UNDP moves to scrap support for ‘risky’ R165bn Limpopo heavy industry zone

An artist’s impression of part of the proposed MMSEZ project. (Photo: MMSEZ website)

By Tony Carnie

25 Feb 2024

A United Nations internal watchdog unit has advised its biggest development aid agency to scrap an agreement backing the development of a R165-billion heavy industry zone in Limpopo. Citing the risk of significant reputational harm to the United Nations Development Programme (UNDP), the agency’s New York-based Social and Environmental Compliance Unit (SECU) has recommended the immediate cancellation of an agreement signed two years ago to support the controversial Musina-Makhado Special Economic Zone (MMSEZ).

The project, driven by the state-owned Limpopo Economic Development Agency (LEDA), was initially touted as a R165-billion scheme supported by a consortium of Chinese investors. It would entail building a major 8,000ha heavy industry hub roughly halfway between the towns of Musina and Makhado next to the coal- and mineral-rich Soutpansberg region.

Map of boundaries of the proposed MMSEZ in Limpopo A map showing the boundaries of the proposed MMSEZ. (Photo: MMSEZ environmental impact report)

It would feature up to 20 new industrial projects clustered together in a single tax- and duty-free zone. This would include a new iron and steel plant, a ferrochrome plant, a chrome plating plant; an agro-chemical and petrochemical manufacturing plant; mineral beneficiation; a new Smart City and a logistics cluster projected to attract foreign direct investment. It would apparently create between 21,000 to 53,000 jobs.

However, the project has drawn strong criticism from several quarters for a variety of reasons – including concerns about massive water demands from heavy industry in a water-scarce region; soaring greenhouse gas emissions; pollution; degradation of eco-tourism in Limpopo; and frustrating the access rights of communities who won a land claim around the project site.

Several civil society groups are also contesting the legality of the project in three separate cases currently before courts in Pretoria and Polokwane.

Nevertheless, in March 2022, the South African office of the UNDP – the UN’s largest development aid agency, with offices in more than 170 countries – lent its official backing to the MMSEZ plan when it signed a non-binding memorandum of agreement (MOU). This promised technical backing and expertise along with other unspecified forms of support to foreign investors.

The wording of the MOU indicated that this was the foundation for a more formal partnership in the future, and internal correspondence suggested that the country office “was also considering how the funding for the action plan would be raised”.

Objections lodged

UNDP's Ayodele Odusola and MMSEZ's Lehlogonolo Masoga; Limpopo From left: Dr Ayodele Odusola, the UNDP’s former representative in South Africa, and Lehlogonolo Masoga, MMSEZ chief executive, sign the MOU in March 2022. (Photo: UNDP/MMSEZ press announcement)

The agreement was signed by the UNDP’s South Africa representative Dr Ayodele Odusola, who was re-deployed to the agency’s Harare office four months ago.

Now, following a formal objection lodged more than a year ago by social and environmental groups Living Limpopo and Earthlife Africa, the UNDP’s endorsement is set to be cancelled.

In a 29-page final draft investigation report, which came to light at the weekend, the SECU formally recommended that UNDP pull the plug on supporting such a “high risk” project as no due diligence was conducted, as required by UNDP policy.

“The fact that the signing of the MOU resulted in UNDP being publicly identified as a partner means that the mere existence of the signed MOU had significance for (the Limpopo Economic Development Agency). This in turn exposed UNDP to whatever reputational risks may arise from being associated with a company, whose project (pursuant to the applicable policies) the UNDP considers to be high risk.”

Hailing the SECU decision as a significant victory, Living Limpopo spokesperson Lauren Liebenberg said: “The MMSEZ is an environmental and economic Chernobyl, and we are gratified that our objections to its endorsement by the UNDP in this manner has been upheld. We look forward to entering into a constructive dialogue with the UNDP on the alternative, nature-based economic development plan Vhembe Biosphere Reserve for which Living Limpopo advocates.”

https://www.dailymaverick.co.za/article/2021-05-25-killing-the-holy-ghost-inside-the-unlawful-bid-for-environmental-approval-of-the-musina-makhado-sez/

Robert Krause, a researcher at the Centre for Applied Legal Studies, suggested that the Limpopo heavy industry cluster also posed “a grave threat” to communities’ livelihoods and their way of life, water security, biodiversity and the prevention of runaway climate change.

