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Electricity and Energy Minister Dr Kgosientsho Ramokgopa has expressed confidence that government and the National Transmission Company South Africa (NTCSA) are close to finding the "sweet spot" that will facilitate the integration of private Independent Power Transmission (IPT) projects.

Such projects could help accelerate the expansion of the grid, which has emerged as a bottleneck for new renewables projects in particular, and help unlock 53 GW of mostly renewables generation in the coming ten years. In South Africa, IPT projects are also referred to as Independent Transmission Projects, or ITPs.

Speaking at the formal launch of the NTCSA, which started trading as an independent subsidiary of Eskom Holdings on July 1, Ramokgopa insisted he had no intention of overreaching in his role as shareholder Minister and that the board should determine independently what IPT model would be acceptable to the NTCSA.

However, he highlighted the success of the IPT model internationally in helping to accelerate the development of grid infrastructure, highlighting that in Brazil, Chile, Peru and India, the model had enabled close to 100 000 km of new transmission lines between 1998 and 2015 and had helped mobilise private capital for the grid of more than $24.5-billion.

"We are not guinea pigs," Ramokgopa asserted, adding that South Africa had an opportunity to use its late-mover status to draw on best practices from other countries while localising the IPT model for its own circumstances.

"[But] one thing I have said to Priscillah Mabelane [NTCSA chairperson] is that we will not overreach.

"The board has fiduciary responsibilities and duties to protect the financial interests of NTCSA, while I have a duty to resolve the energy question in the country and ensure that we will achieve conditions of energy sovereignty and energy security.

"And those interests are not misaligned - there is a sweet spot we are seeking for," he said with reference to ongoing deliberations on what model should be adopted.

The Minister also praised the work of the World Bank and its Multilateral Investment Guarantee Agency in seeking to develop a credit guarantee vehicle that could provide guarantees to IPTs without placing further strain on the NTCSA balance sheet, or add to the National Treasury's contingent liabilities.

IPT OPTIONS UNDER CONSIDERATION

In an interview with Engineering News, Mabelane said the NTCSA was open to considering all IPT models, including a 'build, operate and transfer' framework.

"We are not selective subject to the sweet spot on risk sharing, as we do not have a balance sheet to guarantee build, operate and transfer [projects]."

In weighing the options, she indicated that NTCSA was seeking to draw lessons from the independent power producer procurement programme, which had facilitated R282.2-billion in mostly renewables investment since 2011, with the support of State guarantees.

"So if we can address that particular point [the guarantees], we can actually accelerate access to the private sector," Mabelane added.

She said a lot of work had already been done on IPT models and argued that the next key milestone would be the finalisation of regulations in terms of Section 34, which would be required before a procurement determination could be released.

It has been widely reported that the actual procurement was likely to be undertaken by a new office outside of the NTCSA, developed along the lines of the Independent Power Producer Office.

"We believe that the biggest part of it is to make sure that the risk-sharing mechanism is balanced."

In his address, interim NTCSA CEO Segomoco Scheppers reported that the regulations required for ITP procurement would be developed by the first quarter in 2025.

"This will be followed by a Ministerial determination for an ITP pilot," he said.

R11...

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Steel and Engineering Federation of Southern Africa (Seifsa) president Elias Monage has described the establishment of the Government of National Unity (GNU) as an opportunity to revive the metals and engineering sector by fixing the basics and raising infrastructure spend.

In an address reviewing the past year, he said attracting the investment needed for higher levels of growth would require an ongoing stabilisation of electricity supply, alongside efforts to "fix the very basics" in the areas of water, freight logistics, crime, and visa administration.

"These are the elementary elements of a viable economy," Monage said.

Speaking only days after organised business and government launched a second phase of a partnership to address the electricity, logistics and crime crises, and announced a goal to raise growth to 3% by 2025, Monage argued that the country was at a "hugely significant moment".

