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KZN: The Winning Spirit 2006 - Grant Adlam

2006-03-26

In March 2006, a packed stadium and thousands of other fans at home, watched as one of the most extraordinary games of cricket, ever encountered in the history of the sport, was played out before their eyes. Victory to South Africa seemed impossible in the light of the record- breaking target set. Astoundingly, the batsmen achieved the required runs and South Africans experienced a collective spirit of victory, optimism and national pride that was felt for weeks.

Grant Adlam
Grant Adlam

The Protea's team had to compete on a level that they had never achieved before and did so highly successfully. We all want to be on the winning team and sporting victory is a current icon of achievement. The same principles that went into winning an international sporting event can be applied to those venturing into the market place. The 21 Century belongs to entrepreneurs; individuals who like the Protea\'s captain, Graeme Smith, have the courage to dream, who can see opportunity, and turn their dreams into reality. However, to achieve, motivation, planning, a competitive spirit, the utilization of assets and cooperative team play is required. Especially, as being successful in today's global world means having to compete resourcefully, effectively and to be innovative. The reward is in bringing home profit and adding value to the economy. KwaZulu- Natal shows all the signs of winning and a number of factors can be considered in contributing to this success. The South African Context KwaZulu Natal has to first be positioned in the overall context of the South African market. South Africa is a fast developing and growing economy with unlimited investment opportunities. United Nations secretary-general Kofi Annan, at the joint sitting of the South African Parliament in Cape Town (March 2006), described South Africa's success in relating to the wider world as the best model for the entire developing world. He stated that South Africa's robust economy, stable democracy, support for the rule of law and - perhaps most important - the fully inclusive constitution have made South Africa, a beacon of tolerance, peaceful coexistence, and mutual respect between people of different races, languages and traditions. According to revised StatsSA 2005 data, the current size of the economy, at an estimated R1.39-trillion, is one of the strongest in 50 years. The economy has grown by more than 4% every quarter since 2004 and is continuing on an upwards climb. The seasonally adjusted real GDP at market prices for the first quarter of 2006, compared with the fourth quarter of 2005, increased by an annualised rate of 4, 2%. The main contributors to the increase in economic activity for the first quarter of 2006 were the finance, real estate and business services industry, the wholesale and retail trade, hotels and restaurants industry; the manufacturing industry, the transport and communication industry, and the construction industry. The government is also powering ahead with its plans for the new Accelerated and Shared Growth Initiative. This strategy will build on the steady economic growth of about 5% with a view to making the envisaged 6% achievable in the next few years. An expectation for further growth is desired by many economists who are no longer easily satisfied with the present growth rate but predict that more significant levels will be achieved. This prediction is in accord with the South African Reserve Bank (SARB), in forecasting that the current period of economic expansion will continue. The South African Government has also targeted an economic growth rate of between 6% and 7% over the next decade. Inflation ought to remain in the range of 3% to 6% for 2006/7. The world economy, including a number of emerging markets, appears to ensure good prospects for a steady demand in exports but higher imports will make sure that the current account remains in deficit of 3.6% of GDP. According to Chris Hart, Absa treasury economist, the biggest driver of the economy in 2006 will be investment. 'I think by the end of the year growth is going to be on the upside and GDP will hover between 4% and 5%. You are going to see not only government spending but also private sector investment - both imported and local - in the economy in order to take advantage of the strength we have seen in the past year' (TradeInvestSA, January 2006). The 12th annual Index of Economic Freedom, by The Heritage Foundation and The Wall Street Journal, calculated that South Africa's overall score improved from 2.83 to 2.74, tying the country with Kuwait as the world's 50th most economically free countries out of the 157 countries measured. The Heritage Foundation\'s view is that countries with the most economic freedom also have higher rates of long-term economic growth and are more prosperous than are those with less economic freedom. South Africa is considered more economically free than emerging market competitors such as Mexico, Brazil, India and China. Significantly; South Africans have a competitive advantage in Africa. With the current growth in the economy, an increasing Upper and Black Middle Class is emerging. Over 2 million people have joined the middle class ranks in the last 10 years. This increase has a considerable impact on the South African economy in respect to purchasing power in the retail market. The combination of a strong economy, boosted by higher consumer spending and increased business activity, means that there is a rising level of confidence in the South African market. It is plain to see that South Africa has unsurpassed opportunities in bowling out the competition. KwaZulu-Natal What happens at national level usually has a dynamic effect on regional economies and KwaZulu-Natal is no exception. The Zulu Kingdom has historically been a key component of the southern African economy. The Province links southern Africa through trade to the rest of the world, as well as provides a base for those wanting to venture into African markets. A number of unbeatable factors contribute to this advantage. 1. The KwaZulu-Natal Economy According to latest figures, out of the nine South African provinces, the KwaZulu-Natal's contribution is the second highest contributor to the Gross Domestic Product (GDP). In 2005, real annual GDP at market prices increased by 4.9 percent, compared with 4.5 % in 2004. Gauteng contributed 33.8% and KwaZulu-Natal contributed 16.3%. After a relatively depressed economic period during the late 1980s and early 1990s, KwaZulu-Natal has experienced positive economic growth over the past 7 years. Moreover, the Province's GDP has, since 2000, grown in excess of the national growth rate. The Province is experiencing a boom in the exports, manufacturing, business, entertainment and tourism sectors. The manufacturing sector accounts for 36% of the GPP and therefore plays a major role in the economy and its diversified nature is significant in the Province's economic growth rate. This sector's impressive growth is due to the change from a policy of inward industrialization to an open outwardly focused economy. 2. Resources KwaZulu-Natal has natural, mineral and metal resources, agriculture, and forestry. As KwaZulu-Natal is South Africa's best watered province; it has a larger area of high quality agricultural land than any other province, and it is the national leader in several agricultural products. The Midlands area between Pietermaritzburg and the Drakensberg is the heart of this high quality agricultural area, another area of importance is the North coast region. 