Evaluating the economic impacts of resource-based industries: A case study of Billiton hillside...

EVALUATING THE ECONOMIC IMPACTS OF RESOURCE-BASED INDUSTRIES:

A CASE STUDY OF BILLITON HILLSIDE ALUMINIUM, RICHARDS BAY

MARLM~WALKER

INTRODUCTION

Over the past three decades, Richards Bay has evolved from a small fishing village into one industrial 'hub'of South Africa. The six large-scale, capital-intensive, resource-based industries dominating industrial activities in the town are of national economic importance, generating considerable revenues through exports and offering attractive opportunities for foreign investment. Despite the town's favourable macroeconomic importance, the impact of these industries (Billiton Aluminium, Richards Bay Minerals, In- dian Ocean Fertilizer, Mondi Kraft, Richards Bay Coal Terminal, and Bell Equipment) at the local level is a matter of controversy, particularly in terms of employment creation. While a diverse industrial and service sector exists in Richards Bay, it has been argued that the rate and degree of multiplier and linkage creation has been low (Aniruth, 1997; Aniruth and Barnes, 1998; Manning et al., 1998; Todes and Vaughan, 1999; Business Day, 2000a; Altman, 2001a). Given the fact that the current level of unemployment in Richards Bay is above the national average, it has been queried whether the vast amounts of capital invested in the area over the years, either in new projects or expansions, has achieved the maximum possible impacts or whether an alternate strategy is required (Hall, 1998; Lewis and Bloch, 1998; Manning et al., 1998; Business Day, 2000a).

The international experience reveals that considerable debate surrounds the merits and demerits of resource-based industrialisation (RBI) strategies, particularly with regard to the coherency and suitability of the strategy adopted, strategy implementa t ion , distr ibutive impacts, and the sustainability of the projects in terms of ensuring the endogenisat ion of

Economic Impacts of Resource-Based Industries 135

'clusters' of economic activities that underpin these strategies. On the one hand, evidence from the developing world suggests that resource-based projects such as aluminium smelters, fertilizer plants, or steel mills invari- ably end up as 'enclaves'; generating few direct employment opportunities and resulting in a considerable ' leakage' of revenue to areas outside the immediate vicinity of the project due to the skill-intensive nature of production activities (see Roemer, 1979; Gillis, 1981; Auty, 1987; Ballance, 1987; Auty, 1991; 1994; Davis, 1995; Fitschen, 1998; Hall, 1998; Heeks, 1998; Lewis and Bloch, 1998; Walker, 2001). On the other hand, evidence from a number of developed countries (most notably the Nordic countries, Canada, and Australia) suggests that a RBI strategy may have economic merit. Us- ing their natural wealth as a base, such countries have been able to secure long-lasting industrial development and widespread improvements in social indicators of development and have shifted from a dependence on primary resources into h igh- tech industrial activities. The resource sector successfully generated 'upstream', 'downstream', and 'sidestream' linkages, which, along with their multiplier effect, gave rise to related and supporting industries with associated benefits in increased employment and larger domestic markets (Porter, 1990; Jourdan, 1992; Rouvinen, 1996;Y1/i-Anttila, 2000). Hence, as Porter (1990) points out, concern about resource-based investment projects should not be about their inherent desirability, but rather about the extent to which they can contribute directly or indirectly to productivity growth. More importantly, it is not what is produced that is becomes the critical issue, but rather how it is managed, produced, and utilised that determines whether a resource-based project will be of both social and economic benefit (Altman, 2001b).

Evaluating the likely long-term impacts of resource-based projects and industrial strategies initiated in South Africa in the post-1994 period is limited by the fact that many of the new government programmes (particularly IDZs and the proposed Integrated Manufacturing Strategy) and anchor pro jec ts u n d e r p i n n i n g t hem are st i l l in the i r in i t i a l p h a s e s of conceptualisation and implementation. Moreover, formulating an assessment of the success of a particular new investment project in the context of resource-based industrialisation in South Africa is restricted by a general paucity of information regarding the magnitude and degree of clustering in the vicinity of such projects. While numerous environmental impact assessments and prefeasibility and feasibility studies precede the construc- t ion of a new i n v e s t m e n t project , once ope ra t iona l few fo l low-up investigations have been undertaken assessing the correlation between the predicted and realised impacts. Furthermore, although several studies have been undertaken reviewing various aspects of the SDI programme and the impact of resource-based 'anchor projects' at the local level, the focus has tended to be broadly-based, concentrating on the cumulative impacts of a

136 URBAN FORUM

number of enterprises in a particular area (Aniruth, 1997; Aniruth and Barnes, 1998; Driver, 1998; Lewis and Bloch, 1998; Hall, 1999; Manning et al., 1998; Todes andVaughan, 1999; Altman, 2001b). In addition, while some case-specific investigations have been conducted (see Fitschen, 1998), consideration of the indirect impacts has tended to be neglected.

It is argued in this paper that it is only through an analysis of both the direct and the indirect multipliers s temming from such projects that the true extent of their potential for local employment creation can be deter- mined. Through an examination of the Billiton Hillside Aluminium smelter in Richards Bay (the largest greenfield aluminium smelter in the Western world and the largest new resource-based project to be undertaken by the private sector in South Africa) it is hoped that greater insight can be gained into the various impacts, both direct and indirect, that a large-scale, capital-intensive, resource-based project might have on the local economy in which it is situated, particularly in terms of employment creation. Such an analysis is important as it will not only contribute to the formulation of an industrial strategy that best speeds the development of linkages between investment projects in South Africa and the rest of the economy, thereby avoiding the 'enclave' tendencies to which such projects are prone, but will also assist in ensuring that such impacts are sustainable in the long term.

The paper commences with a review of some of the current debates pertaining to the viability of resource-based investment projects in Richards Bay, particularly with regard to their ability to fulfill national development goals in terms of increased beneficiation and SMME development. This is followed by a brief description of the subjects of research and methodology and an overview of the origin of the Hillside smelter. The results of a qualitative analysis of some of the most notable impacts generated during the construction and subsequent operation of the smelter are then presented. Various examples are provided to illustrate the type and extent of spin-offs fostered at the local, national, and subregional level. The paper concludes with a discussion of the success of the Billiton Hillside Aluminium smelter in fulfilling its proposed objectives and whether the initial projections regarding its impacts at the national and local level in terms of employment creation correlate with the current situation.

RICHARDS BAY--THE INDUSTRIAL "HUB" OF SOUTH AFRICA

Richards Bay is situated on the North Coast of KwaZulu-Natal, approximately 190 kilometres from Durban and 20 kilometres from Empangeni. Beginning as a small fishing village in the 1970s, Richards Bay is currently one of the fastest growing industrial centres in the country. In terms of economic performance, consistently high rates have been recorded in the


area since the 1970s (Aniruth, 1997; Aniruth and Barnes, 1998; Manning et al., 1998; Todes andVaughan, 1999). It has been asserted that the phenomenal growth of Richards Bay area as an industr ial 'hub' of South Africa can be attributed to three key factors: (1) active state involvement in the area since the 1970s; (2) a dense network of infrastructure and an abundant supply of energy and natural resources; and (3) the presence of a number of large-scale, capital- intensive, expor t -or iented extractive or processing plants (Financial Mail, 1994; Aniruth, 1997; Aniruth and Barnes, 1998; Hall, 1998; Manning et al., 1998; Todes and Vaughan, 1999).

As a resource-based town, and a designated SDI and IDZ region, the Richards Bay/Empangeni area has become the focus of increasing atten- tion amongst policy makers and development planners, particularly in terms of its likely long-term industrial and economic growth dynamic at the local, regional, and national level (Business Day, 2000a; 2000b). Richards Bay is the most appropriate region in South Africa from which the various debates pertaining to the viability of a resource-based industrialisation strategy can be assessed, primarily because activities are dominated by six world-scale, resource-based enterprises.

In line with international debates pertaining to the viability of resource- based industries in fulfilling national development objectives, the distribu- tive impacts and sustainability of the 'big six'industries in Richards Bay has been questioned (Aniruth, 1997; Aniruth and Barnes, 1998; Hall, 1998; Lewis and Bloch, 1998; Manning et al., 1998; Todes and Vaughan, 1999; Business Day, 2000a). On the one hand, it is pointed out that a significant degree of diversification has occurred (manufacturing accounts for 55 percent of the GGP) and that the big industries have had a positive impact on the local economy. According to a study undertaken by the IDC in 1991 reviewing the impact of five large industries in the area, more than 7 600 direct employment positions had been created through their activities (85 percent of total direct employment in the town). Moreover, each worker was responsible for about 3.5 dependents. Thus, an estimated 27 000 people were directly dependent on the jobs created by these enterprises (EIA, 2000b). The large businesses were also found to have been responsible for the creation of 12 711 first order indirect jobs in various supply and service activities as well as 5 367 second order indirect opportunities in a number of commercial and social activities, such as schools, municipality, and medical services (Manning et al., 1998; Todes andVaughan, 1999; EIA, 2000b). A number of local small contracting firms have also emerged through outsourcing programmes initiated by the large industries (Manning et al., 1998; Todes and Vaughan, 1999; Business Day, 2000a). Todes and Vaughan (1999) assert that these firms have emerged locally, rather than relocating from elsewhere. Moreover, some of these small firms have been able to become ex- porters in their own right through innovation, the adaptat ion of new

13 8 URBAN FOR UM

technologies, and the introduction of more productive processes. However, in terms of direct employment spin-offs in the downstream manufacturing sector, only about 6 177 jobs are believed to have been created since the early 1970s. Employment spin-offs in other sectors have accounted for the creation of more than 26 177 jobs (four times that of manufacturing) (Manning et al., 1998). Overall, employment levels in the Richards Bay/Empangeni area have, since the 1970s, increased by 69% (Manning et al., 1998).