"After a gruelling election season, the agreement to form a GNU has been hailed as the emergence of a new centre in our heavily polarised political landscape.

"[This] is clearly a hugely significant moment and an opportunity for new beginnings."

He urged business to engage with the GNU in a way that held it to account while building a partnership for mutual growth.

"The secret of change is to focus all our energies not just on fighting the old but on building the new."

He said Seifsa should also use the opportunity to convince the GNU to urgently speed up infrastructure spend to boost demand.

For the metals and engineering sector, where investment had stagnated for years and where employment had slumped, action plans were required to drive demand.

"The Steel Master Plan aims to reverse negative perceptions regarding the steel industry and address constraints to demand by prioritising designation and local procurement, localisation, public and private sector projects, transformation and competitiveness.

"These and other initiatives, as outlined in the plan, will ensure that there is increased output and demand for the metal and engineering sector's intermediate and final products."

Engineering News editor Terence Creamer discusses the partnership previously formed between government and business to tackle loadshedding and other crises; the launch of a second phase of this partnership and the areas of focus; and some of the potential risks to this partnership.

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Electricity and Energy Minister Dr Kgosientsho Ramokgopa is confident that government will be able to positively intervene on Eskom's tariff-hike application for the 2025/26 financial year at the National Energy Regulator of South Africa (Nersa).

If granted as it currently stands, electricity costs for direct Eskom customers would increase by 36.15% on April 1 next year, and by 43.55% at municipal level from July 1.

Speaking at Windaba 2024 in Cape Town on Thursday, Ramokgopa said his department had a number in mind that could prove more palatable, but added that he did not want to disclose this figure as he did not want to compromise the integrity of the Nersa process.

"All I'm saying is that 36% is untenable and 20%-plus is untenable."

Ramokgopa said it was feasible to balance Eskom's financial demands with the needs of business and the general public.

He said the increases proposed by the State-owned power utility would harm South Africa Inc's competitiveness, erode disposable income on all social levels, while it would also place poor households in a position where they would have to choose between having a meal, or power.

It would have "huge, huge implications".

Ramokgopa said it would be possible to lower Eskom's proposed price hikes through policy interventions such as delaying - not scrapping - Eskom's carbon tax compliance, set to kick in in 2026.

"On the bottom line it is like R6-billion - by any measure that is significant."

The rollout of smart meters and prepaid electricity could also significantly bolster Eskom's balance sheet and efficiency, with the utility's municipal debt currently sitting at R82-billion.

While this is happening, it would be possible to partially insulate the poor from electricity price hikes through various interventions.

Ramokgopa said National Treasury had an allocation for the number of poor households to be supported by municipalities with free electricity - ten-million - with the number currently only at two-million, as most municipalities do not have the capacity to determine who qualifies for this support, or the mechanism to deliver the electricity to these households.

Prepaid meters would, however, allow for direct subsidisation of these households, without having to go through the municipality.

It was also on the cards to increase the quantum of free electricity allocated to poor households.

Twenty-one years into the free-electricity programme, 50 kWh per household per month was "surely not enough", noted Ramokgopa.

Increasing this would, however, have a cost implication on the fiscus that would need to be quantified.

"I am confident…that we can provide some degree of relief," said Ramokgopa.

"But we are not going to soil the Nersa process; Nersa is going to run its process."

Ramokgopa said he will make a submission to Nersa in his capacity as the Electricity Minister, while he was also in a position to make public announcements on policy changes that could potentially influence Eskom's application and/or Nersa's decision process.

