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Bell Equipment is set to launch a new business, called Bell Heavy Industries (BHI), at the Mining Indaba in February next year.

BHI will be an arm of Bell Equipment Company South Africa, which is 51% black-owned, says Bell Equipment CEO Leon Goosen.

Bell is a global manufacturer, distributor and exporter of a range of heavy equipment for the construction, mining, quarrying, sugar and forestry industries.

BHI will operate from Bell's plant in Richards Bay, KwaZulu-Natal, which is currently seeing a shift in articulated dump truck (ADT) production to Germany, in an effort to shorten the logistics chain to the group's main suppliers, as well as its main markets, such as North America.

"The critical need for simple logistics routes has been clearly demonstrated over the last few years," says Goosen.

He adds that new and existing products less affected by supply-chain challenges will continue to be manufactured in the South African plant. These include products such as those envisioned by BHI.

"We want to leverage what we have, and the plant in Richards Bay is a great asset. We see the formation of BHI as an enormous opportunity to grow."

Goosen believes that Bell Equipment's normal work could utilise the plant for one or two shifts, while a third shift could use the same equipment (such as plasma cutters) to make products such as railway bogies or excavator buckets.

Many excavators typically arrive in South Africa without buckets, while there is also a "huge replacement cycle", says Goosen.

"As a country we desperately need industrialisation and this is one opportunity to work towards this goal."

Bell on Tuesday recorded a 42% increase in revenue for the six months ended June 30, to R6-billion, compared with the same period last year.

Operating profit was up 74%, at R536-million.

Goosen says strong demand in most markets resulted in the group "performing well".

"We are particularly pleased about the sales growth during the period in the North American market."

Goosen notes, however, that the high global inflation and input cost increases witnessed last year continued to impact the group's margins.

"In addition, the rand weakened sharply against major currencies between December, 2022 year-end, and the end of June, 2023.

"Although a weaker rand is generally favourable for the group over the long term, it is challenging to respond to significant, sudden rand depreciation over a short period."

Goosen adds that operating conditions have also been challenging, with ongoing supply chain issues and staff shortages at the Bell plant in Germany. This constrained growth, as well as Bell's ability to fully capitalise on market demand.

While direct sales from South Africa benefitted from strong commodity demand in the six months under review, the construction and road-building sectors remained weak.

Goosen says Bell's new motor grader will be launched in late 2024.

Outlook

Although global markets and the group's order book are currently strong, the group says it is sensitive to the increasing possibility of markets softening.

Europe could see some reduction in demand for ADTs with the Russia-Ukraine conflict potentially moving country-specific post-Covid-19 stimulus packages from infrastructure spending to building military assets.

Bell has mothballed its operations in Russia, and is unable to repatriate R72-million in cash stuck in the country.

Goosen also notes that the completion dates for some larger infrastructure projects in Europe have been moved out, resulting in a reduced demand for earthmoving equipment.

He says loadshedding, limited availability of vessel space for finished ADT products, partially owing to a rapid increase in vehicle exports from China, and the funding required for the long working capital cycle to import components and material from the northern hemisphere, continue to challenge the South African manufacturing operation.

Goosen is set to depart Bell at the end of the year. The search for his successor is under ...

Special Investigating Unit (SIU) head Advocate Andy Mothibi says the fact that former Eskom CEO André de Ruyter did not receive board authorisation to commission a private intelligence investigation into criminality and sabotage at the State-owned utility raises potentially grave governance issues. Nevertheless, he stresses that the report's content "cannot be ignored" and is proving useful in guiding several ongoing investigations.

In a presentation to the Standing Committee on Public Accounts (Scopa), Mothibi confirmed that George Fivaz Forensics and Risk (GFFR) had been appointed by Business Leadership South Africa (BLSA) to conduct the probe in a contract facilitated by De Ruyter, who "was acting on his own".

The private investigation reportedly cost R50-million and was funded by BLSA together with as yet unnamed private funders, with the BLSA's portion valued at R17.1-million before value added tax.

Mothibi said that, while De Ruyter might have been acting with good intentions, undertaking a private investigation into a State institution without the necessary authority points to possible "maladministration".

"Consideration should be given to holding the former GCEO to account," he told lawmakers, while suggesting that BLSA ought to have known that it could not conduct an investigation at a State institution without the necessary authority.

BLSA CEO Busi Mavuso, who was said to have been cooperating with the SIU enquiries, has previously defended the decision to part-fund the investigation on the basis of businesses' desire to support the combating of crime and corruption at Eskom, which was posing a major risk to ongoing business operations and investment.

BLSA also insisted that it had no role in the appointment of GFFR, nor in vetting the lead investigator Tony Oosthuizen, who has been identified in media reports as having been an apartheid military intelligence operative.

However, the SIU obtained a copy of the contract between GFFR and BLSA which was concluded on January 28, 2022, and reported that a close-out report was issued to BLSA in August 2023.

No specific recommendation was immediately provided regarding what action should be taken against either De Ruyter or BLSA, with Mothibi indicating that it planned to make such a recommendation only once various further enquires had been completed.

