SUREN NAIDOO: Hello, this is The Property Pod with Moneyweb. My name is Suren Naidoo and I’ve been covering the broader South African property industry for over 15 years.
In this episode, I speak to Hamish Erskine, CEO of Dube TradePort Special Economic Zone [SEZ], which is the KwaZulu-Natal [KZN] government state-owned enterprise that is driving the aerotropolis or airport city development around Durban’s King Shaka International Airport. Dube TradePort is now one of the biggest single landholders in KZN and probably South Africa. The aerotropolis is a long-term master plan development.
Today we are speaking to Hamish about industrial and commercial property development at the SEZ. Welcome, Hamish.
HAMISH ERSKINE: Good morning Suren. Lovely to be on the programme.
SUREN NAIDOO: Thank you. Before we get into the latest developments on the industrial and commercial property side, tell us about the size of your land parcel in KZN. I know Dube TradePort had quite a big chunk of land when King Shaka was built back in 2010.
HAMISH ERSKINE: The original masterplan area that we started with was a 2 000ha site. We needed to split that site up to accommodate the King Shaka International Airport which was being built by Acsa [Airports Company South Africa]. That took up roughly 800ha of that original site, and we then also had to put aside quite significant hectarage at the time for environmental offsets. So we started originally for our primary developments on about a 600ha platform.
Since then, from 2012 onwards, we’ve systematically acquired portions of land to the south, north and west of us, which has now brought our total land holdings surrounding the area to just under 4 000ha since 2015.
We’ve also been given the mandate to expand to the south of Durban to provide an automotive supplier park to the Toyota plant and to future automotive investments. We acquired a further 1 000ha from the Illovo area, south of Amanzimtoti in 2015, so our total holdings have grown significantly in the last five years or so.
SUREN NAIDOO: That’s massive, Hamish. The [Durban] South Coast development is a separate story on its own. We are going to zone in on Dube TradePort. How much land has been developed and what sort of investment have we seen from a property side?
HAMISH ERSKINE: Primarily we focused on three zones at Dube TradePort to ensure that what we did was establish a footprint and our value proposition as a property development in the zone. So our three zones are Dube City, which is obviously high density, so very high bulk square meterage but on a smaller footprint. That at the moment sits on a 12ha footprint.
And then to the north of the site we have our first industrial platform; that is 26ha. And that is what’s known as TradeZone 1. Then to the west of our site, we have an 80ha platform, which is the AgriZone, which is a high intensity agri-zone area, mainly 16ha of glass house and a number of packing facilities and support facilities, laboratories, and support buildings.
But our primary focus has been getting our industrial and logistics facilities up and running. And that has been TradeZone 1, which is 26ha.
SUREN NAIDOO: On that note, on the commercial and industrial side, one of the biggest property investors in Dube TradePort is Shree Property Holdings, which is a private Durban-based company. How many warehouses and factories have been built there? I’m talking about factory buildings because I understand a lot of those buildings are owned or leased by Shree. But your investors that you’re luring into the SEZ, such as Samsung and Tufbag, are located within those buildings or some of those buildings.
HAMISH ERSKINE: Correct. Maybe just to touch on our business model as Dube TradePort: our primary function is to open up and support – operationally and with infrastructure – industrial land; serviced industrial sites. So we take care of things like the zoning, the provision of the infrastructure, the earthworks, the bulks and the operations of the zone; so security, all the SEZ benefits, regulations. And obviously we want to then optimise them. The investment government makes by opening up that space for the private sector is to also take risk and to invest within the zone so that there is a balance between public and private investment.
Shree Property was our first major investor that came into the zone. They were well established in the greater Durban area at that stage, and they took a very significant portion of our first phase in 2012, and have subsequently developed, as you say, a large number of properties. Their portfolio currently covers, as you rightly said, Samsung, Mahindra – which is where we assemble the pickup trucks – YOA, which is an optic fibre operation, Tufbag and a number of others; SA Health is one of their tenants. So they have a very significant landholding.
Off the back of that, we then got a number of other private sector investors that similarly saw the opportunity and entered into land leases with us and have developed buildings to house companies such as Conlog, Mara Phones, DB Schenker and iDube Cold Storage. So we’ve got that momentum created by Shree Property.
The first investment has certainly supported us being able to attract investors in, because obviously the private sector developers come in and can more cost effectively put up buildings and obviously provide ready-made spaces. It makes certainly our job in terms of bringing new investment into the zone more complementary to that. It’s a model that has certainly worked well in TradeZone 1.