South Africa has some of the best resources for wind and solar energy in the world. However, the country battles with grid constraints in areas with higher wind speeds, and little renewable-energy deployment in areas with available grid. The Danish-South African energy cooperation addresses these challenges, write Elsebeth Søndergaard Krone, Ambassador of Denmark to South Africa, and Stine Leth Rasmussen, Deputy Director-General of the Danish Energy Agency

With 90 percent of the Danish energy consumption covered by fossil fuels back in the 1970s, the oil crisis inspired us to seek new paths to become energy independent in a sustainable way. Today, more than 60 percent of Denmark's electricity consumption comes from wind and solar energy. Some windy days, we even have 100 percent wind power in our sockets - without compromising our world record security of electricity supply. Thousands of green jobs within consulting, service, maintenance, production and construction now support the whole value chain of renewable energy.

Our green energy transition has not been easy, and through decades, we have learned our hard lessons, for example with regards to tendering renewable energy/offshore wind and integrating large shares of renewable energy into our electricity grid. We are sharing these lessons learnt with South Africa through our strategic energy partnership and with stakeholders in South Africa's energy landscape. In this way, we support the journey away from fossil fuels towards building a new, just and more sustainable energy supply generating new green businesses and jobs.

During a visit from the Danish Energy Agency to South Africa from 7 to 10 October we will, together with our South African partner institutions, discuss some of the results of two projects, which address the opportunities of developing renewable energy in Mpumalanga and other areas with high grid capacity but more moderate wind speeds.

Firstly, we have provided technical inputs to a soon-to-be-launched report by the Independent Power Producer Office (IPPO). The report addresses the impact on power prices related to location of renewable projects in areas with lower wind speeds and fewer solar hours than other areas. Concretely, this report brings forward considerations related to investing in renewables in the provinces of Mpumalanga, which already has an extensive grid, and Northern Cape, that has less grid, but more wind and sun. A key finding is that while the grid is being expanded to often remote areas with abundance of wind and sun, like Northern Cape, an emphasis should also be put on driving developer interest towards renewable energy projects in provinces such as Mpumalanga.

The second project serves the exact purpose of supporting the development of renewable energy in Mpumalanga. Together with our South African partners, we have collected data and visualized this through a digital map, which gives an overview of suitable areas in Mpumalanga to concentrate renewable energy projects. Also with a focus on areas with good possibilities of job creation. Easy access to vital data is key for successful tendering. The map improves the renewable energy developer's access to crucial information about land use, infrastructure etc., and gives an overview of the grid capacity. It will also give the IPPO aspects to consider for regional targeted procurement rounds.

While this may sound like Mpumalanga is a so-so area for renewable energy, this is indeed not the case. South Africa happens to have some of the best resources for wind and solar energy in the world. The Wind Atlas of South Africa, also initiated between Danish and South African partners, has through energy modelling shown that Mpumalanga has wind speeds which are highly suitable for profitable wind power projects. This will provide specific wind data for developers to prioritize these provinces in the coming years' buildout of the renewable energy sector.

Green transition takes time. We are conf...

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Meeting the 193-million-ton rail stretch target set under the newly launched second phase of the partnership between business and government would require a significant amount of work and collaboration, Transnet CEO Michelle Phillips has acknowledged.

Speaking at the Joburg Indaba a day after the target was unveiled as part of a package of targets designed to lift South Africa's growth to 3% in 2025 following more than a decade of sub-1.5% growth, Phillips said Transnet was not yet on track to meet the target.

"As we speak, we are behind, so there's a lot of work to catch up," she said, having announced earlier in the year that Transnet would be seeking to improve on its official 170-million tons target for the 2024/25 financial year.

Meeting even the 170-million tons would represent an improvement on the 152-million tons railed in 2023/24, and be a marked recovery from the volume collapse to149-million-tons in 2022/23.

However, it was still well below the record 226-million tons railed in 2017/18, as well as contracted volumes, particularly with miners. It also fell well short of the 250-milion-ton target set by Transport Minister Barbara Creecy.

Phillips, however, noted that the group had also been well below target at the same time last year, when all indications were that volumes could dip below the 149-million-ton level, and when there was serious congestion across key ports.