3. Good Governance The provincial government of KwaZulu-Natal is committed to providing stability and effective governance, which is the foundation for sustained economic growth. Increased political tolerance has also contributed to solidity in the Province. Good governance and better intra-regional relations are keys to helping Africa unlock its potential and take economic growth to higher levels through trade. 4. Business Environment KwaZulu-Natal is the stepping stone to Africa markets and this is a real advantage in setting up a business base in the Province. KwaZulu-Natal has a business-friendly environment with an informed financial system, a sound banking sector, strong investment ratings, effective trade support facilities, and a huge emerging market. KwaZulu-Natal has a plentiful supply of both skilled and trainable labour, as well as proven entrepreneurial abilities, with the dedicated workforce. Labour costs are low and productivity superior, with high standards of local management. KwaZulu-Natal\'s skills base provides a wealth of opportunities for software development, website development and ICT outsourcing and training. A review by a Brussels-based international investment adviser has found that certain selected industrial undertakings can be operated more profitably in KwaZulu-Natal than in competing investment regions in the world. Based on a survey of potential investors, the following are some of the other criteria that are important for making decisions about investing: • Favourable tax rates • Planning advice and assistance • Marketing aid • Land cost and availability • Competitive investment incentives The Province of KwaZulu-Natal endeavours to meet all these needs and more and the various municipalities, chambers of commerce and industry, as well as the investment promotion agencies are committed to raise business confidence and encourage new investments in the Province. All are ready to work with potential investors, when required, to create a platform for long term business development. 5. Infrastructure KwaZulu-Natal has a well-developed infrastructure, including an excellent road/rail system with access to two deep water ports. Durban and Richards Bay Ports are southern Africa's busiest in terms of handling cargo by value and bulk respectively. There is widespread availability of energy, water and sewerage utilities and the telecommunications system links to regional and global markets. The Province has extensive cellphone networks. Durban is the only city in Africa with a fibre optic cable network. Due to this well established IT infrastructure, the Province has become a popular location for international call centres and the outsourcing of business services. Providing air-links to all national major cities, Durban International Airport currently has approximately l 5 000 people a day passing through its doors (according to eThekwini Municipality). Recent indications are that the private sector and the government are committed to investing in improving and developing infrastructure to sustain long term growth. 6. Trade Trade reform processes are generating new opportunities. Positioned as Africa's global trade gateway, KwaZulu-Natal is poised to compete for a market share of the global economy. The volumes of trade between KwaZulu-Natal and the rest of Africa are growing. Exports by KwaZulu-Natal firms already account for some 30% of GGP, and whilst Rand strength has hurt the pattern slightly recently, the long term prognosis is that this share is bound to grow in the future. Exports are important to regions as global market activity allows nations the potential to raise levels of income by, 1)Meeting the needs of markets beyond the limits imposed by the countries borders, and 2)Through importing goods produced more competitively elsewhere to meet local demand. As such, an economy that is open and which has an export orientation is seen as one most likely to benefit from the process of globalisation. Manufacturing and agriculture continue to be responsible for the top export products. A number of opportunities linked to a range of niche markets are also available in the KwaZulu-Natal. At present KwaZulu-Natal would appear to favour some pharmaceutical (bandages) and cocoa products. Relative to the world, South Africa and KwaZulu-Natal are specialising in fur, essential oils and cosmetics and in nickel products. The benefication of primary products in minerals, agriculture and fishing will create additional export products. This push to 'add value', opens up many opportunities for emerging black entrepreneurs and investors alike. 7. Foreign investment Investor confidence into the region is high - statistics from the South African Department of Economic Trade and Investment show an annualised increase of 9% with a total investment of US $ 20 billion into KwaZulu-Natal in the period 2003 to 2006. According to Carl Eaton of the Notae Group, investment optimism is fuelled by South Africa's well balanced economy, the country's growth history over the last couple of years, KwaZulu-Natal's tourism market and the City of Durban's Economic Development plan. To date, the two most significant and largest Foreign Direct Investments in South Africa are the R35-billion takeover of ABSA by the UK-based Barclays and the R15-billion Vodafone-Vodacom deal in 2005. Companies from India are also entering the South African economy. Tata, the Indian industrial conglomerate, known in South Africa for its passenger and commercial automotive offerings, has significant plans to increase its interests in the country, and use it as manufacturing and export base. Tata's goals in South Africa are significant, ranging across sectors from steel and ferrochrome, to telecoms, energy, information technology and leisure. Proposed investments include • Construction of the new a R600-million high-carbon ferrochrome smelter in Richards Bay, KwaZulu-Natal, in 2006. Tata Steel, MD Muthuraman said that Richards Bay had been selected ahead of a competing site in Australia, owing to South Africa's competitively-priced power, as well as the fact that Richards Bay had an efficient deep-water harbour. • Building electricity utility Eskom's two gas turbine power stations (Tata has been shortlisted with BEE partner J&J Group) • The Group's telecoms subsidiary, Videsh Sanchar Nigam Limited (VSNL), is to become a leading participant in the so-called second network operator (SNO). Tata anticipates that the roll-out of the much-anticipated competitor to South Africa's telecoms monopoly, Telkom, will cost an initial R8-billion to R9-billion. ICICI Bank, India's largest retail bank has opened its office here and is currently expanding across the country. Well over thirty U.S. companies are now located in the Province, the second highest concentration in the country behind Gauteng. Sara Lee (America's largest employer in South Africa) and Masonite are good examples of this high-level presence. Other \"Fortune 500\" companies here comprise: DOW, Citibank, Mobil Oil, Deloitte and Touche, Price Waterhouse Coopers, Lykes Lines, Rohm & Haas. In the investment area, these sectors offer promise: tourism, manufacturing, agribusiness and food processing, chemicals (including petrochemicals) intermodal transport logistics; IT; health care; machinery and supplies. 8. Business Confidence The benchmark business confidence index compiled by the South African Chamber of Business (Sacob) recently rose to 129.4 points from 126.5 in November 2005. Overall business confidence averaged 127.1 points in 2005, compared to 124.4 points in 2004. In particular, the building sector is also benefiting, with its' confidence index increasing from 90 to 94 points. According to a report by the Economic Information Management unit (EIM) at the Department of Economic Development KwaZulu-Natal (November 2005), business confidence in Kwa Zulu-Natal is also growing. 