A recent analysis conducted by KPMG to determine the economic and financial viability of the Cornubia development north of Durban shows that it holds unquestionable benefit to the city, its people and the economy.
The proposed mixed-use development has been earmarked as a strategic project that will have a significant impact on the social, economic and industrial prospects of the region. These prospects have now been quantified following the cost benefit and macroeconomic impact analysis conducted by the accounting and auditing firm.
Appointed by the eThekwini Municipality, KPMG was tasked with determining if the project represents a sound investment or decision, as well as providing a basis for comparing projects on the basis of their costs relative to their benefits.
The Cornubia analysis indicates an overwhelmingly positive outcome from the development for the eThekwini Municipality, local communities, and the regional and provincial economies.
“As important as the economic and financial considerations are, the Cornubia development is regarded as a catalytic intervention undertaken jointly by the eThekwini Municipality and Tongaat Hulett Developments to establish the first fully integrated human settlement in the country,” states Denny Thaver, Project Manager at eThekwini Municipality.
The development has a large impact on job creation in eThekwini during both the construction and operational phases. In the long term, nearly 285 000 new employment opportunities will be created due to the commercial activities associated with Cornubia, representing a healthy 12% of total employment in the province. This will be achieved through 39 000 direct jobs, 144 000 indirect jobs, and an additional 45 000 jobs in the rest of the province, as well as 54 000 jobs resulting from the economic impact of salaries and wages paid to employees at the development.
These jobs exclude the 250 000 employment opportunities expected to be created during the construction phase of Cornubia, representing 20% of the total employment in eThekwini (over a 20-year period). This phase of the project will pump as much as R700 million into lower income households through job creation opportunities, which nearly doubles to R1,3 billion in income for these households during the operational phase of the development.
The construction phase alone will also contribute roughly R8,5 billion to the economy of eThekwini, representing 4% of the local economy’s GDP. Once operational, Cornubia will contribute approximately R3,3 billion directly to the local economy, with the provincial GDP being boosted by an estimated R1,2 billion.
“Over the 20-year period the Cornubia project will not only change the economic landscape of the city, but will deliver significant socio-economic benefits to the region, province and national economy,” comments Karen Petersen, Development Director at Tongaat Hulett Developments. “The target, as set out in the National Development Plan is to increase South Africa’s economic growth to 5,4% on average in real terms by 2030. The total impact of the Cornubia development will contribute about 10% (i.e. R3,3 billion) to eThekwini’s GDP, and 5% to the provincial economy’s GDP of R22,9 billion (with Tongaat Hulett Developments creating the largest impact by contributing R9,4 billion to both the local and provincial economy’s GDPs). Nationally, the Cornubia development will contribute 2% (R50,4 billion) to the South African GDP.”
The development will contribute to poverty alleviation through its impact on household income. The social accounting matrix indicated that through downstream generation of income, households in the eThekwini municipality will receive about R8,9billion, R1,4billion of which will be received by lower income households alone.
The analysis by KPMG also shows that the eThekwini Municipality’s investment in this 1 200ha development is not only sound, but is a financially prudent initiative that will change the face of the region.
This conclusion is drawn from the cost-benefit analysis, which shows that the municipality alone stands to benefit to the tune of more than R4 billion as a result of the Cornubia development. The regional council’s internal rate of return – which measures the profitability of an investment – is 31% (three times the discount rate of 11%), which demonstrates the strong financial justification for undertaking the development.
“Apart from the direct economic stimulus provided by the Cornubia development, the social impact from the construction of affordable, subsidised and public sector housing units will go a long way to improving the quality of living for local residents. Coupled with the job opportunities that are being created, the overall impact on the prospects and attractiveness of eThekwini will be significantly improved,” concludes Denny Thaver.