"We could have easily been 10-million tons worse off last year, but we ended up with about 3-million tons better," she explained, attributing at least part of the improvement to the collaborative efforts of participants in the National Logistics Crisis Committee.

Phillips also stressed that neither Transnet nor government, its sole shareholder, had the balance sheets to support the investments required to improve and expand the rail and port systems and reported that Transnet had, thus, welcomed the reforms under way to facilitate private-sector participation.

"We've embraced the reforms, and we are working towards those on a daily basis," she said, highlighting the vertical separation of Transnet Freight Rail into a train operations business and an infrastructure manager, alongside the corporatisation of the Transnet National Ports Authority, which would be finalised by April.

Opening the rail network to third-party operators required the finalisation of a Network Statement, including a tariff methodology, that would meet the financial needs of the network owner and private train operators.

While defending the need for cost-reflective tariffs, Phillips said it was up to the Interim Rail Economic Regulator Capacity to determine the methodology and arrive at a balanced tariff outcome.

She also reported that, in light of its financial constraints, the State-owned company was aiming to release a number of transactions into the market, but would do so only once the enabling processes, rules and structure were in place.

These transactions ranged from the disposal of noncore assets and the possible concession of rail and port infrastructure, to opening the rail network to third-party operations, entering into partnerships on the heavy-haul corridors, as well as implementing maintenance joint ventures and management contracts.

"There's a lot of work that's going on. And Transnet, as you've known it, is not going to be the same Transnet in the next few years."

Speaking on the same platform, Kumba Iron Ore CEO Mpumi Zikalala acknowledged the progress being made, but also called for greater implementation urgency.

"We are now in a space where we know the challenges . . . and we've got plans.

"What matters the most now is speed, because what moves the dial is not talk, it's speed . . . [and] ensuring that we drive for progress instead of seeking perfection," Zikalala said.

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If you think you are seeing more Chinese vehicles on the road, you are correct.

Chinese vehicle brands accounted for 9% of all passenger and light commercial vehicles (light vehicles) sold in South Africa this year, until the end of July, up from 2% in 2019, says research group Lightstone Auto.

Sales of non-Chinese-owned brands, but with the vehicles produced in China, have also increased, from 2% in 2019, to 10% in 2024.

Lightstone Auto says five Chinese makes reported sales to naamsa | the Automotive Business Council across the light-vehicle market in 2019.

They made up 12% of the total number of light-vehicle brands and 2% of overall new light-vehicle sales that year.

Stablemates GWM and Haval were responsible for 96% of that number.

Fast-forward to 2024, and nine Chinese light-vehicle makes now report sales to naamsa, making up 21% of the overall count of light-vehicle brands and 9% of all light vehicles sold to end-July this year.

GWM and Haval remain significant players in this space, says Lightstone Auto, but they have now been joined by Chery, and together these three brands have sold 88% of Chinese-branded vehicles in the domestic market this year to end-July.

Chinese brands have also grown their sales in the commercial vehicle market bigger than 3.5 t gross vehicle mass.

In 2019, three brands shared in 7% of overall sales, compared with four makes contributing 21% in 2024.

The number of brands and related sales are not the only area where China has seen growth over the last five years, notes Lightstone Auto.

In 2019, vehicle imports from China accounted for 2% of all light vehicles sold in South Africa, with Volvo - although owned by Geely in China, it is still considered a Swedish brand - being the only non-Chinese make imported from China.

By 2024, this picture has changed, with 12 makes - including Ford, Kia and Peugeot - imported from China, making up 10% of all light-vehicle sales in South Africa.

* Not all Chinese brands report their sales to naamsa.

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A second phase of the partnership launched between government and business to tackle South Africa's electricity, logistics and crime crises has been launched under the Government of National Unity (GNU), with an immediate goal of raising growth to over 3% from 2025.

Speaking at the launch in Johannesburg, President Cyril Ramaphosa described growth as the "glue" that held the GNU parties together, while urging business to work with government to take advantage of the "window of opportunity" opened by the May 29 election results to aim for even higher levels of growth in future.

