AfDB Approves €150 Million Loan to Kalagadi Industrial and beneficiation project in South Africa

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Tunis, 18 May 2011 - The Board of Directors of the African Development Bank (AfDB) Group through its private sector window approved on Wednesday, a €150-million senior loan to finance the Kalagadi manganese mining project; the Bank’s first mining beneficiation and industrial project in South Africa.

The project involves mining of manganese, processing of the ore into sinter and smelting of the sinter into alloy. The mining and processing operations are located in South Africa’s Northern Cape Province, while the smelting operations take place in the Eastern Cape Province. Total sinter production is expected to be 2.4 million tons per annum; of which 1.7 million tons will be exported while 0.7million tons will go to the smelter plant in Eastern Cape. The total ore resource estimate is 100 million tons of which 44 million tons have been converted into reserves.

From a socio-economic perspective, the investment will contribute positively to job creation, enhancement of the living conditions of people in the surrounding communities, income generation, poverty alleviation, and skills transfer.

In addition to the fact that Kalagadi beneficiation project will help revive mining activities in the Northern Cape, which is relatively underdeveloped despite holding about 80% of world manganese resources, the project will provide significant economic benefits to both provinces considered to be the poorest in the country by providing long-term employment and income generation activities..

The project will create in excess of 1,000 direct jobs and 19,767 indirect jobs in both provinces. At least 40% historically-disadvantaged South Africans will occupy various management-levels positions, and 30% of women will play core mining roles. Furthermore, household income is estimated to increase by ZAR767 million in Northern Cape and ZAR865 million in Eastern Cape. In the broader economy, as a result of the project, household income will increase by ZAR3.2 billion, and government tax revenue boosted by ZAR6.24 billion.

As one of the largest non-public, non-financial intermediation interventions in the country, the project is expected to have a very positive demonstration effect in South Africa and will represent a concrete example of a successful, integrated investment in the country. The project will encourage women entrepreneurship and indigenous businesses participation in the mainstream of the economy. With the Northern Cape being rich in manganese, an investment of this magnitude and the development of associated infrastructure will likely bring in new investments in the sector.

In line with Pillar I of South Africa Country Strategy Paper 2008–2012, this project supports the Bank’s focus on enhancing private sector competitiveness. The project is also in line with the Bank’s policy to support gender equality, women empowerment, development of women businesses and entrepreneurs.

Finally, the project is directly aligned with government’s goal to drive resource sector growth by focusing on local beneficiation.

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