Appendix B 3

APPENDIX B-3
Economic Impact Report

AMAHLATHI
PETRO PARK
Market Feasibility
and
Economic Impact
Assessment
Final Report
December 2008
The information contained in this report has been
compiled with the utmost care and accuracy within
the parameters specified in this document. Any
decisions based on the contents of this report are
however the sole responsibility of the decision-
maker.
49 Parliament Street
Central
Port Elizabeth
6001
Tel: (041) 585 6640
Fax: (041) 585 6151
Amahlathi Petro Park
Market Feasibility Study
December 2008
Executive Summary
The purpose of this project is to investigate the feasibility of establishing a Petro-

Park complex in the town of Stutterheim which lies within the Amahlathi Local
Municipality in the Eastern Cape and to determine the economic impact of such as
development. Amahlathi Petro Park is anticipated to encompass the development
of a filling station combined with retail and tourism, arts and crafts centre.
The Petro Park is anticipated to play a role in marketing and linking planned
developments in the area for instance by raising awareness of transient market
moving through the town about the cultural precinct in Mlungisi commercial
community park as well as displaying local craft and wood work produced by the
Woodhouse facility. A tourism information office within the Petro Park will be used
to market the eScape route (a variety of tourism products) in Stutterheim and its
surrounds.
Local policies and strategies acknowledge the potential for a PetroPark in

Stutterheim, which can contribute to achieving Amahlathis tourism objectives
and promoting Stutterheim as a key growth node in the N6 corridor.
1. Filling Station Feasibility
There are currently three petrol stations in Stutterheim. The three existing
stations are small with limited amenities. Only one of the existing stations pumps
fuel 24 hours a day, which may in part explain why this station sells more fuel
than the other two stations. Stutterheim Garage and Bloms Motors generate 50-
60% of their profit from workshops that are at the filling stations and therefore
are not solely dependent on fuel sales. None of the 3 stations are currently
pumping at full capacity.
The three stations in Stutterheim are considered small when viewed in the
context of an average South African station. According to research conducted with
various fuel companies a small urban filling station in a city should pump in
excess of 350,000 litres per month to be viable. The current supply of fuel in
Stutterheim as a whole is 552,600 litres per month.
Table 1.1 illustrates the total demand for fuel in Stutterheim.
Table 1.1: Total Demand for Fuel in Stutterheim

Type of Demand Litres
Local Demand 137,415
Transient Demand 547,338
Total Demand 684,753
It is clear that the highest demand is generated by the transient market.

Interviews conducted with the existing filling stations confirmed that a large
portion of their sales comes from the transient market (light vehicles). It should
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December 2008
be noted that Stutterheim currently does not capture the heavy vehicle market
effectively as the existing stations are not large enough to accommodate these
vehicles.
Table 1.2 illustrates the net effective demand for fuel in Stutterheim, based on
the analysis presented in this chapter.
Table 1.2: Total Net Effective Demand for Fuel in Stutterheim (Litres)
Total fuel demand 684,753
Total current fuel supply 552,600
Net effective demand 132,152
Based on the analysis and modelling conducted, there is additional demand for
132,152 litres of fuel per month in Stutterheim, which is currently not serviced by
the existing stations. However, the supply figure of 552,600 can also be viewed
as an alternative demand figure if one assumes that the petrol stations pump
as much fuel as is demanded. Currently the stations only pump 552,600 litres
because only 552,600 are demanded. If demand were to increase then the petrol
stations would have the capacity to meet this simply by requesting additional fuel
deliveries per month. For this reason, demand for fuel in Stutterheim is likely to
fall somewhere between 0 litres to 132,152 litres per month.
There are four important reasons why demand for fuel in Stutterheim is relatively
low, namely: the local consumer market is small and has a relatively low
purchasing power, many large local businesses have their own petrol pumps on
site, there is a high level of income leakage out of Stutterheim (only 35% of local
residents indicated that they buy fuel in Stutterheim) and Stutterheim is too close
to East London to attract the transient market, which generally fills up in East
London or Queenstown.
Interviews with international fuel companies showed that Stutterheim is not

considered to be a Capital Expenditure Injection Area, which means they are not
certain a new station will be feasible. Interviews with trucking and bus companies
highlighted the fact Stutterheim is too close to East London, which is the regions
main point of departure/ destination. Many companies indicated they would not
purchase fuel in Stutterheim even if a new station were built.
At present there is insufficient demand for a new filling station in Stutterheim

based new growth in the area. If a new filling station is built in Stutterheim it
would be dependent on capturing a significant market share from the existing
filling stations in town, potentially to the detriment of the existing filling stations.
This situation may change in future, depending on the rate at which Stutterheim
grows.
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December 2008
2. Retail Feasibility
There is an estimated 6,820m2 supply of retail Gross Leaseable Area (GLA) in

Stutterheim at present. The size and type of retail available in Stutterheim is
indicative of the consumer market profile in the area, namely a small market with
limited spending power.
Retail demand is a function of population size, household income and retail

expenditure patterns of the current consumer market in Stutterheim. The retail
demand estimations provide for leakage (retail expenditure flowing out of
Stutterheim) and injection (retail expenditure flowing into Stutterheim) factors.
Table 1.3 shows the total demand for retail space in Stutterheim, based on the
demand modelling conducted.
Table 1.3: Retail Floor Space Demand

2008 (m2GLA) 2010 (m2GLA) 2012 (m2GLA)
8,559 m2 9,868 m2 11,378 m2
There are relatively high levels of retail expenditure leakage out of Stutterheim
because of its close proximity to King Williams Town, East London and
Queenstown where there is more retail variety and much larger retail centres.
Table 1.4 shows the net effective demand for Stutterheim for the years 2008,
2010 and 2012.
Table 1.4: Net Effective Retail Demand

NED 2008 (m2GLA) NED 2010 (m2GLA) NED 2012 (m2GLA)
1,739 3,048 4,558
The modeling results show that there is an undersupply of retail space in

Stutterheim at present, equaling 1,739m2 in 2008. This undersupply is estimated
to increase to 4,558m2 by 2012.
It is recommended that the first phase of retail development comprise of 1,900m2

GLA (i.e. a local convenience centre), with additional space for a tourism
information office and arts and crafts shop. It is recognised that additional retail
space may be required in future and the detailed design of the facility should take
future expansion into account.
3. Economic Impact Assessment
From the market feasibility study, the proposed Amahlathi Petro Park
development is proposed as a mixed use development mainly comprising of a
filling station, retail and tourism with arts and crafts centre. The preliminary
design of the development encompasses:
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December 2008
Land Use Activity Approximate Size

Retail and Tourism Centre
Retail centre, including a sit-down restaurant 1,900m2
Tourism Office and arts and crafts centre 100m2
Play park (outside) 150m2
Filling Station
Filling station 500m
Car Wash 60m
Convenience shop, ATM and toilets 180m2
Infrastructure
150 parking spaces 3,500m2
Two dedicated bus stops with shelters on one side 300m2
Double lane traffic circle 25m by 45m
It is assumed that the total capital expenditure required for the PetroPark will
total R18,1 million (R12,95 million if the filling station, car wash, convenience
shop and toilets are not included in the development). This excludes the cost to
purchase land as it is assumed that the land will be leased to the developer.
In total, the establishment of the Petro Park will lead to the generation of R55.8
million in business sales during the anticipated 12 month construction period. This
will translate into R10.2 million of value added. The development of the Petro
Park will create about 79 direct employment opportunities during the construction
phase. The project-affected community will directly benefit from the proposed
development as it will create new employment opportunities for the locals,
particularly those who are unskilled and semi-skilled. If the filling station is not
included in the development, the above impacts will be slightly lower.
In addition to the above impacts, the proposed development will have a long-
term beneficial impact on the local economy as it will diversify the economic
activities that are currently taking place in the area. There is set to be direct
annual increases in value added to the region of R3.1 million and direct business
sales of R22.5 million. New direct permanent employment opportunities at the
Petro Park are estimated to be 97. If the filling station is not included in the
development, the above impacts will be slightly lower; most of the impact comes
from the retail component of the development.
Apart from quantifiable impacts stated above there is very likely to be

unquantifiable benefits experienced by the municipality. For example the tourism
industry is likely to grow as a result of the Petro Parks promotion. The local
community is also set to benefit through up-skilling as a result of the employment
opportunities at the Park.
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December 2008
Apart from the positive economic impacts above, there proposed Petro Park could
negatively impact on the existing petrol stations in Stutterheim. The closure of
one or more existing stations would have a negative impact to the economy in
terms of job losses, new business sales, contribution to GGP as well as
contribution to government revenue. However, the net economic impact of the
new development is still expected to be positive overall. To mitigate the potential
negative impact on the existing stations it will be important that the new Petro
Park be able to grow the market share, rather than depending on the existing
market share.
If the filling station were not constructed as part of the Petro Park, the
opportunity cost is relatively small as must of the economic impact associated
with the Petro Park comes from the retail centre. The risks associated with
constructing the new filling station are primarily related to the potential negative
impact on the existing filling stations and the feasibility of the new station.
The risks associated with not constructing the filling station relate to the potential
negative impact on the retail facility; the filling station and retail components are
anticipated to compliment each other if built as a part of the same development.
The transient market may be attracted to the filling station if retail and tourism
related activities are located in close proximity to the station and the local market
may purchase fuel at the station while they are purchasing retail products.
4. Recommendations
Given the outcomes of the market research and economic impact modelling
exercise, it is recommended that the Petro Park development be implemented in
a phased approach (see table below).
Phasing Land Use Activities

2
1,900m retail centre
Tourism office and arts and crafts centre
ATM
Phase 1 - 2009
Toilet facilities
150 parking spaces
Play park (outside)
Filling station
Phase 2 Car Wash
2011* Convenience shop, ATM and toilets
Two dedicated bus stops with shelters on one side
*Depending on future demand
It is recommended that the retail centre at least have a convenience grocery

store, a sit-down restaurant and a take-away facility. It is recommended that the
feasibility of a filling station in Stutterheim be investigated again in the medium
term; i.e. Phase 2 of the development. If the Petro Park is developed in a phase
approach then it is likely that the development as a whole will be feasible and can
contribute meaningfully to sustainable growth and development in Stutterheim.
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December 2008
Table of Contents
CHAPTER 1: INTRODUCTION
1.1 Background 1
1.2 Project brief 1
1.3 Site Location 2
1.4 Report Outline 5
CHAPTER 2: LOCAL DEVELOPMENT CONTEXT
2.1 Introduction 7
2.2 Amahlathi Local Municipality Integrated Development Plan 7
2.2.1 Development Corridors 7
2.2.2 Tourism Development 8
2.3 Amahlathi Local Municipality Spatial Development Plan 8
2.4 Amathole Regional Economic Dev elopement Strategy (AREDS) 9
2.5 ASPIRE Development Initiatives 11
2.6 Synthesis 12
CHAPTER 3: LOCAL ECONOMIC PROFILE
3.1 Introduction 13
3.2 Local Economic Overview 13
3.2.1 Gross Geographic Product and Growth Rate 13
3.2.2 Sector Contribution to GGP and Employment 15
3.3 Sector Profiles 18
3.4 Synthesis 21
CHAPTER 4: LOCAL CONSUMER PROFILE
4.1 Introduction 22
4.2 Population Trends 22
4.3 Age Profile 23
4.4 Education Levels 24
4.5 Employment Status 25
4.6 Reasons for not Working 26
4.7 Occupation Profile 27
4.8 Average Household Income 28
4.9 Household Expenditure in Amahlathi 29
4.10 Transport Preferences 30
4.9 Synthesis 31
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CHAPTER 5: FILLING STATION FEASIBILITY
5.1 Introduction 33
5.2 Supply Profile 33
5.3 Demand Profile 36
5.3.1 Local Market 36
5.3.1.1 Size of the local Market 36
5.3.1.2 Vehicle Ownership 37
5.3.1.3 Average Monthly Fuel Consumption 37
5.3.1.4 Support for Existing Filling Stations 37
5.3.1.5 Total Local Demand for Fuel 37
5.3.2 Transient Market 38
5.3.2.1 Total Vehicles 39
5.3.2.2 Support for Stutterheim Stations 39
5.3.2.3 Average Transient Market Fill 40
5.3.3.4 Active Days 40
5.3.3.5 Total Transient Demand for Fuel 40
5.3.3 Total Demand Profile 41
5.4 Net Effective Demand 41
5.5 Fuel Company Facts 42
5.6 Freight Company and Transport Company Feedback 42
5.7 Development Potential 43
CHAPTER 6: RETAIL FEASIBILITY
6.1 Introduction 44
6.2 Supply Profile 44
6.3.1 Retail Demand 46
6.3.2 Net Effective Demand Estimations 48
6.3.3 Development Potential 48
6.4 Retail Financial Feasibility 49
CHAPTER 7: DEVELOPMENT CONCEPT
7.1 Introduction 52
7.2 Potential for a Petro Port in Stutterheim 52
7.3 Synthesis 53
CHAPTER 8: ECONOMIC IMPACT ASSESSMENT
8.1 Introduction 54
8.2 Current Status of Site 54
8.3 Description of Development 56
8.4 Assumptions and Cist Estimates 56
8.4.1 Construction Phase Assumptions 56
8.4.2 Operational Phase Assumptions 57
8.5 Construction Phase Impact Assessment 58
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December 2008
8.5.1 Increase in New Business Sales 58

8.5.2 Increase in GGP 59
8.5.3 Impact on employment 60
8.5.4 Government Revenue Impact 62
8.6 Operational Economic Impact Assessment 62
8.6.1 Increase in New Business Sales during Operations 62
8.6.2 Impact on GGP 64
8.6.3 Impact on Employment 65
8.6.4 Government Revenue Impact 66
8.7 Municipal Income Impact 67
8.8 Opportunity Costs and Potential Risks of the Development 67
8.9 Operational Impact of New Petro Park on Existing Stations 68
8.10 Opportunity Cost and Potential Risks of the Development 70
8.11 Synthesis 71
CHAPTER 9: CONCLUDING RECOMMENDATIONS
ANNEXURE 1: QUALITATIVE DISCUSSION GUIDELINES
1.1 Stutterheim Station Owner Interviews i

1.2 Transport and Freight Company Information i
1.3 Fuel Company Interviews ii
ANNEXURE 2: MARKET SURVEYS
Local Market Survey iii ix

Transnet Market Survey x - xiv
ANNEXURE 3: UNDERSTANDING ECONOMIC IMPACT

MODELLING
3.1 Introduction xv
3.2 Understanding the Input-Output Model xv
3.3 Defining Economic Impacts xvi
3.4 Types of Economic Impacts xvi
3.5 Measuring Economic Impacts xvii
FIGURES
1.1 Proposed Site of Filling Station Complex, Stutterheim, Eastern Cape 3

1.2 Proposed Development Site (looking south) 4
1.3 Proposed Development Site (looking north-east) 4
2.1 N6 development Corridor and Stutterheim 11
3.1 Sector Contribution to GGP and Employment 16
3.2 Sector Contribution to Employment 17
4.1 Age Profile (2001) 23
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December 2008
4.2 Education Level (2001) 24

4.3 Employment Status (2001) 25
4.4 Reasons for not Working (2001) 26
4.5 Occupation Profile 27
4.6 Average Household Income (2001) 28
4.7 Household Expenditure per Product Type (2007) 29
4.8 Amahlathi Transport Preferences (2001) 30
5.1 Locality of Existing Petrol Stations in Stutterheim 34
6.1 Retailers in Stutterheim 45
8.1 Location of Site A and B 55
TABLES
3.1 GGP Amahlathi and Amathole 14

3.2 Sectoral GGP Growth Rate 15
3.3 Sectoral Employment Growth Rate 16
4.1 Population Trends 22
5.1 Petrol filling stations on Main Road/Street 33
5.2 Average Monthly Volumes Sold 34
5.3 Petrol filling station supply facilities 25
5.4 Local Market Demand 37
5.5 Total Transient Vehicles 39
5.6 Support for Stutterheim Stations 40
5.7 Petrol Sales (Light Vehicles) 40
5.8 Diesel Sales (Heavy Vehicles) 41
5.9 Total Demand for Fuel in Stutterheim 41
5.10 Total Net Effective Demand for Fuel in Stutterheim (litres) 41
6.1 Stutterheim Retail Inventory 44
6.2 Stutterheim Retail Supply Size 46
6.3 Retail Leakage Factor 47
6.4 Retail Expenditure 47
6.5 Retail Floor Space Demand 48
6.6 Net Effective Retail Demand 48
6.7 Retail Preference Demand 49
6.8 Retail Feasibility Variables 50
6.9 Centres of Comparison: Rental Returns 51
8.1 Estimated Capital Investment 57
8.2 Estimated Operational Expenditure 57
8.3 Total Labour Expenditure 58
8.4 Impact on New Business Site 58
8.5 Increase in GGP 60
8.6 Impact on Employment 60
8.7 Government Revenue Impact 62
8.8 Increase in New Business Sales 63
8.9 Impact on GGP 64
8.10 Impact on Employment 65
8.11 Government Revenue Impact 66
8.12 Stations Employment Figures 68
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8.13 Existing Stations Estimated Annual Revenue Generated 69

8.14 Total Capital Expenditure Opportunity Costs 70
8.15 Total Operational Expenditure Opportunity Costs 71
9.1 Phasing of the Development 73
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December 2008
Chapter 1: Introduction
1.1 Background
The purpose of this project is to investigate the feasibility of establishing a Petro

Park complex in the town of Stutterheim which lies within the Amahlathi Local
Municipality in the Eastern Cape and to determine the economic impact of such as
development.
The Petro Park is anticipated to play a role in marketing and linking planned
developments in the area for instance by raising awareness of transient market
moving through the town about the cultural precinct in Mlungisi commercial
community park as well as displaying local craft and wood work produced by the
Woodhouse facility. A tourism information office within the Petro Park will be used
to market the eScape route (a variety of tourism products) in Stutterheim and its
surrounds.
The Petro Park will aim to raise awareness of by-passing travelers and makes
reference to Stutterheim as a forest and tourism destination by providing
information and booking facilities on available local tourism products through the
tourism office with arts and craft display.
This project forms part of the municipal IDP 2007/2008 which recognises the
potential for developing an Amahlathi Arts and Crafts Centre. Currently the area
is without a large mixed-use filling station to serve the local and transient market
and ASPIRE has acknowledged a possible gap in the market. The view of
Amahlathi Local Municipality, ASPIRE and Amahlathi Tourism Association is that a
tourism centre with arts and crafts would not necessarily be sustainable on its
own, hence the development of a filling station on the same site could make a
new development economically viable. Thus, Urban-Econ Eastern Cape has been
appointed by ASPIRE in partnership with the Amahlathi Local Municipality to
conduct a Feasibility Study and Economic Impact Assessment for a proposed
filling station in Stutterheim.
1.2 Project Brief and Objectives
This report will comprise of both a market research component and an economic
impact assessment. There are two key components to the market research
component of the proposed development, each of which will be individually
assessed within the relevant context as well as in an integrated synthesis
regarding the complex development. The proposed development initiatives that
Urban-Econ EC will assess are:
Filling station complex;

Retail Centre with a tourism arts and crafts centre
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December 2008
In this report, a market analysis will be undertaken for both a filling station and a
retail development. The entire complex (i.e. Filling Station with retail with tourism
and arts and crafts centre) will be referred to throughout the report as the Petro
Park. The study will assess the need or desirability of the proposed developments
as well as the nature and extent of existing similar facilities in the town.
Two field surveys were undertaken by Urban-Econ EC for the purposes of this
project. The surveys were aimed at:
The local Stutterheim Market;