For instance, De Ruyter's employment contract still required analysis to assess whether it empowered him to undertake such an investigation without the approval of the board and the knowledge of law enforcement authorities. A scenario described as highly unlikely in light of the legislative and regulatory framework surrounding the initiation of such actions.

De Ruyter left Eskom in February after an explosive television interview in which he revealed that he had been poisoned and implicated senior politicians in widespread crime, corruption and sabotage at the utility; information which appeared to be drawn directly from the GFFR report.

Mothibi denied that pursuing De Ruyter amounted to the "proverbial shooting of the messenger", insisting that the GFFR investigation could set a "concerning precedent" for governance and law enforcement if not addressed.

That said, he also insisted that the SIU and the law-enforcement agencies, which had since had sight of the GFFR document, were not discounting the substance of the report and were actively pursuing several leads.

As with De Ruyter, neither Mothibi nor Lieutenant General Godfrey Lebeya of the Hawks, who also made a presentation to Scopa, would be drawn on the names of the senior politicians identified in the report as having links to coal cartels in Mpumalanga.

Both confirmed that the GFFR contained names, but Mothibi said he could not reveal the identity without further evidence, while Lebeya said the Hawks only named implicated individuals when they were charged.

USEFULNESS OF REPORT CONFIRMED

Despite the unauthorised nature of the report, its "usefulness" was confirmed, ...

Import substitution in the local automotive industry is crucial for the growth of the South African economy, says Hudson Rubber Company MD Stoney Steenkamp.

Hudson Rubber is a Hammanskraal-based rubber and plastics manufacturer which has been in operation for 64 years.

Steenkamp says while the perception regarding the quality of locally produced automotive components is changing for the better, more needs to be done, and at a much faster pace.

"Local substitution saw a significant increase during Covid due to the disruption of overseas distribution channels, forcing local companies to source components at home.

"Since then, when speaking to a number of auto component manufacturers, import substitution has grown."

Going forward, however, the process of substituting imported parts for made-in-South Africa parts requires South Africa-based companies to display the will to find local suppliers.

"Although government is participating in the initiative, it is not up to them alone to force the change - automotive and related companies also need to make localisation a reality," says Steenkamp.

"Businesses are generally aware that purchasing locally means shorter lead times, better cash flow, less administration, and none of the complications experienced with importing.

"However, it seems businesses would rather invest in negotiating with foreign suppliers on issues such as improved terms, lower costs and more reliable shipping methods, than invest the same time and effort with local manufacturers.

"In the cases where some local companies do not react to support local customers, their actions are most likely justified, however, this cannot be generalised," notes Steenkamp.

He adds that localisation can also benefit buyers by allowing them the opportunity to customise or make changes to products in a relative short space of time, adapting to country-specific requirements.

Import substitution can also increase innovation, which, in turn, generates better engineers, which is a boon to the domestic economy.

Steenkamp refers to the vision of the National Tourism Sector Strategy, which is to "rapidly and inclusively grow a tourism economy that leverages South Africa's competitive edge in nature, culture and heritage, underpinned by Ubuntu and supported by innovation and service excellence".

"Why can't we extend this strategy to the automotive and other industrial sectors?"

Steenkamp cites the local public transport sector as one example where import substitution can make a positive impact.

"The vehicles that are locally build should contain locally sourced products that are competitive and on par with imported quality.

"Why are imported parts still used in locally-build vehicles that are used to transport millions of our workers each day - especially when local suppliers are competitive in their costs, provide short lead times, offer cash flow benefits and create much needed local jobs?"

Steenkamp says there must be urgent and strong emphasis on companies to commit to at least consider import substitution.

"In the rubber and plastics industry, for example, Hudson has the expertise and machinery to provide a variety of solutions to the local original equipment manufacturer (OEM, or vehicle manufacturer) market.

"However, as with a number of other industries, OEMs are either not under pressure to buy local products, or they are restricted by their overseas principals to only source from their global supplier network."

"Willing local suppliers have a lot to offer," emphasises Steenkamp.

"They want purposeful and committed engagement from OEMs that will make localisation a reality, for the barriers to be removed and to build local capacity. OEMs do have capacity and the capability to make this a reality."

A new Centre for Development and Enterprise (CDE) report argues that the South African government's policy of localisation is locking the country "into the wrong path" of rising protection and rising inefficiency.

Published following an expert roundtable, the report outlines what it calls the "seven sins of localisation", including:

A policymaking process that is neither transparent nor evidence-based;

The imposition of conditionalities that pose a threat to investment;

A strategy of import substitution that is biased against exports;

A reduction of competition, owing to a restriction on imports;

Constraining innovation by excluding foreign knowhow;

Threatening trade relations by forced localisation that may violate international obligations; and

locking the country into an industrialisation path that relies on protection and facilitates rent-seeking behaviour.

The report comes as the Department of Trade, Industry and Competition (dtic) continues to prioritise localisation as a central pillar in South Africa's industrial policy and amid growing concern over what some are describing as the country's premature de-industrialisation.

