specific events or processes, compares measures and results using common metrics

Probabilistic Models – associate a range of events and the resulting impact with the likelihood of
those events based on certain assumptions

Non-Probabilistic Models – use subjective assumptions in estimating the impact of events
without quantifying an associated likelihood.
8.1.3 Mitigation and Control Measures
In general there are four generic risk responses. These are:

Terminate – Avoidance, action is taken to exit the activities giving rise to risk. Risk avoidance
may involve exiting a project

Treat Reduction – Action is taken to reduce the risk likelihood or impact or both

Transfer – Sharing, action is taken to reduce risk likelihood or impact by transferring or
otherwise sharing a portion of risk

Tolerate – Acceptance, no action is taken to affect likelihood or impact
Risk categories which need to be considered under the generic heading of market risk include:

Market Risk

Interest Rate Risk

Currency Risk

Equity Risk
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
Commodity Price Risk

Credit or Counterparty Risk

Liquidity Risk

Operational Risk
8.1.4 Risk Monitoring
Risk monitoring forms the last element of the risk management process. Risk monitoring can be divided
into two sub-processes.
1. Monitoring risk exposure of the organisation that were previously identified
2. Monitoring the environment for changing circumstances and new risk exposures
Some of the elements to monitor include:

Economic indicators and trends

Political and regulatory environment

Social aspects

Competitor activities

Human resource issues

Financials

Technology matters
8.2 Economic Risks
The risks discussed in this section are those which could have an impact on the performance and
viability of the Steel and Metal Fabrication Hub. It should be noted that the social and environmental
risks can have indirect effects on the performance of the Hub.
8.2.1 Market Risk
The market risks include:

competition

economic decline

market demand

funding
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These aspects are crucial to monitor and adapt during the development phase as well as during the
operational phase of the Hub. Without proper funding a project is doomed to failure. There are a
number of economic risks that could influence the success of the Hub.

Market demand: There should be a sufficient local demand for stainless steel and carbon steel
products. It is crucial for producers to stay competitive within the market and cheaper imports
can have a serious negative effect on the operations at the Steel and Metal Fabrication Hub.

Economic Climate: The economy is consistently changing and needs to be analysed on a regular
basis. The economy is cyclic and thus goes through growth periods as well as periods of decline.
Changes in resource prices and supply will affect the operations of the hub; the changes in the
mining sector must therefore be closely monitored in order to proactively diminish potential
negative effects that may arise due to changes in this sector. Other factors such as labour unrest
and exchange rates can also have an impact on the operations at the Steel and Metal
Fabrication Hub.

Funding: As mentioned, proper funding is crucial to the success of the development of the Hub.
Funding sources like the IDC or DTI should be contacted for financial support.
8.3 Environmental Risks
The operations and construction of the Hub can have a negative effect on the environment in terms of
pollution and destruction of natural habitat. It is therefore important to minimise the negative impact
on the environment by being environmentally sensitive in the approaches followed.
8.3.1 Possible Improvement Strategies

Providing extensive guidance to workers on appropriate behaviour when in contact with the
natural environment

Making all facilities as eco-friendly as possible

Seeking advice from NGOs which focus on environmental conservation

Careful planning of the activities and procedures

Make sure that facilities, projects and buildings are as energy efficient as possible
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Section 9: Incentive Scheme
9.1 Introduction
It is important that the hub have access to financial and non-financial incentives. Without these
incentives the project is just another private or public-private industrial park. The following incentives
are proposed for the Hub and Steve Tshwete Local Municipality. As the hub falls within the boundaries
of Steve Tshwete Local Municipality, the local municipality will have to approve the municipal incentives
proposed in this document through council resolutions.
9.2 Incentive Package
The proposed incentive package for the hub is illustrated in Table 9.1. There are both financial and nonfinancial incentives that could be applied.
Table 9.1: Incentive Package
Non-Financial Incentives
Financial Incentives

One stop investment shop


Fast tracking development applications

Investment facilitation officers

Reduced land use management application tariff

Facilitation with DTI to obtain relevant incentives

Development charge deferral and partial write-off

Provision of spatial economic information

Reduction in service charges

Skills development assistance

Reduced broadband connection charges

Access to sector support organisations
Reduced or exempted building plan application
tariff
9.3 Eligibility Criteria
To qualify for these incentives a company or person will have to meet the set criteria. There are sector
criteria, employment criteria, spatial criteria and performance criteria. Table 9.2 illustrates the relevant
criteria that needs to be adhered to in order to qualify for the incentives.
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Table 9.2: Eligibility Criteria for Incentive Package
Category
Description
General Criteria
The investment must constitute a new ‘external’ investment or the expansion of an existing investment in the area, and cannot simply be
a relocation of businesses already based in the municipality.
Sectoral Criteria
The investment must be in a sector which enhances the value-added production capacity of the municipality. The proposed investment
(except where otherwise stated in the priority sector list) should be located in the manufacturing sector. Priority Sectors:
Spatial Criteria

Broad manufacturing sector

Metals and metal equipment

Business process outsourcing

ICT

Creative industries

Agro-processing

Green technology

Medical technology and pharmaceuticals

Finance and insurance
Applicants will have to fall into one of the following two categories in order to qualify for an investment incentives package:
A: Investment incentives with no direct revenue implications for the municipality will be made available to any investments in priority
sectors described above and can be located anywhere within the boundaries of the municipality, subject to zoning and environmental
approval
B: Investment Incentives with direct revenue implications for the municipality will only be made available to investments that fall in in
the priority sectors described above and are located in pre-determined, qualifying spatial locations; subject to zoning and environmental
approval. Applications that fall into this category will also receive the full suite of non-financial investment incentives
Employment
The employment eligibility criterion applies to both A-Category and B-category investment incentives. The proposed investment must
Creation
create new and sustainable full time employment to be eligible for the incentives package. The employment eligibility criteria is based on
the priority sector:
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document
Sector
Criteria
Broad manufacturing Sector
Large investments resulting in more than 50 people being permanently employed after 24
months
Priority Sector (listed above)
Large investments resulting in more than 30 people being permanently employed after 24
months.
75% of the jobs created in each of the categories must be occupied by South African citizens. The onus is on the investor to provide
auditable and verifiable evidence and will be subject to monitoring.
Counter

Performance
Criteria and
No development within 12 months, or incompletion of the development within 24 months will result in approved investment
incentives lapsing.

Provisos
The stipulated job targets should be reached within 24 months of the date of application, failure to do so will result in all approved
incentives lapsing and deferred payments becoming payable

The investment must be consistent with the provisions of the District Spatial Development Framework as approved by Council, and
subject to relevant zoning and building approval

The applicant and all business associated with it, must be in good standing with Council and SARS, and will be required to register on
the municipality’s Suppliers Database in order to qualify for the incentive.

The premises out of which the business will be (is) operating must be in compliance with the National Building Regulations and
Standards Act
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
The investment must comply with the applicable environmental, labour and heritage legislation.

All financial incentives are subject to the council budgeting processes as prescribed by National Treasury.
Nkangala Steel and Metal Fabrication Hub Feasibility – Phase 4 draft document