The Transient market in Stutterheim;
The N6 Transient market in Cathcart and Queenstown
The Economic Impact assessment will interpret the potential short term and long
term impacts of the investment within the region. This will be achieved by
expressing the economic impacts in terms of direct, indirect effects with the
application of the econometric modelling technique. The impact assessment will
also identify financial and socio-economic risks with respect to the project.
Ultimately the assessment report will be used in the Environmental Impact Report
which is intended to highlight the concerns and make recommendations regarding
possible mitigation measures of the investment.
ASPIRE along with Amahlathi require Urban-Econ EC to provide them with the
necessary information to make market informed decisions on how to proceed with
this development and also provide an indication of the potential economic impacts
of the development.
1.3 Site Location and Characteristics
The proposed site for the Petro Park lies approximately 1.5km to the south of the
Stutterheim CBD on the N6 highway. The town of Stutterheim is situated at the
foot of the eastern slopes of the Kologha Mountains, a spur of the Amathole range
in the Amahlathi Local Municipality.
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December 2008
Figure 1.1: Proposed Site of Filling Station Complex, Stutterheim, Eastern

Cape
Stutterheim, Amahlathi
Stutterheim CBD
Proposed
Filling Station
Complex Site
Stutterheim lies approximately 80km to the north of East London and 110km
south of Queenstown on the N6 National Highway. Refer to Figure 1.1 for a
locality map and a map of the location of the proposed Filling Station Complex.
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December 2008
According to the Minor Feasibility Study conducted by Nzelenzele, Preston and

Medcalf completed in 2008, key characteristics of the proposed development site
include:
The site is located on a portion of erf 80 in Stutterheim which is approximately
1.5km south of Stutterheim CBD and 200m north of the existing R346 and N6
traffic intersection.
The size of the site is approximately 25 000m (i.e. 2.5 hectares).
It is considered to be suitable for development in terms of storm water
management.
Infrastructure connections including water supply, sanitation, electricity, and
telecommunication are located within close proximity.
The site is gently sloping from North to South and favourable for development.
Figures 1.2 and 1.3 indicate the location of the proposed development site
relative to the N6 and R346. As indicated by the Traffic Impact Assessment
included in the Minor Feasibility Study by Nzelelzele, Preston and Medcalf in 2008,
there are two possible traffic entry points to the site. Traffic entry point 1 would
be a direct access from the N6 while traffic entry point 2 would be through an
access road travelling parallel to the N6 with entry at the existing N6 and R346
intersection.
Figure 1.2 Proposed Development Site (looking south)
Proposed Site R346 from King Williams Town

Possible Entry Point 2
N6 National Road
Figure 1.3: Proposed Development Site (looking north-east)
Proposed Site
N6 National Road
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December 2008
1.4 Report Outline
The remainder of the report is structured under the following chapters:
This chapter presents the policy framework

in which the proposed filling station and/or
Chapter 2 Local Development
retail complex has been conceptualised and
Context
planned in Amahlathi and provides an
overview of local development priorities.
This chapter provides an overview of the

economic profile and trends in Amahlathi
Chapter 3 Local Economic
Local Municipality and puts in context these
Profile
local trends within the district economy of
Amathole.
This chapter puts the proposed development

Chapter 4 Local Market Profile into context in terms of the potential local
consumer market of the new development.
The chapter investigates the current supply
of fuel in Stutterheim and the demand for
Chapter 5 Filling Station fuel in the town by both the local and
Feasibility transient markets. Ultimately the net
effective demand for fuel in Stutterheim is
presented.
The chapter investigates the current supply
of retail in Stutterheim and the demand for
Chapter 6 Retail Feasibility retail in the town by the local market.
Ultimately the net effective demand for
retail space in Stutterheim is presented.
The chapter presents recommendations

based on the market feasibility study
conducted for both the filling station
Chapter 7 Development
component and retail component of the
Concept
proposed development. The concepts
presented here will then be tested for their
anticipated economic impact to the region.
This chapter will provide an overview of the

anticipated economic impacts that will result
Chapter 8 Economic Impact from the construction and operation of a
Assessment Petro Park complex to the region. These
outcomes will then be incorporated into the
Environmental Impact Assessment process.
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December 2008
This chapter presents various development

Chapter 9 - Concluding recommendations that will assist Aspire and
Recommendations the Amahlathi Local Municipality in taking
the proposed Petro Park project forward.
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December 2008
Chapter 2: Local Development Context
2.1 Introduction
It is important to understand the policy framework in which the proposed Petro

Park is being planned in Amahlathi and whether planning documents such as the
IDP and SDF have identified the proposed Petro Park as a priority project. This
chapter also considers other projects identified in and around Stutterheim that
may impact on the proposed Petro Park project.
This chapter provides an overview of the following planning documents, namely:
Amahlathi Local Municipality Integrated Development Plan (IDP), 2008/2011

Amahlathi Local Municipality Spatial Development Framework (SDF), 2006
Amathole Regional Economic Development Strategy (AREDS), 2007
ASPIRE N6 Development Corridor Regeneration
2.2 Amahlathi Local Municipality Integrated Development Plan
The Integrated Development Plan for Amahlathi for 2008/2011 focuses primarily
on improving service delivery and infrastructure in the municipality through public
sector investment projects.
The IDP strategy, although focused on public sector investment, seeks at the
same time to spark private sector investment in the municipality through
increasing the capacity of the local population i.e. improving access to education.
2.2.1 Development Corridors
The IDP identifies development corridors as roads or railway routes that are
usually associated with the movement of people between places. The IDP has
acknowledged that movement corridors have the potential to accommodate
development of different levels of intensity and a mix of land uses at certain
points along the route.
In this regard the N6 corridor between East London and Queenstown has been
indentified by the IDP as a Special Route particularly in the context of
transporting locals and tourists within the municipality.
The proposed site for the Petro Park is located on the N6 national highway which
places the site in the strategic development area. This issue is expanded upon as
part of the Strategic Development Framework.
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December 2008
2.2.2 Tourism Development
The IDP for Amahlathi acknowledges tourism as a potential growth sector in the
municipality and aims to increase the number of tourists to the area. The IDP has
recognized the importance of developing a tourism master plan and creating
linkages with tourism marketing bodies outside of the local municipality.
The IDP acknowledges that Stutterheim boasts two Tourism Zones in close
proximity to the town, namely the South Eastern section of Amahlathi LM which is
recognized as having eco-tourism potential while the Thomas River Conservancy
boasts eco and Nature tourism potential. The IDP highlights a heritage and craft
objective of preserving culture, history and uncover hidden talents through
craft. The IDP recognizes the development of an Amahlathi Arts and Crafts
centre in Stutterheim, however due to the sustainability of a such a project,
Aspire has acknowledged that the development of a new filling station with an
arts and crafts centre could make such a project feasible.
Implications for the Project:
The overall focus of the IDP is that of service delivery improvement through
public spending. Increasing the number of tourists to areas around Stutterheim
will benefit the Petro Park Development. In the medium to long term,
encouraging day visitors and sleep over tourists to the area will increase the
demand for both fuel and retail products and have a positive contribution to the
local economy. Currently however the tourist market is relatively small around
Stutterheim and much benefit from this market is unlikely in the short term.
2.3 Amahlathi Local Municipality Spatial Development Plan
The Amahlathi Spatial Development Framework proposes to make use of four

spatial structuring elements, two of which apply to the location of the proposed
development, these include:
The concept of Development Nodes

The concept of Urban Edges
Development nodes are categorized as towns or places where higher order

functions are found. Stutterheim is an important service centre for surrounding
farms and rural communities and is therefore considered a primary node. The
functions of primary nodes generally include private and public institutions such
as schools, government offices, etc. and private enterprises such as retail and
tourism-related enterprises. The SDF confirms that development nodes are often
located on main transport routes to provide maximum access and act as catalysts
for new growth and development.
The SDF recognizes Stutterheim as the primary economic and service centre of
the Amahlathi Municipality. The spatial development emphasis in this area has
been identified as ensuring that there is the infrastructure and services in place to
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December 2008
support the development of this node; and ensuring adequate linkages between
Stutterheim and surrounding nodes.
The SDF suggests that business growth in Stutterheim should occur as close to
the towns CBD as possible as it recognizes the importance of consolidating the
CBD. It suggests that a site for a new shopping centre close to the CBD needs to
be determined.
According to the SDF, the proposed site for development of a Petro Park is
considered to be part of the Urban Edge. The SDF recognizes that consolidated
development and densification should be promoted within the urban edge. The
SDF acknowledges developments such a residential and businesses development
on an Urban Edge as being desirable especially to the west of Stutterheim and
near Mlungisi. The SDF identifies the proposed site for the Petro Park as being the
intersection of the N6 and the R346, which lies opposite the proposed site for this
development. The current proposed site is identified for further residential and
business development.
It is important to note that the SDF merely serves as a guide to future potential
development. When detailed planning is done it may be found that sites identified
in the SDF for specific land uses are not suitable. For example, the site identified
in the SDF for the Petro Park has significant limitations in terms of slope of the
land and access to the site; the current proposed site is deemed more suitable.
With respect to new retail developments, at present there is limited land available
in and around the CBD for new retail development. There exists a possibility to
develop a new node close to, but outside, the CBD.
The SDF does identify a site for a Petro Park, across the N6 from the current
proposed site. Both sites are within the urban edge.
2.4 Amathole Regional Economic Development Strategy (AREDS)
ASPIRE developed the Amathole Regional Economic Development Strategy

(AREDS) on behalf of the Amathole District in 2007. AREDS consists of 2
volumes, Volume 1 is the Economic Development Strategy and Volume 2 consists
of a number of input papers, which were used as a basis from which to develop
AREDS. The sectors assessed in detail in Volume 2 include manufacturing,
tourism, commercial farming, subsistence farming, human capital and
government social expenditure.
AREDS identifies Stutterheim (along with Alice, Fort Beaufort, Butterworth, etc.)
as a secondary order node. This confirms Stutterheims role as a service centre
for the surrounding farms and rural areas. AREDS also identifies the N6 as one of
4 primary transportation routes in the Amathole District.
9
December 2008
AREDS has adopted a corridor approach based on the transportation routes in the
area, therefore development efforts will be focussed on the N6 corridor, the N2
corridor, the R72 corridor and the R63 corridor.
The vision outlined in the strategy is that of developing an economy with higher
GVA and with sustainable and quality employment opportunities. More specifically
achieving a target whereby 60% of households earn an income and 50% of
households have an income above the MLL.
AREDS identifies four strategic elements, which will be focused on to achieve the
above vision and targets, namely:
High impact investment

Improved governance
Knowledge skills and human capital development and
Communication, interaction and partnerships between stakeholders
Within each of these four elements, a number of result areas have been identified
and are important focus areas that can help achieve the desired results. It is
expected that programmes will be identified for each result area in each of the
four development corridors.
Strategic Element Result Area

Investment to improve localities
Sub-Sector focus where competitive advantage
High Impact exists
Investment Public Good Economic Investment
District Venture Capital available
Stimulate new sectors with value adding capabilities
Collaborate to improve competitiveness
Targeted vocational training programmes
Targeted Skills retention & attraction programme
Support to and development of capacity to local
Improved Governance
municipalities
Business Development Support to Business
Develop Sub-sector Research & Innovation
Capability
Reduce Red Tape
Needs specific operational planning & Budgeting
Knowledge, Skills & Effective Land use and Management
Human Capital Transparent and Principled Governance
Development Effective Public Procurement & investment
Align Organisational responsibility to
Quality Current & accessible Economic Data
Communication, Facilitate and support Regional Growth Coalition
IGR forum
interaction &
Support to policy & Programmes linkages
partnerships with
Partnership programme, including PPPs
stakeholders Implement Effective M & E Programme
10
December 2008
AREDS has identified the N6 as one of its four development corridors, and
Stutterheim as an important secondary node within the District. For this reason
ASPIRE has identified a number of development opportunities, including the
proposed Petro Park, in Stutterheim. The proposed development clearly falls
within a number of strategic elements, including high impact investments.
2.5 ASPIRE Development Initiatives
Aspire is engaged with overseeing the stimulation of the Amathole District

Municipality with the objective of regenerating small town economies. Aspire
recognizes small towns as economic and service hubs for rural communities and
growth point areas for a corridor development approach through catalytic
projects. Aspire has concentrated efforts on building economic potential inherent
in the corridors created by the regions four primary routes: N2, N6, R72, R63.
Stutterheim has been identified as a key development focus area as it is an
important economic and service centre and an anchor of the N6 corridors
development.
Figure 2.1 depicts the position of Stutterheim relative to the N6 development

corridor.
Figure 2.1: N6 Development Corridor and Stutterheim
Source: Adapted from Aspire, 2008, (Online)
About R4.5m EU funding has been sourced to develop this route which entails
development of 15 new tourism products in Stutterheim area ranging from
archery, guided forests walk, canopy tours, abseiling etc as well as R65m funding
from National Treasury NDPG for renewal of Stutterheim through development of
a cultural precinct with entertainment facilities in the township of Mlungisi that is
linked to the Petro Park development. Furthermore, R45m investment has been
secured from IDC for blueberry farming initiative 17km south of Stutterheim that
11
December 2008
will generate -+5000 seasonal jobs for Stutterheim residents. The indirect and
induced effects will be experienced by the rest of Amahlathi economy.
Given the location of the proposed Petro Park development, it is expected that
the direct benefits of its development will be observed throughout Amahlathi,
taking into consideration that Stutterheim constitutes the largest urban economy
in the local municipality. Regeneration of Stutterheim area through this
development and other proposed development in the area such as Mlungisi
commercial community park, the Woodhouse project and Amabele blueberries
and station renewal aim to strategically position Stutterheim by building on the
areas competitive advantage as well as promote value chain development of
sectors with competitive advantage.
Aspire has recognised the Petro Park as being an important component of

Stutterheims and the N6 corridors development. The Petro Park is particularly
relevant as it is intended to encourage the transient market passing through the
area on the N6 to stop at convenient location near the town where they can be
informed of the areas tourism attractions and be encouraged to spend longer
periods of time in the area.
2.6 Synthesis
The Amahlathi IDP and AREDS both recognise the economic potential for
Stutterheim as a service and development node for the region. ASPIRE in its
corridor approach distinguishes the potential of a small town such as Stutterheim
as an economic growth point.
The Petro Park development will take the form of a private investment in
Stutterheim and clearly falls within a number of strategic elements identified in
the Amathole Regional Economic Development Strategy, most notably the form of
a high impact investment.
The proposed site for the development, although not specifically identified in any
of the strategic documents, was derived from the SDFs recommendation for the
development of a Truck Stop in the immediate vicinity of the proposed site.
Aspire has recognised the Petro Park as being an important component of
Stutterheims and the N6 corridors development as it has the potential to attract
the transient market and in turn promote other development initiatives in the
area such as tourism products as well as local arts and crafts.
12
December 2008
Chapter 3: Local Economic Profile

3.1 Introduction
This chapter provides an overview of the economic profile and trends in Amahlathi
Local Municipality and puts in context these local trends within the district
economy of Amathole and local development priorities. This economic analysis,
along with the local consumer profile (Chapter 4) provides a foundation for
assessing the potential for development of a new filling station and/or retail
development in Stutterheim.
The chapter is structured under the following headings:
Local Economic Overview

Gross Geographic Product and Growth Rate
Sector Contribution to GGP and Employment
Sector Profiles
3.2 Local Economic Overview
The Amahlathi Local Municipality is situated in the Eastern Cape Province of South
Africa within the Amathole District Municipality. It is a Category B Municipality.
The Amahlathi Municipal area is comprised of 20 Wards and is characterized by a
range of settlement patterns and associated land uses, including formal urban
areas, formal and informal rural settlement areas, and privately owned farmland.
Amahlathi has a dominant rural characteristic and therefore has fairly limited
economic activity in the area apart from the three dominant urban clusters of
Stutterheim, Cathcart and Keiskamahoek the two former being situated on the N6
national highway between East London and Queenstown. The remainder of the
municipality comprises of rural communities.
As a result Stutterheim and Cathcart are important service and economic centres
of the municipality, Stutterheim being the largest centre. Stutterheim provides a
number of higher order services, including access to government services (e.g.
Amahlathi Local Municipality, clinics, libraries, schools), business and banking
services and retail services. The sparsely distributed rural population makes
provision of services, infrastructure and access to economic opportunities very
difficult for the majority of the population in Amahlathi.
3.2.1 Gross Geographic Product and Growth Rate
Gross Geographic Product (GGP) comprises the value of all final goods and
services, produced during a year, within the boundaries of a specific region and is
commonly used to measure the level of economic activity in a specific area. GGP
is utilised as an important indicator of economic activity.
13
December 2008
Table 3.1 presents total GGP in Amahlathi, the growth of the local economy and
the percentage contribution to the GGP of Amathole District Municipality for the
ten year period from 1997-2007.
Table 3.1: GGP Amahlathi and Amathole

GGP (Rand) Growth Rate Contribution to
Year
(000s) Amahlathi ADM GGP
1997 R 666,423 4.8% 3.5%
1998 R 678,083 1.7% 3.5%
1999 R 715,105 5.5% 3.6%
2000 R 757,316 5.9% 3.7%
2001 R 800,529 5.7% 3.8%
2002 R 819,104 2.3% 3.8%
2003 R 853,940 4.3% 3.9%
2004 R 909,318 6.5% 4.0%
2005 R 1,029,926 13.3% 4.3%
2006 R 1,303,119 26.5% 5.2%
2007 R 1,400,208 7.5% 5.3%
Source: Urban-Econ Eastern Cape calculations based on Quantec (2008)
The economy of Amahlathi was valued at R1.4 billion in 2007 and has been
growing on average 7.7% from 1997 to 2007. This is a fairly high growth rate
when compared with 3.4% growth in ADM over the same period. The growth
witnessed in Amahlathi has come off of a relatively small base in 1997 compared
the whole of Amathole which includes Buffalo City, but is still significant.
The large growth rate of the economy in 2005 and 2006 is indicative of the high
increase in demand for timber and subsequent increases in price for raw and
finished wood products over this period. This result was partly due to the
expanding building industry during this time as well as the significant loss of
timber in other parts of the country due to fire damage which provided the area
with a competitive advantage.
Amahlathi Local Municipality contributed 5.3% of the total Gross Geographic

Product (GGP) of the Amathole Municipality in 2007. This amounted to
approximately R1 billion, making it one of the largest contributors to the district
GGP after Buffalo City Municipality which contributes approximately 83% of the
districts economic output.
It is evident that the contribution of Amahlathi to the district economy has been
growing over the 10 years assessed (from 3.5% to 5.3%). This indicates that the
economic growth of Amahlathi is higher compared to the growth of the other local
municipalities in the district.
14
December 2008
Implications for the study:
The Amahlathi economy is a relatively large and fast growing economy, whose
contribution to the ADM economy has grown over the last 10 years. These
positive growth trends bode well the future development of Amahlathi if this
growth can be sustained. It could also bode well for the development of the
proposed Petro Park.
3.2.2 Sector Contribution to GGP and Employment
Table 3.2 illustrates the GGP growth rate in Amahlathi per economic sector.
Table 3.2: Sectoral GGP Growth Rate

Economic Sectors 2001- 2007 Growth Rate
Total 7.7%
Agriculture 0.3%
Mining -2.9%
Manufacturing 22.7%
Electricity & water -2.5%
Construction 10.8%
Trade 4.6%
Transport & communication 0.3%
Finance and business services 10.4%
Government Services 4.1%
As seen in Table 3.2 several economic sectors in Amahlathi have witnessed

positive growth over the last 6 years and the total economy grew by 7.7% during
this period. However, most sectors of the economy have been growing at a
slower rate than 7.7% and for this reason their contribution to the overall GGP of
Amahlathi has decreased. The manufacturing sector has grown significantly over
this period at 22.7%.
Figure 3.1 illustrates the relative sector contribution of each economic sector to
the overall GGP of Amahlathi Local Municipality.
15
December 2008
Figure 3.1: Sector Contribution to GGP (2001 & 2007)