2005 figures show the solid improvement in the index, which is due to the strong performance of the following underlying variables: • The volume of full containers shipped from the Port of Durban is increasing while the volume of containerised imports continued to grow. • The share-price performance of 19 KwaZulu-Natal firms listed on the Johannesburg securities exchange was exceptional. • A record number of new passenger and light commercial vehicles have been sold in the Province • Growth in manufacturing output in the province had a positive effect on the business confidence index. 9. Tourism and Sport KwaZulu-Natal's magnificent Drakensberg mountains, sub-tropical coastline with glorious beaches and game parks are closest to the main national population and economic centres in Gauteng. The Province has great accommodation facilities, wonderful leisure and recreation opportunities, a rich history and diverse cultures. As a consequence, KwaZulu-Natal remains the nation's premier domestic tourist destination, with twice as many domestic tourists as any other province; and it also has a significant share of international tourists. The ICC remains the best conference centre in Africa and its expansion into an entertainment arena this year will bring new benefits. The promotion of business tourism to the Province has many spin-offs for the holiday destinations. A current provincial strategy focuses on ensuring that world class events are attracted to the Province of KwaZulu-Natal, which reinforces our passion for sport, art and culture During the next three years, including some annual events, KwaZulu-Natal will host the A1 Grand Prix, Clipper Round the World Yacht race, World Veterans Tennis, World Cycling, World Beach Soccer Series, FINA Swimming, Duzi Canoe Race, Comrades Marathon, the Midmar Mile, Tour Durban cycle race, Amashovashova cycling race, the Zulu Rally and the Vodadom July Handicap to name but a few great sporting occasions hosted in the Province. 10. Unsurpassed quality of life And if all the above reasons are not sufficient, there are even more advantages if you look as the wider social fabric cannot be ignored. There is plenty of land, houses to suit most income groups, good medical care and education. KwaZulu-Natal offers an unmatchable combination of assets- sunshine, leisure opportunities, relaxed lifestyle, and a growing economy. It is alive with possibility! Distribution of Economic Activity Economic activity is distributed around the Province in a number of nodes but many other areas have high potential for growth, which should not be overlooked. 1. The Durban-Pinetown metropolitan area possesses over 80% of KwaZulu-Natal's factories, and with more than 10% of those in the Republic, is South Africa's second or third most important industrial region. Its factories are associated primarily with shipping, food processing, chemicals, sugar, and oil refining. The Department of Trade and Industries (the dti) is promoting Durban as having the potential to develop into the country\'s largest industrial hub within the decade because of the excellence of the Durban Port. 2. Just outside Durban the Umhlanga area is growing rapidly as a commercial and business heartland. Stretching across the Umhlanga Ridge, Gateway and the La Lucia Office Estate, the area is recognised as South Africa\'s fastest-growing property development sector 3. The buoyant economic outlook in Pietermartitzburg has been confirmed in a study which points to a 50% growth in turnover by factories over the past decade. George Oldham and Mike Hickson, of the School of Economics and Finance in Pietermaritzburg, reported that through growth in manufacturing, Pietermaritzburg is re-establishing itself as an industrial growth point. Hulett Aluminium, the capital city\'s largest industrial operation, is to embark on a R54 million heat-treated plate expansion project. Pietermaritzburg has a number of industries consisting of an aluminium plant, several footwear factories and food processing plants and has experienced an increase of almost 100% in economic activity from January 2003 to June 2005 (Coetzee, Economic and Business Report, January 2005). 3. The lower Umfolozi area (Richards Bay/Empangeni) is home to some of the biggest business concerns namely Foskor, Richards Bay Minerals, Hillside Aluminium, Bayside Aluminium and Richards Bay Coal Terminals. The expansion plans for the Richards Bay Port and the creation of an Industrial Development Zone will promote future growth in the region. 4. The Ladysmith - Emnambithi region, The KwaZulu-Natal (KZN) Provincial Growth and Development Strategy and the National Spatial Development Framework state that one of the primary development corridors run through the uThukela Regional Council (RC) area from Pietermaritzburg to Harrismith, with a branch off to Ladysmith and Newcastle. Ladysmith is thus centrally located with respect to the important development corridor and transport routes in the region. It is generally accepted that the corridor will increase economic opportunities in and around Ladysmith leading to growth of the town and increasing migration and commuting. 5. The Newcastle - Madadeni region. Analysis suggests that the past decade has seen rapid, growth in Newcastle of service and retail activities - such that Newcastle's position as Northern KwaZulu-Land's Service Hub is being increasingly recognised by both the private and public sectors. 6. The South-Coast is also showing signs of increasing economic activity, especially in tourism related projects. Economic Sectors A brief look at a few of the economic sectors and the plans for future expansion in the Province indicate that KwaZulu-Natal will be forging ahead in attaining a record growth rate. Manufacturing KwaZulu-Natal's economy is driven by the manufacturing sector and in particular the automobile and component sector, paper and paper product industries, and chemicals. The mining sector which includes titanium dioxide, zircon along with iron, steel and ferroalloys is important. The manufacturing sector, in particular, plays a major role in the economy and its diversified nature is significant in the Province's economic growth rate, and to providing employment. Chemicals account for about 20% of manufacturing output, while clothing and textiles accounts for 20% of manufacturing employment. There are many opportunities for small businesses in value added initiatives. Of note is the importance of downstream development, which is required to increase capacity and lay a foundation for successful economic development where it is most needed. One of the industries considered conducive to more downstream development is the aluminium industry, where beneficiation both by large companies and financially-assisted small, medium and micro enterprises (SMMEs) is considered to be economically feasible. Automobile There are 1 317 motor retail businesses in the province. According to Brand Pretorius, chief executive of McCarthy Limited, who addressed delegates at the annual Durban Motor Show on 17 March 2006. " It is expected that around 80 000 new vehicles will be sold in KZN in 2006," said Pretorius. "The province currently holds a 16% share of the national new vehicle market, with Gauteng 46% and the Western Cape 17% respectively." These statistics well indicate the importance of the automobile sector to KwaZulu-Natal. Toyota South Africa based primarily in Durban, has established its dominance in the domestic market as a key producer of passenger and light commercial vehicles. Toyota has committed itself to expand production at its Durban plant to facilitate its export programme. This will see it doubling production to 200000 units a year. To facilitate growth an automotive supplier park is being developed in south Durban by Toyota, the provincial and local governments. The park, a few kilometres from Toyota\'s assembly plant