“The UNDP and all decision-makers now have a new opportunity to meaningfully consult communities and other stakeholders on how to chart a people-centred development path that brings much-needed broad-based prosperity while conserving this irreplaceable landscape.”

A spokesperson for the UNDP’s Pretoria office confirmed that the SECU report was received on February 21, stating: “We are reviewing the interim findings; we look forward to the final report and recommendations.

“UNDP’s Social and Environmental Standards (SES) are a mandatory requirement for all parts of the organisation – in all programmes and projects – as part of UNDP’s quality assurance and risk management process. The Social and Environmental Compliance Unit (SECU) was established to ensure accountability to individuals and communities we work with. It is important that their voices are heard, and gives UNDP the opportunity to respond to the issues that they raised.”

Senior MMSEZ officials, however, have not responded to requests for comment sent on Friday morning, February 23.

‘Using’ the UNDP

Limpopo MMSEZ project An artist’s impression of part of the proposed MMSEZ project in Limpopo. (Photo: MMSEZ website)

The SECU report notes that the Limpopo government agency sought a written agreement with UNDP “precisely because it believed that engaging with the [UNDP] would help it deal with the challenges that it faced in its relations with outside stakeholders, who were concerned about the potential adverse social and environmental impacts of the project”.

In other words, the Limpopo agency appeared to be “using” UNDP to help it resolve problems with local stakeholders opposed to the project, by listing the UN aid agency as a strategic partner.

“Given that one of UNDP’s strongest assets is its good name and high reputation, the potential costs of exposing itself to reputational risk without proper due diligence are considerable,” the SECU report warns.

SECU stressed that it had not investigated the merits or specific risks of the MMSEZ project. Instead, the eight-month investigation focused solely on whether its South African office had complied with all the applicable UNDP policies and procedures.

It notes that the UNDP has two distinctly different templates for entering into MOUs – one for the private sector and one for governments/state-owned entities. In the case of MMSEZ, the UN country office erroneously signed a less onerous government template.

“The private sector template has provisions dealing with publicity, the use of the UNDP emblem and reputational risk. Had the country office used the private sector template it would have been prompted to seek representations from [LEDA] to assure itself of certain facts before entering into the MOU.

Carbon emissions

“The potential “vast scale use of coal” was one of the many risks flagged by Living Limpopo and Earthlife Africa, who argued that the MMSEZ project was expected to generate nearly 1 billion tonnes of carbon dioxide equivalent emissions over the lifetime of the project – and would therefore consume between 10% to 24% of the country’s carbon emission budget.

This was disputed by the UNDP’s Odusola, who said in July 2022 that MMSEZ had provided assurances that it had “jettisoned” plans for a coal-fired power plant in favour of a renewable energy project.

https://www.dailymaverick.co.za/article/2020-11-19-how-the-musina-makhado-sez-will-parch-the-people-of-zimbabwe/

The SECU report further notes that project documents make it clear that the Limpopo heavy industry plan would be very water-intensive, mainly drawing from the Limpopo River.

“The complainants are concerned that this water will go to the project at the expense of the resiliency of the Limpopo River basin system and all those who depend on it. In other words, they are worried that the project will take the water that they currently depend on for its own purposes, thereby threatening their ability to access enough water for their farms, households and other needs.”

A further risk factor involved potential human rights violations against the Mulambwane community, who were forcibly evicted from their land during the apartheid era.

“Following the advent of democracy in South Africa, the Mulambwane filed a land claim seeking to regain access to their land. Their claim was successful, and they were authorised to take possession of their land again. However, since their legal victory, they have not been able to reclaim their land. This land has now become part of the land that the state has designated for the MMSEZ, further complicating the resolution of this issue.”

As a result, the compliance unit now recommends that UNDP’s South African office should “withdraw” from the MOU.

It said that if LEDA wished to continue its relationship with the UNDP, the parties would need to prepare a new MOU using the correct private sector template, and the UNDP would also need to complete the necessary due diligence “including the necessary consultations with the appropriate offices in the UNDP hierarchy, before signing a new MOU”. DM

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Objections lodged

‘Using’ the UNDP

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