40.9%

9.4%

2.9%
Trade 6.4%
8.5%
Construction 3.8%
3.6%
Electricity & w ater 0.3%

0.6%
Manufacturing 40.6%
20.8%
Mining 0.1%
0.2%
Agriculture 7.6%
13.1%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
2001 2007
The most significant trend illustrated by the above graph is that because the
manufacturing sector has grow extremely fast (23% on average) over the last 6
years it has emerged as the largest contributor to the local economy.
Government (including community services), is still the 2nd largest contributor to

the GGP of Amahlathi. This dependence on the public sector is unfavorable as it is
not considered a productive sector of the economy; however the contribution of
government to the local economy has dropped by 12% in the last six years.
Agriculture is a very small contributor to GGP and has been stagnant (i.e. not
grown) over the past 6 years. However, the role of agriculture in the local
economy is critical as much of the manufacturing taking place in Amahlathi is
agro-processing and dependent on agriculture for inputs.
Table 3.3 illustrates the employment growth rate in Amahlathi per economic
sector. The table illustrates that overall; employment has only grown at 1.1%.
There are significant differences in growth between the different sectors, with
agriculture, mining and manufacturing seeing negative growth (i.e. job losses),
while other sectors saw more growth (e.g. trade and finance and business
services).
Table 3.3: Sectoral Employment Growth Rate

Economic Sectors 2001- 2007 Growth Rate
Total 1.1%
Agriculture -3.9%
Mining -2.3%
Manufacturing -1.6%
Electricity & water 1.2%
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December 2008
Construction 3.4%
Trade 6.6%
If one considers Table 3.3 in the context of Table 3.2 (GGP growth) it is evident
that most sectors experiencing large growth in GGP have also seen growth in
employment, with the exception of the manufacturing sector, which saw growth
in GGP of 23%, but negative employment growth. This could be due to the fact
that manufacturing is a capital intensive industry and may have seen significant
increases in efficiency that negated the need to increased employment.
Figure 3.2 illustrates the sector contribution of each economic sector to

employment in Amahlathi Local Municipality.
Figure 3.2: Sector Contribution to Employment (2001 and 2007)
Community services 39.0%

41.1%

6.1%

1.5%
Trade 16.5%
12.0%
Construction 9.1%
8.0%
Electricity & w ater 0.3%

0.3%
Manufacturing 8.7%
10.2%
Mining 0.6%
0.7%
Agriculture 14.8%
20.1%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
2001 2007
The government and community service sector is by far the largest generator of
jobs in the economy, although its contribution to total employment has decreased
slightly to 39%.
Agriculture was the 2nd largest contributor to employment in 2001, but has been
overtaken by the trade sector, which saw both growth in GGP and employment
from 2001 to 2007. Agriculture is a labour intensive sector of the economy, which
is why it contributes more to employment than to GGP. The declining
employment in agriculture is a trend mirrored throughout the province as farmers
implement more mechanized forms of farming to retain their competitiveness.
17
December 2008
The above illustrates that the agriculture, manufacturing and tertiary economic
sectors are important contributors to both GGP and employment in Amahlathi.
The economy is relatively well diversified across the sectors relative to other
areas in the province. The local economy has been moving away from its
dependence on government and has seen growth, both in GGP (fast) and
employment (slow) over the last 6 years.
3.3 Sector Profiles
This section provides an overview of the productive sectors in Amahlathi,

meaning all sectors excluding the government sectors and the utilities sector and
is presented according to the primary, secondary and tertiary grouping of sectors.
The primary sectors involve the extraction and production of raw materials such
as agriculture and mining sectors. The secondary sectors involve the
transformation of raw materials into goods in this case being the construction and
manufacturing sectors. The tertiary sector involves the provision of services to
consumers and businesses.
Primary Economic Sectors
Together the primary sectors in Amahlathi (i.e. agriculture and mining) accounted
for approximately 8% of the municipalitys GGP (2007). Agriculture, and
specifically commercial forestry, is the most important primary sector in
Amahlathi (over 7% contribution to GGP coming from agriculture). The RSC
database (2006) lists 41 registered agricultural enterprises based around
Stutterheim. These range from small animal husbandry services up to large
forestry plantations.
Commercial forestry is one of the cornerstones of Stutterheims economy. There

is approximately 13,500 hectares of land under plantation in the Amahlathi area
of which 81% is state owned and 19% privately owned (Eastern Cape Forestry
Sector Profile, 2007). The largest private sector plantation company is Amathole
Forestry Company. Private and state plantations employ in excess of 500 people.
It has been noted that there is potential to expand plantation sizes in the area to
a total of approximately 22,000 hectares. There is a strong link between forestry
and manufacturing (e.g. saw milling) in the local economy, with the bulk of
timber grown around Stutterheim being processed locally. Local companies have
indicated that they also import timber for processing because local supply is
insufficient.
Other forms of agriculture in Amahlathi include commercial farming, which

includes poultry, livestock and a small amount of citrus. The area is well known
for its Dohne sheep populations. Commercial farming is characterized by private
ownership of land producing higher yields due to better access to infrastructure
18
December 2008
and support systems. Subsistence farming in the area tends to be focused more
on the production of traditional staple crops such as maize and the rearing of
livestock. Due the high unemployment in the area, a large proportion of the
population located outside of the urban areas like Stutterheim and Cathcart rely
on subsistence farming as part of the mix of their livelihood strategies. Unlike
commercial farming, communal/subsistence farming contributes little to GGP in
the area.
There are two sand and aggregate quarries in the immediate vicinity of
Stutterheim, one is owned by the municipality while Stutt Quarries is a private
company and the largest in the area.
Two large poultry productions operate within the vicinity of Stutterheim, ANCA
and Grassdale. These productions mostly supply to the market outside of the
area.
The primary sector is a labour intensive sector and therefore a decrease in the
contribution of this sector towards employment (as seen over the past 6 years)
can negatively impact on employment as a whole.
Secondary Economic Sectors
Manufacturing is the dominant secondary economic sector in Stutterheim and is

primarily comprised of manufacturing in the form of saw milling, poultry food
production and light industry. The RSC database (2006) lists 8 manufacturing
companies located in Stutterheim and four others within Amahlathi.
The saw mills in the area are located in close proximity to the local timber
plantations. The largest timber producing company in the area is Rance Timber.
The company operates two saw mills in Amahlathi located approximately 16km
from Stutterheim. The majority of the raw materials used in their production are
acquired locally; this reflects that a significant percentage of raw materials
derived from the area are turned into either intermediate or final goods through
agro-processing (local value adding). This is reflected in the manufacturing
sectors high contribution to GGP (44%).
The Kubusi Sawmill, which is the company's large log sawmill with sawn board
output production of 45 000m per annum. The other mill produces an output of
16 000 m board per annum. The Rance Timber is based solely in Amahlathi
where shareholders, directors and management are all people from the local
communities and dividends and salaries are retained locally.
Western Province Timber is another major timber manufacturing company in

Stutterheim. The company manufactures various finished products. Most of inputs
used in manufacturing are sourced locally i.e. from Rance Timbers and other
small saw mills. Other smaller manufacturers of significance in Stutterheim
include Amabele Poles and Stutt Poles.
19
December 2008
The demand for timber has increased considerably in the last few years owing to
a number of fires which have destroyed many plantations in northern parts of the
country. Prices for timber products have increased dramatically over the last few
years; this has also been as a result of the demand for wood sparked by a growth
in the building industry in South Africa over the past 4 years.
Another large manufacturing company located in Stutterheim is Newden Products

(Boardman Brothers) whose factory is located in Stutterheim. The factory
employs 185 permanent staff members. The company first established in the area
in 1969 but has seen several expansions over the years. The company distributes
a variety of hardware products and cleaning materials both nationally and abroad.
The construction sector in Stutterheim comprises predominantly of small

contractor businesses, the RSC database lists 20 active construction related
businesses in Stutterheim. Examples of local construction related companies
include: Zwelihle Building and Civil Construction, Mbiyakhe Contractors, Uluntu
Construction and Mpahlas Construction.
The manufacturing sector is the largest productive economic sector in

Stutterheim and Amahlathi. Most of the manufacturing taking place in
Stutterheim is agro-processing, and specifically timber processing from the
commercial forestry plantations in and around Stutterheim. The fact that raw
material (i.e. timber) is transformed through value-adding in the area is a
significant benefit to the local economy.
Tertiary Economic Sectors
The tertiary economic sectors are relatively well developed in Stutterheim as the
town is an important service centre for surrounding farmers and rural
communities. Specifically finance and business services and the trade (i.e. retail)
sector contribute towards the strength of the tertiary sectors.
The retail sector is characterised by a dominance of local shops ranging from

small clothing stores to general dealers. There are few national retailers located in
the municipality apart from examples like Spar, Pep and Town Talk. As the
municipality is so close to East London, Queenstown and King Williams Town
there is a significant amount of leakage out of the area as many local consumers
travel to these areas to make retail purchase. There is no evidence of a large
retail centre in the municipality. For a more in depth analysis of retail activity in
Stutterheim refer to the retail feasibility chapter of this report, Chapter 6.
In terms of finance and business services, there are a number of banks in

Stutterheim including Absa, Standard Bank, First National Bank and Old Mutual.
This is indicative of the importance of Stutterheim as a service centre for other
area. There are also a few local, small accounting, law firms, estate agents, etc.
found in Stutterheim, their presence however indicates that the town does form a
service centre for surrounding areas.
20
December 2008
The tourism sector is also a tertiary economic sector and has been identified as
having significant growth potential. The area boasts a variety of tourism products
such as hiking, fishing, horse riding and mountain biking, craft centres and
memorials. Tourism in Stutterheim is both business (conference) and leisure
orientated; with the latter bring bringing in the highest number of tourists to the
area. The Stutterheim area boasts the largest selection of Hotels, guest houses,
self catering, camping and Bed & Breakfast accommodation in the municipality.
Popular hotels and guesthouses in the area include: The Manderson (with
conference centre), The Croft Guest Cottages, Eagles Ridge and Casa Mia. Other
tourist orientated attractions around the town include, Mgwali Village,
Wrigleswade Dam and Amabele.
It should be noted that Amahlathi has recently re-launched their tourism

information board which now falls under the eScape brand. Their offices with
information centre are located in Stutterheim.
3.4 Synthesis
The Amahlathi local economy is characterised as a relatively small, but growing

economy that is still heavily dependent on the government and community sector
for both employment and value added contributions. It appears though that the
private sector is beginning to drive economic growth particularly through large
manufacturing companies in the area which bodes well for the proposed
development.
Stutterheim acts as the economic and service hub of Amahlathi and its economy
is relatively diversified. The commercial forestry sector is one of the most
important economic sectors as it provides inputs into the manufacturing sector
(the largest contributor to the local economy). Manufacturing primarily focuses on
timber processing and is a competitive advantage in the area.
The tertiary sectors, including retail and finance and business services are
strengths in the local economy and draw surrounding communities into
Stutterheim (as do government services). Tourism has been identified as an
important sector with growth potential, particularly considering Stutterheims
position along the N6 between East London and Queenstown.
21
December 2008
Chapter 4: Local Consumer Profile
4.1 Introduction
The purpose of this chapter is to provide a concise overview of the potential

consumer market of the proposed PetroPark in Stutterheim. The demographic
analysis profiles the following indicators, namely:
Population trends
Age profile
Education levels
Employment status
Occupation profile
Average household income
Expenditure patterns
Mode of transport
The chapter provides the foundation for assessing the potential for new
development (described in the next chapters) as the local Stutterheim population
(and to a lesser extent the Amahlathi population) will be one of two potential
markets for any new petrol station and will be the primary market for any retail
development.
4.2 Population Trends
There are approximately 137,000 people who live in Amahlathi Local Municipality
(about 1% of the population of Amathole District Municipality) in four urban areas
(Stutterheim, Cathcart, Kei-Road and Keiskamma) and numerous rural villages
throughout the municipality. Table 4.1 describes the household structure and
density for the municipal area and for Stutterheim.
Table 4.1: Population Trends

Indicator (2007) Amahlathi Stutterheim
Population total 137,286 26,470
Households total 33,763 6,478
Population Growth rate (95-01) 0.9 1.9
Population Growth rate (01-07) -0.1 1.3
Household Size 4 4
Area (Sqr Km) 4,267 79
Population density (People per Sqr Km) 32 335
Household density (H.H. per Sqr Km) 7.9 82.0
22
December 2008
Findings:
Stutterheims population totals 19% of Amahlathis population and is the

largest urban area in the local municipality.
Stutterheims population growth rate is higher than that of Amahlathi, this is a
typical pattern and illustrates evidence of rural-urban migration.
Amahlathis growth rate from 2001 to 2007 is negative, this is indicative of a
migration out of the municipality to larger urban areas such as Buffalo City.
The population density of Stutterheim is over 10 times that of Amahlathi, this
is typical of an urban area, where people live in close confines.
Amahlathi as a whole is affected by out migration and negative population
growth rate, although there is evidence of migration to Stutterheim.
Population indicators are important for developmental planning as they directly

influence decisions on where to locate future and planned developments. In the
case of Amahlathi, investing in Stutterheim makes sense as it is the largest urban
area, although additional pressure is put on infrastructure and service provision in
Stutterheim because of in-migration. This must be considered when planning new
developments in the area.
4.3 Age profile
The age distribution of a population is important as the largest population age

group inevitably dictates the demands of the market. Figure 4.1 below presents
the age distribution in Amahlathi and Stutterheim.
Figure 4.1: Age Profile (2001)

85+ 0.38%
0.50%
80-84 1.13%
1.26%
75-79 0.91%
1.38%
70-74 1.21%
2.11%
65-69 1.65%
2.46%
60-64 2.98%
3.44%
55-59 2.12%
2.80%
50-54 2.98%
3.47%
45-49 5.34%
4.59%
40-44 5.88%
5.38%
35-39 6.73%
5.63%
30-34 6.45%
5.48%
25-29 8.02%
6.25%
20-24 9.53%
8.22%
15-19 11.40%
12.90%
10-14 12.92%
13.83%
05-09 11.32%
11.89%
00-04 9.05%
8.40%
0% 2% 4% 6% 8% 10% 12% 14% 16%
Amahlathi Stutterheim
23
December 2008
Findings:
It is evident that there are more elderly and young people in Amahlathi as a
whole, and more working aged people living in Stutterheim. This makes sense
as there will be more employment opportunities in urban areas. People often
leave their dependents in the rural areas when they go to find work.
53% of the population of Stutterheim is of working age which is notably
higher than the province, where only 35% of the population is of working age.
Still, 45% of the Stutterheim population is under the age of 19, which
illustrates that the area is characterised by a relatively young population.
Development Implications:
Over half the population of Stutterheim is of working age (higher than in

Amahlathi) which bodes well for the proposed development as there is a large
potential work force available locally and potentially a comparatively large
consumer base. However these statistics must be considered in relation of
education levels to determine whether the local population has the skills required
to take up employment opportunities. A large proportion of the Stutterheim
population is under the age of 19, which is indicative of a relatively youthful
population.
4.4 Education Levels
Education levels in any given market area will influence economic and human
development. Household and personal income levels are also affected by
education levels. Low education levels lead to a low skills base in an area while
high education levels have the opposite effect, producing a skilled population.
Figure 4.2 illustrates the education levels in Amahlathi and Stutterheim.
Figure 4.2: Education Levels (2001)
35%
28.9%
30% 27.3%
26.7%
25.3%
25%
19.7%
19.8%
20%
15%
10.7% 11.0%
9.8% 9.7%
10%
6.8%
4.3%
5%
0%
No schooling Some primary Complete Some Std 10/Grade 12 Higher
primary secondary
24
December 2008
Findings:
Noticeably, the education profile of Amahlathi and Stutterheim is very similar,

although there are slightly more people in Stutterheim with matric or a higher
qualification than Amahlathi.
Still, less than 1 in 5 people in Stutterheim have Grade 12 or higher
education, this is lower than provincial and national averages suggesting a
highly unskilled workforce particularly for an urban area.
About 1 in 5 people in both Stutterheim and in Amahlathi have no education
at all; the Stutterheim figure is particularly high for an urban area.
Considering the large workforce available in Stutterheim it is concerning that

education levels are so low (only 28% having matric or a higher qualification).
Education levels are an important indicator for future investors in an area, as it
means that if skilled labour is not available within a specific area they will need to
be brought in from elsewhere. Even though the types of jobs created by the
proposed petrol filling station/retail development will be largely semi-skilled and
unskilled positions, employers prefer to have access to a well educated workforce.
Skill levels will also have an influence on the types of jobs available in the area
and the potential purchasing power of the population relative to their income.
4.5 Employment Status
Figure 4.3 indicates the employment status of the local population and indicates
the portion of the population which is not economically active.
Figure 4.3: Employment Status (2001)
60% 55.5%
50%
42.5%
40%
31.4%
30% 26.1% 27.2%
20% 17.3%
10%
0%
Employed Unemployed Not Economically Active
Amahlathi Local Municipality Stutterheim
25
December 2008
Findings:
There are roughly 6,880 employment opportunities in Stutterheim, which

means that roughly 26% of the population is employed.
As expected, employment in Stutterheim is higher than in Amahlathi as a
whole being an urban area. It is also higher than the Amathole Districts
employment level of 21%.
Over 40% of the population in Stutterheim is not economically active. Section
4.6 illustrates why people are not economically active.
Development Implications:
Employment and unemployment levels represent a fair indication of the local

socio-economic status and its income levels. The above figures are indicative of a
market where there is likely to be low purchasing power as a result of high
unemployment and high dependency on of the population to generate income.
Household expenditure is thus anticipated to focus on food and transportation,
which is typical of lower income areas.
4.6 Reasons for Not Working
This section illustrates why almost 40% of the population is not economically
active. Figure 4.4 presents the various reasons.
Figure 4.4 Reasons for not working (2001)
Could not find w ork 13.9%

20.4%
Does not choose to w ork 6.3%

8.6%
Seasonal w orker 2.0%

1.1%
Disability 12.7%
8.1%
16.0%
Pensioner 12.0%
4.2%
Home-maker 9.0%
44.9%
Scholar or student 40.8%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Amahlathi Local Municipality Stutterheim
Findings:
Over 13% of the population in Stutterheim and over 20% of Amahlathis

population is not working because they could not find work. These individuals
26
December 2008
may be classified as unemployed if the broad definition of unemployment is

used.
Most of the population in Stutterheim is not working because they are either
school children or in tertiary institutions (45%), which correlates with the
analysis of the age profile in Stutterheim, where 45% of the population is
under 19.
Implications on the study:
The presence of a large potential workforce, but relatively high levels of

unemployment (45% if one considers the broad definition of unemployment) are
indicative of the fact that the local economy is unable to create enough jobs to
keep up with population growth. This is supported by the fact that the Amahlathi
Municipality only saw a growth of 1% in employment from 2001 to 2007. New
investment in the region is expected to be of benefit to the community, assisting
in the creation of both short-term construction employment and long-term
sustainable jobs.
4.7 Occupation Profile
The occupation profile is an indicator of the level of income that can be generated
by the local population. The profile indicates whether the population has a
dominant skilled or unskilled labour force. Figure 4.5 shows the occupation profile
of Amahlathi and Stutterheim.
Figure 4.5: Occupation Profile (2001)
Elementary occupations 37.5%