"If we can achieve more rapid growth, we will create jobs and reduce poverty," he added.

Discovery CEO Adrian Gore, who has been a leading figure in forging the partnership with government in recent years an in galvanising CEOs to pledge their support for collaborative action, expressed confidence that South Africa could break free from its weak growth performance, which has average about 1.2% for more than a decade.

He also outlined the targets that government and business had identified to elevate growth to 3% from next year, including:

Building 4 GW of additional renewable energy in 2025, which would mobilise R23-billion in private investment;

Building 1 000-km of new transmission lines;

Continuing on a trajectory of no loadshedding;

Increasing the volume of goods railed to 193-million tons against a current base of only 170-million tons, including by facilitating R28-billion in private rail investment; and

Removing South Africa from the Financial Action Task Force grey list by the end of 2025.

Describing the actions outlines as "stretch targets", Gore said modelling conducted together with the Bureau for Economic Research indicated that, together with efforts to deliver secure water supply and a rise in national sentiment, the initiatives outlined could increase growth to 3.3% against a baseline for 2025 of closer to 2.2%.

"It's a massive stretch, but then ending loadshedding was a massive stretch target," he added, speaking more than six month since Eskom last implemented rotational power cuts on March 26.

The partnership between business and government would remained confined to the three priority areas of electricity, freight logistics and crime and corruption, but could extend to additional areas, such as water and infrastructure or support for local government, in future.

Ramaphosa said the GNU, which is approaching 100 days since its formation, was fully committed to following through on the reform agenda in the three priority areas, where problems persisted.

"The challenges in our freight logistics system continue to undermine economic growth and hinder our competitiveness.

"The constraints in our transmission network present a risk to much-needed investments in renewable energy.

"The rate of violent crime remains unacceptably high.

"Our unemployment rate is unsustainable," the President said.

He added, however, that the recent progress made in tackling problems such as loadshedding had proved the value of working collaboratively.

"We have built credibility and trust by turning plans into action, and we need to continue to turn those plans into real action.

"And everyone in the government that I lead is now motivated to make sure that the next 100 days, the next 300 days, and the next five years, we can turn the plans that we have into real action."

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The electricity subcommittee of the National Energy Regulator of South Africa (Nersa) has recommended the approval of four more electricity trading licences, dismissing the objections raised by Eskom's distribution division during hearings in July.

The recommendation that GreenCo Power Services, Discovery Green, Green Electron Market and CBI Electric Apollo receive national trading licences will now be taken to the Energy Regulator, Nersa's highest decision-making body, for approval.

Eskom shocked the market on July 18 when it argued that, under the current rules, Nersa was prohibited from allowing two or more licensees to supply the same area.

Eskom also accused the traders of "cherry picking customers" and warned that granting the licences would also compromise the sustainable and orderly development of electricity supply infrastructure.

The objection was lodged despite the fact that Nersa had already issued six trading licences since 2014 to PowerX, EnPower Trading, Neura Trading, Energy Exchange of Southern Africa, Envusa Trading and even to Eskom Holdings' National Transmission Company South Africa.

In recommending that the four new licences be approved, Nersa members argued that the limitation to no more than two licensees related to a distribution licence, which involved the building of physical networks and operations.

There was no such limit on trading licences, where traders relied on those networks and operations to buy and sell electricity and paid to use them.

Traders would be expected to pay the licensed distributor, including Eskom or municipal distributers, to wheel electricity through the networks and there was, thus, no potential for infrastructure conflicts or safety concerns, Nersa concluded.

Regarding cherry picking, Nersa stressed that it could not control which customers and generators traders entered into agreement with, and again underlined that the licensed distributor was entitled to received revenue for the use of its network.

The subcommittee members also noted that Nersa was obliged through both direct legislation and South Africa's competition legislation to ensure non-discriminatory access to distribution grids.

