Loan sets KZN shipbuilding industry on course for recovery
June 22, 2008
By Wiseman Khuzwayo
Johannesburg - The order book of a once defunct firm will soon exceed R1 billion, thereby creating hundreds of new jobs, largely thanks to a relatively tiny injection of loan funding by the KwaZulu-Natal Growth Fund.
Since the R24 million loan was made two-and-a-half years ago, the once moribund Southern African Shipyards (SAS) has created 270 full-time jobs.
SAS, formerly Africa's largest ship builder, was shut down in 2003 due to a lull in demand for ships. But the KwaZulu-Natal department of finance and economic development decided in January 2006 to resurrect the province's shipbuilding industry.
The KwaZulu-Natal Growth Fund granted the loan, which is structured as a seven-year debt instrument, to acquire SAS to Ocean Masters Marine Services, a 47 percent black-owned and led company.
Since then the shipyard has secured a contract valued at R400 million to build five harbour tugs for state-owned rail and freight firm Transnet.
Ocean Masters says about 270 permanent jobs have been created as a result of the contract, while R200 million has so far been spent on local suppliers and sub-contractors.
And Prasheen Maharaj, the chief financial officer of Ocean Masters and SAS, says the firm's prospects remain positive. "Based on immediate contracts that are in the process of being finalised, we will see our order book swell to over R1 billion and direct permanent employment levels increasing to 450 employees."
Tomorrow vice-admiral Johannes Mudimu, the chief of the South African navy, will visit SAS to establish its technical ability to build new vessels for the navy. He will engage with SAS management on its capacity and willingness to build ships beyond the country.
He will be accompanied by KwaZulu-Natal MEC for finance and economic development Zweli Mkhize and five senior admirals. The visit to the shipyard in Bayhead at Durban port is part of Mudimu's worldwide fact-finding tour of shipyards.
Explaining the rationale behind financing the deal from the growth fund, Mkhize said: "Shipbuilding is very labour intensive. It has an employment multiplier effect of seven. The industry beneficiates thousands of tons of locally produced steel and creates a wide range of downstream opportunities."
The growth fund targets infrastructure to draw private sector investment into the province. It focuses on tourism routes, provision of bulk water supply, transport and logistics for commercial and industrial nodes, as well as sector-specific infrastructure projects.
One requirement for funding is that a project should be labour intensive.
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