China and South Africa have entered into a large-scale industrial agreement which will take root in Limpopo over the next five years.
Much has been written about South Africa’s power pandemic, which currently sits uneasily at the crossroads of sustainable production and ethical liability. Recent deals struck between President Cyril Ramaphosa and Chinese president, Xi Jinping, point in a worrying direction, in defiance of South Africa’s much anticipated renewable energy revolution.
China in Africa
China’s headlong foray into Africa has been harshly described as textbook neo-colonialism. In the last 18 years, China has pumped more than $124 billion into Africa, with the East’s latest offering, agreed to during the Africa-China Conference, totalling a whopping $60 billion.
These loan agreements are, on the surface, aimed at unblocking the financial bottleneck currently strangling emerging economies, by providing assistance with large-scale infrastructure development programmes. All over Africa, Chinese companies are involved in the construction and management of roads, ports, power plants and industries.
The question asked by global economic analysts is; why is China, a country with over 100 million people who are still living below the poverty line, investing billions of dollars in offshore schemes?
Worryingly, China’s liberal loan hand-outs have been labelled as ‘debt colonialism’. China is loaning exorbitant amounts of capital to impoverished nations which have almost no practical way of repaying the debt.
This debt trap has been exposed by countries like Malaysian and Sri Lanka – the latter being forced to cede control of a major port due to its default on repayments.
Due to China’s loan policy, the International Monetary Fund (IMF) has warned of increasing debt distress in 15 African countries.
In August, China pledged R196 billion to South Africa, during the 10th annual BRICS summit which was held in Johannesburg. A portion of these funds is set to assist embattled state-owned enterprises, Eskom and Transnet.
South Africa’s energy plan
South Africa should be embracing renewable energy. For one, a shift towards sustainable and renewable sources of electricity will employ more locals. Two, harnessing the power of the sun, wind and water has almost no negative effect on the environment or the surrounding community.
Yet, South Africa is defiantly pumping more money into coal-powered power stations, which is hugely problematic for the environment, community wellbeing, job security and the nation’s energy stability.
The burning of coal is responsible for most of the world’s carbon dioxide emissions. Coal-fired power stations account for 77% of South Africa’s electrical output. 92% of all coal consumed on the African continent is produced in South Africa.
Despite a global move towards cleaner energy, South Africa still continues to flog coal, despite pleas from the international community.
Energy Minister, Jeff Radebe, recently released his Integrated Resource Plan (IRP), published under Electricity Regulations on New Generation Capacity. This sets to outline South Africa’s power plans for the next 10 years.
The IRP makes no mention of major coal power stations due to be built in the near, or distant, future – other than Medupi and Kusile, which are, according to reports, near completion.
So why has President Ramaphosa approved the construction of another 4 600 megawatt coal-fired power station in Limpopo? More worryingly, why is this massive development, which is ultimately going to impact negatively on South Africa, being undertaken by China?
The South African Energy and Metallurgical Special Economic Zone (EMSEZ) is a bilateral industrial agreement with China, scheduled for development to the east and west of Musina, in the Limpopo province.
Why is this earmarked as a ‘Special Economic Zone’? Simply, because of coal and tax breaks.
“The South African Energy and Metallurgical Special Economic Zone is a state-level energy and metallurgical special economic zone approved by the South African Government in according with the Special Economic Zones Act No. 16 of 2014, and enjoys preferential taxes for special economic zones in South Africa and all the privileges given by the South African Government for encouraging foreign investment.”
The Chinese controlled industrial plant will contain at least 7 metallurgical processing plants. According to a report by Business Insider, the 4 600 megawatt coal-fired power plant’s sole purpose is to electrify the industrial zone.
China hasn’t shied away from its involvement in the scheme, making its intentions clear, again, via the official website:
“The EMSEZ is located in the Musina-Makhado Limpopo River Bank area of Limpopo Province, South Africa.
Facing with Zimbabwe and Mozambique across a river and connected with those two countries through bridge. The reserve of surrounding large open-cast coking coal mines is over 10 billion tons, and the chromium resources in South Africa account for over 83% of total global chromium resources, while Manganese resources account for more than 81%.
The region is abundant with raw material mine resources necessary for stainless steel production, including iron ore, silicon ore, nickel ore, limestone, etc. National railways, highways and power supply lines run through the SEZ, and its distance to the Port of Maputo in Mozambique is 500km.
The 4 600 megawatt coal-fired power plant, known as the “Power China International Energy Project” will service:
A coal washing plant (with the capacity to process 12 million tonnes per year)
A coking plant (3 million tonnes)
An iron plant (3 million tonnes)
A stainless steel plant (3 million tonnes)
A Ferro manganese powder plant (1 million tonnes)
A ferrochrome plant (3 million)
A limestone plant (3 million)
An apartment building, hotel, shopping mall, hospital and school will also be built.
Artist impression of EMSEZ via the official website
The 4 600 megawatt coal-fired power plant, known as the “Power China International Energy Project” (EMSEZ)
Iron and ferrochrome plants. (EMSEZ)
The coking and lime plants (EMSEZ)
Nine Chinese companies have invested $10 billion in the Musina-Makhado Special Economic Zone.
According to Business Insider, these companies will enjoy substantial tax breaks: apart from VAT and import duty relief, they will pay a reduced corporate tax rate of 15%, instead of 28% for SA companies.
Why should South Africans be concerned?
By now the answer to this question should be clear.
Coal power is dirty and unhygienic, a step backwards in South Africa’s already unsteady power scheme. Even worse, if the plant is only used to power a Chinese scheme, how does that benefit the host nation?
The nine Chinese companies involved in this scheme will surely bring with them their own employment, or at the very least, overpower local punters thanks to massive tax breaks.
Really, the question should be, how could this scheme ever benefit South Africa?
Why is the country borrowing money from China, to further suffocate itself with coal-fired energy, for a scheme which seeks to benefit Chinese multinationals?