SUREN NAIDOO: In terms of total, including the property investment as well as the investment from the likes of Samsung and the companies that have factories and manufacturing plants around the airport – all part of the SEZ – what’s the total investment that’s already come in there?
HAMISH ERSKINE: In total, we’ve achieved just under R3 billion worth of investment in TradeZone 1 – largely in manufacturing with some degree of logistics. So that has been a very positive signal for us in terms of what we’re trying to achieve with our SEZ mandate, which has a very strong focus on manufacturing.
SUREN NAIDOO: Hamish, all this development has pretty much been in TradeZone 1 at Dube TradePort [DTP]. Tell us about the newly launched TradeZone 2, which is the big news out of DTP at the moment, and it’s coming to market. You are marketing it now with the land leases up for further opportunities and investment.
HAMISH ERSKINE: TradeZone 2 is coming a little later than we would have hoped for. There were some delays, but those have now all been put behind us. TradeZone 2 – the nice thing about developing a project in phases is you learn a lot, especially when your first Phase 1 runs over a period of six or seven years as ours has. You learn obviously a lot about the market and the kind of things that work and what doesn’t work. But we were also able to refine our mandate and our focus quite significantly in that time.
So TradeZone 2 is a platform directly parallel and adjacent to TradeZone 1. It is twice the size of TradeZone 1. We are building it for growth.
We are building it [TradeZone 2] to accommodate significantly more investment than we achieved in TradeZone 1.
To give you a sense, it’s over 45ha of fully level, flat, fully-serviced sites, secure and zoned for a special economic zone. But because it’s at the very heart of our precinct and at the core of our land holdings, it’s a unique site in that it’s very hard to ever replicate it locationally and in terms of its proximity to infrastructure – so its proximity to the cargo terminal, for example, the access via the N2, via our link road that was completed a few years ago.
It’s a unique precinct. We are bringing it into focus as very much a priority manufacturing zone, high-value manufacturing, because we want to bring in the investments that have the maximum amount of long-term impact and value to that site.
And then we’ll open up secondary sites at other portions of our land that are more linked to some of the secondary and support-type activities, so that we are able to optimise the TradeZone 2 site for manufacturing, primarily in the electronics – obviously we’ve got a strong footprint in electronics – but increasingly pharmaceutical, healthcare, telecommunications, tyre manufacturing. And we have a series of those investments which we’re currently assessing for location in TradeZone 2.
SUREN NAIDOO: My final question, Hamish. With all the land that Dube TradePort has, what will be the next big thing there? I know you are focusing on TradeZone 2. You also have been talking to Tongaat Hulett about possible joint-venture developments, and you did mention also the acquisition of land in our first question, for which a lot came from Tongaat Hulett itself.
HAMISH ERSKINE: Suren, I think that’s an excellent question because we almost have two joint mandates. As you mentioned, I think in your introduction, we are also developing and have the mandate to implement the aerotropolis in this region with the (KZN) Department of Economic Development and Provincial Government.
The aerotropolis has been the masterplan for a much wider area than just our land holdings and our core investments.
It’s a very large radius that runs basically from the Cornubia side all the way through to the Ballito side, and then obviously east and west of that up towards Ndwedwe. And there you’ve got multiple land uses that have been incorporated into that masterplan – residential, recreational, commercial, industrial – and obviously driven very much by transportation spines and corridors. So it’s a much bigger investment that requires a lot more players to be involved to really see to the vision.
So, our focus has been a dual focus. One is to obviously get the core of Dube TradePort really functioning and operational and adding the kind of value that it needs to add so that it can accelerate and create a driver for the aerotropolis. What has been very encouraging is we’ve seen the result of that. We’ve had a private developer on our western boundary; Whetstone Developments [Whetstone Business Park] are undertaking a R2 billion industrial platform at the moment. Phase 1 is well advanced. They have secured a number of major investors there, and they’re moving on to Phase 2. That’s being done within the context of our overall aerotropolis master plan.
So the next big things we’re looking at are how we unlock affordable residential, how we unlock the core transportation road infrastructure, and the longer-term rail linkages and rail infrastructure, both in terms of passenger and logistics, cargo operations … We continually have our eye on that broader mandate. In terms of our landholdings we’ve master-planned them.
From TradeZone 2 we have TradeZones 3, 4 and 5. Some occur to the south of our boundary, some on the west of our boundary. But all of it is being undertaken in the context of an already-approved aerotropolis masterplan.
So, I guess the big story coming out will be the rolling out of the aerotropolis and ensuring that we maintain momentum going forward.
SUREN NAIDOO: Thank you so much for your time, Hamish. That was Hamish Erskine, CEO of Dube TradePort Special Economic Zone.