in Prospecton, will be based on a 30ha site owned by the Airports Company South Africa (Acsa). Combined Motor Holdings, and both are currently in the process of expanding their national and KZN dealer networks. McCarthy Limited is a division of Bidvest and currently its number one local profit contributor. Revenue increased during the 2005 financial year to R13.6 billion, and the company recorded an operating profit of R501 million. The company employs 5 289 people at its operations around the country. " McCarthy Limited is planning to invest R225 million in new facilities in 2006," said Pretorius. "The expansion of McCarthy Limited's portfolio in the KZN province includes a mega Toyota dealership in Kingsmead, a new Toyota dealership in Ballito, and a Renault dealership in Pietermaritzburg". Swedish manufacturer Volvo has announced it is to open a production plant in Durban. Volvo Trucks has been assembling kits for both truck and bus products in Gaborone, Botswana since 2000. However, in-line with an aim to achieve higher global efficiencies, the decision has been taken to move production to Durban from Gaborone. Volvo is investing almost R41 million in the production plant, creating 82 jobs. Agriculture Agriculture is a labour-intensive sector, which is especially relevant in a provincial context of high unemployment. Growth in this sector is being actively pursued as there are many schemes being implemented, which have the potential to provoke socio-economic upliftment in the Province. In line with this thrust the identification of crops and the creation of opportunities for SMME agribusiness prospects are of importance. Proposed projects include: - honey farming, the growing of cut flowers, the production of essential oils for on-sale into the pharmaceuticals and cosmetics markets, and the cultivation of plants that can be marketed as indigenous medicines. Some studies show high value/ low mass floriculture and horticulture for export are likely to take the lead in the future. The potential for sugar cane to be used as biofuel is also of importance to entrepreneurs. One such project is being undertaken by the Ilembe Local Municipality where research has indicated that rose, geranium and lavender plants for essential oil production would grow particularly well in the area, generating commercial opportunities for local workers. According to Municipal Manager, Dr Buks Pretorius, Ilembe is presently trying to find a strategic position relative to Dube Trade Port and the King Shaka International Airport, (which will be operational in 2009) for an agri-processing facility to allow for rural produce to be grown and processed for export. Timber is the main feedstock of the Province's large world-class and expanding pulp-and-paper industry due to that availability of lumber resources in KwaZulu-Natal. The manufacture of wood products remains a part the manufacturing activities but for the most part paper production occurs. Due to Durban's port, which offers export linkages to international markets Durban is the site of a number of paper and board mill operations who export a significant amount of their production. Mondi supplies a number of BEE operations which include furniture production and paper making. Mondi South Africa Ltd. CEO, John Barton, believes the "Proudly South African" campaign reinforces the company's marketing slogan "South African Roots - Global Reach"; launched in conjunction with major restructuring in November last year. While Mondi is a global company, Mr. Barton says Mondi South Africa and subsidiary Paperlink are "delighted to participate in this demonstration of both our good practices and our commitment to South Africa." The Mondi group restructuring led to the creation of two major Black Empowerment companies. Shanduka Resources Ltd, a broad based BEE company, acquired 42% of Mondi's newsprint business and 45% of Mondi's packaging operations, resulting in Mondi Shanduka Newsprint and Mondi Packaging South Africa becoming truly BEE companies. Sugar-processing includes the broader activities of food and beverage processing. This sector should grow significantly in the years to come with the growing middle class. In addition, the influx of people moving to urban areas causes more food to be purchased, rather than grown. Construction and Property development The construction and property development sector is booming across the Province with numerous residential and commercial projects underway. Durban is experiencing an increase in inner-city rejuvenation as investors are being attracted to urban renewal projects, specifically in commercial conversions of former offices into upmarket residential units. The Durban Point Development Project near the city's central business district is bringing significant volumes of property stock to the market, providing numerous opportunities for property management companies and agents. A prime example is Shaka's Gate, a R400 million development which is to be built at the Durban Point Waterfront. Described by the developers as one of the most exciting and magnificent development projects, Durban has seen for decades, Shaka's Gate will offer 220 luxury air-conditioned apartments and penthouses all with secure basement parking, world-class security, a swimming pool, spa and a gymnasium. Construction commenced in 2006 with completion anticipated in December 2007. The Umhlanga Ridge area, which in the past five years has boomed into Durban\'s new central business district, has been acknowledged as South Africa\'s fastest-growing commercial hub. The influx of workers has fed demand for large-scale, upmarket residential property developments and provoked a property boom not experienced in the city for decades. Billion rand deals from the oil-rich Middle East Arab countries whose companies are shifting money away from Europe and the US are occurring. Kuwait-based IFA Hotels & Resorts K.S.C.C ("IFAHR Kuwait"), the largest single foreign investor in KwaZulu-Natal tourism to date, boosted the SA economy when it reverse-listed two SA subsidiaries onto the JSE main board under the banner IFA Hotels & Resorts Limited ("IFAHR SA"). The company perceives South Africa to be a springboard for expansion into the continent. Through its two subsidiaries IFAHR SA now owns the exclusive Zimbali Lodge on Kwa-Zulu Natal's north coast, rated by Condé Naste as one of the world's top hotels, and a 50% stake in the multi-million rand Zimbali Coastal Resort. The Zimbali integrated resort project jointly developed with Moreland Developments, which indirectly owns the remaining 50% interest, offers hotels, luxury residences, golf courses and leisure facilities. The rapid take-up of properties has prompted the joint venture to develop a 300 ha extension, Zimbali Lakes, which will include a Gary Player signature golf course. The multiple award-winning Midlands Mall in Pietermaritzburg, R120 million extension project is due for completion in 2006. The state-of-the-art regional shopping and lifestyle centre is owned by Liberty Group Limited and its extension forms part of the Liberty expansion programme to add further value to one of South Africa's best performing property portfolios. The strategically situated Midlands Mall development is Liberty Properties\' first major retail development in KwaZulu-Natal. Stephen Roberts, Bentel Associates International's project director for the retail development stated that, "The centre has added a new dimension to the area, it has become the focal point of retail activity and entertainment in Pietermaritzburg and the resultant increase in local confidence has provided a fresh impetus for further economic activity and development. The expansion is expected to sustain local construction industry jobs and job creation in retail and service sectors will further