On the other hand, despite the fact that industrial growth in the area has been accompanied by employment spin-offs, it has been queried whether these are significant in relation to the high level of investment involved (R40 billion since the 1970s) (Aniruth and Barnes, 1998; Lewis and Bloch, 1998; Hall, 1998; Business Day, 2000a). In assessing the cost effectiveness of strategies and policies designed to promote and foster economic growth, Dickman (1991: 129) asserts that, "cost effectiveness in general implies that, when formulating economic policy, an eye is cast to the rational determinants of the flow of benefits received for the flow of funds committed. The objective is maximum benefits at minimum costs". Since the resource-based industries in Richards Bay require considerable investment, both to establish the plant and to continually upgrade it in order to maintain competitiveness, it is questioned whether critical capital resources are achieving the maximum levels of productivity possible. A key objective of both the SDI programme and the GEAR strategy is to resolve the unemployment and unskilled labour crisis in South Africa and amelio- rate many of the legacies of apartheid (ANC, 1994; Department of Finance, 1996; CDE, 1998a; 1998b; Hirsch and Hanival, 1998). Since unskilled and semi-skilled labour is relatively cheap in South Africa, compared with developed countries (though not compared to some developing competitors), it is argued that industrial and economic strategies should focus on labour- intensive industries as opposed to capital-intensive ones. In response to this, Jourdan (1994) points out that resource-based anchor projects in South Africa are all huge net foreign exchange earners and generally are able to recapture initial expenditure within two to three years. In addition to this, the country has a surplus of capital, an extensive natural resource endow- ment, and lacks any other type of productive activity that can generate similar levels of investment. Moreover, in terms of overall costs, it has been pointed out that South Africa's beneficiation industries are very competitive internationally. Not only has a significant local prowess been created in mineral beneficiation technology, thus reducing technology costs, but the availability of cheap energy inputs has provided a highly competitive base for the establishment of numerous low-cost industries in South Af- rica (Jourdan, 1994).

Nevertheless, it has been pointed out that the large industries in Richards Bay have not generated significant linkages between themselves, which


would assist in enhancing the depth and magnitude of industrial clustering in the area and ensure the endogenisation of economic growth (Lewis and Bloch, 1998; Manning et al., 1998). Lewis and Bloch (1998) maintain that agglomeration alone will be an insufficient mechanism to catalyse and sustain local and regional industrial development. It has to be comple- mented by the development of linkages between firms. Indeed, there is fear that endogenous growth will never material ise in Richards Bay/ Empangeni and that the projects will continue to function as enclaves, dependent on the continuous infusions of capital and state-administered investment projects (Lewis and Bloch, 1998). While some diversification has occurred, levels of unemployment in Richards Bay are higher than the national average (Business Day, 2000a). The rate and level of employment creation in the greater Richards Bay area has tended to parallel the construction and production phases of each new project-- the initial boom is accompanied by a slump later on- -wi th the number of permanent employees retained by the firms considerably less than those employed during the construction phase (Aniruth, 1997; Aniruth and Barnes, 1998; Manning et al., 1998). It is also argued that many large industries are still reliant on the assistance of external specialists and contractors for various skills and services, such as management, maintenance, and upgrading, which cannot be localised in the region, thus limiting opportunities for local employment creation (Altman, 2001a). In addition, in order to remain internationally competitive, many of these investment projects have had to reduce staff levels through rationalisation in order to minimise corporate costs (Lewis and Bloch, 1998; Todes andVaughan, 1999). It is evident that while many of the big industries in Richards Bay are fulfilling national goals (remaining internationally competitive, generat ing increased foreign exchange revenues) in terms of increased employment, improved livelihoods, and skill enhancement at the local level, considerable debate exists.

Recently, the big businesses in Richards Bay have begun to take greater cognisance of the various debates pertaining to the sustainability of their activities and various initiatives and programmes have been devised and initiated in an attempt to achieve the greatest beneficial impact on the sur- rounding communities (Business Day, 2000a; 2000b). One of the most significant programmes has been the development of a tender service at the Zululand Chamber of Business (ZCB) to assist, promote, and utilise the services of locally accredited SMMEs (Todes andVaughan, 1999). Although many of the initiatives are in their infancy, it has been pointed out that the level of corporate involvement in the area is unusual, and that there is considerable commitment to the development of the greater Richards Bay area (Todes and Vaughan, 1999). Nevertheless, since the majority of the products produced in Richards Bay are exported (including aluminium ingots), with only a small proportion fabricated elsewhere, it is argued that increased

140 URBAN FORUM

beneficiation is essential not only to diversify the local economy, but to increase the number of labour-intensive and less skill-intensive employment opportunities in the area (Engineering News, 1999a; Schneider, 2000a; 2000b; Altman, 2001a; Engineering News, 2001a; 2001c; 2001e).

SUBJECTS OF RESEARCH AND METHODOLOGY

The Billiton Hillside Aluminium smelter is the most suitable project in the Richards Bay area from which to assess these various debates, as well as investigate the multiplier effects for three reasons. First, due to the fact that it only reached full production in June 1996, its spin-offs and progress can be traced relatively easily. Second, its progress is both of national and corporate concern. Since its inception the Hillside smelter has been of particular importance to national development planners and policy makers and has been used as a 'guinea pig' from which to track various projects, as well as to ascertain the effects of a new investment project on the local economy. The Hillside smelter differs from other new resource-based investment projects in the country in that it was conceived and came into operation in a new economic and political environment. In addition to this, it was the first project to be initiated by the private sector. It has been pointed out that it was largely due to the unique public-private partnership entered into between the Government, Billiton, the IDC, and Eskom in the early 1990s that resulted in its successful s tart-up and subsequent growth (Mitchley, 2000). Another feature distinguishing the Hillside smelter from other/previous large-scale developments, is the emphasis given to including the 'local' in corporate activities. Although ensuring the success of the smelter internationally is a predominant concern of Billiton, the company recognises the economic importance of simultaneously developing and including the local community in its activities. Billiton's agreement with the DTI to use Hillside as a model for the 'unpacking ' of large investment projects, particularly with regard to 'downstream' and 'sidestream' activities, has resulted in numerous partnerships and workshops being formulated and developed with various national and local organizations in order to develop an appropriate approach to the 'unpacking' of new investment projects and ensure that the maximum positive linkages are engendered in the long-term.

The approach adopted in this investigation differs from the conventional methodology employed for assessing the economic impacts of new investment projects in that it is qualitative in nature. While a quantitative analysis, utilising data drawn from input-output tables and social accounting matrices (SAMs) (see Fatemi, no date; Van Seventer, 1999; EIA, 2000c), is useful for obtaining a broad assessment of the impacts engendered at the


local, provincial, and national level, it does not provide policy makers and development planners with adequate information regarding the types and nature of employment opportunities that are stimulated as a consequence of a particular investment. By contrast, a qualitative analysis provides insight into such issues as the type of sectors, the size of firms, and the degree of value-added generated through each direct and indirect employment spin-off, which can be used to validate numerical projections.

Although the direct and indirect impacts fostered during the construction phase were examined, the main emphasis was on those stimulated as a consequence of operations at the smelter. Examination of the impacts arising during both phases concentrated on those activities and sectors where the spin-offs were perceived to be significant in terms of employment creation and which would facilitate a correlation between the projected and realised impacts to be made. In order to determine the extent and diversity of employment opportunities stimulated in sectors such as retail, tourism, housing and construction, education, transport, and infrastructure development in the greater Richards Bay area as a consequence of direct integration and association with the smelter, a questionnaire survey was undertaken with a random sample (46) of Hillside employees. The potential for Hillside employees to foster additional employment opportunities in household activities (e.g., domestic work, gardening) was also invest igated. Informat ion obta ined from the ques t ionnai re survey was supplemented with data and results from other studies conducted within the Richards Bay area. Three caveats regarding the investigation of Hillside Aluminium need to be mentioned at the outset. First, a considerable degree of overlap exists between the impacts fostered during the construc- t ion and those in the ope ra t ions phase . Second, s ince the area is characterised by resource-based industrial activities, each spin-off identified in this research project could have been influenced by other developments in the area. Third, research is focused exclusively on the impact of Hillside Aluminium on the Richards Bay area. Although it is recognised that many of the initiatives adopted by the smelter in terms of outsourcing and SMME development parallel those adopted by similar big businesses and are key elements in the Richards Bay Spatial Development Initiative (SDI) programme, emphasis is placed on what Hillside has done in this respect and the results that these have engendered.

Billiton Hillside Aluminium

Prior to 1992, the Bayside smelter (owned by Alusaf) had never made an operating loss and had generated considerable profits. However, in 1992 it was forecast to make an operating loss for the first time. The remarkable economic performance of the smelter was due primarily to".., a protected

142 URBAN FORUM

internal market and export subsidies, including a rebate on electrical costs" (Alusaf, 1992a: 3). In the early 1990s, however, all export incentives were abolished by the Department of Trade and Industry and notice was given that the prevailing high level of 20 percent import duty protection was to be reassessed before the end of 1992. These structural changes in Govern- ment policy highlighted the high cost base of the Alusaf smelter compared to aluminium smelters elsewhere, especially during periods of low metal prices (Alusaf, 1992a; 1992b). The profitability of the company was under- mined to the extent that the long-term operational viability of the smelter was called into question. Moreover, the company was unable to generate the funds necessary to finance the upgrading of its technology to meet international standards regarding health, safety, and environmental emissions (Alusaf, 1992a; 1992b). The uncompetitiveness of the Bayside smelter rested on three factors. The first was old technology, as the technology used by the smelter was of the open pot and S6derberg technology type which was both labour-intensive and deemed environmentally unacceptable in the medium-term. The smelter, therefore, needed to either be upgraded to meet modern standards or gradually phased out. Secondly, its small size limited the development of extensive economies of scale. Thirdly, the high costs of critical inputs such as electricity and alumina during periods of low metal prices (Alusaf, 1992a; 1992b).

The decision to proceed with the construction of the largest greenfield smelter, utilising state-of-art technology, the best management practices, and pricing-based contracts for inputs, rather than phasing out the existing smelter, was only made after extensive audits and prefeasibility and feasibility studies were made. Factors such as the profitability of the old smelter with or without new electricity tariffs, the capital cost to upgrade the smelter, the returns from increased production, and the impact of the closure of the smelter on the national and local economy were all taken into consideration (Alusaf, 1992a; 1992b). In addition, a review of the state of the international aluminium market and the South African economy was made together with an evaluation of the impact of a new smelter at both the national and international level. The various studies highlighted that conditions in the international and national economy were perfect to proceed with the construction of a new smelter (Alusaf, 1992a; 1992b).

The R5.5 billion Hillside smelter was completed in June 1996. It was fi- nanced by Genmin, the IDC and a number of other financial institutions. The main shareholders were Gencor (44.4 percent), the IDC (35.1 percent), and various other smaller interests held by institutions and insurance companies. In the late 1990s, Gencor, the South African mining house (which had acquired a controlling share of Alusaf in the 1980s), restructured its assets by transferring its base metals and coal interests to Billiton Plc., an international mining and metals company. Alusaf (Aluminium South Af-


rica) was subsequently renamed Billiton Aluminium South Africa. Situated on a flat, well-drained, 100 hectare site, the Hillside smelter is located approximately 4 kilometres from the Port of Richards Bay and 180 kilometres northeast of Durban. Bayside Aluminium is approximately 1.5 kilometres southwest of the Hillside smelter (Alusaf, 1992b; Jourdan, 1994; Billiton, 2000; Mitchley, 2000)

EMPIRICAL FINDINGS

In this section some of the most significant direct and indirect impacts of the construction and subsequent operation of the Hillside Aluminium smelter at the local, provincial, national, and sub-regional level are dis- cussed.