37.7%
Plant assemblers 9.8%

9.4%
Craft w orkers 12.8%

10.5%
Skilled agricultural w orkers 4.8%

8.2%
Service w orkers 8.7%

9.1%
Clerks 8.8%
7.8%
Technicians 9.2%
10.6%
Professionals 4.3%
4.1%
Legislators 4.2%
2.7%
0% 5% 10% 15% 20% 25% 30% 35% 40%
27
December 2008
Findings:
Two in five working people both in Stutterheim and in Amahlathi are employed
in elementary occupations as mentioned previously this is typical of an
unskilled population, and the low education levels in the area are testament to
this.
Semi-skilled jobs (i.e. craft workers, skilled agricultural workers and service
workers) make up roughly 26% of the total, as do skilled positions.
A large part of the work force in Stutterheim is employed in elementary

occupations, which indicates that the levels of income are expected to generally
be low. The PetroPark would primarily create unskilled employment opportunities,
which will perpetuate the occupation trends witnessed in the region.
4.8 Average Household Income
The average household income provides an understanding of income levels in any

given area. Figure 2.6 shows the monthly household income for households in
Stutterheim and Amahlathi.
Figure 4.6: Average Household Income (2001)
R204 801 or more 0.1%

0.0%
R102 401 - R204 800 0.7%
0.3%
R51 201 - R102 400 1.0%
0.2%
R25 601 - R51 200 0.3%
0.2%
R12 801 - R25 600 1.2%
0.6%
R6 401 - R12 800 4.0%
1.9%
R3 201 - R6 400 5.0%
3.6%
R1 601 - R3 200 9.8%
7.6%
R801 - R1 600 17.9%
15.5%
R401 - R800 26.4%
29.8%
R1 - R400 9.7%
8.5%
No income 23.9%
31.7%
0% 5% 10% 15% 20% 25% 30% 35%
Findings:
70% of households in Amahlathi live below the poverty line of R800 a month
compared with 60% of households in Stutterheim that also live below the
poverty line.
28
December 2008
One in three households in Amahlathi has no income at all compared to one in

four households in Stutterheim.
Only 22% of Stutterheim residents have a monthly household income of more
than R1, 600 per month.
The weighted average monthly household income in Stutterheim is R3,900
compared to that of the Eastern Capes of R2,600.
The household income results reflect a population of both rural and urban
dwellers with very low purchasing power, 70% and 60% households respectively
living below the poverty line. This will impact on motor vehicle ownership and
transport and retail expenditure patterns.
4.9 Household Expenditure in Amahlathi
Figure 4.7 illustrates household expenditure patterns in Amahlathi.
Figure 4.7: Household Expenditure Per Product Type (2007)
Misc. Services, Furniture/

Appliances, 3.2%
8.7%
HH Services, 2.4% Transport , 15.2%
Rent, 4.6%
Petroleum
Products, 2.7%
Medical Products & Recreation/
Services, 5.7% Entertainment,
9.4%
HH Consumer
Goods, 4.2% Other durable
goods, 0.8%
HH Fuel, 3.9%
Clothing/ Footwear,
14.4%
HH Furnishings,
Food, 21.5% 2.7%
Miscellaneous
Goods, 0.5%
Findings:
Households in Amahlathi spent R1.3 billion on various goods and services in

2007, of this; most income was spent on food and beverages, followed by
transportation.1
It is expected that household expenditure in Stutterheim will generally follow
the same trends as in Amahlathi.
1
Transportation includes payment for public transport, fuel purchases, motor vehicle accessories, etc.
29
December 2008
Retail (particularly for food items) and transport costs are the two largest
expenditure items, which is expected amongst lower income households. The use
of public transport, primarily taxis and busses, and ownership of private vehicles
will be important to consider when determining the demand for an additional
petrol station in Stutterheim. Similarly retail expenditure patterns will important
to determine demand for new retail facilities.
4.10 Transport Preferences
Transport preferences indicate the form of transport that the Amahlathi and
Stutterheim populations utilise in order to travel back and forth from work/school
(refer to Figure 4.8).
Figure 4.8: Amahlathi Transport Preferences (2001)
Other 0.2%
0.2%
By train 0.2%
0.2%
By bus 1.9%
1.6%
By minibus/taxi 4.5%
4.0%
By car as a passenger 4.4%

3.8%
By car as a driver 0.4%
2.1%
By motorcycle 0.1%
0.3%
By bicycle 0.3%
0.3%
On foot 88.0%
87.7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Findings:
An overwhelming majority of people got to and from work/school on foot in
both Amahlathi and Stutterheim in 2001.
While it is likely that more people will be dependent on motorised transport in
2008, it is still probable that most people do not depend on vehicular
transport to travel locally in Stutterheim.
In 2001 roughly 7% of the Stutterheim population travelled with a vehicle that
would require petrol to operate (Note: car passengers are excluded from this).

The use of motorised transport will impact on the demand for petrol in
Stutterheim. Surveys conducted in 2008 will provide a better indication of this
demand than the above data. Refer to Chapter 5 for a more detailed analysis.
30
December 2008
4.11 Synthesis
The table below provides a synthesis of the consumer market analysis.
Variable Amahlathi Stutterheim

Population (2007) 137,286 26,470
Number of households
33,763 6,478
(2007)
Average household
4 4
size (2007)
Average pop. growth
0.4% 1.6%
(2001-2007)
47% of population falls 45% of population falls
under the age of 19. under the age of 19.
58.1% falls in 15-64 61.3% falls in 15-64
years group (i.e. years group (i.e.
Age profile (2001)
potentially economically potentially economically
active) active)
% of population is over 8% of population is over
65 years old. 65 years old.
20% have no schooling 20% have no schooling
Level of education 27% some primary 25.3% some primary
(2001) 10% Grade 12 11% Grade 12
4% higher than matric 6.8% higher than matric
17.3% employed 26.1% employed
Level of employment 27.2% unemployed 31.4% unemployed
(2001) 55.5% economically 42.5% economically
inactive inactive
21% Food
Household expenditure
15% Transport Not available
(2007)
14% Clothing & shoes
87.7% Foot 88% Foot
Mode of Transport
4% Taxi 4.5% Taxi
(2001)
3.8% Car as passenger 4.4% Car as passenger
Weighted average
R 1,936.04* R 3,944.99*
monthly h.h. income
*2001 National Census
Stutterheim and Amahlathi have a relatively large working population compared

to other areas in the Eastern Cape. Unfortunately, the population is largely
undereducated. As a result the types of jobs available in the area are mostly
elementary which results in relatively low monthly household incomes.
Expenditure patterns reflect the fact that Stutterheim (and Amahlathi) are lower
income areas.
The consumer market profile will influence the proposed development (and vice
versa) in a number of ways. Firstly, Stutterheim has a fairly small population and
it is likely that a new retail facility or petrol station will have to attract the
31
December 2008
surrounding populations and transient market to ensure its sustainability. A new

development must also try and capture a large local market share.
The Stutterheim and Amahlathi populations are not wealthy, which means that
vehicle ownership levels will be lower than in affluent areas. It is expected that a
new petrol station will require support from the transient market and the local
commercial market for fuel sales as it is unlikely that the local population will be
able to sustain an additional filling station. The demand for fuel in Stutterheim is
examined in Chapter 5.
Wealth levels also have an influence on retail expenditure patterns and

preferences, which are explored further in Chapter 6.
32
December 2008
Chapter 5: Filling Station Feasibility
5.1 Introduction
This section of the report analyses the feasibility of establishing a new Filling
Station along the N6 at Stutterheim. This will be achieved by assessing all
demand and supply factors that relate to the establishment of a petrol filling
station at this site. Demand for a petrol filling station is determined by estimating
the number of fuel sales that will be drawn by the new facility. This section
outlines the various variables that will influence demand such as total vehicles,
levels of support for the garage and average fuel consumption. These will inform
the model used to investigate total potential demand.
This chapter is presented in terms of the following sections:
Supply profile
Demand profile
Net effective demand modelling
Development potential
5.2 Supply Profile
There are currently three existing petrol stations in Stutterheim as illustrated in

Figure 5.1.
All 3 stations are owner operated (i.e. do not pay rent to oil company) and have
been in existence for over 20 years. All three are less than 2 kilometres from the
proposed new filling station complex. BCN Motors and Bloms Motors are located
directly across from one another along the N6, which travels through Stutterheim.
Table 5.1 summarises key information about the existing stations.
Table 5.1: Petrol filling stations on Main Road/Street

Colour on Distance from Shared Traffic
Name Operator Figure 1.1
Proposed Site Stream
BCN Motors Engen Blue 1.6 km Yes
Stutterheim Garage Shell Orange 1.1 km Yes
Bloms Motors BP Green 1.5 km Yes
Source: Urban-Econ Eastern Cape, 2008
33
December 2008
Figure 5.1: Locality of Existing Petrol Stations in Stutterheim
Proposed
Filling Station
Complex Site
Table 5.2 shows the tank capacity and average fuel volumes (i.e. petrol and
diesel) that are sold by each of the three fuel retailers in Stutterheim.
Table 5.2 Average Monthly Volumes Sold1

Ave. Volume Sold
Station Name Tank Capacity (Litres)
p/Month (Litres)2
BCN Motors 97 000 250 000
Stutterheim Garage 83 000 200 100
Bloms Motors 64 000 102 500
Total 244 000 552 600
It is evident from table 5.2 that the existing stations in Stutterheim would only
need to fill their tanks between 1.6 and 2.6 times per month in order to meet
current demand for fuel, which is estimated to be in the region of 552 600 litres
per month for the whole town.
It is also evident that BCN Motors (i.e. Engen) sells the most fuel in Stutterheim
and that Bloms sells the least. BCN Motors is also the only station that pumps
fuel 24 hours a day, which may in part explain why this station sells more fuel.
1
Figures are derived from the average monthly fuel sales for the first half of 2008.
2
Obtained from official records provided by owners
34
December 2008
Table 5.3 below provides a summary of facilities and services for each of the
existing petrol filling stations situated in Stutterheim
Table 5.3 Petrol filling station supply facilities

Facilities Engen Shell BP
No. Petrol Pumps 3 5 3
No. Diesel Pumps 1 1 1
Car Wash facility No No No
Restaurant (i.e. Steers/Wimpy) No No No
Retail Facility Yes* Yes Yes*
Operating hours: Station 24 12 -14 12 - 14
Operating hours: Convenience Store 24 24 12 - 14
Next to shopping Store/Centre No Yes No
Car Service Station No Yes Yes
ATM No No No
*Note: Tuck shop and not fully fledged retail facility
Findings:
The Shell station has the most pumps available, while the BP and Engen
garages are the same size (despite this the Engen garage pumps the most
fuel).
None of the existing petrol stations offer a sit down restaurant and only the
Shell has a 24 hour retail facility (Two others have tuck shops). None of the
retail facilities is an accredited fuel company brand and are all less then 50m
in size.
None of the stations offer any car wash facilities, but two of the three have
service stations (i.e. workshops) on site.
Only the Engen garage operates 24 hours a day and only the Engen relies
solely on fuel sales to generate an income.
The Shell and BP garages rely heavily on the workshops operating from the
site to generate income. Each of these workshops is owned and operated by
the station owner themselves and they estimate that 50-60% of their profit
comes from the workshop (i.e. 40-50% from fuel sales).
The three stations in Stutterheim are considered to be small when viewed in
the context of an average South African Station. According to research
conducted with various fuel companies, a small urban filling station in a city
would pump in excess of 350 000 litres per month while a larger station such
as an Engen One-Stop or Shell Ultra City would supply in excess of 1 million
litres per month.
35
December 2008
5.3 Demand Profile
The total demand for fuel in Stutterheim is determined from the amount of fuel
sold to the local market together with the total sold to traffic moving through the
area (i.e. transient trade).
Dfs=f(lm ; lt)
Dfs=demand for a filling station
lm=fuel sold to local market
lt=fuel sold to transient market.
Section 5.3.1 illustrates how the fuel sold to the local market has been
determined, while section 5.3.2 illustrates how the fuel sold to the transient
market has been determined.3
5.3.1 Local Market
The demand for local market petrol is a function of the number of residential units
(i.e. households), vehicle ownership, average monthly fuel consumption and
percentage support for local filling station. This is presented in the following
function:4
Dlm=f(r; v; l; s)
Dlm=local market fuel demand
r=residential units (i.e. households)
v=vehicle ownership ratio
l=average monthly fuel consumption
s=support to Stutterheim Stations
Demand from local taxis and commercial vehicles have been included in the
transient market calculations due to data availability.
5.3.1.1 Size of the Local Market (r)
From the local market profile (Chapter 3) the number of households in

Stutterheim in 2007 was 6,470. This figure reflects only the urban residential
population of Stutterheim.
3
Important note: While local demand does comprise of households and businesses, the demand of the
local market in terms of taxis and commercial vehicles has been calculated in Section 5.4.1: Transient
Market because traffic counts were used to derive this demand and it was not possible to determine
which vehicles were local/transient from the traffic count.
4
Local demand calculations are most sensitive to changes in the support of local households for
Stutterheim stations compared to other local demand variables.
36
December 2008
5.3.1.2 Vehicle Ownership (v)
The local market survey conducted by Urban-Econ Eastern Cape in September

2008 indicates 56.6% of households (i.e. 3,688) in Stutterheim own at least one
vehicle.5 This is a relatively low ownership ratio, however considering the
consumer market profile defined in Chapter 3 as being predominantly unskilled
with high unemployment numbers and subsequent low household income, this
figure is realistic for a population such as Stutterheims.
5.3.1.3 Average Monthly Fuel Consumption (l)

2008 shows that 1st cars consume 117 litres of fuel a month and 2nd cars
consume 83 litres of fuel per month. This correlates with the findings of a national
household survey.6
5.3.1.4 Support for Existing Filling Stations (s)

2008 shows that only 34.6% of local residents primarily purchase fuel in
Stutterheim. Other preferred locations to purchase fuel include King Williams
Town, Queenstown, East London and Cathcart.
Some of the reasons provided by local residents as to why they do not purchase
the bulk of their fuel in Stutterheim include Stutterheim stations are very busy at
the end of the month, some residents work in nearby towns and fill up there and
residents fill up with petrol when they conduct other activities like shopping in
nearby towns.
5.3.1.5 Total Local Demand for Fuel
Table 5.4 shows how the demand for fuel from the local Stutterheim market was
calculated.
Table 5.4: Local Market Demand

Variable Value
Households (r) (Source: Quantec, 2008) 6,470
Vehicle ownership (v) (Source: Urban-Econ EC Survey, 2008) 3,688
Total 1st cars 2,545
Total 2nd cars 1,143
Average Monthly Fuel Consumption (Litres) (l) 392,614
(Source: Urban-Econ EC Survey, 2008) 117
5
This can be compared with the National Department of Roads and Transport database (June 2008) of
registered and unregistered vehicles in Stutterheim. The total is 4,506, which would mean 69% of
Stutterheim households own a vehicle, however these figures include people living outside
Stutterheim who register their vehicles in the town (Cathcart and Stutterheim are the only two
licensing offices in Amahlathi). The two sets of figures correlate with one another.
6
According to the National Household Driveway survey the average consumption of 1st cars is 120-
150 liters per month and 2nd cars consume 80-100 liters per month. These figures correlate with the
findings of the local market survey.
37
December 2008
1st car litres/month

1st car total litres 297,724
2nd car litres/month 83
2nd car total litres 94,890
Support (s) (Source: Urban-Econ EC Survey, 2008) 35%
Local Market Litres Demanded Total per Month 137,415
It has been estimated that the total demand for fuel in Stutterheim from the local
market is 137,415 litres per month.
5.3.2 Transient Market
The transient market in Stutterheim is defined as traffic moving through

Stutterheim. This includes all northbound and southbound traffic travelling along
the N6 as well as all eastbound and westbound traffic entering the N6 and R356
traffic intersection.
The demand for fuel in terms of transient trade is a function of the volumes of
petrol and diesel consumed by the transient market. This is presented in the
following function:7
Dtt=f(pv ; dv)
Dtt=demand for transient trade
pv=petrol consumption
dv=diesel consumption.
The demand for fuel by local taxis and commercial vehicles has been calculated in
this section as traffic count data was used to derive demand figures. The overall
demand for both petrol and diesel is determined by the following functions:
Petrol volumes
Dpv=f(v ; s ; af ; ad)
Dpv= demand for petrol volumes
v= vehicles (12/24 hour)
s= % support for Stutterheim Stations
af = average fill
ad= active days
Diesel volumes
Ddv=f(t ; s ; af; ad)
Ddv= demand for diesel volumes
v= vehicles (12/24 hours)
s= % support for Stutterheim Stations
af= average fill
ad= active days
7
Interception rates and average fill (particularly in the case of heavy vehicles) are noted as being the
most sensitive variables in calculating transient fuel demand.
38
December 2008
5.3.2.1 Total Vehicles (v)
This refers to the total number of vehicles, both light (Petrol) and heavy (Diesel)
that pass the proposed site for the filling station on an average day. The table
below shows the results of the traffic counts undertaken for one day in June 2008
with adjustments made for removing locals for the count.
In order to calculate an estimated total transient market vehicles traveling

through Stutterheim for one given day, it has been assumed that:
4 hours of peak traffic occur between 06h00 08h00 and 16h00 - 18h00
8 Hours of off-peak traffic occur between 08h00 and 16h00
50% of off-peak traffic past Stutterheim is local traffic in all directions except
for the small R346 (access road) which is all local traffic.
75% of morning peak traffic going towards East London and evening peak
traffic returning from East London is local traffic.
It has been assumed that 50% of traffic travelling on the R346 at all times is
local traffic.
All heavy vehicles passing through the intersection are transient.
All heavy vehicles accessing and existing the Ambulance Depot (R346 West)
are local
Traffic between 18h00 and 06h00 equates to 20% of traffic between 06h00
and 18h00 (Industry Average)
Given the above assumptions, Table 5.5 illustrates the total transient market
passing through Stutterheim per day.
Table 5.5 Total Transient Vehicles

N6 N6 R346 R346
Total
North South West East
Total light vehicles 690 1,647 0 773 3,110
Total heavy vehicles 250 384 0 149 811
(Source: Traffic Count, 2008)
5.3.2.2 Support for Stutterheim Stations (s)
The support for Stutterheim stations (i.e. interception rate) refers to the
percentage of the total transient traffic that currently utilise existing filling
stations in Stutterheim.
The interception rate for light vehicles has been derived from the market survey
conducted by Urban-Econ Eastern Cape in September 2008 in which 19% of the
people surveys indicated that they would stop in Stutterheim to put in fuel. It has
assumed that due to the close proximity of King Williams Town, only 5% of the
transient market moving along the R346 would put in fuel in Stutterheim.
The information obtained from local fuel station owners on the number of heavy
vehicles that use their stations on a daily basis, in addition to interviews with local
39
December 2008
businesses, have been used to determine the interception rate for heavy vehicles.
According to current owners, on a good day it is said that 12 heavy trucks would
fill up with fuel in all three stations, while on a quiet day only 3 might do. Many of
the large companies operating out of Stutterheim have their own fuel pumps on
site (e.g. ANCA, Rance Timbers, Grassdale and Stutt Quaries). Therefore an
average interception of 1% is used for heavy vehicles passing through
Stutterheim, given the traffic count figures.
Table 5.6: Support for Stutterheim Stations

N6 R346 R346
Type of Vehicles N6 North Total
South West East
Light Vehicles 19% 19% 0% 5% 11%
Heavy Vehicles 1.0% 1.0% 0.0% 1.0% 0.8%
5.3.2.3 Average Transient Market Fill (af)
The average fill refers to the average amount of petrol/diesel that is purchased
per vehicle stopping in Stutterheim. According to the market survey conducted by
Urban-Econ Eastern Cape in September 2008, the average fill for light vehicles in
Stutterheim is 36 litres and for heavy vehicles is 111 litres.8
5.3.2.4 Active Days (ad)
The number of active days per month is 30 days for light vehicles as this is the
average number of days a month and 22 days for heavy vehicles as this is the
average number of days that heavy vehicles will operate per month.
5.3.2.5 Total Transient Demand for Fuel
The tables below indicate the figures and variables used in calculating the total
fuel sales to the transient market within the study area. Distinction is be made
between the potential petrol sales to light vehicles and potential diesel sales to
heavy vehicles
Table 5.7 Petrol Sales (Light Vehicles)