reduce unemployment in the area". Richards Bay Keystone Investments has been approved by the Umhlatuze Municipality Council as the preferred developer of land in the southern block of the Richards Bay CBD and proposes to develop a R340 million regional shopping mall. The proposed mall, known as Inkwazi Regional Mall, will have about 30 000m2 of lettable space with high quality finishes, wide pedestrian malls and roof lights. The developers have also committed to constructing a 'town-square' in front of the Richards Bay Civic Centre. Demand for residential property in Richards Bay remains high. Development plans for a number of new development have been passed, which include the R300 million Richards Bay Golf Course Estate and town house complex on a portion of the Empangeni Golf Course and the Tennis Club. The Zini River Estate will transform former sugar cane farmland into a 175h housing estate on the northern side of Mtunizni. Services Sector A new company, KZNonSource, has been established as a result of the strategic partnership to drive the services sector and position the Province as a location for outsourcing. Factors influencing the growing in call centres in the Province include cost effectiveness, English fluency, accent and language skills and a compatible time zone to many countries. William Goldstone CEO of KZNonSource anticipates a period of rapid growth. He stated that the company is starting to see the fruits of its work in publicising the region and that it was a very exciting time. He believes that it is vitally important to continue to support training and skills development and ensure that KwaZulu-Natal has the infrastructure in place to support existing and emerging call centres to meet the challenges ahead. The transport sector and freight logistic is extremely relevant to the KwaZulu-Natal context. The communication sector is making impressive in-roads in increasing its contribution the KwaZulu-Natal economy. Tourism Tourism has been identified as a catalyst for economic growth and the rapid growth in tourism presents a variety of investment opportunities. Present indications are that the KwaZulu Natal coast will continue to draw tourists for the next 10 years due to its beaches, excellent weather, golf courses and shopping facilities. Current successes include uShaka Marine World with its world-class aquariums and research facilities and Africa's leading convention centre, Durban's International Convention Centre, is nearing completion of a R460-million expansion. The regional tourism authority, Tourism KwaZulu-Natal, has a number of new investment projects underway. The multi-million rand projects being developed include five casino developments, the eMakhosini Valley cultural conservancy, the Port Shepstone marina, Shushu hot springs, the Mkhambathini Game Reserve and a tourism centre in Mnweni valley in the uKhahlamba-Drakensberg world heritage site. There are number of sound opportunities for investment in tourism properties. According to Fred Parsons, chairman of Realty 1, the decision by international hotel group Marriott to build a R1, 6 bn five-star hotel in Umhlanga Rocks 10 km north of Durban represents "one of the biggest foreign direct investments in the history of South African tourism". The project is a joint venture between US-based international five star Marriott Hotel group and Notae Resorts, an international entertainment, development and investment company with offices in Durban, Johannesburg and New Jersey, US. The leisure and entertainment centre will boast a 150-room, five-star international hotel, 300 apartments and a retail component. Carl Eaton, CEO of the Notae group, disclosed that the funding for the project would be provided by US hedge fund, Creators Structures. Parsons was also confident that the majority of apartments, which range from R1, 8m to R10 m, will be bought by overseas buyers. The tourism sector of Richards Bay\'s robust economy is set for expansion - close to one third of all overseas arrivals to South Africa visit KwaZulu-Natal and a significant proportion of these visit the north coast and Zululand. Richards Bay is an hour\'s drive from the Greater St Lucia Wetland Park World Heritage Site and offers easy access to \'Big Five\' game-viewing opportunities within a 45-minute drive. Richards Bay Marina and Waterfront Development Initiative for the development of tourism and related activity infrastructure have earmarked several projects. • The Ridge - medium-density housing and terraced residential apartments; golf course with clubhouse. • Pelican Island - private beachfront residential units; private boat mooring facility; public commercial facilities. • Bayshore- Alkantstrand - chalet-type residential development and commercial facilities; waterfront shops and cafés; active recreation and watersport entertainment facilities. • East Bay - outdoor entertainment facilities; mooring jetty for ferry and beach hotel complex. Indaba Organized by Kagiso Exhibitions, Durban has become home to Indaba, the continent's premier travel trade exhibition. During May this year, more than 10 000 people descended on the ICC Durban and the Durban Exhibition Centre (DEC). Indaba has grown in status, quality and diversity to become one of the top three must travel trade shows on the global calendar. Indaba 2006 brought together a showcase of Southern African tourism products and services for the international travel trade. Challenges While KwaZulu-Natal has many advantages and successes, its' challenges in the process of development and economic growth should not be discounted. The following factors are of concern. • Poverty: Eradication of poverty remains the number one priority in improving living standards • Labour: Government has identified labour legislation as a problem and the possibility of deregulation in order to reduce the unemployment problems has been mooted. • HIV/Aids: Somewhere between 4.5 million and 6.5 million people in South Africa are HIV positive and KwaZulu-Natal is badly affected. Economically, however, most listed companies and increasingly unlisted companies have programmes ensuring that HIV/Aids is a manageable disease and allowing workers to remain productive for years to come. • Oil: The global shortage of refining capacity and the rising petrol price will push inflation. • Service Provision: The developmental needs of KwaZulu-Natal are substantial, especially in the provision of basic needs and services, but there is room for investors in these areas. • Crime: The necessity to reduce the crime rate requires greater attention at all levels. Meeting the Economic Challenge To maintain the overall growth trajectory, South Africa is striving to fulfill the obligation of labour market reforms and effective civil service, through a skills strategy and infrastructure expansion in the context of a dual economy. One economy is wealthy, regulated, first world and modern, while the other is poor, marginalized, unregulated and informal, which is characterized by high unemployment levels and "survivalist" economic activity. The economic challenge is to enable greater economic self-reliance and vitality in the second economy so that the two economies can become mutually dynamic and more interdependent. The emerging fact is that the first economy cannot, on its own, achieve high levels of growth and stable development for all. The second economy must also become a major driver of the national economy. A number of objectives have been proposed to achieve this goal. • The promotion of technological innovation and competitiveness in key economic sectors • The implementation of initiatives that improve logistics capacity and enhance key supply chains • The provision of integrated economic support for selected project categories • The implementation of flag ship projects to create sustainable jobs and empowerment of previously disadvantaged. • Promote industrial development and stimulate internal competitiveness of KwaZulu-Natal\'s economy. • Providing support to small towns to stimulate their economies • Support for the development of SMMEs Central to this tenet is an urgency to build the economy through competitive investment and development programmes. Distributed around the Province, KwaZulu-Natal has a number of such economic development projects in progress. In order to facilitate economic growth, centralized provincial funds are managed by the Provincial treasury. These include: 1. The Provincial Growth fund the mains purpose of which is the provision of capital for large infrastructure projects to seed private sector investment. 