Impacts of the Hillside Aluminium Smelter: Construction Phase

In terms of employment, the input-output analyses employed in the initial feasibility studies and impact assessments projected that during the construction period 7 000 direct positions would be created in on-site operations, of which 4 800 would be in construction-related activities, and 25 000 indirect opportunities would be fostered (Alusaf, 1992a; 1992b; En- gineering News, 1993b; Mitchley, 2000). The majority of these jobs would be on a temporary or contractual basis. In addition to total capital costs, which were estimated to amount to R7.625 billion, it was asserted that a further R500 million would be spent locally by various companies on housing, ex- tending the power supply, roads, rail links, and other infrastructural upgrades. Moreover, approximately R700 million would be spent by Alusaf on wages and the purchase of goods and services (Alusaf, 1992a; 1992b; Engi- neering News, 1993b; EIA, 2000a). Although the construction (and subsequent operation) of the smelter would necessitate the import of foreign expertise and supplies, emphasis was placed on the sourcing and procurement of local resources (e.g., services, supplies, and labour). It was maintained that as much as 70 percent of goods and labour would be sourced from within South Africa, of which 20 percent would be from within the greater Richards Bay area (Alusaf, 1992a; 1992b; Engineering News, 1993b).

Direct impacts. Construction of the smelter commenced in early 1992. In the initial months, activity on the site was almost exclusively related to issues pertaining to the transfer of technology between France (Pechiney) and South Africa (Alusaf), and the planning, engineering, and design of the project. At this stage, the workforce consisted of a core of highly skilled South African and international technical experts from a range of different disciplines. A rapid increase in the size of the on-site workforce occurred

144 URBAN FORUM

once the earthworks commenced. Approximately 160 construction workers were engaged in these activities and were accommodated in a purpose- built construction village located off-site, but in close proximity to the smelter (Engineering News, 1993g). The number of construction workers increased to approximately 300 when piling began and about 700 workers were employed to erect the two potrooms. Structural steel work (2 800 workers) and mechanical erection (3 300 workers) followed these activities. Additional local and national employment opportunities were fostered in activities associated with the construction of the anode manufacturing plants, gas production and treatment facilities, furnaces, and casthouse. All in all, approximately 6 000 contractors were involved. At start-up (June 1995), 3 500 people were employed on-site, including key managerial personnel. Between the commissioning and final production phase (21 June 1996), the number of construction workers, project managers, services providers and associated employees on-site gradually declined until just the final labour complement of 1 380 employees remained (Engineering News, 1993b; 1993c).

Indirect Impacts. THE CONSTRUCTION VILLAGE. One of the most significant local indirect impacts of the construction of the smelter was the establishment of the Alusaf construction village to house the 4 800 temporary construction workers employed on-site. Not only was such a deve lopment deemed necessary to prevent overcrowding and incidents arising from increased pressure on municipal resources, but also as there was a lack of affordable housing in the region, particularly on a short- term basis and for low- and medium-wage earners. Local labour resources were used to con- struct the prefabricated buildings of the contractor village, which was sited on part of the local council's Zululand showgrounds. Instead of disman- tling the buildings once construction of the smelter had ended, Alusaf do- nated some of the buildings to the Zululand Chamber of Business (ZCBF) for use as a Community Park, fulfilling its commitment to local economic development (EIA, 2000a; 2000b; Hillside News, 2000a). The construction of the Community Park (R22 million) was seen as a means by which the skills, education, and quality of life of the residents of Zululand could be gradually improved. The remainder of the buildings (15 000 square metres) were dismantled and reerected as classrooms with ablution facilities in 10 schools throughout Zululand. This was largely due to the serious shortage of space in schools throughout the region. In all, 108 classrooms were established. Local people received training and employment in construction and related activities throughout the duration of the Masibambane Project, as it was known (Schneider, 2000b).

THE PORT OF RICHARDS BAY. It has been pointed out that determining the employment spin-offs of a particular development on the Port of Richards bay is problematic, due to the fact that a variety of different large-scale,


resource-based enterprises utilise the services at the Port. Over the past few years, each of these enterprises have started, proposed, or completed capacity expansion programmes and, thus, could have contributed to fostering employment spin-offs at the Port. The cumulative impacts of these developments in terms of export and import volumes, increased revenue, and employment creation are positive. The only employment impacts that can be attributed to a specific industry are those which pertain exclusively to the operations of the plant concerned (E/A, 2000b).

The impact of the Hillside development on the Port following its construction and operation were twofold. Firstly, it had to accommodate an additional 1.17 million tons of raw materials annually. Secondly, it had to manage and export 466 000 tons of aluminium ingots each year. Employ- ment opportunities relating to the management, maintenance, and storage (e.g., silos, containers) of the raw materials at the Port (e.g., alumina, pitch, petroleum coke) and transportat ion (e.g., conveyor, trucks) of materials between the two smelters and the Port emerged. In addition, a variety of office, IT-related (e.g., scanning, bar-coding, stock keeping), and management (e.g., stacking, packaging) jobs were fostered as a result of the production of new products for export. Although the existing facilities were considered adequate to handle the increase in exports, Portnet approved the building of a further 440 metres of clean cargo key walI to allow for future expansion of the industry. Each of these developments stimulated the creation of temporary and permanent employment posit ions in the greater Richards Bay area, as well as in the rest of South Africa (Engineering News, 1993b).

ESKOM. Since the Hillside smelter requires daily power inputs equivalent to that utilised by a city the size of Port Elizabeth, the construction of the smelter necessitated the expansion of Eskom's power facilities in KwaZulu- Natal (Engineering News, 1993d; 1993e). While electricity supplies generated by the existing Impala sub-station were considered adequate for the Bayside smelter, a variety of projects were u n d e r t a k e n by Eskom to strengthen its 400kV system in the greater Richards Bay area in order to meet Hillside's initial 810 MW requirements. The projects, which amounted to approximately R442 million, included the construction of a 400/132 kV subs ta t ion near Empangen i (called Athene) and the erect ion of 460 kilometres of 400 kV transmission line. Approximately 1 100 people were employed in these various projects, which took eighteen months to complete (Engineering News, 1993d; 1993e). Although the Hillside development was the governing impetus for Eskom's expansion programme, it was not the only beneficiary. Indeed, it was asserted that the additional 72 MW required for expanded operations at the Bayside smelter would be provided by the new substation and the s trengthening of the transmission system would also cater for a general load growth in the amount of electricity sup-

146 URBAN FORUM

plied by Eskom to the rest of the country (Engineering News, 1993d; 1993e). More significantly, since eight tons of coal is required to produce one ton of aluminium, approximately 3.728 million tons of coal would be required annually to provide the electricity requirements at the smelter, thus pre- serving jobs in the coal mining industry. Additional temporary and permanent employment opportunities were fostered at the substation in office, management, and organisation activities.

MANAGEMENT SERVICES. Indirect employment spin-offs were also fostered in various IT, technology, and logistic activities. Although various contracts were outsourced to a number of international companies, South African expertise and skills also played an integral role. One of the most significant contracts was that awarded to Alprom, a joint venture between SNC- Lavalin (Canada) and EMS (Bedfordview, South Africa) for the engineering, procurement, construction, and project management of the smelter. It was asserted that an amalgamation of South African and international best practices would ensure the maximum benefits for the industry. Not only was Alprom responsible for negotiations and discussions with Pechiney regarding the choice of technology, processes, and the design of the smelter, but also for the outsourcing of the topographical surveys, geotechnical study work, and test pile programme contracts to other local South African firms (Engineering News, 1993f).

Impacts of the Hillside Aluminium Smelter: Production Phase

The analyses that were undertaken in 1992 to assess the impact of the operation of the Hillside smelter at the local, regional, and national level projected that, with the multiplier effect, national revenues would increase by as much as R2.6 and R3 billion annually. The net effect of this on national GDP would be an increase of 1.2 percent. The greater Richards Bay area would, moreover, benefit directly from the R200 million spent annually by Billiton on wages, harbour-related expenses, maintenance and contract services, levies, rates, consumables, and capital expenditure. In terms of employment creation, approximately 1 400 permanent employment opportunities would become available within the smelter. Employees would also directly benefit from the development and training programmes imple- mented within the smelter. Moreover, about 5 000 people (3.5 per employee) would be dependent on direct employment opportunities at the smelter. A further 500 direct job opportunities would be generated in Richards Bay in activities such as maintenance, security, and catering, and 4 350 in related 'upstream' and's idestream' activities. At the national level, it was projected that approximately 29 800 jobs would be fostered in South Africa in port- related activities, at Eskom, and in associated supplier and manufacturing enterprises. In addition, it was maintained that the operation of the Hill-


side smelter would stimulate growth in local support industries of between R25 and R60 million (Alusaf, 1992a; 1992b; Engineering News, 1993b; EIA, 2000a; Mitchley, 2000).

Local direct impacts. There are two parts to determining the extent and degree of value added by Billiton Hillside Aluminium to the Richards Bay area. First, it involves identifying the key' upstream',' sidestream', and 'downstream' activities arising from the production process and provision of services within the smelter. Second, it requires formulating a cost structure detailing the various costs incurred in the production process. Calculating value-added using such an approach is based on the premise that each Rand spent by Billiton has the potential to broaden the employment base and increase the range and possibility of future employment opportunities Io- cally and nationally.

'UPSTREAM' ACTIVITIES. 'Upstream' activities refer to the suppliers of the main inputs or raw materials needed in the smelting process. These include electricity, alumina, pitch, petroleum, coke and other raw materials (e.g., carbon lining materials, cryolite, and aluminium fluoride). In 1999, variable production costs amounted to approximately R2.018 billion and fixed operating costs R2.31 billion (Hillside Aluminium, 2000). With the exception of power, all the other major raw material inputs are imported. Since 50 percent of the aluminium produced in South Africa returns to input suppliers in the form of tolling agreements, a sizeable leakage in value- added occurs, particularly to Australia. South Africa only benefits through the beneficiation of coal of which eight tons is required to produce one ton of aluminium (Alusaf, 1992a; Mitchley, 2000; www.hillside.co.za).