Variable Value
Total light vehicles (v) (Source: Traffic Count, 2008) 3,110
Support for Stutterheim stations (s) (Source: Urban-Econ EC
11%
Survey, 2008)
# of support light vehicles 483
Average fill (litres) (l) (Source: Urban-Econ EC Survey, 2008) 36
Light vehicles petrol litres/day 17376
Active Days (ad) 30
Light vehicles Petrol Litres/month 521,284
8
36 litres is considered to be two thirds of the capacity of a medium sized family car (i.e. Toyota
Corolla) and 111 litres is just under half of the tank capacity of a standard four ton or larger truck.
40
December 2008
Table 5.8 Diesel Sales (Heavy Vehicles)

Variable Value
Total heavy vehicles (v) (Source: Traffic Count, 2008) 811
Support for Stutterheim stations (s) (Source: Urban-Econ
0.8%
EC Survey, 2008)
# of support heavy vehicles 8
Average fill (litres) (l) (Source: Urban-Econ EC Survey, 2008) 111
Heavy vehicles petrol litres/day 868
Active Days (ad) 22
Heavy vehicles Diesel Litres/month 26,054
It has been estimated that the total demand for fuel in Stutterheim from the
transient market is 547,338 litres per month. It is evident that most of this
demand currently comes from light vehicles travelling through Stutterheim, this
includes demand from local taxis who regularly fill up in Stutterheim. This is in
part due to the close proximity of Stutterheim to East London which is the
regions main point of destination and departure for heavy transport vehicles and
due to the fact that many local companies have their own pumps on site.
5.3.3 Total Demand Profile
Table 5.9 illustrates the total demand for fuel in Stutterheim, i.e. local and
transient demand, based on the data presented in Sections 5.3.1 and 5.3.2.
Table 5.9: Total Demand for Fuel in Stutterheim

Type of Demand Litres
Local Demand 137,415
Transient Demand 547,338
Total Demand 684,753
5.4 Net Effective Demand
Table 5.10 illustrates the net effective demand for fuel in Stutterheim, based on
the analysis presented in this chapter.
Table 5.10: Total Net Effective Demand for Fuel in Stutterheim (Litres)
Total fuel Demand 684,753
Total current Supply 552,600
Net Effective Demand 132,152
Given the above assumptions it is evident that there is additional demand for
132,152 litres of fuel per month in Stutterheim, which is currently not serviced by
the existing stations.
According to petrol station owners in Stutterheim they accumulatively pump on

average 552,600 litres of fuel per month. While this is the supply figure used in
41
December 2008
the model presented above, in reality the supply could be higher as all 3 stations
are currently not pumping at full capacity. The capacity would be much higher as
all stations would be equipped to receive far more deliveries of fuel per month.
The figure of 552,600 can also be viewed as an alternative demand figure if one
assumes that the petrol stations pump as much fuel as is demanded. Currently
they only pump 552,600 litres because only 552,600 are demanded. If demand
were to increase then the petrol stations would have the capacity to meet this
simply by requesting additional fuel deliveries per month.
5.5 Fuel Company Feedback
Qualitative interviews were held with BP, Shell and Engen to test the fuel
companys perceptions around the potential for the new filling station in
Stutterheim. The following summarises their inputs:
Fuel companies identify certain Capital Expenditure Injection Areas around

the South Africa where they consider financing the construction of new
stations where feasibility is considered high Stutterheim as a town is not
considered to be a Capex injection area.
Within these injection areas, feasibility for a new station is considered to be
good if:
The number of vehicles passing the proposed site exceeds 10 000
to 15 000 vehicles per day.
The station can be expected to pump in excess of 350 000 litres
per month
The forecourt over hang of the station is visible for 250 metres in
all directions.
If however a private investor were to develop a station themselves and simply
purchase fuel from a particular fuel company, they would not be required to
meet the above expectations, as this would be considered an individual risk of
the investor.
5.6 Freight Company and Transport Company Feedback
Qualitative interviews were held with logistics managers of eight freight/transport

companies (e.g. Stutterfords, DHL, Translux, Citiliner, etc.) regarding Stutterheim
as a potential location for a new truck stop and filling station that their fleets
might consider utilising.
The majority of companies interviewed belong to either e-fuel or specific fuel

company card systems i.e. they receive through negotiations slightly
discounted diesel rates at participating filling stations around the country.
Therefore their trucks stop where it is convenient making location the deciding
factor. Unanimous concerns were raised that Stutterheim is too close to East
London which is the regions main point of departure/destination.
42
December 2008
Most indicated that a proposed station would have to offer high incentives for
their vehicles to stop there (i.e. accept profit margins of 2% to 3% less than
competitors).
Translux & Citiliner indicated that their busses only stop for five minutes in
Stutterheim to pick-up and drop-off passengers because the town is so close
to East London. No passengers are currently allowed off bus when they stop in
Stutterheim. They indicated it was unlikely that if a new station was to open in
Stutterheim that they would purchase fuel here or consider it a pit-stop for
their passengers due to the close proximity to East London.
5.7 Development Potential
It has been shown that demand for fuel in Stutterheim can be considered in two
ways. Demand modelling has shown that optimistically, there is a net effective
demand for 132,152 litres per month, but could be as low as zero demand if it is
assumed that the current stations pump what is currently demanded in the town.
Local fuel demand (from both households and businesses) is quite low and
existing local petrol stations are heavily reliant on the transient market. At
present none of the existing stations are pumping at full capacity and none pump
the 350,000 litre volume per month which is considered to be a successful small
station output by fuel companies.
Fuel companies have not identified Stutterheim as a capital injection area as the
market is too small at present and transport and bus companies appear unlikely
to significantly change their current operations if a new Petro Park is built in
Stutterheim.
At present there is insufficient demand for a new filling station in Stutterheim

based on new growth in the area. Given the above, if a new filling station is built
in Stutterheim it would likely be dependent on capturing a significant market
share from the existing filling stations in town.
43
December 2008
Chapter 6: Retail Feasibility
6.1 Introduction
This chapter provides an assessment of the retail potential in Stutterheim given

the current retail supply and retail expenditure patterns of the market. This
chapter is therefore presented in terms of the following sections:
Supply profile
Demand profile
Net effective demand modelling
6.2 Supply Profile
Table 6.1 provides an indication of the formal retail supply in Stutterheim.1
Table 6.1: Stutterheim Retail Inventory

Retailer Type of Retail
AMAHLATHI SPAR Monthly and Top Up Groceries
AMATOLA SPAR Monthly and Top Up Groceries
TRIPLE STREAMS Monthly and Top Up Groceries
STUTTERHEIM BUTCHERY Monthly and Top Up Groceries
MEAT 'N CHICKEN Monthly and Top Up Groceries
HARVEYS PTY LTD SUPERMARKET Monthly and Top Up Groceries
WILLOWVALE BUTCHERY Monthly and Top Up Groceries
KRAUSE COUNTRY MEATS Monthly and Top Up Groceries
AMATOLA BAKERY Monthly and Top Up Groceries
JOE'S FRUIT AND VEG Monthly and Top Up Groceries
RUBELLA CASH STORE Monthly and Top Up Groceries
SOUTHERN FRIED CHICKEN Restaurants & take-aways
BUDDY BURGER Restaurants & take-aways
STUTTERHEIM COUNTRY CLUB Restaurants & take-aways
BARRONE SPORTS PUB & RESTAURANT Restaurants & take-aways
IMPRESSIONS COFFEE SHOP Restaurants & take-aways
JOE'S CAF TAKEAWAYS Restaurants & take-aways
BIG DADDY LIQUOR STORE (PRESTONS) Speciality goods
SPARKS LIQUORS Speciality goods
ISIDENGE BOTTLE STORE Speciality goods
SCOONIE LIQUORE STORE Speciality goods
MAGEBHEZA PRINTERS & STATIONERS Speciality goods
GIFTS AND FABRICS Speciality goods
HOGSBACK CLOTHING Clothing, shoes & accessories
TAGS CLOTHING Clothing, shoes & accessories
PEP STORES Clothing, shoes & accessories
MADLOMO CLOTHING Clothing, shoes & accessories
COLLETS PHARMACY Personal care
1
This list is not intended to be a comprehensive audit of retail facilities (i.e. retail facilities in the
surrounding townships have not been included); rather the list is intended to provide an indication of
the type of retail available in Stutterheim.
44
December 2008
TOWN TALK Furniture & Homeware

LEWIS STORES Furniture & Homeware
SAVELS FURNITURE Furniture & Homeware
STUTT DRY CLEANERS Cleaning services
BOARDMANS HARDWARE (BUILD-IT) Hardware goods
MR VIDEO Leisure & entertainment
ESCAPE Leisure & entertainment
Findings:
There are limited national chains in Stutterheim; some of these include Spar,
Kwik-Spar, Lewis, Savels, Town Talk and Prestons Liquor and Pep.
There are no national chain restaurants or takeaways in Stutterheim.
Most of the retailers are grocery stores, including two Spars
Most of the retailers in the category of speciality goods are liquor stores, there
are limited other speciality stores in town
There are very few personal care, hardware, cleaning services and leisure and
entertainment retailers in Stutterheim.
The types of retailers in Stutterheim reflect that the local consumer market is
not wealthy or large
Figure 6.1 provides an indication of the type of retail available in Stutterheim.
Figure 6.1: Retailers in Stutterheim
45
December 2008
Table 6.2 provides an overview of the supply of retail in terms of Gross Leasable
Area (GLA) per retail category.
Table 6.2 Stutterheim Retail Supply (m2)

Retail Type Current Supply (m)
Monthly Groceries 3,350
Clothing, shoes & accessories 525
600
Hardware goods 300
Personal care 150
Cleaning services 75
Restaurants & take-aways 800
Leisure & entertainment 120
Speciality goods 900
Total Supply 6,820m
It is evident that all of the retailers in Stutterheim are relatively small in size. The
largest retailer is estimated to be 400m2.
The supply of retail is indicative of the type of consumer market in the area,
namely a small market with emphasis of basic food stuffs and little evidence of
luxury and personal care stores. A population with relatively limited spending
power is reflected in the local consumer profile (chapter 4) which determined that
retail expenditure is expected to make up a large portion of households annual
income.
6.3.1 Retail Demand
Retail demand is a function of population size, household income and retail

expenditure patterns of the current consumer market in Stutterheim. Expenditure
patterns take into account the population profile of the town. Demand estimations
are calculated using population and income growth trends.
The retail demand estimations provide for leakage and injection factors. For
example, consumers in Stutterheim will purchase a percentage of their goods
outside of the town, either because there is more variety elsewhere or prices
outside of Stutterheim might be cheaper for certain goods. This is considered
leakage. On the other hand, many rural consumers travel to Stutterheim to
purchase some of their wares. This is considered an injection into the Stutterheim
retail market. Because demand estimations have considered both injections and
leakages, they are considered conservative and realistic.
Table 6.3 provides an indication of what proportion of the local consumer market
chooses to purchase certain goods outside of Stutterheim. These results were
derived from the local market survey conducted in Stutterheim and adjusted
according to the estimated injection of non-Stutterheim residents coming to shop
in the town.
46
December 2008
Figure 6.3 Retail Leakage Factor

Retail Type Injection/Leakage
Monthly groceries -5.6%
Top up groceries -4.4%
Clothing, shoes & accessories -18.8%
Furniture & Homeware -3.1%
Hardware goods 8.7%
Personal care 1.9%
Cleaning services (e.g. laundromat) -3.1%
Restaurants & take-aways -12.5%
Leisure & entertainment -11.3%
Speciality goods 3.1%
(Source: Urban-Econ EC Survey, 2008)
The above figures make sense when one considers the retail supply profile of
Stutterheim. Most people will purchase their monthly groceries at larger national
retailers at month end outside of Stutterheim, but most people buy their top-up
groceries more frequently in town.
In the same manner, people go outside of Stutterheim primarily to purchase

clothes, shoes and accessories, to eat out at restaurants and for leisure and
entertainment purposes. This is because there are limited retailers in Stutterheim
catering for these products.
Table 6.4 presents estimations for potential retail expenditure per retail product
type in the Stutterheim market for the years 2008, 2010 and 2012.
Table 6.4: Retail Expenditure2

2008 2010 2012
Retail Type
(RAND/ANNUM) (RAND/ANNUM) (RAND/ANNUM)
Monthly groceries R 58,923,195 R 67,938,650 R 78,333,500
Top-up groceries R 10,719,187 R 12,359,260 R 14,250,270
Clothing, shoes,
R 22,430,619 R 25,862,582 R 29,819,647
accessories
Furniture/Homeware R 12,602,079 R 14,530,241 R 16,753,418
Hardware goods R 3,365,880 R 3,880,872 R 4,474,659
Personal care R 7,921,512 R 9,133,531 R 10,530,993
Cleaning services R 1,200,198 R 1,383,832 R 1,595,564
Takeaway/Restaurant R 5,803,874 R 6,691,887 R 7,715,769
Entertainment R 3,064,609 R 3,533,504 R 4,074,143
Speciality goods R 2,680,000 R 3,090,050 R 3,562,838
TOTAL R 128,711,153 R 148,404,409 R 171,110,801
From Table 6.4 it can be derived that currently the local market in Stutterheim
spends about 46% of its retail expenditure on monthly/bulk groceries. This figure
2
Function of population growth rates, numbers of households, annual household income, disposable income (i.e.
after tax), inflation and leakage/injection rates per product. Base year is 2007, survey data is from 2008.
47
December 2008
is higher than national averages however it is typical of a lower income earning

population such as Stutterheims.
The above expenditure patterns translate into demand for retail floor space in the
Stutterheim market as summarised in Table 6.5.
Table 6.5: Retail Floor Space Demand

Retail Type 2008 (m2GLA) 2010 (m2GLA) 2012 (m2GLA)
Monthly groceries 3,275 3,776 4,354
Top-up groceries 596 687 792
Clothing, shoes,
1,194 1,376 1,587
accessories
Furniture/Homeware 1,042 1,201 1,385
Hardware goods 179 207 238
Personal care 322 371 428
Cleaning services 99 114 132
Takeaways/Restaurants 342 394 454
Entertainment 1,305 1,504 1,734
Speciality goods 205 237 273
TOTAL 8,559 m2 9,868 m2 11,378 m2
It is calculated that the current demand for retail in Stutterheim is 8,559 m in

2008. This is expected to increase by 2,818 m in the next five years.
6.3.2 Net Effective Demand Estimations
Net effective demand represents retail demand that has been adjusted for supply
in the primary market i.e. Demand measured on the basis of retail expenditure
less the current market supply measured of retail in square metres.
Table 6.7 provides the net effective demand for Stutterheim for the years 2008,
2010 and 2012.
Table 6.6: Net Effective Retail Demand

NED 2008 (m2GLA) NED 2010 (m2GLA) NED 2012 (m2GLA)
1,739 3,048 4,558
The modeling results illustrate that there is an undersupply of retail space in

Stutterheim at present, equaling 1,739m2 in 2008. This undersupply is estimated
to increase to 4,558m2 by 2012.
6.3.3 Development Potential
Net effective demand results together with survey results indicate that clothing
stores, personal care stores, restaurants and grocery stores are in highest
demand in Stutterheim. Consumers are particularly enthusiastic to see an
increase in retail variety for restaurants, clothing stores and groceries. It was
revealed that local consumers would like to see an increase in the number of
48
December 2008
national chain stores that operate from Stutterheim. The total net effective
demand for retail is currently 1739 m2.
Consumers have acknowledged that they would like to see another brand of
grocery store in Stutterheim such as a Shoprite or a Pick n Pay, as currently the
only national options are two Spar stores. People in Stutterheim want to see a
national restaurant or takeaway introduced to the town such as KFC or Nandos,
the town currently offers only local restaurants and fast food outlets. Currently
people need to travel to larger town to purchase most of their clothes; the
population would like to see a national clothing store such as Jet or Edgars in
Stutterheim.
Table 6.7 indicates the preferred brands of local consumers per retail category.
Most of the brands identified are generally associated with a lower income
market, which characterises the Stutterheim and surrounding populations.
Table 6.7 Retail Preference Demand

Retail Type Choice 1 Retailer Choice 2 Retailer
Groceries Shoprite Pick n Pay
Clothing, shoes & accessories Jet Edgars
Furniture & Homeware Ellerines Joshua Door
Hardware goods Buildrite Builders Express
Personal care Clicks Dis-Chem
Cleaning services n/a n/a
Restaurants & take-away KFC Nandos
Leisure & entertainment Mr Video Musica
Specialty goods Game Total Sports
In conclusion, it has been shown that there is potential to introduce a variety of

new retail in Stutterheim taking into consideration the brand preferences listed in
Table 6.7.
The type of retail provided at the PetroPort should be considered in light of other
possible retail developments being planned in Stutterheim (e.g. Mlungisi
Commercial Park). Due to the location of the PetroPort along the N6 retail shops
such as a grocery store, restaurant and take-away may be more appropriate at
that location while other retail developments could focus on clothing, personal
care items, etc.
6.4 Retail Financial Feasibility
The following section considers if a retail development of 2000m would be

financially feasible in Stutterheim. The feasibility of any small retail development
considered to be a convenience centre is dependent on several key requirements:
49
December 2008
A permanent anchor tenant is vital to the success of a small convenience

centre, as the majority of consumers will be drawn to the centre because of
this tenant.
A small centre needs to meet the immediate needs of the local population
which makes variety especially important.
Usually convenience centres are located in close proximity to a residential area
and/or a busy traffic intersection.
Convenience centres need most/all of their shops to operate for longer hours
compared to conventional retail, so that they can meet the needs of
consumers after hours.
The following function will be used in this study to determine the financial
feasibility of a new retail development:
FF=f(Cpx;Opx;Rs)
Cpx= Annual Capital Expenditure repayments
Opx = Annual Operational Costs
Rs = Leasable Retail Space
The following assumptions are made in determining the feasibility of establishing

a new convenience retail centre in Stutterheim:
A participatory bond will be accessed to finance the construction. 70% of the

capital will be from the bond and 30% from the developers own contribution.
Interest on the repayment will be at prime (taken at an average of 14%) for a
period of 10 years.
The value of the lease payment is assumed to be equal to the annual value of
current rates and taxes payable to the municipality for the given value of the
property.
Occupancy rates for the period of 10 years will be assumed to be 90% with a
total leasable retail area of 2,000m.
Table 6.8 lists the estimated values for the different retail feasibility variables
used in this study.
Table 6.8: Retail Feasibility Variables

Variable Value
Initial Capital Expenditure Cost R11,000,000
Value of Loan (70% Participatory Bond) R7,700,000
Payment Period 10 years
Interest Rate 14%
Annual Operational Expenditure R691,350
Annual Expected Rate of Return (AERR) 15%
Leasable Retail Space 2000m
Assumed Occupancy Rates 90%
Rental Rates per m per month R129.83
50
December 2008
The following factors could influence the required rental income of the retail
complex for the first 10 years:
Obtaining a loan at an interest rate of less than prime (i.e. development loan).
A loan might be taken out over a longer time period increasing the total
amount payable in the long term, but reducing annual payments. (However
this is not recommended).
Results indicate that for the first 10 years of retail operation the developer of this
convenience centre will require an average monthly rental income of R129.83 for
retail space in the centre should they want an annual expected rate of return of
15%. Should however the developer be prepared to break even for the first
decade and only capitalise after the repayment period (i.e. AERR = 0%), they
would only require an average monthly rental income of R112.89.
Without knowing how the project will be packaged and financed it is very difficult
to provide accurate fees and estimates.
To put into perspective the feasibility of generating such a rental income from a
retail centre in Stutterheim, it is important to consider average rental amounts of
retail centres in other similarly sized towns or nearby towns.
Table 6.9 provides the average monthly rental rates for shopping centres in
nearby areas or similarly sized towns in South Africa.
Table 6.9 Centres of Comparison: Rental Returns