2. The Poverty Alleviation Fund is aimed at financing small scale community or individual driven economic projects and provide a safety net for the poorest of the poor. The fund will be used to stimulate micro-enterprise development and will support co-operatives and related enterprise formations linked with IDP projects. The idea is to encourage people to play a practical role in the economy by offering them a seed fund to kick-start their own income generating businesses. The focus will be on viable sectors such as agriculture, transport, tourism, health and micro-manufacturing. At present the KwaZulu-Natal government is planning to spend billions on infrastructure to meet its wished-for 6% growth targets. From new locomotives to the upgrading of strategic rail links and the building of new stations, road restoration as well as the increasing port capacity, mutual advantage can be derived from private public partnerships in these opportunities. An integrated transport plan has been submitted to the Treasury for a major upgrade of transport facilities and a people mover within the city centre is being planned. In addition to its existing roads, KwaZulu-Natal's 14000 km of local and 1 300 km of freeways are being upgraded. Durban's public transport system (taxis, buses, minibuses) is being overhauled. Dube Trade Port Central to KwaZulu-Natal's logistics development will be the Dube TradePort (DTP), which will include the state-of-the-art King Shaka International Airport. The Dube TradePort is to be situated about 30 kilometres north of Durban\'s city centre, in close proximity to the Indian Ocean. Further development of the transport corridor, linking Durban to Gauteng, the inland economic heartland, means that Durban can supply Gauteng with a variety of manufactured goods. The Dube TradePort will be connected to the national N2 freeway and the busy R102, with a railway station alongside the site. In the future, the new dual freeway road corridor between Durban and Richards Bay will stimulate growth by effectively linking to the two ports. The overall aim is to integrate air, land and sea transport. The development will incorporate an air platform for both freight and passenger use, in addition it will be linked with other cargo-driven airports such as Johannesburg International Airport, thereby unlocking additional sources of revenue. The multibillion-rand initiative will also contain commercial developments such as hotel and conference facilities, as well as service activities, residential elements, and a resource centre focusing on training workers to international standards. This exceptional project is expected to provide an outstanding environment for manufacturing, agro-industrial, logistics, transportation and e-commerce related activities. These measures will ensure that KwaZulu-Natal remains strong in transportation and logistics; contributing to the southern African economy for decades to come. The development will provide a boost for the participation of the southern African region and the entire African continent in the global economy. Construction on Durban\'s new international airport, King Shaka International, is set to begin in 2007. The project, which has had slow start, will be operational by 2009, thanks to a R1, 7 billion, three-year allocation from the provincial treasury. The total investment required for the airport, is about R2, 5 billion and the Development Bank will provide R500 m in debt funding. Durban International Airport will relocate to King Shaka International when it is operational. The spin-offs will not only be in trade but in tourism. There will be more international flights to our province, which will provide easier access to the wealth of attractions present. In addition, large industrial and commercial developments are being built from Mt. Edgecombe and Simbithi right up to Richards Bay. Richards Bay The Zululand region is making huge strides in attracting both local and foreign investment. However, the success of the Industrial Development Zone (IDZ) depends on the sustained efficiency of the region's infrastructure. Driven by the country\'s economic growth, the National Ports Authority has announced that Richards Bay will receive a R600-million boost for the upgrading of the coal terminal and improvements to the bulk liquid berthing capacity. Port Manager Thami Ntshingila said that the 2006 investment will enable the port to handle increased cargo volumes and also reduce the costs of operating out of the port. This upgrade will make the facility the world's largest coal export terminal. The cost of the expansion will be borne by RBCT's shareholders which are; AngloCoal, BHP Billiton's Ingwe, Xstrata, Evesizwe, Kanga Coal, Sasol and Total Coal South Africa. The expansion will be completed by July 2008. To further facilitate efficient transport from the coal fields of Mpumalanga, Spoornet is expected to spend R 3.8 billion over the next five years on upgrading the coal line between Witbank and Richards Bay. Transnet has announced that it would spend R 3.5 billion on 110 new locomotives to boost the capacity of its Richards Bay Coal Line by 30%. It is thought that 85% of all goods and services required will be sourced from local suppliers and the expansion project will generate the creation of jobs and likewise work will be created through the development of new mining operations. Emphasis is to be placed on developing human capital, to ensure that with the added capacity, a skilled and technically-trained staff is developed. World Cup 2010 Of significance is the World Cup in 2010, which will contribute greatly to stimulating economic growth and investment. Economists estimate that the economic effect of staging the World Cup could boost the country's GDP by a massive R21 billion (€2.68 billion) with the construction sector alone benefiting by an expected R2.3 billion (€287.5 million) through spending on new and upgraded stadiums and infrastructure, especially roads and hotels. The development and rolling out of the 2010 soccer strategy that ranges from establishing a soccer academy, a coaching school, a schools' soccer league, developing translators in all the international languages is an all-inclusive and strategic exercise for the Province. The anticipated influx of visitors for the 2010 World Cup augurs well for the development of tourism in the region. By 2010, 10 new hotels would be built in Durban. The government has indicated that small and medium enterprises will be afforded a key role in the public and private infrastructure and other improvements that are expected in the build-up to World Cup 2010. This significant opportunity for both entrepreneurs and investors could just be the catalyst that the SMME sector has been waiting for, with an expected 159,000 jobs created. Senzangakhona Stadium The new Senzangakhona Stadium, named after King Shaka's father, which was unveiled in June 2006 at Durban\'s ICC by KwaZulu-Natal\'s Premier S\'bu Ndebele and eThekwini Mayor Obed Mlaba, will be a