' SIDESTREAM' ACTIVITIES. ' Sidestream' activities refer to the service network, vendors, and key contracting firms directly affiliated with the smelter 's operations. Not only is this sector significant in terms of contributing to broadening the local and national employment base and enhancing the potential for further employment spin-offs, but it is of critical importance to the functioning of all the departments within the smelter.

In 1999, Hillside Aluminium's vendor spend amounted to R626 million. Of this, R280 million (44.7 percent) was spent within South Africa, R240 million (38.3 percent) internationally, and R106 million (16.9 percent) within the Richards Bay/Empangeni area. Total vendors numbered 1 231, of which 756 (61%) were located in South Africa, 395 (32%) in Richards Bay/ Empangeni, and eighty (6 percent) internationally (yon Gordon, 2000). The local 'sidestream' sector supporting the Hillside Aluminium smelter com- prises vendors of various sizes, providing either hard or soft services (yon Gordon, 2000).

In 1998, prompted by the fact that the Hillside smelter had no process which aligned services and supplies with appropriate vendors, a fundamental reassessment of the relationship between the smelter and its sup-

148 URBAN FORUM

plier network occurred. An extensive vendor list (3 000 businesses) and very few contract-based deals (10 percent) resulted in high administration costs and hassle (von Gordon, 2000). An Integrated Supply Chain (ISC) programme was subsequently developed, which emphasised the need to shift to long-term contracts with suppliers and to redefine and rationalise vendor lists, distribution, and expenditure in an attempt to alleviate these restraints (Hillside News, 1999). Of particular concern was the high proportion of expenditure spent internationally on the procurement of inputs. In total, fifty-six vendors in twelve countries were benefiting from the R240 million spent during the 1998/1999 financial year (von Gordon, 2000). Un- derpinning the ISC is a classification system identifying of a number of approaches for changing the perceived concerns regarding international vendor spend into opportunities. In particular, investigations were made into the possibility of localising the production of spares in South Africa. Specific products were identified and the value of off-shore procurement tabulated (Hillside News, 1999; von Gordon, 2000). During 2000, there was a marked reduction in the Rand/value spend abroad.

Hillside Aluminium, together with other big businesses in Richards Bay, is also actively involved in promoting local economic development and sustainable job creation in the area by directly supporting and incorporating SMMEs into their activities. Not only does Hillside view its involvement and support of the SMME sector as essential in terms of generating a competitive industrial base within Richards Bay, but also as an economic imperative (Mthembu, 2000; von Gordon, 2000). Hillside Aluminium's SMME policy was formulated after considerable investigation was made by both public and private individuals into SMME best-practice regarding training, development, and support programmes. Approved in June 1998, the policy identified four issues that are critical to the successful identification, development, and support of a viable SMME supplier sector in Richards Bay/ Empangeni (Mthembu, 2000):

• Evaluating vendors from the SMME database against approved suppliers" standards and directly assisting SMMEs in order to overcome deficiencies in various aspects of supplier performance, quality, administration, and competitiveness.

• Determining the various departments'responsibilities and the extent to which support and development will/can be provided.

• Contributing to the development of new emerging entrepreneurs through joint ventures, thereby facilitating the transfer of skills.

• Helping SMMEs access resources in terms of finance, technology, and latest business development information.

At present, Hillside Aluminium has forty-five accredited SMME companies on their database. In order for an enterprise to be registered as an SMME, two requirements have to be fulfilled. Firstly, at least 55 percent of


the equity has to be owned by someone from a previously disadvantaged economic background. Secondly, the enterprise must be willing to enter into partnerships with larger vendors in order to facilitate a transfer of skills and technology in order to provide a base for the future growth of the business (Mthembu, 2000; von Gordon, 2000).

Since 1998, the level of expenditure by Hillside Aluminium on commercial activities supporting local SMMEs (local substitution of commodities previously sourced internationally and reengineering of products) has increased substantially. The smelter's SMME spend has increased from R6 million in the 1998/1999 financial year to R25 million in 1999/2000. The target for 2002/2003 is R75 million (Mthembu, 2000; von Gordon, 2000). Hillside Aluminium's shift towards a greater emphasis on incorporating SMMEs into their supplier network is also partly due to a reassessment of the nature of business at the smelter. While requirements in terms of hard and soft services have traditionally been handled by the senior staff within large industries, such an approach, particularly at Hillside is no longer fea- sible. It has been maintained that by outsourcing non-core activities to firms (particularly SMMEs) in Richards Bay/Empangeni, time, resources, and skills wi th in the smel te r can be u t i l i sed more effectively. Not only does outsourcing assist in reducing corporate costs, but it also contributes to broadening the local employment base (Mitchley, 2000; Mthembu, 2000; von Gordon, 2000).

Although a number of local firms have benefited from association with the smelter, it is argued that there is potential for greater SMME utilisation at Hillside (Mthembu, 2000; yon Gordon, 2000). A number of opportunities have consequently been identified for increasing outsourcing to SMMEs in each of the nine departments, including things such as general engineering, security, transport, landscaping, plant maintenance, industrial cleaning, painting of road signs, printing, stationers, canteen, and library services (Mthembu, 2000: 30).

EMPLOYMENT WITHIN THE SMELTER. Total costs of sales for the 1998/1999 financial year amounted to R3.635 billion. Of the total wealth generated by the smelter, 14 percent (R187 million) was paid out to the 1 083 Hillside employees in the form of salaries. Direct employees include those employed on a permanent, temporary and casual basis as well as those in a management or executive position. It does not include contractors (Hillside Alu- minium, 2000). Employees at Hillside, 70 percent of whom are from within the KwaZulu Natal province, comprise an operating director, general managers, supervisors/managers, engineers/section heads, administrators, op- erators, and artisans. Since 1997 there has been a gradual reduction in the number of employees at the smelter (from 1 187 in 1997 to 1 060 in 2000). This has largely been in response to the need to reduce corporate expenditure and to streamline activities in order to remain internationally corn-

150 URBAN FORUM

petitive (Mitchley, 2000; Engineering News, 2001b). The labour force is generally young, women constitute approximately 10 percent of the workforce, labour turnover is 8.3 percent, and the level of absenteeism is low (Hillside Aluminium, 2000).

Hillside Aluminium places considerable emphasis on employee training and skill development. The successful start-up and operation of the smelter was, in many ways, due to the comprehensive training of all staff before- hand. Approximately R30 million and 50 000 days of training was invested to ensure that each employee was sufficiently equipped to operate and manage the technology and equipment within their designated departments (Mitchley, 2000; www.hillside.co.za). Stringent hiring criteria (i.e., a minimum qualification of a Grade 12 with Mathematics and Science as key subjects) were applied in order to ensure a productive workforce and to provide a foundation on which to develop worker skills and employability. A single- class management approach has been adopted at the smelter whereby op- erators and artisans are paid according to their level of skill and staff according to performance (www.hillside.co.za).

One of the most notable developments that has been undertaken to ad- vance employee skills and employability has been the formulation of a se- lection of individual t ra ining programmes for identif ied 'h igh flyers ' . Through the Accelerated Development Programme (ADP/ASDP), opera- tors acquire skills and training to enable them to manage and utilise their equipment more effectively. Each training programme is also National Qualifications Framework (NQF) compliant. In this way, the ADP supports the national Skills Development Act, which emphasises worker training and the simultaneous attainment of accredited and recognised qualifications (Hillside News, 2000b). In addition to the ADP, Hillside employees are encouraged to pursue other courses and degrees. At present, about 446 Hillside employees are currently studying courses offered by various technical colleges, technikons, universities, and other recognised insti tutions in South Africa (Hillside News, 2000b).

'DOWNSTREAM' ACTIVITIES. 'Downstream" activities refer to industries and enterprises engaged in the further processing/fabrication of a luminium produced at the smelter. The majority of the remelt ingots produced at Hill- side are exported with very little further value addition within South Af- rica. Recognising this, as well as the employment benefits associated with increased beneficiation, Billiton Aluminium (together with the DTI) have investigated the possibilities and viability of fostering the development of a downstream aluminium-based SMME sector in Richards Bay. This initiative has received support from other national departments, organisations, and local businesses (i.e., Richards Bay SDI, the provincial Department of Economic Affairs, the CSIR, the ZCBF, and Richards Bay Minerals's small business advice centre. The Downstream Aluminium Pilot Project (DAPP)


is scheduled to commence once the proposed upgrade to the Hillside smelter has been completed (2003). The Project, which will be launched on the site of the construction village established to house workers engaged in the expansion activities, will include a small foundry and will be geared towards the manufacture of a luminium-based tourist items, as well as components for the aluminium industry (Brook Hunt, 1999; E/A, 2000a; 2000b; Schneider, 2000a). The DAPP is projected to create about 1 000 jobs, and approximately thirty new direct and indirect businesses each year. In addition to DAPP, Billiton and representatives from the Richards Bay SDI are investigating ways in which to attract high-tech fabrication industries to the region. Numerous opportunities exist for the fabrication of cast wheels, building components, trailers and campers, containers, aerosol cans, and pumps and water heaters for either the domestic or international market (EIA, 2000a; 2000b; Schneider, 2000a; Altman, 2001a).

Local Indirect Impacts. Indirect impacts are similar to direct impacts as they arise as a consequence of capital flows between individuals and firms within a particular area. However, the scale and depth of clustering resulting from indirect impacts is likely to be much more extensive and the employment multipliers much greater than those arising from direct spin-offs. There are three ways in which indirect employment spin-offs are fostered. In the first ins tance , e m p l o y m e n t is s t imula ted t h rough ' u p s t r e a m ' , 'sidestream', and 'downst ream' activities. In the case of Hillside Aluminium, the majority of local indirect impacts are likely to arise from sidestream activities as the 'upstream' and 'downstream' sectors are relatively undevel- oped in Richards Bay. Each contract signed between an input supplierJven- dor and the smelter results in an exchange of resources. Generally, this exchange entails the supply of labour, skills, and materials by the vendor in return for capital from the smelter. The greater the perceived and realised value offered by a particular firm to increasing the smelter's operating effi- ciency and productivity, the greater the flow of resources. This transfer of capital between the smelter and the vendor in turn stimulates further ex- changes. As the vendor expands, either through innovation or because of increased business with the smelter, its dependence on other service and supplier firms also increases. This results in new contracts and exchange of resources arising between the initial vendors and new suppliers. This process is continuous and the multiplier effect increases with each subsequent stage that occurs. Each spin-off emerging from the interaction of a direct vendor to Hillside Aluminium and a new supplier is an indirect impact as it has emerged as a consequence of demands by the vendor, not the smelter. It may be said that the greater the initial level of direct corporate expenditure in sidestream activities, the greater the spin-offs in terms of value added and capital flows. These flows can take place at a variety of levels and similar employment impacts occur in upstream and downstream activities.