It was also noted that Eskom had been delaying the issuance of grid connection budget quotes to generators that had entered into bilateral contracts with traders that had not yet received a licence.

The development highlighted the need for a national wheeling framework, which Nersa intended to finalise before the end of the year.

GreenCo Power Services' application for an import and export licence was not considered by the subcommittee, however, but a commitment was made to adjudicate the matter in the not-too-distant future.

During the meeting, Eskom's application for a generation operating licence for solar PV projects at the Lethabo power station site, in the Free State, and the Sere wind farm site, in the Northern Cape were also recommended for approval, as was AGV Projects' application to operate battery energy storage systems.

Meanwhile approval was given for the registration of the Lion Thorn distribution facility, in North West province, given that distribution facilities were not covered by the generation licensing exemption of 2023.

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Electricity and Energy Minister Dr Kgosientsho Ramokgopa says that government would like to be "ultra-aggressive" in the roll-out of new renewable energy, which he describes as the "future".

However, key structural constraints, including those relating to grid capacity and regulation, had to be cleared to increase the pace of deployment and to ensure that the credibility of the public procurement process in particular was restored.

Addressing a renewable-energy seminar in Gauteng, the Minister acknowledged that South Africa's public system for procuring renewables capacity from independent power producers (IPPs) - which had been much-lauded when it was initiated in 2011 - was in urgent need of review.

This, owing to recent failures of bid windows to procure new wind capacity in particular, as well as changes in the market that made it possible for private IPP projects of any size to proceed without a licence.

"As part of our quest to ensure that we see the exponential rise of renewables as part of the energy mix, we are going to be a bit more aggressive in onboarding renewables.

"But I think that statement is hollow if we are not able to address … the inherent weaknesses in the system," he said at the gathering, convened to allow practitioners in the renewables sector to outline the hurdles to higher levels of investment and propose possible solutions.

Across the board, South Africa's underinvestment in grid infrastructure, together with a cumbersome grid-allocation system and outdated regulatory processes, were highlighted as key obstacles to higher levels of investment.

IPP Office head Bernard Magoro said the public procurement of renewables IPPs had yielded R272-billion-worth of investment since 2011, while the 6 300-MW fleet of operating wind and solar plants procured since that date were current contributing about 10% of South Africa's electricity.

PROTRACTED PROCESSES

However, the procurement process had become protracted, largely owing to the time it took for bidders to secure grid-connection cost estimate letters (CELs) from Eskom and preferred bidders to gain the grid-connection budget quotes (BQs) needed before construction could begin.

"We need to firm up our allocation rules," Magoro said, describing as a good first step the prevailing Interim Grid Capacity Allocation Rules, which shifted such allocations from the 'first come, first served' model used previously to 'first ready, first served'.

"[But] we need to finalise that process and get rules that make the process much more seamless and faster."

South African Independent Power Producer Association chairperson Brian Day argued that CELs and BQs, which were currently only being issued after IPPs had secured all their other regulatory approvals, should be processed in "parallel rather than in series" so as to derisk the development process and speed up implementation.

In the short-term, however, Day saw curtailment as the key instrument for unlocking much-needed grid capacity, especially in the renewables-rich Northern, Eastern and Western Cape provinces, but noted that the National Energy Regulator of South Africa (Nersa) had still not approve the curtailment framework.

He argued that the delay was symptomatic of larger problems at Nersa, which Day said was struggling to keep pace with the rapid changes under way in the electricity sector and had become a "huge bottleneck".

In the medium-term, the grid constraint could be eased by the National Transmission Company of South Africa's (NTCSA) decision to begin using turnkey contracting to deliver new grid capacity.

Nevertheless, the longer-term solution would probably depend on government developing a model to open up the sector for Independent Power Transmission (IPT) projects, without which it was unlikely that NTCSA alone could deliver the grid infrastruc...