world-class stadium. The first-class multi-purpose sporting facility will be built by the Ibhola Lethu consortium on the site of the existing King\'s Park stadium. Projected capital expenditure on construction of the stadium is R1, 6 billion, making it the most ambitious construction project undertaken in South Africa to date. The stadium will have a seating capacity for 70 000 people, cover 320 x 280 square metres and will be 45m in height. According to Durban's Mayor, 'the City of Durban is ready, willing, geared up and getting kitted out for 2010''. A host of other projects are in the pipeline to get ready for 2010 and these have much potential for investors. Sustaining Momentum It is not only the responsibility of government but the private sector in KwaZulu-Natal must develop an ongoing game plan in order sustain the current momentum so that we can all be on the winning side. In order to prosper, companies need to develop an innovative culture to be competitive and to invest in new technology and processes. At present, opportunities lie in providing products and services, which have unique value, and this requires a creative spirit. Research is essential and it is apparent that the most important business resource is no longer labour, capital, or land, but is knowledge. Acquiring intellectual capital is a powerful means of shaping the success of businesses today and in the future. This is especially relevant to being competitive in the global market, where the impact of countries such as China can be detrimental if a clear growth plan is not established. The overall health of the global economy is also a very important factor, via the demand for export goods. However, the effect of the stronger Rand on the export market has caused many businesses to reassess their strategy in the market place. Transformation Many of the top companies operating in the region, such as Grindrod, Toyota, Mondi and Sappi are committed to ensuring that their business concerns are not only sustainable and profitable, but contribute to the overall well being of KwaZulu-Natal s environment, resources, people, and economic growth. To avoid stagnation, the necessity to embrace change in organizations, companies, and government departments, is at the heart of progress in the region. With empowerment fast becoming one of the major differentiators for successful companies, any strategy that fails to incorporate a well-defined approach to Black Economic Empowerment (BEE) will have little relevance. The evolution of Black Economic Empowerment (BEE) has been a source of much controversy. However it is now apparent that such strategies are a source of any growth initiative and an increasing number of BEE deals are being finalized. Companies such as the Notae Group, Metallon, Enaleni Pharmaceuticals, Mondi, Afripack, KPMG and many more besides are leading the way of progress and reaping market benefits by using this South African business imperative to its fullest advantage in procuring business deals. As the companies meet the needs of black economic empowerment policies, they also are expanding! However, a mere change of ownership is not sufficient but mentoring and skills development is essential if such transactions are to be sustainable. Skills KwaZulu-Natal needs skills and opportunities exist to provide and nurture these. Learning opportunities and training programs are the venture capital of the future. Despite increases in the number of individuals participating in the labour market, skills constraints remain an impediment to faster growth in the South African economy. Currently wide-ranging legislation is aimed at promoting training and skills development in order to fast-track the improvement of world-class competence. There is significant capacity in the strong network of educational and training institutions to develop skills further. According to S'bu Ndebele in his 2006, State of the Province address, the Province of KwaZulu-Natal is currently aiming to forge strategic partnerships, not only with the traditionally affluent western nations, but also with third world countries with which South Africa shares a common history for liberation and similar visions of development An essential aim is to ensure that local knowledge is integrated with international expertise to develop new ideas and technological approaches in meeting global standards. Priority growth sectors include oil and sugar refineries, clothing and textiles, mining, metals and minerals, automotives and transport, chemicals, tourism, agriculture, information and communication technology, cultural industries, services and aerospace Current relationships have provoked a range of projects as well as the exchange of knowledge. Examples include: • Dry Land Rice and Mushroom technology has been imported from China to address the basic need of food security; • Furniture making and wood carving skills are being imported from Indonesia. Strong links have also been facilitated in the textile and garmenting industry. • Belgium has committed a R60 million rand grant over five years at 12 million rand a year to food security programme. • Invaluable insight into the organising, programming and preparation for the 2010 World Cup is being obtained from Germany. •Strong linkages have been established with India which has become a world leader in the field of science and technology. A Memorandum of Understanding was concluded on the evening of the 24th December 2005 with the Province of Punjab. This province, known as the "food basket of India", produces more grain and wheat than countries such as Canada and Australia, will be sharing their agricultural expertise with us. SMMEs Along with skills development, it is argued that small and medium enterprise development represents the core of local economic development. KwaZulu-Natal has become the third province in the country to open the offices of the Small Enterprise Development Agency (SEDA) - North West and Mpumalanga were the first. The launch of SEDA in KwaZulu-Natal well indicates the Province's commitment to the promotion of small medium and micro enterprises. The retention and expansion of the Province's broad base of medium to larger businesses, through local and foreign direct investments, is a key to future sustainability. But in addition, the development of small, medium and micro businesses should be perceived as a building block for current economic growth. The growing SMME sector has enormous potential to reduce unemployment, increase average household incomes, reduce the poverty gap, and increase the tax base. The "informalisation of employment" gained speed in the 1990's and has become a major feature of business in the Province, especially in Durban and Pietermaritzburg. The development of SMMEs has generated considerable interest in the Province, due its attractiveness to proponents of the free market ideology and the relief it may provide government in providing jobs for its people. As a consequence of increased competition and in part, through reduced employment by large firms and increased employment by smaller firms, Small Medium and Micro Enterprise (SMME) growth has occurred. SMMEs range from factories employing 50 highly skilled workers to the self-employed street trader. The SMME fund holds the key to the achievement of the goals of the Provincial Growth and Development Strategy. The SMME fund will target:- • Training and Skills Development programmes, •Growth sectors in the KZN economy and opportunities for beneficiation, • BEE deals with the focus on reviving township and village economies through the establishment of village markets, craft markets, franchising etc; By the end of February 2006, Ithala Development Finance Corporation, KwaZulu-Natal\'s major development agency, had approved 678 SMME applications for loans