152 URBAN FORUM

Secondly, indirect impacts are also fostered as a result of an increase in disposable income--a direct impact of employment in the smelter and in the supplier network. As the wages and security of livelihoods of employees increases, demand patterns change. A more diversified mix of enterprises providing a range of products and services often emerges in the vicinity of the new investment project in order to meet these new demands. These goods and service enterprises are often unrelated to the activities and products produced or sourced by the firm in which the employees work and, as such, can be termed indirect impacts. Such activities include, among others, entertainment, retail, education, care/medical, residential, and transport facilities. Employment creation in new firms arises not only as a result of a change in demand, but also as a result of an increase in the level of spending on the part of employees in order to fulfill their particular requirements. Work pressures imposed by direct employment within the smelter and in upstream, sidestream, and downstream industries, as well as an increase in household income, can also provide the impetus for further indirect employment creation. In particular, the outsourcing of household tasks such as domestic work, gardening, landscaping, and child minding contributes to broadening the local employment base. Although these are not value adding activities (due to their unskilled nature), the fact that most people earning over a particular amount rely on such services it is a significant element in local employment creation.

The third way in which indirect impacts are fostered in the local economy is through the smelter's corporate social investment strategies and community development programmes. Each year, Billiton allocates a specific amount to welfare, education, business, and environmental projects in the greater Richards Bay area. Although this is direct expenditure, the employment impacts that arise from it are indirect as the spin-offs require a considerable period of time to realise and Billiton is not the only beneficiary. Some of the indirect impacts arising from direct employment in the smelter and corporate social investment in the Richards Bay area will be 'unpacked ' below.

THE HOUSING AND CONSTRUCTION SECTOR. There is evidence to suggest that the construction and subsequent operation of the Hillside smelter has had a significant impact on employment creation in activities relating to the local housing market (Todes andVaughan, 1999; EIA, 2000a; 2000b). A comparative analysis by Schlemmer (2000, cited in EIA, 2000b) of the number of housing units in 1999 with those recorded in the 1996 Census re- vealed that between 1996 and 1999 the local housing sector grew by as much as 24 percent. Similarly, Todes and Vaughan (1999) point out that between 1994 and 1997 there was a significant increase in the number of building plans (e.g., houses, office, accommodation, retail), approved in Richards Bay. The value of building plans passed in 1996 was 10.5 times


greater than those passed in 1990 and 2.8 times greater than those in 1995. Although a similar boom occurred in Empangeni, it was not of the same scale and extent as that in Richards Bay.

Todes and Vaughan (1999) maintain that the boom-slump nature of the building cycle in Richards Bay/Empangeni between 1993-1999 parallels the construction and subsequent operation of the Hillside smelter. Construc- tion began in early 1993 and peaked in 1995. During this period, there was a significant increase in the number of outside firms and contractors that settled in the area. The influx of new residents and firms stimulated a demand for commercial, residential, and office accommodation in close proximity to the construction site. Numerous indirect employment opportunities in the local construction and building industry, real estate/property development, and transport sectors, and in design and marketing firms, were fostered as a consequence. The growth of these activities was also fuelled by the purchase of additional property by individuals who hoped to capit- alise on the influx of visitors by renting out their facilities. The smelter became fully operational in 1996. During the year, land values increased and the value of building plans approved reached their peak. As construction neared completion the demand for new properties waned. This triggered a decline in both property prices and employment in many of the firms associated with the property and construction industry. Todes and Vaughan (1999) point out that in 1998 vacancy rates in commercial and office accommodation, as well as the number of repossessions, increased considerably and the number of firms and land values decreased to levels recorded in the early 1990s. An examination of the value of council levies and number of levy payers in the Lower Umfolozi District (of which Richards Bay and Empangeni constitute the greatest part) reveals a similar pattern. De- spite the boom and slump accompanying the construction of the smelter, Hillside Aluminium did indirectly influence the growth of local businesses, as well as the flow of municipal funds in the region. An increase in the number of levy payers in the area not only attests to the stimulus engendered by the Hillside development, but also to the gradual broadening of the local employment base.

RETAIL AND TOURISM SECTORS. The Hillside smelter has also had an indirect impact on the growth of employment opportunities in the local tourist and retail sectors. Since 1996, there has been an increase in the number of commercial developments in the area, particularly in Richards Bay. The most notable deve lopment has been the Boardwalk shopping centre in the Richards Bay CBD. Numerous other smaller retail outlets (e.g., Spars, su- permarkets, a mall in Meerensee) have also accompanied this development. Although it is difficult to attribute such developments and the employment opportunities that were fostered as a consequence to one particular industrial activity, prior to the inception of the Hillside smelter, Richards

154 URBAN FORUM

Bay was lacking a large retail complex. The construction of the Boardwalk shopping complex has had a significant impact on the Richards Bay community in terms of localising expenditure and stimulating local employment opportunities.

The local tourist industry has also flourished. In particular, three tourist hotels, three small guest lodges, a Formula One (motel), twenty-five bed & breakfasts (in total between 900 and 1 500 rooms), and twenty-four new restaurants have been established since 1995 (EIA, 2000b: 30). It has been asserted that these businesses have emerged as a consequence of industrial developments in the area. Given the specialised nature of the large- scale, resource-base plants in the area, and the need to continually upgrade, there is often a constant flow of technicians, consultants, trade delegations and other business visitors from within South Africa and internationally into Richards Bay. In 1999, occupancy levels in hotels, bed and breakfasts, guesthouses, hotels, and motels were considerably high, as many of the key enterprises were engaged in shutdowns, refurbishment, renovations, and extension programmes. According to the EIA (2000b), as much as 80 percent of visitors to Richards Bay are businessmen visiting for business purposes, the rest are leisure tourists. With each new tourist enterprise that is indirectly fostered, additional employment spin-offs arise in linked activities (e.g., landscaping, marketing, cleaning, catering, management, finance, property development), each of which contributes to broadening the local employment base.

THE TRANSPORT SECTOR. Indirect employment in transport-related activities has also been fostered as a consequence of the Hillside development (EIA, 2000a: 22). During the construction of the smelter, roads connecting the various facilities on-site and the smelter to the Port were constructed and upgraded. Numerous temporary employment opportunities were generated in construction, engineering, and supplier industries. The operation of the smelter has resulted in approximately five trucks transporting mol- ten aluminium between Hillside and Bayside and forty-four transporting ingots to the Port every twenty-four hours. It has been asserted that while Richards Bay is well served by air, rail, and road infrastructure, there is considerable potential for further infrastructure expansion and transport-related employment activities in the area. In particular, while volumes of bus and taxi traffic are not high, it has been pointed out that the two lane road leading to the smelter is not adequate in peak traffic. One of the proposed SDI developments is the upgrade of the John Ross Parkway. Not only is it the busiest route in the RBTLC area, but it also links Empangeni with the N2. It is hoped that this project will alleviate this problem (EIA, 2000a; 2000b). In terms of transport usage by workers in the area, although there is an adequate taxi network, there is only one major bus company, Ikhwezi Transport, which is based in the Alton industrial area. There is no com-


muter rail system. Although the available taxi and bus network is utilised by many Hillside employees, due to the fragmented form of the region many private liftclubs have emerged.

THE EDUCATION SECTOR. It was asserted that due to the fact that the majority of employees at Hillside smelter would fall between the 18-35 age category, the impact of an increase in marriages and children on the local economy would be considerable. Not only would employment opportunities be created in schools, day cares, and nursery schools, but also in clinics and medical facilities. An increase in the number of school-going children would, moreover, stimulate a need for additional classrooms, teachers, and associated services. Feasibility studies predicted that, once operational, the number of pupils would increase dramatically. Moreover, based on 1 400 permanent staff, and a staff/pupil ratio of 1:30, an additional forty-six teach- ing posts would become available (Alusaf, 1992b).

ADDITIONAL EMPLOYMENT. Direct employment at Hillside Aluminium has also benefited residents from Nseleni, Esikhawini, Mandhlazini, Heatonville, and Ngwelezane who have gained emp loymen t in Richards Bay and Empangeni as gardeners and domestics workers. Indirect employment in such activities is particularly important at the local community level, as wages are often remitted and the number of dependents supported by these wages are often high.

BILLITON'S CORPORATE SOCIAL INVESTMENT (CSI) PROGRAMME. Billiton Alu- minium has made it its priority to ensure that the international success of the smelter and local economic development are linked. Through its Cor- porate Social Investment (CSI) programme, Billiton hopes to indirectly contribute to the development of a healthy, skilled labour force in the greater Richards Bay area by directly funding a variety of education, welfare, conservation, and business projects. The programme has been outsourced to the Zululand Chamber of Business Foundation (ZCBF), a Section 21 company, and is based at the ZCBF Communi ty Park (EAI, 2000a; 2000b; www.zcbf.org.za). During the 1999/2000 financial year, Billiton invested R8 346 364 in community development--Hil ls ide contributed 74 percent of this investment and Bayside, 26 percent. A total of R8 611 950 has been allocated for CSI projects in the 2000/2001 and 2001/2002 financial years (EAI, 2000a; 2000b).

National and Regional Direct Impacts. The macroeconomic impacts of the Hillside smelter in the 1998/1999 fiscal year include (Hillside Aluminium, 2000: 13):

R187 million paid to employees within the smelter. R291 million paid to bankers and lenders. R156 million paid to the government in the form of taxes (Hillside does, however, benefit from a reduction on its company tax to the value of R174 million).

156 URBAN FORUM

• R300 million paid to shareholders in the form of dividends. • R233 million allocated for the depreciation of assets. • R249 million was retained to fund capital replacements and working capital

replacement. • R3.365 billion generated through costs of sales.

In addi t ion to corporate taxes, each employee is subject to various forms of taxes (i.e., personal taxes, VAT, bank/sav ing charges, levies, and rates) each of which contr ibutes to increas ing the flow of resources both wi th in the immedia t e vicinity of the smel ter and e l sewhere in the country. Each transfer of capital assists is indirect ly e n h a n c i n g the oppor tun i ty for im- proving the l ivelihoods of res idents wi th in the country, as well as employ- m e n t creation.