Variable Value p/month for 50m
East London, Balfour Park R85m
Vredenburg (Western Cape) R82m
Polokwane Market Street R61m
King Williams Town, Stone Towers R135m
King Williams Town, Market Square R120m
Table 6.9 reflects that in smaller towns the average monthly rental for retail
shops of 50m varies between R60m to R135m. It should be noted that shops
larger than 50m will likely pay less per m than amounts indicated above. These
figures suggest that a new centre in Stutterheim would require relatively high
rental returns (R129.83) to make the development feasible. These indications can
only serve as a guide as a potential developer would conduct their own detailed
feasibility study before investing in such a project.
51
December 2008
Chapter 7: Development Concept
7.1 Introduction
This chapter presents the proposed development concept for the Stutterheim
Petro Park, based on the findings of the market research conducted to test the
feasibility of developing a new filling station with associated retail and tourism
arts and crafts centre in Stutterheim.
7.2 Potential for a Petro Park in Stutterheim
Two components of the proposed Stutterheim Petro Park were researched,

namely the:
Filling station complex;

Retail Centre with a tourism arts and crafts centre
These two economic activities are expected to compliment each other if built as a
part of the same development. The transient market may be attracted to the
filling station (over the others in Stutterheim) if retail and tourism related
activities are located in close proximity to the station and the local market may
purchase fuel at the station while they are purchasing retail products.
Demand modelling has shown that there is a demand of roughly 1,800m2 of

additional retail in Stutterheim in 2008; this will grow to 3,000m2 in 2010. The
market research has also shown that a tourism information office could add value
to the development, offering arts and crafts for sale could potentially attract a
larger segment of the tourism market to stop at the site.1
For this reason, it is recommended that the first phase of retail development
comprise of 1,900m2 GLA (i.e. a local convenience centre), with additional space
for a tourism information office and arts and crafts shop. It is recognised that
additional retail space may be required in future and the detailed design of the
facility should take future expansion into account.
Demand modelling for fuel has shown that optimistically, there is a net effective
demand for 132,152 litres per month in Stutterheim, but this could be as low as
zero if one assumes that the existing petrol stations pump according to demand.
At present some vehicles, particularly large trucks and buses, find it difficult to
obtain fuel in Stutterheim because of the size and layout of existing stations.
There is potential for the Petro Park to capture some of this latent potential,
although other factors also influence the decision to purchase fuel in Stutterheim.
1
eScape the recently re-branded tourism information centre has shown particular interest in
relocating to a site on the N6 highway in order to attract the attention of the transient market moving
through the area. It is currently located in Hill Street a far distance from the towns main through
route. Along with ASPIRE they have identified the Petro Park as an ideal location for the establishment
of a new tourist information centre with associated arts and crafts displays/retail.
52
December 2008
At present there is therefore insufficient demand for a new filling station in

Stutterheim based new growth in the area. If a new filling station is built in
Stutterheim it would be dependent on capturing a significant market share from
the existing filling stations in town. This situation may change in future,
depending on the rate at which Stutterheim grows.
A new filling station in Stutterheim should comprise of the following:
24 hour Service
Four to Six Mixed Petrol/Diesel Pumps (Light vehicle access)
Separate Diesel Pump (Heavy vehicle access)
Convenient truck access2
Convenience Store & ATM facility
Car wash3
Ablution facilities
Sufficient parking
7.3 Synthesis
The proposed Amahlathi Petro Park development is a mixed use development

mainly comprising of a filling station, retail and tourism with arts and crafts
centre. The table below presents the different components of the development
with estimated sizes.4 These have been used to model the potential economic
impact of the Petro Park in Chapter 8.

Filling Station
Car Wash 60m
Infrastructure
2
This could potentially increase the demand for fuel in Stutterheim as larger trucks cannot easily fill
up and stop-off at existing stations as access is restricted, being so close to the CBD.
3
The demand for a car wash did not come out strongly in the surveys conducted, however the client
requested that the car wash be included in the development concept and impact modelling. A car
wash would compliment the other proposed facilities and none of the 3 existing filling stations in
Stutterheim have a car wash.
4
These are indicative sizes and will be confirmed when the detailed design and layout of the facility is
completed.
53
December 2008
Chapter 8: Economic Impact Assessment

8.1 Introduction
The purpose of this chapter is to present the economic impact that the proposed
Amahlathi Petro Park complex is anticipated to have on the regional economy.
These outcomes will be incorporated into the Environmental Impact Assessment
process that is currently being completed.
The anticipated economic impact is quantified in terms of 1) value added or gross

geographic product (GGP) 2) business output or sales volumes 3) employment
opportunities 4) government revenue 5) impact on municipal income and 6) the
impact on existing petrol stations in Stutterheim. These measures can be an
indication of improvement in the economic well being of the local community. 1
Two alternatives are presented in this chapter, as there is currently limited

demand for another petrol station in Stutterheim; the first alternative models the
whole Petro Park complex (i.e. filling station with retail and tourism, arts and
crafts centre) while the second alternative considers the impact of the retail and
tourism complex excluding the filling station.
The economic impacts presented in this chapter should be considered in the

context of the local economic and population profiles presented in Chapters Two
and Three of this report respectively.
8.2 Current Status of the Site
In the prefeasibility study conducted by Nzelenzele Preston and Medcalf, 2008

two sites were assessed to determine the ideal location for the proposed
development (Refer to Map 8.1 on following page). The study recommended that
Site A would be more suitable for the development because of various factors
thus this chapter only considers the economic impacts associated with the
construction and operation of the development on Site A.2
According to the Amahlathi Local Municipality, to whom Site A currently belongs,

they have been approached in the recent past from several private investors who
have expressed a desire to purchase and/or lease the land in order to develop a
residential or retail complex. This reflects that there is a general interest for
future development on the site by the private sector.
1
Refer to Annexure 1 for a comprehensive description of the Economic Impact Assessment modelling
process.
2
The economic impact of the proposed development on Site B is anticipated to be almost identical to
that of Site A.
54
December 2008
Figure 8.1 indicates the location of both Sites A and B.
Figure 8.1: Location of Site A and Site B
Source: Nzelenzele Preston and Medcalf, 2008
The following characteristics describe the current status of the proposed site (Site
A) for the Petro Park Development.
The site is owned by the Amahlathi Local Municipality and the intention is for
the land to be leased by means of a negotiated long-term lease agreement
with the municipality.
Soil tests reveal the site is geotechnical suitable for the development and
placement of fuel storage tanks.
A storm water detention facility will need to be constructed on site to control
storm water run-off.
There is suitable water supply connection to the site via a 110mm water main
in the north western corner of the site.
A new sanitation facility will need to be constructed within the building lines of
the adjacent ambulance depot.
The site is gently sloping from North to South in some places, while relatively
flat in others making it suitable for new development.
Accessibility to the site will be through a newly developed double lane traffic
circle on the N6 highway adjacent to the site and west of the existing R346
intersection.
55
December 2008
8.3 Description of Development
The proposed Amahlathi Petro Park development is a mixed use development

mainly comprising of a filling station, retail and tourism with arts and crafts
centre. The preliminary design of the development encompasses:

Filling Station
Car Wash 60m
Infrastructure
8.4 Assumptions and Cost Estimates
The following section describes the various capital expenditure and operational
expenditure assumptions made in modelling the impact of the proposed
development.3
8.4.1 Construction Phase Assumptions
The construction cost assumptions presented for this development are reflective
of current 2008 values. It was assumed that the majority of construction workers
particularly unskilled and semiskilled will be residing on site.
It is assumed that the total capital expenditure required for the filling station and
retail development will total R18,1 million and R12,95 million excluding the filling
station, car wash, convenience shop and toilets. This excludes the cost to
purchase land as it is assumed that the land will be leased to the developer. It is
important to note that these assumptions are preliminary and considered to be as
realistic as possible given the available information regarding the project. Certain
deviations from these assumptions are possible when the detailed design is
completed.
3
Detailed costings have not yet been done for the proposed development by a Quantity Surveyor or
Engineer. For this reason CAPEX and OPEX assumptions were made and approved by ASPIRE.
56
December 2008
The capital expenditure assumptions are provided in Table 8.1.
Table 8.1 Estimated Capital Investment
Capital Expenditure Size (m) Cost excl VAT
Retail and Tourism Centre:

Tourism Office 100m R 550,000
Retail centre 1900m R 10,450,000
Play park (outside) 150m R 150,000
Filling Station:
Car Wash 60m R400,000
Filling Station 500m R 3,840,000
Convenience Shop 180m R 990,000
Infrastructure:
Services/Paving/Roads4 - R1,800,000
Alternative 1: Total CAPEX Costs R 18,180,000
Alternative 2: Total CAPEX Costs,
excluding Filling Station R 12,950,000
8.4.2 Operational Phase Assumptions
It is estimated that once all commercial components of the proposed

development are complete and reach full operation the total annual operational
expenditure will be approximately R17.042 million5.
Table 8.2 provides information on the estimated cost of sales of the Petro Park.
Table 8.2: Estimated Direct Operational Expenditure
Operational Expenditure Size (m) Cost ex VAT

Tourism Office 100m R250,000
Retail centre 1900m R13,300,000
Play park (outside) 150m R0
Filling Station:
Car Wash 60m R780,000
Filling Station 500m R1,834,560
Convenience Shop 180m R877,500
Maintenance: - R1,373,760
Alternative 1: Total OPEX Costs R17,042,060
Alternative 2: Total OPEX Costs,
excluding Filling Station R14,135,000
4
This cost includes storm water detention and sewerage facilities.
5
This OPEX figure does not account for expenditure of municipal rates and taxes (should the land be
purchased by the developer) nor does it account for the possible annual lease amount to be paid to
the municipality as this amount could not be estimated.
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December 2008
Table 8.3: Total Labour Expenditure

Labour OPEX Permanent Cost/ annum
Alternative 1
Highly skilled 8 R 2,600,000
Skilled 15 R 1,852,500
Semi- & unskilled 74 R 2,501,200
Total Alternative 1 97 R 6,953,700
Alternative 2
Highly skilled 6 R 1,950,000
Skilled 11 R 1,358,500
Semi- & unskilled 50 R 1,690,000
Total Alternative 2 67 R 4,998,500
The following assumptions were used estimate annual salaries per skill level
(including 13th check):
Highly skilled R325,000

Skilled R123,500
Semiskilled/unskilled R33,800
8.5 Construction Phase Impact Assessment
The following section describes the direct and indirect economic impact of the
construction of the proposed Petro Park on the local and regional economies. The
following should be noted when interpreting the following tables:
Tables 8.4-8.7 refer to the direct, indirect and total economic impacts of the
construction phase of the proposed development (i.e. excluding the
operational impacts).
The construction phase direct and indirect impacts are once off impacts that
will occur for the duration of the construction of the development.
8.5.1 Increase in New Business Sales
The construction of the Amahlathi Petro Park will involve site and infrastructure
development, building construction, installation of machinery and equipment,
landscaping, and other business activities related to the construction of the
proposed development. This would create a positive impact on the local and
regional economies, as the demand for products and services used in construction
will create new business sales.
Table 8.4 Impact on New Business Sales

Direct Impact Indirect Impact Total Impact
Tourism Office R 643,000 R 1,096,000 R 643,000
Retail centre R 12,210,000 R 20,827,000 R 33,037,000
Play park (outside) R 175,000 R 299,000 R 474,000
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December 2008
Filling Station:
Convenience Shop R 1,157,000 R 1,973,000 R 3,130,000
Car Wash R 467,000 R 798,000 R 1,265,000
Filling Station R 5,560,000 R 4,918,000 R 10,478,000
Infrastructure:
Services/Paving/Roads R 2,103,000 R 3,588,000 R 5,691,000
Total Alternative 1 R 22,315,000 R 33,499,000 R 55,814,000
Through the direct impact, the proposed project is set to generate R22,3 million
of new business sales (2008 prices, excl. VAT). Furthermore, through the spin-off
effects arising from the increased demand for goods and services of sectors
supporting the development of Amahlathi Petro Park, production during the same
period will increase by an additional R33,5 million. In total, the Amahlathi Petro
Park Development should increase new business sales by R55,8 million during the
construction period. Should the filling station not be constructed, total new
business sales as a result of construction will amount to approximately R41
million.
Impact: Increase in new business sales during construction

The impact is direct and indirect and is generated
through capital expenditure that shocks the
Nature economy. It results in an increase in economic
activities of directly and indirectly affected
businesses.
Status Positive
Extent National
Duration Short term
Intensity Medium
Probability Highly Probable
Degree of confidence Medium
Significance (no Medium
mitigation)
In order to optimise the stimulation of the economy
through direct and indirect effects, the following
should be applied where possible:
Mitigation
Procure construction materials, goods, and
products from local suppliers if feasible.
Employ local contractors where possible.
Significance (with Medium
mitigation)
8.5.2 Increase in GGP
Along with the increase in new business sales, the GGP regionally and nationally
will grow. The GGP is the total value added to a region as a result of a capital
investment such as this.
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December 2008
Table 8.5: Increase in GGP

Tourism Office R 88,000 R 230,000 R 318,000
Play park (outside) R 24,000 R 63,000 R 87,000
Filling Station:
Convenience Shop R 158,000 R 415,000 R 573,000
Car Wash R 64,000 R 167,000 R 231,000
Filling Station R 763,000 R 1,150,000 R 1,913,000
Infrastructure:
Services/Paving/Roads R 288,000 R 753,000 R 1,041,000
The development of the Amahlathi Petro Park will directly increase the regions
GGP by approximately R3 million, but could have a total impact of over R10
million. If the filling station is not developed then the total impact is expected to
be R7,5 million.
Impact: Increase in GGP during Construction

through capital expenditure that shocks the economy.
Nature
It results in an increase in economic activities of
directly and indirectly affected businesses.
Status Positive
Extent National
Duration Short term
Intensity Medium
Degree of confidence High
Significance (no
mitigation) Medium
To increase the positive impacts on the local economy
Mitigation
employ local companies and suppliers where possible.
Significance (with
mitigation) Medium
8.5.3 Impact on Employment
Table 8.6 provides information on the employment opportunities that are

expected to be generated during the construction of the Amahlathi Petro Park.
Table 8.6: Impact on Employment

Tourism Office 3 2 5
Retail centre 52 39 91
Play park (outside) 1 0 1
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December 2008
Filling Station:
Convenience Shop 5 4 9
Car Wash 2 1 3
Filling Station 7 11 18
Infrastructure:
Services/Paving/Roads 9 7 16
Total Alternative 1 79 64 143
The construction of the new development will create about 79 direct employment
opportunities for the construction workers and professionals involved in the
development. The indirect employment positions created as a result of
construction are likely to be both local positions and positions created outside of
the municipality, this dependent on the number of local products sourced as
inputs for the developments construction. A total of 143 employment
opportunities are expected to be created for the given construction period if the
entire complex is built, and 113 will be created if the filling station is not built.
This is particularly relevant to the unemployed project-affected people who are

within the working age, but who do not work due to the inability to find work. The
current unemployment level in Amahlathi stands at a high 31%. It is expected
that the proposed development will assist in decreasing the unemployment level
in the area, although this positive impact will only be felt in the short term.
Workers and particularly those who are characterised as unskilled or semiskilled
will benefit from the employment by acquiring new skills and improving their
ability to earn an income after the project or their tasks are complete.
Impact: Employment during Construction

It results in an increase in economic activities of
Nature
directly and indirectly affected businesses, which
subsequently leads to the creation of new
employment opportunities.
Status Positive
Extent National
Duration Short term
Intensity Medium
Probability Probable
Significance (no
mitigation) Medium
The following is recommended to enhance the benefits
of the created employment in the local area where
feasible:
Employ labour-intensive methods in construction.
Mitigation
Employ local residents and communities, where
possible.
Sub-contract to local construction companies,
where possible.
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December 2008
Utilise local suppliers, where possible.

Significance (with
mitigation) Medium
8.5.4 Government Revenue Impact
As a result of the construction of the Amahlathi Petro Park there will be both
direct and indirect contributions of various forms of tax generated by government
for the period of construction. Table 8.7 provides the total government revenue
created for construction.
Table 8.7: Government Revenue Impact

Total Alternative 2 R 847,336 R 1,445,360 R 2,292,696
The total amount of tax generated for the construction period is expected to be
R3,1 million. Should the filling station not be constructed total, tax generated is
expected to be 26% lower over 12 month period of construction.
Impact: Government Revenue during Construction

Nature
It results in an increase in taxes paid by all companies
involved in the construction of the development.
Status Positive
Extent National
Duration Short term
Intensity Medium
Significance (no
mitigation) Medium
Mitigation n/a
Significance (with
mitigation) Medium
8.6 Operational Economic Impacts
The following section describes economic impacts that would be observed during
the operational phase of the project. Unlike capital expenditure impacts which are
short term, these impacts are assumed to be sustainable and long-term provided
the development is fully functional. The figures therefore reflect annual impacts
that will be experienced during each year of operation.
8.6.1 Increase in New Business Sales
As indicated in Table 8.8, it is anticipated that the proposed Petro Park will
generate approximately R47,9 million of new business sales per annum.
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December 2008
Table 8.8: Increase in New Business Sales

Filling Station:
Filling Station6 R 2,235,000 R 2,539,000 R 4,774,000
Car Wash R 950,000 R 1,079,000 R 2,029,000
Convenience Shop R 1,069,000 R 1,214,000 R 2,283,000
Management R 1,707,000 R 1,744,000 R 3,451,000
About two thirds of new business sales are expected to be generated by retail
components alone within the Petro Park, this amounts to R15,131 million of the
total R22,514 generated by the whole Petro Park.
The operation of the Petro Park will also create additional demand for services
and goods that are required to maintain its operations, which could result in the
generation of new business sales in the local Amahlathi municipality; however
most products supplied to the development are expected to come from
businesses outside of the local municipality. The local businesses that will be
expected to benefit from this development in this case will include:
Food and beverage manufacturing industries

Local Craft Producers
Local Tourism Products (i.e. Guesthouses, Bed and Breakfasts, Museums, as
well as other local projects such as Mlungisi Commercial Park and the
Woodhouse project etc.)
Through indirect effects, business will experience an increase in annual sales by

an additional R25,4 million.
Impact: Increase in new business sales during operation

The impact is generated through annual operating
expenditure of the commercial components of the
proposed development. They stimulate economic
Nature
activities of directly and indirectly affected businesses,
which subsequently leads to the creation of new
business sales.
Status Positive
Extent National
Duration Long term
Intensity Medium
Probability Highly probable
Significance (no Medium
6
Turnover of filling station is calculated assuming that the station will pump on average 350 000 litres
of fuel per month.
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December 2008
mitigation)
The Petro Park should be encouraged to procure
materials, goods and products required for the
Mitigation
operation of their businesses from local suppliers
where possible.
Significance (with
mitigation) Medium
8.6.2 Impact on GGP
When operational, the proposed development will generate approximately R13,9

million in value adding.
Table 8.9: Impact on GGP

Direct Indirect Total Impact
Impact Impact
Filling Station Component
Filling Station R 905,000 R 473,000 R 1,378,000
Car Wash R 385,000 R 201,000 R 586 ,000
Convenience Shop R 433,000 R 226,000 R 659,000
Management R 785,000 R 307,000 R 1,092,000
The 2007 GGP of Amahlathi stands at approximately R1 billion, thus the operation
of such a development in 2008 would have the potential to increase the
municipalitys GGP by roughly 1%.
Impact: Impact on GGP during Operation

