‘New York of Africa’ coming soon
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Johannesburg - Explosives and chemicals firm AECI had given preference to Chinese land developers in the sale of a 1 600 hectare site as they could buy a larger portion of its Modderfontein property with more than R1 billion up front, chief financial officer Mark Kathan said yesterday.
Kathan said that local buyers “never made firm offers” and only expressed interest to buy small pieces of the 1 600ha of undeveloped land which is managed by AECI’s Heartland subsidiary.
Hong Kong Stock Exchange-listed Shanghai Zendai Property will develop the mixed-use site over a period of 10 years and has expressed an interest in collaborating with local developers on projects.
Shanghai Zendai planned to transform the Modderfontein property, in eastern Johannesburg, into a “New York of Africa” with investments of R80bn over the next 15 years, chairman Dai Zhikang said.
The company will build a financial hub, 35 000 houses, an educational centre and a sport stadium. The site was home to an explosives factory that opened in 1896 to support the gold mining industry. It included a wetlands area that would be protected, and could be the equivalent of Central Park in New York, Dai said.
“It will become the future capital of the whole of Africa,” Dai said. “This will be on par with cities like New York in America or Hong Kong in the Far East.”
According to the company’s local legal adviser, Edward Nathan Sonnebergs (ENS), the development will include an African heritage theme park and a convention centre.
However, ENS Africa said: “No plans have been approved yet as the deal was conditional on contractual undertakings in the following months on behalf of both the buyer and the seller.”
The development, which is yet to be named, would become a hub for Chinese firms investing in sub-Saharan Africa, Dai said. The deal is set to create nearly 22 000 jobs over the next 10 years, 65 percent of which will be semi-skilled and unskilled. The firm estimates direct and indirect benefits for the economy will total R14bn over the same period.
AECI chief executive Mark Dytor said: “The problem is in the South African economy, there are not many guys that can come with that much money up front, knowing it would take such a long time to develop and to get the returns – so this was ideal for us.”
He said the sale of this large tract of land would help AECI focus on its core strategy, which was mainly specialty chemicals and explosives. “The land business has never been a competence of ours because what we really do is open up the land but we never build top structures on the land.”
Kathan said that the company was looking for a way to exit the property in a clear way and this deal would enable such a move.
As the property is largely undeveloped, Shanghai Zendai will still need to add roads, electricity and other infrastructure. AECI will give the Chinese company a 15 percent discount for providing cash upfront.
Dytor said the company had about four years to transfer the land to the developers and would receive the whole amount around July 2014 subject to AECI delivering the first tranche of land.
Other conditions precedent to the land deal are the approval from Shanghai Zendai’s headquarters and the Competition Commission.
The land that will be transferred to Shanghai Zendai includes Longlake, Westlake and a “farm portion”, the largest of which is Modderfontein North. The mixed-use site includes portions that are zoned commercial, residential and retail.
The other portions of the Modderfontein development include the existing Greenstone shopping centre and some commercial, recreational and residential features.
About 1 200ha of the Modderfontein property is still available for sale or to extend AECI’s footprint.
Shanghai Zendai has developed as many as 12 properties in China and most recently in New Zealand. Dai said Modderfontein was identified due to its size and strategic locality in the development corridor between OR Tambo International Airport and the Sandton central business district. He said it was a stepping stone for the company should it choose to grow its footprint in South Africa and the rest of Africa.
The sale of Modderfontein is AECI’s largest single land deal .
Kathan added that the sale of some of the company’s Milnerton property in Cape Town in 2006 was another significant transaction totalling R260 million, but “it certainly was not of this magnitude”.
AECI management had not yet decided how to spend the cash from the deal, but said acquisitions and expansions could be on the cards.
Dytor said the explosives business would be pushed into international markets, with a particular focus on Africa.
AECI’s interim results to June showed a 13 percent rise in revenue to R7.2bn after a good performance from its explosives unit. It rose 2.07 percent to R123.50 on the JSE yesterday. - Business Report. Additional reporting by Bloomberg.