Provincial, National, and Subregional Indirect Impacts. In 1993, various assert ions were made with regard to the potent ia l impact of the smel ter at the provincial and nat ional level. Hule t t Alumin ium's Manag ing Director ma in ta ined tha t"Expans ion of the Alusaf smel ter at Richards Bay over the next four years will reinforce South Africa's posit ion as one of the a lumin ium hubs of Africa; creat ing many business and e m p l o y m e n t oppor tuni t ies and o ther benefi ts" (Engineering News, 1993a). The cons t ruc t ion of Hillside Alu- min ium was also envisaged as a"cata lys t for a new growth phase in South Africa ... it shows that South Africans have conf idence in their count ry and are prepared to invest in its future" (Engineering News, 1993g). Fur thermore , the project wou ld" in itself create stability, conf idence and prosper i ty wi th in South Africa which is urgent ly n e e d e d to reverse the d o w n w a r d economic spiral and to revitalise the industr ial sector of the economy. . . " (Engineering News, 1993g). There is evidence to suggest that the conf i rmat ion of the decision to proceed with the Hillside smel ter did indeed prompt the g o - a h e a d of a n u m b e r of plant upgrades and new inves tment projects in Richards Bay and in KwaZulu-Nata l , and s t imula ted in te rna t iona l interest in various downs t r eam activities in South Africa (Engineering News, 1993a; 1993g; 1993h).The success of the smel ter since coming on - s t r eam in 1996 has aIso given Billiton the conf idence to proceed with fur ther expansions to both the Hillside and Bayside smelters and to extend its opera t ions e l sewhere in Sou thern Africa. Each of these activities has resul ted in signif icant economic spin-offs for South Africa. Some of the mos t notable impacts are detai led below.

INDUSTRIAL DEVELOPMENTS IN RICHARDS BAY/EMPANGENI. There is genera l consensus that the R5.5 billion Hillside smel ter deve lopmen t provided the i m p e t u s for a n u m b e r of p r o p o s a l s to be s u b m i t t e d for e x p a n s i o n p rogrammes to various existing plants (aside from Bayside) and the sit ing of new ones in the area. In addi t ion to a p roposed R500 mill ion dry dock, a p roposed conta iner terminal , and a mul t i -mi l l ion Rand sod ium-ch lo ra t e plant for Nat ional Chemical Plants were also considered. Proposals were


also submitted for the siting of a Blue Circle Cement Plant next to IOF. Perhaps the most significant development, however, has been the been Iscor's decision to locate a heavy-mineral mining operation near the Felixton sugar mill in Zululand and a R1.9 billion smelter in Empangeni. The Iscor development is likely to play an important rote in influencing the future industrial dynamic of the region. If these projects get the go-ahead, considerable direct and indirect economic spin-offs will be fostered throughout the country (The Star, 1996a; 1996b; The Mercury, 2000).

THE HILLSIDE ALUMINIUM EXPANSION PROGRAMME. The phenomenal growth of the smelter and its international success has prompted Billiton to un- dertake an expansion programme to increase the physical capacity of the Hillside smelter from 466 000 tons per year to 650 000 tons per year (i.e., an increase of 25%). Although much of the existing infrastructure will be used, the R2.5 billion expansion programme will entail the construction of a third potline of half-size, a gas treatment centre, substation and services in the reduction area, an anode baking furnace, and an extension of the storage area for rodded and spent anode assemblies in the carbon area. Surplus metal produced at the smelter will be processed at Bayside Alu- minium into higher value-adding products (EIA, 2000d; Engineering News, 2000a; 2000d). The twenty-seven-month project is scheduled to commence in 2002 (Engineering News, 2001b). A number of spin-offs will accompany the construction and operation of these additional facilities most notably in 'upstream' and 'sidestream' purchases, local SMME activities, increased exports and national revenues, increased wage earnings, permanent and temporary employment opportunities with concomitant increases in skills levels and marketability of the local workforce, transport, retail, housing and construction (EIA, 2000a; 2000b; 2000c; 2000d; Engineering News, 2000a; 2000b).

HULETT ALUMINIUM. The decision by Hulett Aluminium, in March 1996, to proceed with a R2.4 billion upgrade of its facilities in Pietermaritzburg was a significant indirect impact of the Hillside smelter, particularly in terms of broadening South Africa's downstream aluminium industry. Hulett Alu- minium, together with Hulett-Hydro Extrusion and Hulett Aluminium, accounts for approximately half of the total domestic aluminium conversion (Engineering News, 2001d). The company's expansion project entailed the construction of a new hotline, plate, and heat treatment plant and remelt and recycling facilities on a greenfield's site in Camps Drift. A third cold mill, a second coil coating line, and finishing equipment were added to the existing Edendale site. As a result of this upgrade, Hulett Aluminium is one of the most advanced aluminium-rolling plants in the world (Engineering News, 1999b; 2000e; 2001d).

Once full capacity is reached (i.e., 2003), it has been asserted that these expansions will increase fabricated outputs from an initial 50 000 to 185 000

158 URBAN FORUM

tons per annum and foster more than 31 000 jobs throughout South Africa (Engineering News, 2001d). The construction of the Hillside smelter provided Hulett Aluminium with the opportunity to obtain competitively- priced and top-quality primary aluminium locally (Engineering News, 2000e). Huletts Aluminium is of particular economic importance to South Africa. Not only does it generate sizeable foreign exchange earnings for the country, but contributes significantly to employment creation. Indeed, it has been asserted that for every 6 tons of aluminium fabricated, 1 job is created (En- gineering Nems, 2000e). As much as 51 percent of its products are exported to thirty-four countries. In 2000, capital employed amounted to approximately R4.5 billion and its turnover was R2 billion. Its annual turnover is projected to reach R5 billion by 2004. Currently, 2 050 people are employed on-site (Engineering News, 2000e; 2001d).

It has been pointed out that 10 percent of the material sold by Hulett Aluminium to local customers is used to manufacture value-added exports. In the past two years, exports by these customers have increased by over 50 percent (this is forecast to achieve an annual rate of R400 million by the end of 2002) (Engineering News, 2001d). The impact of the Hulett expansion programme has also been significant in terms of generat ing additional employment spin-offs. A noteworthy example of the spin-off effects from Hulett Aluminium is First Graphics, an aluminium lithographic plate manu- facturer based in Pietermaritzburg. A R25 million, three-fold expansion to its existing facilities was only permissible due to the local availability of high quality rolled aluminium. The project will increase its capacity from 1 500 tons to over 5 000 tons per annum. It has been asserted that this increase in capacity will enable First Graphics to adopt an export drive and penetrate international markets (Sunday Times, 1999; Engineering News, 2001c).

THE MOZAL SMELTER. Billiton's $1.3 billion Mozal aluminium smelter is the largest private investment project of its kind in Mozambique. The 250 000 ton per year smel ter came on - s t r eam in 2000, six mon ths ahead of schedule and $100 million under budget, and is scheduled to reach full production in the first quarter of 2001. During construction, the workforce peaked at 4 000 people and 900 permanent positions were created once production commenced. It has been pointed out that it was largely due to the success of the Hillside smelter that prompted Billiton to proceed with its decision to establish a similar facility in Mozambique (Engineering News, 1996a; 1996b; Financial Mail, 1997; Engineering News, 1998a; 1998b; 1998c; Bill#on World, 2000; Mitchely, 2000; Engineering News, 2001d). Although only half the size of Hillside, many of the key input suppliers and lessons learnt in the construction of the Hillside smelter have been adopted and utilised in the Mozal development. Billiton, together with the other shareholders, moreover, views the smelter as a'catalyst' for economic growth in


the SADC region (Financial Mail, 1998; Engineering News, 2000c). Due to the phenomenal success of the Mozal smelter, Billiton has submitted proposals for the construction of a second potline at the smelter which will increase its capacity to 490 000 tons per annum (Billiton World, 2000; Engi- neering News, 1998d; 2000f). It is likely that South Africa will benefit significantly from the economic spin-offs that will arise from this development, particularly in terms of the procurement of resources and technical expertise.

DISCUSSION OF RESEARCH FINDINGS

In terms of the realisation of the impacts projected during the construction phase, overall capital costs were lowered by approximately R1.5 billion; the project came on-s t ream five months ahead of schedule; 4 000 employment opportunities were created in direct construction-related activities; and personnel from a wide variety of disciplines were involved in on-site activities. In addition, 6 000 contractors were employed and a diverse range of employment opportunities were fostered in off-site activities within Richards Bay (e.g., housing, retail, and transport), at the Port and through Eskom's power expansion programme near Empangeni. Al- though 30 percent of goods and services were sourced from abroad, repre- senting a ' leakage' of South African resources, this was deemed essential to secure the best technical expertise and equipment. However, due to the fact that the world a luminium industry was experiencing an economic downturn following the dissolution of the former Soviet Union, critical inputs were sourced at very competitive rates (Alusaf, 1992a). The remaining 70 percent of the goods and services were procured from firms within Richards Bay and cities such as Cape Town and Johannesburg. Despite the fact that priority was given to the use of local labour, the condensed construction period necessitated the interregional distribution of activities in order to avoid bottlenecks. The South African construction sector benefited from the construction of the smelter, as it was under taken during a period when the construction industry was experiencing a downturn in economic activity following the completion of the Mossgas project (Alusaf, 1992a). Eskom also benefited from the construction of the smelter, as it needed an outlet for its surplus electrical capacity. As no large industrial project re- quiring sizeable power inputs had been under taken in the period prior to the construction of Hillside Aluminium, Eskom was able to extend its operations in the area (Engineering News, 1993b). Moreover, a luminium smelting contributes to the further beneficiation of South Africa's coal resources, as 10 percent of its excess capacity is exported overseas in the form of aluminium ingots. The smelter is also Eskom's largest industrial customer, as

160 URBAN FORUM

it is consumes 4 percent of South Africa's total power consumpt ion (Mitchley, 2000; Engineering News, 2001b; www.hillside.co.za). Not only did Hillside benefit through securing competitively priced power linked to the price of aluminium on the LME, but the Bayside smelter and the rest of the country did, as well (Mitchley, 2000). Perhaps the most notable impact on the greater Richards Bay area was the establishment of the construction village to house the workers engaged in on-site activities. Following the cessation of construction activities the village became the site of the ZCBF Community Park and some of the buildings were dismantled and reerected as classrooms elsewhere in the region. The ZCBF Community Park provided the impetus for the commencement of corporate involvement in welfare, education, small business development, and conservation activities in the greater Richards Bay area.