The impact is generated through annual operating
expenditure of the commercial components of the
proposed development. They stimulate economic
Nature
activities of directly and indirectly affected businesses,
which subsequently leads to the generation of value
added.
Status Positive
Extent National
Duration Long term
Intensity Medium
Significance (no
mitigation) Medium
The Petro Park should be encouraged to procure
materials, goods, services and products required for
Mitigation
the operation of their businesses from local suppliers
where possible.
Significance (with Medium
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December 2008
mitigation)
8.6.3 Impact on Employment
It is estimated that the new development will create 97 direct sustainable job
opportunities, of which the majority will be in the retail component of the
development. The creation of sustainable job opportunities will have a small but
positive contribution to the decrease of unemployment in Amahlathi.
Table 8.10: Impact on Employment

Tourism Office 2 2 4
Retail centre 59 51 110
Filling Station
Filling Station 21 18 39
Car Wash 3 3 6
Convenience Shop 6 5 11
Management 6 6 12
The distribution of direct employment in terms of skills levels is expected to be as

follows:
Highly skilled 8%
Skilled 15%
Semiskilled and unskilled 75%
The creation of employment opportunities at the new Petro Park could also bring
substantial benefits to the project-affected community. The developer should be
committed to encourage the local unemployed residents to apply for available
positions. Potentially they could be employed as filling station attendants, retail
staff or general maintenance workers.
The increase in business activities in the area will likely stimulate the creation of
new employment opportunities in other sectors to the extent of 84 positions.
Impact: Employment during Operation

The impact results from operational expenditure of
commercial components of the Petro Park and
businesses indirectly affected by operations. The
Nature
operation will create sustainable employment
opportunities at directly created new businesses and
businesses indirectly affected by operations.
Status Positive
Extent National
Duration Long term
Intensity Medium
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December 2008

Significance (no
mitigation) Medium
Maintain a database of available positions at the
Petro Park and a database of employment seekers
at the project-affected community
Encourage local residents to apply for available
Mitigation positions at the Petro Park.
Local Municipality to establish link with relevant
SETAs and government departments that can
provide training in the identified business and
employment creation sectors.
Significance (with
mitigation) Medium
8.6.4 Government Revenue Impact
Table 8.11 indicates the annual amount of tax that will be contributed by the
development to government revenue.
8.11: Government Revenue Impact

The Petro Park is this expected to annually generate R2,7 million to government
revenue. This includes and is not limited to value added tax (Vat.), personal
income tax and business tax. Should however the filling station component of the
complex not be constructed then it would contribute approximately R2,2 million
annually.
Impact: Government Revenue during Operation

The impact is generated through operational
expenditure into the economy. It results in an annual
Nature increase in taxes paid by all businesses operating
from the Petro Park as well as associated/supporting
businesses.
Status Positive
Extent National
Duration Long term
Intensity Medium
Significance (no
mitigation) Medium
Mitigation n/a
Significance (with
mitigation) Medium
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December 2008
8.7 Municipal Income Impact
The land on which the development is set to take place is currently owned by the
Amahlathi Municipality and a future investor would sign a long term lease with
the municipality to develop and operate on-site. The precise value of the lease
amount will be determined through negotiations with the municipality and will be
influenced by the price of the land as well as the infrastructure included.
Impact: Municipal Income

The lease payments paid by a potential owner of the
Nature development will increase the municipal income
during operation of the Petro Park.
Status Positive
Extent National
Duration Long term
Intensity Medium
Significance (no
mitigation) Medium
The municipality needs to insure that it receives
maximum benefit from the operation of the Petro Park
albeit through rates and taxes or lease payments. At
Mitigation the same time it needs to insure that the owner or
developer of such a project is not financially burdened
by municipal payments so that the development is
unsustainable.
Significance (with
mitigation) Medium
8.8 Operational Impact of New Petro Park on Retail in Stutterheim
With the proposed development of a 1,900m retail facility it is anticipated that

there could be a degree of negative impact experienced by existing retailers in
town (i.e. Main Street) if people prefer to go to the new centre rather than
purchase goods in town. The overall impact of the new retail centre in
Stutterheim is however, expected to be positive due to specific characteristics of
the local market.
Currently Stutterheim experiences a high level of retail leakage, i.e. the local
market purchases a large portion of their goods outside of Stutterheim due to
among other things a current lack of retail variety in the town. With the
development of a new complex it is expected that the current retail leakage
would be reduced and people would purchase more items in Stutterheim
compared to before.
Due to the proposed location of the retail complex, it is also expected that the
retail centre would draw at a larger portion of the transient market passing
through the town, as the Petro Park would be far easier to gain access to,
compared to existing retailers in the CBD. Therefore the new complex is expected
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December 2008
to attract a new market rather than merely competing for a proportion of the
existing market share.
8.9 Operational Impact of New Petro Park on Existing Stations
The market feasibility conducted for the Amahlathi Petro Park found that there is
currently insufficient demand to sustain the operation of four filling stations in
Stutterheim. It found that if a new fuel station were built it is likely that one or
more of the three existing stations would be negatively impacted, as they would
lose their market share. All three existing stations in Stutterheim pump much less
than the 350 000 litre volume per month which is considered to be a successful
small station output by South African oil companies (Refer to Table 8.13).
Some of the reasons why demand for fuel in Stutterheim is so low include that
many locals purchase much of their fuel in nearby towns like East London and
King Williams Town, as they either work in these towns or conduct much of their
retail and business activities there. Much of the transient market does not acquire
fuel in Stutterheim due to the close proximity of the town to East London, which
serves as the main point of departure and final destination on the N6.
An additional filling station in Stutterheim would provide both the local and
transient market passing through the town with better filling station facilities than
are currently available. For example, none of the existing stations has a large
convenience store, nor do any have a car wash facility or adjacent retail facilities.
Large vehicles cannot access the existing stations easily because of the size and
layout of the stations and as such Stutterheim does not capture much of the
heavy vehicle market. The new station could provide better facilities for heavy
vehicles and grow this market share.
Table 8.12 provides an indication of the current employment of existing stations
compared to the newly proposed filling station.
Table 8.12: Stations Employment Figures

Filling Station Other Total
Station Name
Employees Employees Employees
BCN Motors 12 0 12
Stutterheim
11 10 21
Garage
Bloms Motors 8 14 22
Proposed New
21 9 30
Station
BCN Motors (unlike Bloms Motors and Stutterheim Garage) relies solely on the
sale of fuel and a small tuck shop for income generation. Bloms motors and
Stutterheim both have a workshop which accounts for approximately half of their
business income. As both of these stations pump fewer litres per month
compared to BCN Motors it is predicted that these stations will experience the
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December 2008
greatest negative impact should a new filling station open in the town (Refer to
Table 8.13).
It is estimated that 21 employees would be required to operate the proposed

Petro Park filling station. This amount is slightly more compared to the number of
employees that existing stations employ in their filling stations as it has been
assumed that the proposed station will pump at minimum 350 000 litres of fuel
per month which is considerably higher than any of the current stations pump,
therefore requiring additional staff to man the station.
Should either Bloms or Stutterheim Garage be forced to close as a result of a

new filling station being established in Stutterheim, 8 to 11 permanent
employment positions could be lost. If both stations were to close approximately
19 permanent employment positions would be lost. This means that the new
filling station could potentially only have a net positive impact of 2 employment
positions (if considering the filling station in isolation) if the new station causes
the two smaller stations in Stutterheim to close down. It should be noted that the
proposed car wash and convenience store components of the filling station will
create nine additional permanent employment opportunities.
Table 8.13 estimates the total revenue generated by existing stations from petrol
sales based on a standardised distributor margin of 6% and a current average
fuel price (Petrol and Diesel) of R9.60.
Table 8.13 Existing Stations Estimated Annual Revenue Generated

Ave. Current Volume Sold Current Monthly Estimated
Station Name
p/Month (Litres)7 Revenue on Fuel Sales
BCN Motors 250 000 R144 000
Stutterheim
200 100 R115 257
Garage
Bloms Motors 102 500 R59 040
Total 552 600 R318 297
Should either Stutterheim Garage or Bloms Motors close as a result of the

development of a new station then it can be assumed that each of the stations
would incur a loss of R115,257 and R59,040 per month respectively. It is
assumed though that any income generation by one of these stations would be
recouped by the new station.
Apart from the possible loss in employment as a result of one or more of the
existing filling stations closing down, the closure of one or more existing stations
would also have a negative impact to the economy in terms of new business
sales, contribution to GGP as well as contribution to government revenue.
However, the net economic impact is still expected to be positive given the
positive impact the new filling station will have on the economy of Stutterheim.
7
Obtained from official records provided by owners
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December 2008
As both Bloms Motors and Stutterheim garage do not rely purely on income
generation from fuel sales alone, both businesses would not necessarily close
altogether should the filling station component of their business close. The may
wish to expand upon their workshops and other business components to make
these their core functions.
Impact: Existing Stations

The development of a new filling station in
Nature Stutterheim is expected to have a detrimental impact
on existing stations.
Status Negative
Extent Local
Duration Long term
Intensity Medium
Significance (no
mitigation) Medium
It is possible that if one or more stations were to
close, then the employees of these stations could
be accommodated as employees of the new filling
station as they would have the appropriate skills
Mitigation required for such work.
Another option would be to encourage an existing
station to move their business to the Petro Park;
however engagements with the existing station
owners indicate that this is unlikely to occur.
Significance (with
mitigation) Medium
8.10 Opportunity Costs and Potential Risks of the Development
There are opportunity costs and risks associated with not constructing the filling
station and related facilities as a part of the Petro Park. Tables 8.12 and 8.13
reveal the total capital and operational opportunity costs for should the filling
station not be established within the complex.
It is important to note that the tables below do not take into account the potential
negative impact of the development on existing filling stations (see Section 8.9
above). The opportunity cost of not developing the filling station is therefore
actually lower than what is presented in Table 8.15.
Table 8.14: Total Capital Expenditure Opportunity Costs

Indicator Total Direct Opportunity Costs8
New Business Sales R 7,004,000
GGP R 985,000
Employment Opportunities 14
8
For given construction period, estimated to be 12 months
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December 2008
Government Revenue R 402,304
If the filling station is not included in the development, 14 less employment

opportunities will be created over the construction period and the regional
economy will loose almost R1 million in contribution to GGP.
Table 8.15: Total Operational Expenditure Opportunity Costs

Indicator Total Direct Opportunity Costs9
New Business Sales R 7,383,000
GGP R 1,564,000
Employment Opportunities 30
Government Revenue R 214,032
Should the filling station not be developed together with the retail centre it is
estimated that region will loose approximately R7,4 million in direct business
sales per year of operation along with 30 direct permanent employment
opportunities.10 The filling station is expected to contribute 21% of the Petro
Parks direct business sales and 17% of the complexs contribution to regional
GGP, which is relatively small.
Should the filling station be developed within the complex and there is insufficient
demand to sustain a station of this size, it is anticipated that the opportunity
costs reflected in Table 8.15 would also be reduced.
Some of the risks involved in not including the filling station in the development
include: loss of income for retail complex because the complimentary land use is
not on site, site may not develop into such a large development node if the filling
station is not on site.
While there are risks to not including the filling station in the development, there
are also risks if the filling station is developed, including: potential closure of one
or more existing filling stations in Stutterheim with the associated job losses and
loss of income and there may be insufficient demand to enable the filling station
to pump 350,000 litres of petrol per month (benchmark for a viable station).
8.11 Synthesis
In total, the establishment of the Petro Park will lead to the generation of R55.8
million in business sales during the anticipated 12 month construction period. This
will translate into R10.2 million of value added.
The development of the Petro Park will create about 79 direct employment
opportunities during the construction phase. The project-affected community will
9
Operational Costs reflected per annum
10
Calculations based on the assumption that the filling station pumps on average 350 000 litres of
fuel per month.
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December 2008
directly benefit from the proposed development as it will create new employment
opportunities for the locals, particularly those who are unskilled and semi-skilled.
In addition to the above impacts, the proposed development will have a long-
term beneficial impact on the local economy as it will diversify the economic
activities that are currently taking place in the area. There is set to be direct
annual increases in value added to the region of R3.1 million resulting from
anticipated direct business sales of R22.5 million. New direct permanent
employment opportunities at the Petro Park are estimated to be 97.
The net impact associated with the retail component of the development are
expected to be positive due to the significant leakage of retail expenditure out of
Stutterheim at present and the expectation that the complex will also draw new
market share rather than depending primarily on capturing the existing retail
market share from other retailers.
The net impact of the filling station component is also expected to be positive,
although the extent of the positive impact is dependent on how the new station
impacts on the existing stations. It will be important that the new Petro Park be
able to grow the current market share, rather than depending on capturing the
existing market share, to mitigate against potential negative impacts on the
existing stations. If one or two existing stations were to close, this would
contribute towards the feasibility of the new filling station (and other remaining
stations) because they would capture the demand from the station(s) that have
closed.
It has been shown that if the filling station were not implemented as part of the
Petro Park, the opportunity cost is relatively small. This confirms that most of the
positive economic impacts associated with the Petro Park will be derived from the
retail centre. The risks associated with constructing the filling station are primarily
related to the potential negative impact on the existing filling stations. The risks
associated with not constructing the filling station relate to the potential negative
impact on the retail facility and the development of a new and vibrant
development node in Stutterheim.
Apart from quantifiable impacts stated above there is very likely to be

unquantifiable benefits experienced by the municipality. For example the local
tourism industry is likely to grow as a result of the Petro Park as well as local
community projects such as Mlungisi Commercial Park and Woodhouse Project.
The local community is also set to benefit through up-skilling as a result of the
employment opportunities at the PetroPark.
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December 2008
Chapter 9: Recommendations
Given the outcomes of the market research and economic impact modelling
exercise, it is recommended that the Petro Park development be implemented in
a phased approach.
There is currently demand for additional retail in Stutterheim. It is recommended

that the retail centre at least have a convenience grocery store, a sit-down
restaurant and a take-away facility. The tourism office and arts and crafts facility
could move into the new retail centre in the short term. The retail facility should
have between 8-15 shops and be constructed on one level (i.e. ground floor
retail).
There is currently insufficient demand for a new filling station in Stutterheim

based new growth in the area and demand for fuel in Stutterheim is currently
relatively small overall. The opportunity cost of not developing the filling station is
relatively small compared to the retail component. For these reasons it is
recommended that the feasibility of a filling station in Stutterheim be investigated
again in the medium term; i.e. Phase 2 of the development.
Table 9.1 illustrates the recommended phasing of the development to ensure its
sustainability.
Table 9.1: Phasing of the Development

Phasing Land Use Activities
2
1,900m retail centre
Tourism office and arts and crafts centre
ATM
Phase 1 - 2009
Toilet facilities
150 parking spaces
Play park (outside)
Filling station
Phase 2 Car Wash
2011* Convenience shop, ATM and toilets
Two dedicated bus stops with shelters on one side
*Depending on future demand
The following should be considered when implementing Phase 2 of the

development, namely:
Sufficient parking space should be assigned to cater for light vehicles around
the filling station.
Access to the petrol filling station should be convenient and safe, designed
according to acceptable engineering standards.
Sufficient signage should support the development, in order to be seen from a
reasonable distance at a reasonable speed
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December 2008
The design should adhere to the specifications and approval of the South
African National Roads Agency Limited (SANRAL).
Sufficient manoeuvring space should be provided to accommodate heavy
articulated vehicles.
The filling station and retail components are anticipated to compliment each other
if built as a part of the same development. The transient market may be attracted
to the filling station (over the others in Stutterheim) if retail and tourism related
activities are located in close proximity to the station and the local market may
purchase fuel at the station while they are purchasing retail products.
If the PetroPark is developed in a phase approach, and is designed based on

market demand, then it is likely that the development as a whole will be feasible
and can contribute meaningfully to sustainable growth and development in
Stutterheim.
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December 2008
Annexure 1: Qualitative Discussion Guidelines
1.1 Filling Station Owner Interviews
Station owners were interviewed in Stutterheim, Cathcart and Queenstown. The

following components were discussed in each of the station owner interviews:
1. History of their fuel operation

2. Views regarding Stutterheim as a service centre
3. Components of their business
4. Market description of their stations (Diesel/Petrol); (Transient/Local)
5. Capacity of their stations (Tanks)
6. Average Monthly Fuel Pumped
7. Future development/expansion intentions
8. Thoughts on the establishment of a new fuel station in Stutterheim
9. Thoughts on the establishment of a retail centre in Stutterheim
1.2 Transport and Freight Company Information
The following standard questions were posed to each logistics manager for each
of the transport and freight companies interviewed:
1. On the N6, where do their trucks/busses currently fill-up or stop to take

breaks? Why do they stop where they do?
2. What is their opinion of Stutterheim as a fuel-filling location?
3. Do their vehicles ever stop in Stutterheim to purchase fuel? Why/Why not?
4. If there were incentives in place for their vehicles to fill-up in Stutterheim,
would they do so?
5. Do they currently have any fuel-filling arrangements with garages along
the N6?
1.3 Fuel Company Interviews
The following components were discussed in each of the fuel company interviews:
1. Criterion for the establishment of a new filling station franchise i.e.

market, location, traffic count etc
2. Different Franchise Models i.e. privately owned stations, fuel company
owned stations
3. Construction cost of franchise
4. Operational costs of franchise
5. Opinions of Stutterheim as a location for a new franchise opportunity
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December 2008
Annexure 2: Market Surveys
AMAHLATHI PETRO PARK

LOCAL MARKET SURVEY
FIELDWORKERS NAME: _______________________ TEL NO: _____________________
TIME TAKEN TO COMPLETE SURVEY: _________________________
INTRODUCTION
Urban-Econ Eastern Cape has been appointed by ASPIRE to undertake a Market Research
and Feasibility Study for the establishment of a service complex including a filling station,
retail facilities, tourism and arts and craft centre and related amenities in Stutterheim.
Please assist us in answering the following questions. All your responses will be kept
confidential, your time is appreciated!
SECTION A: BACKGROUND INFORMATION
1. Name: __________________________________________________ Q1
2. Contact number: __________________________________________________ Q2
3. No. of people in household: __________________________________________ Q3
4. Please indicate which category best describes your household Q4
Stay-at home singles 1 New Parents 6

Students 2 Single parent 7
Starting out singles 3 Mature Parents 8
Couples 4 Golden Nests 9
Mature singles 5 Left alones 10
SECTION B: FUEL PROFILE
5. How many vehicles does your household have?
Vehicle Number
Petrol (Car) Q5
Petrol (Motorcycle/Scooter) Q6
Diesel (Car/4x4/Double-Cab) Q7
Diesel (Large Truck) Q8
Diesel (Farming equipment) Q9
TOTAL Q10
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December 2008
6. On average how much do you spend on fuel MONTHLY per vehicle? Q11
No. Petrol (Car) Petrol Diesel Diesel Diesel

(Motorcycle/ (Car/4x4/ (Large (Farming
Scooter) Double-Cab) Truck) equipment)
1 R R R R R
2 R R R R R
3 R R R R R
4 R R R R R
TOTAL R R R R R
7. In an average MONTH where do you and your family mostly make your fuel
purchases?
% of Total Fuel
Town
Purchased
Stutterheim Q12
Cathcart Q13
Queenstown Q14
East London Q15
King Williams Town Q16
Other
Q17
________________________________
Other
Q18
________________________________
100%
8. If you purchase a large percentage of petrol outside of Stutterheim, why is this? Q19
9. Which Petrol Station in Stutterheim do you prefer to use, and why do you prefer that
specific station? Q20
Station 9 Why? Q21

