De Aar Logistics Hub
De Aar is strategically located in the centre of South Africa. It is a major rail junction at the intersection of the Cape Corridor (Johannesburg to Cape Town), the Namibian corridor (Gauteng to Namibia) and provides a link to the three ports of the Eastern Cape. The N10 road highway (Port Elizabeth outskirts to Upington) passes through the town.
There are inefficiencies in the transport sector which restrict economic growth and job creation because over 80% of freight in South Africa is moved via road. The result of this is poor road conditions which have an impact on product quality, product losses and substantial expenditure towards vehicle maintenance and related costs. The result is increased operational expenditure for miners and farmers.
The Northern Cape is a major exporter of table grapes, fruit and meat and is responsible for much of the cattle, sheep and goat farming in the country. Long distances and poor access to markets and storage facilities are limiting profitability for farmers. Small-scale and emerging farmers are excluded from exporting due to the lack of critical mass and other dynamics such as access to markets and financial resources.
The mining sector has expressed similar concerns. Approximately 60% of the commodities from three large producers (BHP, Kumba and Assmang) is already moved from Hotazel by rail through the province via De Aar or Bloemfontein to Port Elizabeth. Various other commodities are moved via rail through the town of De Aar, of which the most notable are cement from Ulco (domestic market), coal and lime, and containers holding general cargo and automotive components.
Train drivers and locomotives are changed in De Aar, which supports the concept of De Aar becoming a consolidation point for freight to ensure migration from road to rail due to its location and connectivity.
The De Aar Logistics Hub serves as the first step for the long-term solution sought by the Northern Cape Department of Transport, Safety and Liaison (NCDTSL) to optimise the freight strategy and logistic functions of the province.
The project entails construction of an inland intermodal system comprising a container terminal, a vehicle parking terminal, and a warehouse/cold room terminal. Once completed it is envisaged that De Aar Rail Freight Intermodal Terminal will be an internationally accessible trade free zone, with facilities that can handle intermodal operations, warehousing, logistical services and a rail cargo-carrying service.
The long-term goal is to provide a sustainable transport network for the transportation of freight/ commodities by miners and farmers using the hub as a central storage facility that can be redistributed to its destination via rail. The immediate plan is to develop SMMEs that will benefit from the hub’s key facilities such as the storage, food-processing plant and a multi-purpose container depot. Local SMMEs will participate in an enterprise development and incubation programme that will prepare them to play an integral part in provid-ing core services.
The project has the potential to add R1.7-billion to local economic development in the Pixley ka Seme District and to create 2 475 temporary and full-time jobs.
The Northern Cape Department of Transport, Safety and Liaison appointed a team of specialist advisors to embark on Transactional Advisory (TA) Services, spearheaded by the TM/Nelutha Consulting Joint Venture to determine project feasibility and to develop the De Aar Logistics Hub business case. This project will be structured as a Public Private Partnership (PPP) and by using the PPP model in terms of Treasury Regulation 16 issued to the Public Finance Management Act (PFMA) No 1 of 1999.
Total development costs are estimated at around R780-million, excluding borrowing costs during construction. This will be expended in building the car parking terminal, container terminal and the cold-room warehouse.
Development of the project is estimated at 24 months. The proposed funding structure entails a cash equity injection of 15% and the balance being funded through senior and subordinated loans.
Potential commodity mix
The Northern Cape has many commodities that can be traded and transported via the De Aar Logistics Hub, which could serve as a catalyst for local and regional economic development (see table above).