Since becoming fully operational in 1996, the Hillside smelter has engendered spin-offs in a range of direct and indirect activities at the national and local level. In terms of flows of capital within the greater Richards Bay area and nationally as a consequence of corporate expenditure and production activities, in 1999, exports amounted to R3.625 billion; R2.395 billion was spent on the purchase of goods and services; R187 million spent on wages; R25 million was spent on outsourcing to SMMEs; and R156 million was paid in corporate taxes. In addition to the 1 060 people directly employed in production, administrative, and management activities in the smelter, approximately 1 151 vendors and suppliers throughout South Af- rica are directly affiliated with the smelter. Numerous first- and second- stage indirect employment opportunities have emerged as a consequence of transactions between vendors and other local and interregional service providers. Moreover, employees within the smelter and the vendor supply network have dependants, family members, and other persons, such as domestic workers and gardeners, who are reliant on the income derived from employment within the smelter and in 'upstream', 'sidestream', and 'downstream' activities. Numerous local indirect employment opportunities have also been fostered in sectors such as housing and construction, transport, retail, and tourism and education. Although Billiton's corporate social investment programme, Downstream Aluminium Processing Project (DAPP) initiative, and the ADP programme are still in various stages of development and implementation, these represent important local indirect spin-offs, particularly in terms of enhancing the skills and marketability of workers and providing opportunities for the local beneficiation of aluminium.

The operation of the smelter has also been significant at the national level. Not only has it encouraged various large-scale industries to consider settling in the area, but it has also provided the impetus for a number of plants to proceed with multi-million Rand expansion programmes. The most


significant of these pertain to the Hillside smelter and Hulett Aluminium expansion programmes, both of which will generate sizeable national revenues, as well as temporary and permanent employment creation in a range of different activities once complete. Further, the smelter has been highly important in terms of contributing to subregional economic development. Prompted by the success of the Hillside smelter, Billiton and the IDC pro- c e e d e d wi th the cons t ruc t i on of the Mozal a l u m i n i u m sme l t e r in Mozambique. Although Mozambique is the main beneficiary of the long- term benefits of the operation of the smelter, South Africa has benefited from the indirect spin-offs resulting from its construction, particularly with regard to the procurement of equipment and skills. Numerous permanent and temporary employment opportunities were fostered as a consequence of the various contracts that were entered into relating to Mozal.

Overall, it is evident from 'unpacking' the spin-offs from Hillside Alu- minium smelter that, in assessing the spin-offs from a resource-based industrial project, a distinction has to be made between national and local impacts. In addition, consideration must be afforded to the manner in which both corporate and national objectives are simultaneously fulfilled through the operation of the smelter. Hillside Aluminium's international success is dependent on its costs remaining within the lower quartile of the aluminium cost curve. In order to achieve this, corporate costs have to be reduced by as much as 3 percent per year (EIA, 2000b). It is only through further rationalisation of the workforce and the vendor supply lists that Hillside's objective "to be the world's leading aluminium smelter" can be realized (Hillside Aluminium, 2000: 17). Billiton's direct impact on the local economy, therefore, is strongly influenced by a range of exogenous factors to which it has to respond in order to sustain both its international position and export revenues. In the pursuit of these corporate objectives, however, Billiton is also influenced by the broader national development challenges regarding the need for large resource-based enterprises to maximise their local impact, encouraging SMME development and generating employment creation. Although the national government has been proactive in providing an enabling environment for the realisation of these development challenges, the ability for an enterprise such as Hillside Aluminium to take advantage of such developments is constrained by the nature of the business. Although outsourcing to local SMMEs and programmes to stimulate the localisation of spares in the area has intensified since 1998, maintain- ing product quality and worker safety is fundamental to the operation of the smelter.These issues cannot be compromised in the fulfilment of broader national economic goals. Nevertheless, Billiton allocates considerable resources and investment for worker training in order to ensure that the company, the local community, and the national economy all benefit from the operation of the smelter.

162 URBAN FORUM

From the qualitative analysis of the impact of Billiton Hillside Aluminium on the Richards Bay area, it is apparent that the range and diversity of employment opportunities generated via indirect multipliers has been significant. The decision to proceed with the construction of the smelter not only retained the 3 000 employment opportunities at Bayside Aluminium, but also in many local fabricating industries reliant on its products (Alusaf, 1992a; 1992b). Moreover, the Billiton investment prompted Iscor to set up operations in Empangeni, a town historically characterised by commercial activities, and Hulett Aluminium to proceed with its R2.4 billion expansion programme. The rapid growth and economic success of the Hillside smelter since 1996 was largely responsible for Billiton's decision to proceed both with the construction of the Mozal smelter, as well as to propose expansions to both the Bayside and Hillside smelters. Once the upgrades have been completed, the Hillside and Mozal smelters will create the southern African 'aluminium triangle' producing 5 percent (1 million tons) of the world's demand for primary a luminium--an entirely new development in only six years (Engineering News, 2000c; Mining Weekly, 2000). Equally important, however, have been the less tangible indirect impacts of the construction and operation of the smelter. These include, inter alia, restoring national industrial confidence in a period of economic and political uncer- tainty, a climate few were prepared to invest in; providing a model for the restructuring of Bayside Aluminium; securing competitive prices for key inputs for both smelters; stimulating a regular flow of international and national investors into the area; serving as an international benchmark in various aspects of smelter management and appearance; and providing local fabricators with competitively-priced and high-quali ty primary aluminium (Alusaf, 1992a; 1992b). Taken together, the direct and indirect impacts of the Hillside smelter on employment creation have, therefore, been considerable.

CONCL USION

In final analysis, two key insights can be drawn from the investigation of the impact of Hillside Aluminium on the Richards Bay area. Firstly, it is apparent that new large-scale, resource-based investment projects have the potential to foster significant direct and indirect economic impacts. More- over, many of these extend beyond the immediate vicinity in which the project is situated. Companies, industries, and government officials are generally unaware of the broader positive economic effects engendered by resource-based plants, primarily because the emphasis tends to be on the direct impacts. In determining the magnitude and depth of the impacts fostered by a new investment project, particularly in terms of employment


creation and income generation, it is imperative that a consideration be given to the indirect impacts, as well as a qualitative analysis of the nature of the impacts be undertaken.

Secondly, it is evident that investment decisions have a distinct spatial or geographic dimension. A'cluster 'of specialised SMME vendors is beginning to emerge in the greater Richards Bay area. Although it is still in the initial stages of development, as innovation and adaptation of skills and technology increases within local enterprises, their importance to both national development and the aluminium industry will become ever more apparent. Due to the 's idestream' nature of a number of these firms and the shift towards outsourcing of non-core activities by large industr ies to SMMEs, a local networking and sharing of services and skills be tween SMMEs and other big businesses in Richards Bay will gradually emerge, ensuring the endogenisation of economic growth. In addition to these developments, Iscor's decision to locate its new smelter in Empangeni- -historically, a commercial ly-oriented town-- i s likely to be a fundamenta l element in influencing the future spatial reorientation of industry in the greater Richards Bay area. At a provincial level, the aluminium'cluster 'which is emerging in Pietermaritzburg attests to the fact that large-scale, capital- intensive projects have multiple centres of production. Not only is Hulett Aluminium linked to the Hillside and Bayside smelters in terms of supply and demand for primary aluminium, but numerous firms are reliant on the semifabricated products produced at Hulett Aluminium for further fabrication. Hillside's phenomenal growth, coupled with Hulett Aluminium's expansion programme, have intensified the downst ream processing and beneficiation of aluminium in South Africa. At the national level, the geographic and spatial impact of the Hillside smelter has been of critical importance in initiating subregional economic development in the SADC region. Not only will the Mozal smelter provide the impetus needed for economic growth in Mozambique, but the emergence of the 'a luminium triangle' between Richards Bay and Maputo provides a unique engine for transnational economic growth within Southern Africa. Moreover, the economic development of the 'aluminium triangle' is reinforced by the con- tinual flow and exchange of resources, skills, and expertise between South Africa and Mozambique.

REFERENCES

Altman, M., 2001a: The Richards Bay SDI. Unpublished Research Report, February.

2001b: Employment Promotion in a Minerals Economy. Paper Prepared for WORK2001, First International Conference on Employment Creation

164 URBAN F O R U M

in Development• University of the Witwatersrand: Johannesburg, 2-5 April.

Alusaf., 1992a: Feasibility Study Report: The Construction of a New Aluminium Smelter in South Africa• Alusaf (Pty) Ltd., May 1992: Richards Bay.

• 1992b: Environmental Impact Assessment for a 466 O00tpa Alu- minium Smelter in Richards Bay, South Africa, Summary Report. The Peli- can Joint Venture, University of Cape Town Environmental Evaluation Unit and CSIR Environmental Services, September 1992: Rondebosch.

ANC (African National Congress), 1994: Reconstruction and Development Programme• Umanyawo Publications: Johannesburg•

Aniruth, J., 1997: Regional Economic Development: A Case Study of the Dynamic Underlying Richards Bay's Economic Development• Unpub- lished MA Dissertation• University of Natal: Durban.

Aniruth, J. and J. Barnes, 1998: Why Richards Bay grew as an industrial centre: lessons for SDIs. Development Southern Africa, 15 (5): 829-849•

Auty, R.M., 1987: Backward versus forward integration in resource-based industries: Malaysia and Indonesia• Tijdschrift voor Economische en Sociale Geografie, 78 (2): 82~93.

• 1991: Third world response to global processes: the mineral economies• Professional Geographer, 45 (1): 63-76.

• 1994: Industrial policy reform in six large newly industrialised countries: the resource curse thesis. World Development, 22 (1): 11-26.

Ballance, R. H., 1987: International Industry and Business: Structural Change, Industrial Policy and Industry Strategies• Allen & Unwin: London•

Billiton, 2000: Bill#on: Annual Report, 1999. Billiton PIc, Westerham Press: London• Billiton World, 2000: Together we make a difference• Bill#on World, 3 (3): 3. Brook Hunt, 1999: Primary Aluminium Smelting Costs 1996-2003. Septem-

ber 1999. Brook Hunt & Assoc. Ltd.: Surrey• Business Day, 2000a: Expansion plans a confidence booster, Richards Bay:

Survey, Business Day, 31 March, 24. • 2000b: Region has rich potential, Richards Bay: Survey, Busi-

ness Day, 31 March, 25. CDE (Centre for Development and Enterprise), 1998a: Growth, employ-

ment and economic policy in South Africa: a critical review. CDE Focus Series. Occasional Paper for the Centre for Development and Enterprise (CDE): Johannesburg.

• 1998b: Labour-demanding growth: lessons from the international experience? CDE Focus Series. Occasional Paper for the Centre for Development and Enterprise (CDE): Johannesburg.