totalling more than R471 million. A number of other bodies have been formed to promote SMMEs e.g. • The Department of Economic Development has established the Small Enterprise Development Agency (SEDA). • The Ethekwini business Development Centre. • Durban Chamber of Commerce Advice Desk Tourism SMMEs are being supported by various government and public-private initiatives. SMMEs have particular advantages as they transfer the benefits of tourism spend directly into the pockets of SMME owners and operators. Further Smme's can occupy niches that connect tourists directly to some of South Africa's world class experiences and best kept secrets Local Economic Development Local economic development refers to those initiatives that help strengthen the economic base and competitiveness of a locality, through improved access of local enterprises to market opportunities and enhanced collective efficiency of businesses. In South Africa, the Integrated Development Plans (IDPs) that are based on the principles of participation have been effective in uniting local stakeholders around programmes of development. The KwaZulu-Natal Local Economic Development (LED) support program is a six year program supported by the European Commission (EC). The program will support LED initiatives, provincially and initially from four selected 'learning areas' - the Districts of uMgungundlovu, Umkhanyakude, Uthungulu and Ugu. It is worth some 37 Million euros. A major challenge for locality development in KwaZulu-Natal will be to go beyond the once-off impacts of public works programmes on employment, business formation and income generation and to focus on complementary private investment in economic activity geared to commercial markets. Both the Extended Public Works Programme (EPWP) and the Municipal Infrastructure Grant (MIG) provide such an opportunity. Many municipalities are actively looking for partners in growth. Some of the other major projects proposed or underway in KwaZulu-Natal include: • Richard\'s Bay Dry Dock - Privatized greenfield development on Portnet-leased land • Privatization [operating concessions] for 3 Municipal Airports: Richard\'s Bay, Port Shepstone/Margate, Pietermaritzburg (Oribi) • Port Shepstone Marina - public-private partnership; game parks and additional resort developments included in the Port Shepstone-Port St. John\'s corridor running for 200 km along the Indian Ocean coast. • The re-development of Port Shepstone beachfront, including the riverfront of the Umzimkhulu River into a world-class tourism resort • Lubombo SDI: Cluster of a dozen tourism/resort developments. • Richards Bay Industrial Development Zone • Lilani: once a luxurious health spa has all the natural resources and development potential to make it an ideal site for building and developing a successful holiday destination. In Durban a large number of projects can be found. The expansion of the ICC; development of the Bluff Headlands for public access and a Peace Centre; rejuvenation of the city's beachfront; South Durban Basin redevelopment projects, including proposals for a 'Unity Bridge' across the bay; a People Mover system and the Point Development project are just a few of the initiatives underway or being planned.. I firmly believe that with accurate research, 2006 will provide investors with great opportunities to find good investments. Entrepreneurs and investors must • Build, harness and channel capital to achieve goals • Think strategically • Use skills and education • Be innovative • And determined Here is to a year of us all increasing our financial intelligence and taking advantage of the many prospects available. It is important to stand together for what is best for the province, to make the most of all those assets. KwaZulu-Natal is ready to welcome entrepreneurs and investors! May KwaZulu-Natal have a future beyond all our expectations! The Winning Spirit Grant Adlam In March 2006, a packed stadium and thousands of other fans at home, watched as one of the most extraordinary games of cricket, ever encountered in the history of the sport, was played out before their eyes. Victory to South Africa seemed impossible in the light of the record- breaking target set. Astoundingly, the batsmen achieved the required runs and South Africans experienced a collective spirit of victory, optimism and national pride that was felt for weeks. The Protea's team had to compete on a level that they had never achieved before and did so highly successfully. We all want to be on the winning team and sporting victory is a current icon of achievement. The same principles that went into winning an international sporting event can be applied to those venturing into the market place. The 21 Century belongs to entrepreneurs; individuals who like the Protea\'s captain, Graeme Smith, have the courage to dream, who can see opportunity, and turn their dreams into reality. However, to achieve, motivation, planning, a competitive spirit, the utilization of assets and cooperative team play is required. Especially, as being successful in today's global world means having to compete resourcefully, effectively and to be innovative. The reward is in bringing home profit and adding value to the economy. KwaZulu- Natal shows all the signs of winning and a number of factors can be considered in contributing to this success. The South African Context KwaZulu Natal has to first be positioned in the overall context of the South African market. South Africa is a fast developing and growing economy with unlimited investment opportunities. United Nations secretary-general Kofi Annan, at the joint sitting of the South African Parliament in Cape Town (March 2006), described South Africa's success in relating to the wider world as the best model for the entire developing world. He stated that South Africa's robust economy, stable democracy, support for the rule of law and - perhaps most important - the fully inclusive constitution have made South Africa, a beacon of tolerance, peaceful coexistence, and mutual respect between people of different races, languages and traditions. According to revised StatsSA 2005 data, the current size of the economy, at an estimated R1.39-trillion, is one of the strongest in 50 years. The economy has grown by more than 4% every quarter since 2004 and is continuing on an upwards climb. The seasonally adjusted real GDP at market prices for the first quarter of 2006, compared with the fourth quarter of 2005, increased by an annualised rate of 4, 2%. The main contributors to the increase in economic activity for the first quarter of 2006 were the finance, real estate and business services industry, the wholesale and retail trade, hotels and restaurants industry; the manufacturing industry, the transport and communication industry, and the construction industry. The government is also powering ahead with its plans for the new Accelerated and Shared Growth Initiative. This strategy will build on the steady economic growth of about 5% with a view to making the envisaged 6% achievable in the next few years. An expectation for further growth is desired by many economists who are no longer easily satisfied with the present growth rate but predict that more significant levels will be achieved. This prediction is in accord with the South African Reserve Bank (SARB), in forecasting that the current period of economic expansion will continue. The South African Government has also targeted an economic growth rate of between 6% and 7% over the next decade. Inflation ought to remain in the range of 3% to 6% for 2006/7. The world economy, including a number of emerging markets, appears to ensure good prospects for a steady demand in exports but higher imports will make sure that the current account remains in

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