BP 1
Shell 2
Engen 3
10. Do you think that there is sufficient demand for another Petrol Station Complex in
Stutterheim?
YES / NO 9 Q22
Yes 1
No 2
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December 2008
11. Why/Why Not? Q23
SECTION C: FUTURE FUEL COMPLEX PREFERENCES
12. If a new petrol station were to open in Stutterheim what fuel company brand would
you prefer to see introduced? Please indicate from the following list your top three
desirable brands. Where 1 is most desirable and 3 is the least desirable.
Top 3 Ratings
Fuel Company Type
Shell Q24
BP Q25
Caltex Q26
Engen Q27
Zennex Q28
Sasol Q29
Excel Q30
Other Q31
__________________________
Other Q32
__________________________
13. What type of Fast Food Outlet/Sit Down Restaurant would you prefer to see
introduced at a new Petro Park? Please indicate from the following list your top three
Fast Food Outlet Top 3 Ratings
Steers Q33
Wimpy Q34
Wild Bean Cafe Q35
KFC Q36
Chicken Likin Q37
Hungry Lion Q38
Whistle Stop Q39
Other Q40
__________________________
Other Q41
__________________________
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December 2008
14. Would you utilise any of the following complementary facilities if they were offered
at a new Petro Park in Stutterheim?
Complementary Facility Rating 9

Yes Maybe No
Sit Down Restaurant 1 2 3 Q42
Fast Food Outlet 1 2 3 Q43
24hour Convenience Store 1 2 3 Q44
Car Wash 1 2 3 Q45
Auto Repair Workshop (incl.
1 2 3 Q46
tyres/shocks etc)
Art and Craft Shop 1 2 3 Q47
Home Industry (Local Produce) Shop 1 2 3 Q48
Tourism Office 1 2 3 Q49
ATM Banking 1 2 3 Q50
Gift Shop 1 2 3 Q51
Post Office 1 2 3 Q52
Other
1 2 3 Q53
__________________________
Other
1 2 3 Q54
__________________________
15. If a new Petrol Station Complex were to open in Stutterheim, would you utilise this
complex?
YES / NO 9 Q55
Yes 1
No 2
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December 2008
SECTION D: RETAIL PROFILE
17. On average, how much money do you currently spend, MONTHLY on the following
types of retail items?
Current Spending
Category
Rand/month
Monthly groceries Q57
Top up groceries Q58
Clothing, shoes & accessories Q59
Furniture & homeware Q60
Hardware goods Q61
Personal care (e.g., hair & beauty salon, pharmacy) Q62
Cleaning services (e,g, laundromat) Q63
Restaurants & take-aways Q64
Leisure & entertainment Q65
Speciality goods (e.g. music, sport, baby, stationery)
Q66
(Please specify)_______________________
Other (Please specify)
Q67
____________________________________
TOTAL (Monthly RETAIL Expenditure) Q68
18. Do you need to travel to another town (i.e. outside of Stutterheim) in order to obtain any
of the following commodities? If so, where are you most likely to purchase the following
products?
Category YES NO Town Name
Monthly groceries 1 2 Q69 Q80

Top up groceries 1 2 Q70 Q81
Clothing, shoes & accessories 1 2 Q71 Q82
Furniture & homeware 1 2 Q72 Q83
Hardware goods 1 2 Q73 Q84
Personal care (e.g., hair & beauty salon, 1 2 Q74 Q85
Cleaning services (e,g, laundromat) 1 2 Q75 Q86
Restaurants & take-aways 1 2 Q76 Q87
Leisure & entertainment 1 2 Q77 Q88
Speciality goods (e.g. music, sport, baby,
stationery) 1 2 Q78 Q89
(Please specify)_______________________
Other (Please specify)
1 2 Q79 Q90
____________________________________
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December 2008
19. Why do you purchase the above items outside of Stutterheim? (Only answer if
applicable) Q91
20. Would you buy these products in Stutterheim if they were available locally? (Only
answer if applicable)
YES / NO 9 Q92
Yes 1
No 2
21. If no, why not? Q93
SECTION E: RETAIL PREFERENCES
22. Do you believe there is a need for a NEW Retail/Shopping Complex in Stutterheim?
YES / NO 9 Q94
Yes 1
No 2
24. Would you utilise a NEW Retail/Shopping Complex, should it be built in Stutterheim?
YES / NO 9 Q96
Yes 1
No 2
25. If NO, please indicate why not? Q97
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December 2008
26. If a NEW Retail/Shopping Complex, were built in Stutterheim, which brand of retailers
would you prefer?
Retailer Name Retailer
Category Choice 1 Name
Choice 2
Monthly groceries Q98 Q109
Top up groceries Q99 Q110
Clothing, shoes & accessories Q100 Q111
Furniture & homeware Q101 Q112
Hardware goods Q102 Q113
Personal care (e.g., hair & beauty Q103 Q114
salon, pharmacy)
Cleaning services (e,g, laundromat) Q104 Q115
Restaurants & take-aways Q105 Q116
Leisure & entertainment Q106 Q117
Speciality goods (e.g. music, baby, Q107 Q118
sport, stationery)
Other (Please
Q108 Q119
specify)_______________________
27. Any other ideas you might have for a new petrol station complex in Stutterheim?
Q130
SECTION F: INCOME
28. What is your current total MONTHY household income [before tax and benefits are
deducted]? Q121
R0 R1,500 1 R10,001 R15,000 6 R35,001 40,000 11

R1,501 R2,500 2 R15,001 R20,000 7 >R40,000 12
R2,501 - R5,000 3 R20,001 R25,000 8
R5,001 R7,500 4 R25,001 - R30,000 9
R7,501 R10,000 5 R30,001 R35,000 10
Thank you for your participation!
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December 2008
AMAHLATHI PETRO PARK

TRANSIENT MARKET SURVEY
FIELDWORKERS NAME: _______________________ TEL NO: _____________________
TIME TAKEN TO COMPLETE SURVEY: _________________________
LOCATION OF SURVEY CONDUCTED: _____________________(TOWN AND/OR PETROL STATION)
INTRODUCTION
Urban-Econ Eastern Cape has been appointed by ASPIRE to undertake a Market Research
and Feasibility Study for the establishment of a service complex including a filling station,
retail facilities, tourism and arts and craft centre and related amenities in Stutterheim.
Please assist us in answering the following questions. All your responses will be kept
confidential, your time is appreciated!
SCREENING QUESTION
i. Do you intend to travel, or have you already travelled through Stutterheim on this
journey?
SECTION A: BACKGROUND INFORMATION
1. Name: __________________________________________________ (Q1)
3. Contact number: __________________________________________________ (Q2)
3. Hometown: __________________________________________________ (Q3)
4. Point of departure of journey _________________________________________ (Q4)
5. Final destination of journey __________________________________________ (Q5)
6. Frequency of respective journey_______________________________________ (Q6)
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December 2008
7. Form of Transport: (Please select one option only)

Vehicle Tick 9
Motorcycle/Scooter Q7
Car/Bakkie (Petrol) Q8
Car/Bakkie (Diesel) Q9
Truck (larger than 1 ton bakkie) Q10
Taxi Q11
Bus Q12
8. How many people are you travelling with today?_________________________(Q13)
SECTION B: FUEL PROFILE
9. How regularly do you stop at this Petrol Station Complex? (Please tick where
appropriate)
Regularity of Stops Tick 9
First Time Q14
Once or Twice Per Year Q15
Less than Once Per Month Q16
Once Per Month Q17
2 or 3 times Per Month Q18
Once Per Week Q19
2 or 3 Times Per Week Q20
5 or More Times Per Week Q21
10. How much do you usually spend on the following, when you visit this Petrol Station
Complex?
Facility Amount (Rand)
Fast Food Outlet R Q22
Convenience Store R Q23
Gifts/Tourism products R Q24
Petrol/Diesel R Q25
Other_________________________ R Q26
Total R Q27
11. How often do you stop in Stutterheim when you travel through Stutterheim?
(Please tick only one)
Regularity of Stops Tick 9

Always Q28
Most of the time Q29
Sometimes Q30
Almost never Q31
Never Q32
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December 2008
12. Please explain the reason why you do/do not stop in Stutterheim? Q33
13. Which of the following do you most often utilise when you stop in Stutterheim?
(Can tick more than one)
Facility Tick 9
Fast Food Outlet/Restaurant Q34
Shopping Q35
Banking Facilities Q36
Petrol/Diesel Q37
Other_________________________ Q38
SECTION C: FUEL AND RETAIL PREFERENCES
14. If a new Petrol Station Complex were to open in Stutterheim, would you utilise this
complex? (Petrol Station plus other facilities such as ATMs, convenience shop,
restaurant, etc.) Q39
YES / NO 9 Q40
Yes 1
No 2
16 Which of the following facilities would you utilise at a new Petrol Station Complex in
Stutterheim?
Facility Yes Maybe No
Sit Down Restaurant 1 2 3 Q42
Fast Food Outlet 1 2 3 Q43
24hour Convenience Store 1 2 3 Q44
Car Wash 1 2 3 Q45
Auto Repair Workshop (incl.
1 2 3 Q46
tyres/shocks etc)
Art and Craft Shop 1 2 3 Q47
Home Industry (Local Produce) Shop 1 2 3 Q48
Tourism Office 1 2 3 Q49
ATM Banking 1 2 3 Q50
Gift Shop 1 2 3 Q51
Post Office 1 2 3 Q52
Other__________________________ 1 2 3 Q53
Other__________________________ 1 2 3 Q54
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December 2008
17 . If a new petrol station were to open in Stutterheim what fuel company brand would
you prefer to see introduced? Please indicate from the following list your top three
Fuel Company Type Top 3 Ratings
Shell Q55
BP Q56
Caltex Q57
Engen Q58
Zennex Q59
Sasol Q60
Excel Q61
Other__________________________ Q62
Other__________________________ Q63
18. What type of Fast Food Outlet/Sit Down Restaurant would you prefer to see
introduced at a new Petro Park? Please indicate from the following list your top three
Fast Food Outlet Top 3 Ratings
Steers Q64
Wimpy Q65
Wild Bean Cafe Q66
KFC Q67
Chicken Liken Q68
Hungry Lion Q69
Whistle Stop Q70
Other__________________________ Q71
Other__________________________ Q72
19. Would you stop in Stutterheim at a new retail complex if it did not contain a petrol
station?
YES / NO 9 Q73
Yes 1
No 2
21. Which services/products would make you stop at a new retail complex in
Stutterheim that did not have a petrol station? Q75
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December 2008
22. Any other ideas you might have for a new Petro Park complex in Stutterheim?
Q76
SECTION D: INCOME
23. What is your current total MONTHY household income [before tax and benefits are
deducted]? Q77
R0 R1,500 1 R10,001 R15,000 6 R35,001 40,000 11

R1,501 R2,500 2 R15,001 R20,000 7 >R40,000 12
R2,501 - R5,000 3 R20,001 R25,000 8
R5,001 R7,500 4 R25,001 - R30,000 9
R7,501 R10,000 5 R30,001 R35,000 10
Thank you for your participation!
xiv
December 2008
Annexure 3: Understanding Economic Impact

Modelling
3.1 Introduction
Economic impacts are caused by the interaction between the various sectors of
the economy and these impacts are measured for a specific geographical area.
Economic impacts may be viewed in terms of (1) business output or sales
volume, (2) value added or gross regional product (GGP), (3) Government
Revenue Impact, (4), or (5) jobs. Any of these measures can be an indication of
improvement in the economic well being of the local communities, which is
usually the main goal of economic development efforts.
Economic impacts also lead to fiscal impacts, which are changes in government
revenues and expenditures. Economic impacts on total business sales, wealth or
personal income can affect government revenues by expanding or contracting the
tax base.
This chapter will proceed according to the following sections:
Understanding the Input/Output model

Defining economic impact
Types of economic Impacts
Measuring economic Impacts
3.2 Understanding the Input-Output Model
While there are many methods of regional economic impact analysis, the I/O
modelling approach has proven to be a particularly effective method for
evaluating the implications of introducing an exogenous change to the economy.
The Input-Output Table forms the nucleus of the I/O model. Essentially the Input-
Output Table is nothing more than an extension of the National Accounts of a
country, i.e. desegregating it into the various sectors of the economy. Therefore,
the Input-Output Table is a quantified and summarised version of all transactions
that took place between the main economic stakeholders in a particular year. For
this reason, Input-Output Tables are compiled and published by Statistics South
Africa (SSA), using primarily South African Reserve Bank Accounts data. These
sectoral figures are therefore strictly compatible with the macro national
accounting data published by the South African Reserve Bank and STATS SA on a
regular basis.
The Input-Output Table makes provision for two kinds of transactions at a

sectoral level, namely the purchase of intermediate and primary inputs on the
one side, and the supply of intermediate and final outputs on the other side. In
order to arrive at proper multipliers for the different sectors, household income
expenditure has been included in the inter-industry section of the Input-Output
xv
December 2008
Table. This implies that household income is treated as being spent within the
economic system and is generating further economic activity.
It is also important to note that the main economic decision-makers who are
responsible for the transaction activities contained in the Input-Output Table are
entrepreneurs, workers, households and government (all three levels).
Importantly, it is the matrices that can be derived from the I/O model that are
used as instruments for economic analysis. This is done by means of the so-called
technical input coefficient matrix and the Leontief Inverse matrix. The
fundamental assumptions with regard to the I/O model, as well as the use of this
model for analytical purposes, are:
Production activities in the economy are grouped in homogeneous sectors.

The mutual interdependence of sectors is expressed in meaningful input
functions.
Each sectors inputs are only a function of the specific sectors production.
The production by different sectors is equal to the sum of the separate
sectors of production.
The technical coefficients remain constant for the period over which forecast
the projections are made.
There will be no major change in technology.
It should also be noted that:
All the Rand values in this report represent 2008 current prices.
The different measures of economic impact (jobs, GDP and new business
sales) cannot be added together and should be interpreted as separate
economic impacts.
The model quantifies direct and indirect economic impacts for a specific
amount of time (e.g. 5 years). Therefore, the estimates that are derived do
not refer to gradual impacts over time.
3.3 Defining Economic Impacts
Economic impacts can be defined as the effects (positive or negative) on the level
of economic activity in a given area(s). The net economic impact is usually
measured as the expansion or contraction of an areas economy, resulting from
the changes in (i.e. opening, closing, expansion or contraction of) a facility,
project or program. Importantly, the net economic impact is ultimately informed
by the exogenous change to a particularly defined geographical area/entity.
3.4 Types of Economic Impacts
The net economic impact of an exogenous change in the economy will be

translated according to various direct and indirect economic effects, as are
defined below:
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December 2008
Direct economic impacts: are the changes in local business activity

occurring as a direct consequence of public or private business decision, or
public programmes and policies. Furthermore, increased user benefits lead to
monetary benefits for some users and non-users (individuals and businesses)
within the geographical area:
For affected businesses, there may be economic efficiency benefits in terms of

product cost, product quality or product availability, stemming from changes
in labour market access, cost of obtaining production inputs and/or cost of
supplying finished products to customers. For affected residents, benefits may
include reduced costs for obtaining goods and services, increased income from
selling goods and services to outsiders, and/or increased variety of work and
recreational opportunities associated with greater location accessibility.
Indirect and induced impacts: Ultimately, the direct benefits to business and
the residents of communities and regions may also have broader impacts,
including:
Indirect business impacts business growth for suppliers to the directly-

affected businesses. Induced business impacts business growth as the
additional workers (created by direct and indirect economic
impacts/effects) spend their income on food, clothing, shelter and other
local goods and services. This business growth will also have implications
for potential municipal income due to raised taxes and service levies.
Dynamic economic effects shifts in broader population and business

location patterns, land use and resulting land value patterns, which may
also affect government costs and revenues. These changes will ultimately
affect income, wealth and/or well-being.
3.5 Measuring Economic Impacts
The direct and indirect economic impacts listed are measured according to the
following broad economic variable categories:
New business sales: refers to the value of all inter- and intra-sectoral business
sales generated in the economy as a consequence of the introduction of an
exogenous change in the economy. Explained more simply, new business sales
equates to additional business turnover as a result of the introduction of an
exogenous change in the economy.
Total employment generation: reflects the number of additional jobs created

by the economic growth that result from an exogenous change in the economy.
A job is defined as one person employed for one year. This is the most popular
measure of economic impact because it is easier to comprehend than large,
abstract Rand figures. However, job counts have two major limitations: (1) they
do not necessary reflect the quality of employment opportunities, and (2) they
xvii
December 2008
cannot be easily compared to the public costs of attracting those jobs (through
subsidies, tax breaks or public investments).
New salaries and wages: measures the increase in existing salaries and wages as
a result of the exogenous change in the economy.
Change in Gross Domestic Product: is a broader measure of the full income

effect. This measure essentially reflects the sum of wage income and corporate
profit generated in the study area as a result of an exogenous change in the
economy.
Increased tax revenue: The direct and indirect economic impacts will lead to
fiscal impacts, which are changes in government revenues and expenditures. For
example, economic impacts on total business sales, wealth or personal income
can affect government revenues by expanding or contracting the tax base.
xviii

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APPENDIX B-3

Economic Impact Report

The purpose of this project is to investigate the feasibility of establishing a Petro-

Local policies and strategies acknowledge the potential for a PetroPark in

1. Filling Station Feasibility

Table 1.1 illustrates the total demand for fuel in Stutterheim.

Table 1.1: Total Demand for Fuel in Stutterheim

It is clear that the highest demand is generated by the transient market.

Interviews with international fuel companies showed that Stutterheim is not

At present there is insufficient demand for a new filling station in Stutterheim

There is an estimated 6,820m2 supply of retail Gross Leaseable Area (GLA) in

Retail demand is a function of population size, household income and retail

Table 1.3: Retail Floor Space Demand

Table 1.4: Net Effective Retail Demand

The modeling results show that there is an undersupply of retail space in

It is recommended that the first phase of retail development comprise of 1,900m2

3. Economic Impact Assessment

Land Use Activity Approximate Size

Apart from quantifiable impacts stated above there is very likely to be

Phasing Land Use Activities

It is recommended that the retail centre at least have a convenience grocery

CHAPTER 2: LOCAL DEVELOPMENT CONTEXT

CHAPTER 3: LOCAL ECONOMIC PROFILE

CHAPTER 4: LOCAL CONSUMER PROFILE

CHAPTER 5: FILLING STATION FEASIBILITY

CHAPTER 6: RETAIL FEASIBILITY

CHAPTER 7: DEVELOPMENT CONCEPT

CHAPTER 8: ECONOMIC IMPACT ASSESSMENT

8.5.1 Increase in New Business Sales 58

CHAPTER 9: CONCLUDING RECOMMENDATIONS

ANNEXURE 1: QUALITATIVE DISCUSSION GUIDELINES

1.1 Stutterheim Station Owner Interviews i

ANNEXURE 2: MARKET SURVEYS

Local Market Survey iii ix

ANNEXURE 3: UNDERSTANDING ECONOMIC IMPACT

1.1 Proposed Site of Filling Station Complex, Stutterheim, Eastern Cape 3

4.2 Education Level (2001) 24

3.1 GGP Amahlathi and Amathole 14

8.13 Existing Stations Estimated Annual Revenue Generated 69

The purpose of this project is to investigate the feasibility of establishing a Petro

1.2 Project Brief and Objectives

Filling station complex;

The local Stutterheim Market;

1.3 Site Location and Characteristics

Figure 1.1: Proposed Site of Filling Station Complex, Stutterheim, Eastern

According to the Minor Feasibility Study conducted by Nzelenzele, Preston and

Figure 1.2 Proposed Development Site (looking south)

Proposed Site R346 from King Williams Town

Possible Entry Point 1

Figure 1.3: Proposed Development Site (looking north-east)

Possible Entry Point 1

1.4 Report Outline

The remainder of the report is structured under the following chapters:

This chapter presents the policy framework

This chapter provides an overview of the

This chapter puts the proposed development

The chapter presents recommendations

This chapter will provide an overview of the

This chapter presents various development

Chapter 2: Local Development Context

It is important to understand the policy framework in which the proposed Petro

This chapter provides an overview of the following planning documents, namely:

Amahlathi Local Municipality Integrated Development Plan (IDP), 2008/2011

2.2 Amahlathi Local Municipality Integrated Development Plan