Davis, G.A., 1995: Learning to love the 'Dutch disease': evidence from the mineral economies. World Development, 23 (10): 1765-1779.

Department of Finance, 1996: Growth, Employment and Redistribution: A Macro-Economic Survey. Department of Finance: Pretoria.


Dickman, A. L., 1991: Costs of industr ial decent ra l iza t ion in South Africa. South African Journal of Economics, 59 (2): 127-145•

Driver, A., 1998: The Fish River SDI: n e w hope for industr ia l r egenera t ion in the Eastern Cape? Development Southern Africa, 15 (5): 787-805•

Engineer ing News, 1993a: Electricity deal keep smel ter compet i t ive . Mar- tin Creamer's Engineering News, 29 January: 51.

• 1993b: Smel ter creates jobs. Martin Creamer's Engineering News, 29 January: 51.

,1993c: Calendar for Alusaf II. Martin Creamer's Engineering News, 29 January: 54.

• 1993d: Eskom funds R300m advanced capital for Alusaf project• Martin Creamer's Engineering News, 29 January: 55.

1993e: Eskom launches projects• Martin Creamer's Engineering News, 29 January: 59.

, 1993f: S ta te -o f - the -a r t t echno logy set to boost opera t ing effi- ciency. Martin Creamer's Engineering News, 29 January: 59.

• 1993g: May kick-off for Alusaf ear thworks• Martin Creamer's Engineering News, 29 January: 61.

• 1993h: Value added a lumin ium products will create jobs. Mar- tin Creamer's Engineering News, 29 January: 69.

• 1996a: First symbolic sod set to be tu rned today• Martin Creamer's Engineering News, 14 June: 17.

• 1996b: A lumin ium project set to boost foreign exchange by expor t ing 490 000 t -a -year product ion• Martin Creamer's Engineering News, 14 June: 18.

• 1998a: Expansion on track, Martin Creamer's Engineering News. 19-25 June: 20.

1998b: Mozal project get official go -ahead . Martin Creamer's Engineering News, 19-25 June: 20.

,1998c: Full s team ahead for $1.18 billion Mozal smelter• Martin Creamer's Engineering News, Mozal Feature, 11-17 December : 17.

• 1998d: Second potl ine at smel ter mul led over. Martin Creamer's Engineering News, Mozal Feature, 11-17 December : 33•

• 1999a: Local manufac ture rs encouraged to team to exploit potential of a lumin ium sector• Martin Creamer's Engineering News, 17-23 September: 6-7.

1999b: A l u m i n i u m project app roaches final straight• Martin Creamer's Engineering News, 24-30 September : 15.

• 2000a: SA could supply 5% of wor ld a lumin ium. Martin Creamer's Engineering News, 21-27 April: 4.

• 2000b: A lumin ium - the metal of the future, Martin Creamer's Engineering News, 23-29 June: 33.

166 URBAN FORUM

2000c: Mozal an engineering feat. Martin Creamer's Engineering News, 30 June- 6 July: 70.

2000d: Aluminium smelter upgrade studies by mid-2001. Mar- tin Creamer's Engineering News, 29 September-5 October: 11.

2000e" South Africa will have to 'go downstream'• Martin Creamer's Engineering News, 3-6 November: 5.

2000f: Boom on way for aluminium exporter. Martin Creamer's Engineering News, 1-7 December: 21.

2001a: Aluminium export market imperative• Martin Creamer's Engineering News, 22-28 June: 24.

2001b: Smelter expansion approval delayed. Martin Creamer's Engineering News, 22-28 June: 26.

2001c: Much export potential for SA's a luminium products. Martin Creamer's Engineering News, 22-28 June: 28.

.2001d: Kudos for M'bique aluminium project• Martin Creamer's Engineering News, 24-30 August: 92

• 2001e:Aluminium's next challenge is to move downstream• Martin Creamer's Engineering News, 14-20 September: 16-17.

EIA (Environmental Impact Assessment), 2000a., Hillside Aluminium EIA: Scoping Phase: Social and Socio-economic Specialist Study• April 2000. Pre- pared by ACER Environment Management Consultants (appointed by CSIR Environmentek): Pretoria•

• 2000b., Hillside Aluminium EIA: Impact Assessment Phase: Social Impact Assessment• August 2000. Prepared by ACER Environment Man- agement Consultants (appointed by CSIR Environmentek): Pretoria.

• 2000c., Hillside Aluminium EIA: Macroeconomic Specialist Study• August 2000. Issued by Division of Water, Environment and Forestry Technology, CSIR: Pretoria.

• 2001d: Proposed Expansion of an Aluminium Smelter in Richards Bay, KwaZulu-Natal Province: Summary of Draft Environment Impact Re- port: Impact Assessment Phase. 25 October 2000. CSIR, ACER (Africa), Mayaka Greyling Mering (Pty) Ltd.: Pretoria.

Fatemi, A• S., no date: I n p u t - O u t p u t Economics (ar t ic le) , h t t p : / / www.fatemi, com.

Fitschen, A., 1998: The impact of the Saldanha Steel project on the West Coast Economy. Development Southern Africa, 15 (5): 771-785•

Financial Mail, 1994: Kwa-Zulu Natal Market ing Initiative: A Survey• Supplement to Financial Mail, October•

• 1997: Mozal: Alusaf presses 'go 'button for huge Maputo smelter• Financial Mail, 27 June.

• 1998: Billiton: giant projects heave out of the starting blocks• Financial Mail, June.

Economic Impacts of Resource-Based Industries 16 7

Gillis, M., 1981: The Effects of In-State Investment: Lessons from Oil-fired Development in Other Parts of the World. Paper prepared for the Per- manent Fund Trustees, HIID and Department of Economics• Harvard University: Cambridge, Massachusetts•

Hall, R V., 1998: Regional Institutional Structure and Industrial Strategy: Richards Bay and the Spatial Development Initiatives• Paper Presented at the ASCP Conference, Pasadena, California, 5-8 November 1998.

Heeks, R., 1998: Small enterprise development and the 'Dutch disease' in a small economy: the case of Brunei, IDPM Discussion Paper Series, Dis- cussion Paper 56• Ins t i tu te for Deve lopment Policy, Univers i ty of Manchester: Manchester.

Hillside Aluminium: http://www.hillside.co.za Hillside Aluminium, 2000: Employee Report, 1999. Billiton Hillside Alu-

minium: Richards Bay. Hillside News, 1999, ISC update, Hillside News, May/June, 11.

• 2000a: ZCBF: the purpose of the Foundation, Hillside News, May/ June, 8•

• 2000b: Study assistance update, Hillside News, Sept/Oct, 8• Hirsch, A. and S. Hanival, 1998: Industrial Restructuring in South Africa:

the Perspective from Government. Paper presented at the Trade and In- dustry Policy Secretariat (TIPS) 1998 Annual Forum, 20-22 September, Muldersdrift.

Jourdan, P•, 1992: Mineral Beneficiation: Some Reflections on the Potential for Resource-based Industrialisation in South Africa. Economic Trends Re- search Group, Working Paper No. 14. University of Cape Town School of Economics: Cape Town.

• 1994: South Africa's Mineral Beneficiation Industries and the Potential for Mineral-Based Industries. Unpubl ished Masters Thesis• University of the Witwatersrand: Johannesburg.

Lewis, D. and R. Bloch, 1998: SDI: infrastructure, agglomeration and the region in industrial policy• Development Southern Africa, 15 (5): 727-755.

Manning, C., J. Cronje, and E• Naude, 1998: The Richards Bay Spatial De- velopment Initiative (SDI). Development Bank of Southern Africa: Midrand.

Mining Weekly, 2000: Gilbertson in partnership mood, Mining Weekly, 29 September - 5 October, 2.

Mitchley, M., 2000: Billiton Hillside Atuminium. Powerpoint Presen- tation. Billiton Hillside Aluminium, 2 November.

Mthembu, T.M., 2000: Small, Medium and Micro Enterprise Programme: Opportunities for SMMEs. Unpublished Technical Report Presented to the Hillside Aluminium Smelter, 15th August•

Porter, M. E., 1990: The Competitive Advantage of Nations. MacMillan: Lon- don.

168 URBAN FORUM

Roemer, M., 1979: Resource-based industrialisation in the developing countries: a survey, Journal of Development Economics, 6, 163-202.

Rouvinen, P., 1996: Advantage Finland: The Future of Finnish Industries. The Research Institute of the Finnish Economy/The Finnish National Fund for research and Development (ETLA/SITRA): Helsinki.

Schneider. M., 2000a: Making more of it, The Richards Bay/Empangeni Investor's Report, The Richards Bay/Empangeni Spatial Development Initiative, The South African Report, Johannesburg: 17-19.

2000b: The bridge builders, The Richards Bay/Empangeni Investor's Report, The Richards Bay/Empangeni Spatial Development Initiative, The South African Report, Johannesburg: 20-21.

SundayTimes, 1999: New R2.4 bn plant a boost for local firms• Sunday Times, 11 July.

The Mercury, 2000: Investor confidence sparks growth. The Mercury, 21 November: 21.

The Star, 1996a: Iscor likely to approve R2bn titanium plant for Richards Bay. The Star, Business Report, 29 July.

• 1996b: Iscor favours Richards Bay for processing plant. The Star, Business Report, 3 September.

Todes, A. and A. Vaughan, 1999: Reasons for Growth and Investment in Particular Localities: Three Case Studies. Unpublished Research Report for the Department of Constitutional Development: Pretoria.

Van Seventer, D. E. N., 1999: The estimation of a system of provincial input-output tables for South Africa. Journal for Studies in Economics and Econometrics, 23 (2): 55-75.

Von Gordon, Z., 2000: Large Business Meets Small. PowerPoint Presenta- tion. Billiton Hillside Aluminium, 23 June.

Walker, M., 2001: Resource-based Industrialisation Strategies: A Compara- tive Analysis of the South African and International Experience. South African Geographical Journal, 83 (2): 93-104.

Yl~i-Anttila, P., 2000: Nokia and Oulo--Nat ional and Regional Growth Driv- ers in Finland. Paper presented at the seminarVerdiskaping kompetanse og innovasjon, mot en ny politick for nyskaping og n~eringsutvikling, Oslo, May 8 2000.

Zulu land Chamber of Business Founda t ion C o m m u n i t y Park: h t tp : / / www.zcbf.org.za/

Evaluating the economic impacts of resource-based industries: A case study of Billiton hillside...

Documents

Transcript of Evaluating the economic impacts of resource-based industries: A case study of Billiton hillside...