#EarthCrimes — Limpopo’s dirty white elephant part 2: the dodgy designation

How a Chinese company hijacked the Musina-Makhado Special Economic Zone.

Documents obtained via an access to information request show that shady Hong Kong businessman Yat Hoi Ning boarded the strategic economic zone (SEZ) train without a ticket.

An SEZ is a designated zone where there are special rules on tax, export incentives and other benefits to encourage investment and trade.

The documents were obtained from the department of trade and industry (DTI) by the Centre for Environmental Rights (CER), which is challenging environmental aspects of the planned R40-billion energy and minerals complex just south of the border town of Musina in Limpopo.

Read part 1 of this story here for more on Ning and his company.

The documents released by the CER and pieced together by amaBhungane raise doubts about the planning process for this mega development.

They show Ning’s company was inserted as SEZ operator without any formal assessment and based on proposals that appeared to be little more than a thumb-suck.

Read Comment: Digging dung in the time of Corona here.

And, although President Cyril Ramaphosa trumpeted promises of multi-billion rand investments in the SEZ when he returned from a state visit to China in September 2018, the documents show this project emerged earlier, from deep within the troubled Zuma era.

The evidence also raises concerns over the delegation of powers to the Limpopo department of economic development, environment and tourism (LEDET) and the Limpopo economic development agency (LEDA).

We will deal with the LEDET and LEDA’s weak and conflicted positions in detail in part 3.

For now, it is worth noting the project was initiated and driven by the Limpopo government and Premier Stan Mathabatha in particular.

The documents disclose that Ning’s plan for a giant coal-fuelled mineral processing zone was never tested via a feasibility study – standard procedure for a project of this size, impact and complexity.

Instead a “pre-feasibility” study, commissioned by the LEDA and dated May 2014, was for a petrochemical, agro-processing and logistics hub.

Engineering consultants Mott MacDonald were tasked to look at the prospects for a coal-to-liquids complex (like Sasol) at the site now earmarked for a coal-fired power station and multiple mineral smelting and processing industries, including a new steel mill.

Click on the Evidence docket to access all the documents referred to in this investigation plus the pre-feasibility studies. 

The synthetic fuel plan made some sense because of the coal reserves present in the Musina area and as Musina lies on a major transport corridor along which fuel products could be distributed throughout South Africa and the SADC countries to the north.

Even so, Mott MacDonald warned, “The economic viability of the project depends largely on the quality and price of coal sourced from the area, the price of crude oil … and the access to markets (transport costs) that will enable it to recover the exceptional high capital cost of constructing the proposed plant and clean up the high volume of greenhouse gas emissions – i.e. carbon dioxide.”

A presentation to DTI in June 2014 noted that the petro-chemicals proposals might be viable, “but only in the medium to longer term”.

Out of the blue, in August 2014, one of Ning’s companies, the Hong Kong Mining Exchange, produced its own “feasibility” study.

According to one person who visited the company’s Hong Kong offices, who spoke on condition of anonymity, the “exchange” was little more than a single office.

Ning’s study was conducted by no recognised authority, but by the “HK Mining Exchange Company Limited Research Institute of Technology”.

We suggested to the DTI, which carries the document on its website, that no such institute exists. The department did not respond to this or to detailed questions.

The study’s figures for investment and output are all in round global sums, suggesting they are no more than bald guesses.

An official Mott MacDonald pre-feasibility report dated July 2015 made no mention of the Hong Kong Mining Exchange proposals.

And it called for a “detailed feasibility study for the establishment of the coal to hydrocarbons complex” including “a bankable feasibility study” at an estimated cost of US$50-million.

Mott MacDonald recommended this detailed study, including financial modelling and risk analysis, should be done prior to a “go or no-go” decision.

Strangely, on 31 July 2015 (according to its document properties), a re-jigged version of the pre-feasibility report was produced, this time recast as a “business plan” on behalf of the LEDA to serve as the basis for the Musina SEZ license application.

Tacked on to the earlier version of the document was a new section titled “Targeted investments with timelines”.

This section noted: “A consortium…  [has] been working to locate in the proposed Musina SEZ Metallurgical Cluster…

“This cluster development in the SEZ is seen as a flagship project between China and South Africa by Hoi Mor Industrial, who has signed an MoU with the Limpopo province premier in October 2014. Hoi Mor is well connected to the China government and the rest of the Chinese industry.”

The additions included an appendix listing “potential investors”, naming them as Hong Kong Mining Exchange Company Limited (a Ning company), Hoi Mor Industrial Group Limited (another Ning company), China Harbour Engineering Company, Rising Steel (Guangzhou) and Mwana Africa PLC (the previous name of ASA Resources, where Ning was already a director and major shareholder).

It is surely no coincidence that a month earlier, in June 2015, then-trade and industry mnister Rob Davies had received rote “letters of interest” from these companies.

On 28 July Tshepo Phetla, then acting managing director of the LEDA, sent an application to Davies for the designation of a Musina SEZ.

Although no firm commitments had been made, the letter stated, “The SEZ has already attracted an investment worth approximately R38-billion. A Memorandum of Understanding … to develop a metallurgical cluster zone to produce steel and stainless steel products has been signed by LEDA and Hong Kong Mining Exchange group (Hoi Mor).”

The Mott MacDonald document was revised again on 21 August 2015 according to its file record released by the DTI in terms of the access to information request.

This time Mott MacDonald faithfully reproduced the full Ning/Hoimor wish-list contained in the 2014 Hong Kong Mining Exchange document, including nine projects that would supposedly form part of the metallurgic cluster: a coking plant, a coal power station, a ferrochrome plant, a ferromanganese plant, a ferrosilicon plant, a pig iron plant, a steel plant, a stainless steel plant and a lime plant.

We invited Mott MacDonald to explain this shift. They did not respond.

In the revised version of the report Mott MacDonald did attempt to salvage some credibility by stating: “The environmental pre-feasibility study of the proposed development at the Makhado site has identified several problem areas that subsequently require further and more robust investigation. If practical and effective mitigation measures cannot be implemented, then the overall project viability is questionable.”

It noted that among environmental issues that were “of critical concern” were the projects’ intrusion into a protected biosphere and the Ning proposal’s “high water requirements … in a water scarce area where much of the existing water resources are required for agriculture and thus food security”.

Despite the fact that no proper pre-feasibility study was done for the proposed metallurgical cluster, never mind a detailed feasibility study, Davies on 14 July 2016 announced that cabinet had approved the decision to designate the Musina-Makhado SEZ.

He confirmed, “A consortium of Chinese investors led by Hong Kong Mining Exchange (Hoi Mor) will be investing more than R40-billion into the park which they will also develop and manage.”

We asked the DTI to explain why we should not conclude that the department had “abandoned prudent and responsible planning, assessment and feasibility protocols for what would be one of the largest industrial developments in the country’s history – in favour of a ‘pet project’ approach, driven by opaque and unaccounted for private and geopolitical interests”.   

They did not respond.

Read all the stories in this series:

Comment: Digging dung in the time of Corona
#EarthCrimes — Limpopo’s dirty great white elephant
#EarthCrimes – The dirty white elephant part 3: Limpopo – the weakest link
#EarthCrimes — The dirty white elephant part 4: Caution, environmental hazard!

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Evidence Docket

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