Government has responded with a series of initiatives, including a 2021 approach to the social partners represented in the National Economic Development and Labour Council with a call for a 20% reduction in nonfuel imports over a five-year period.

In addition, the dtic has for some time been working across various sectors, from steel and automotive to renewable energy and clothing, to develop masterplans to identify opportunities for local industrial development.

It also comes as several other countries, including highly developed countries, are ramping up their own industrial policies to revive domestic manufacturing.

Nevertheless, CDE executive director Ann Bernstein argues that, instead of compelling the local manufacture of products, government should be working to shape a business environment that attracts and rewards investment shaped by strong competitive pressures and which is more often export-oriented.

She, thus, calls on government to rethink its adherence to the localisation policy, which the CDE report describes as "expensive".

"We need a different approach to building an expanding local economy with many more growing, innovative and export-oriented firms creating employment opportunities for the whole South African labour force.

"That is the kind of 'localisation' we need," Bernstein concludes.

Electricity Minister Dr Kgosientsho Ramokgopa reports that he is planning to co-host a seminar with the JSE in September to unpack various financing options for the expansion of South Africa's electricity grid.

Insufficient investment in the transmission system over the past number of years has emerged as a key constraint to the integration of much-needed new generation capacity and is particularly acute in regions with high-calibre wind and solar resources such as the Eastern, Northern and Western Cape provinces.

Ramokgopa reports that government has received various grid-related funding proposals, including from the International Partnership Group that has agreed to extend $8.5-billion in concessionary finance under the Just Energy Transition Partnership, as well as from the Brics bloc's New Development Bank.

"We want to understand, firstly, what is the size of these facilities that are available, what are the conditions . . . [and] what are the kind of structures that, in the view of the financing community, will be acceptable for them to participate in," he reported during his weekly briefing on the implementation of the Energy Action Plan.

Lessons will also be shared from countries that have experienced similar grid constraints, with the Minister highlighting Brazil as an example of a country from which South Africa could learn.

A report outlining the possible financing options would be drafted for Cabinet consideration and Ramokgopa indicated that it could have implications for the current moratorium imposed on Eskom with regards to the utility raising new debt. The moratorium is one of the conditions linked to the R254-billion Eskom debt relief package approved earlier this year.

The Minister highlighted a footnote to the National Treasury conditions, which indicated that Eskom could approach the Finance Minister should it believe there was a case for it to take on new debt.

He did not immediately indicate whether government would consider public-private partnership models for the delivery of new grid infrastructure, saying only that any model decided upon should be responsive to the views of the private sector, "otherwise you are unlikely to attract any significant amount of interest".

It is estimated that up to R235-billion in investment is required to strengthen and expand the grid in a way that positions it to connect the 53 GW of new generation capacity that will be required by the early 2030s, and there are concerns that the balance sheet of the unbundled National Transmission Company South Africa will not be sufficient to support such a roll out.

News of the grid-financing seminar comes days after Eskom and independent power producers agreed to adjusted new rules for grid access, which resulted in G7 Renewable Energies withdrawing its court case against the Interim Grid Capacity Allocation Rules (IGCA) unveiled by Eskom on June 17.

Many of the initial IGCA conditions that were considered onerous by the industry have been adjusted, including those relating to water-use licences, wind-measurement periods and land leases.

In addition, Eskom is reportedly close to finalising the approach it will be taking to the issue of curtailment as it moves to immediately unlock scarce grid capacity in high-potential renewables regions ahead of a grid investment roll-out.

Eskom is likely to outline the approach it will be taking when it publishes an updated Generation Connection Capacity Assessment later this month.

Curtailment involves the reduction of the output from renewables plants in response to system-security needs or constraints and is widely employed globally to release grid capacity.

Engineering News understands that a preliminary analysis has indicated that if Eskom accepts curtailment of no more than 10%, the capacity of a grid-constrained province such as the Western Cape to host additional renewables generators could be almost doubled, and that as much as 4 GW of additional capacity could be connected immediately.

With South Africa's social partners having failed to agree the social compact that President Cyril Ramaphosa called for in his 2022 State of the Nation Address, participants to the 28th National Economic Development and Labour Council (Nedlac) summit have indicated a preference for pursuing issue-based partnerships.

Nedlac executive director Lisa Seftel said that despite broad-based agreement on the "poly-crisis" afflicting the economy there was no consensus across the constituencies of labour, business, community, and government on a systemic long-term programme to turn the economy around.

This lack of a common economic vision for the future had made it difficult to achieve "the big trade-off" envisaged.

"That shouldn't stop us from continuing to build understanding and trust, responding to key issues, and representing the best interest of our constituencies, especially in the context of adversity.

"That is the poly-response to the poly-crisis," Seftle said, adding that new forms of social compacting should be pursued, including with a diverse group of social partners.

Deputy President Paul Mashatile also hinted to the need for a different form of social compacting based on the principles of "trust-building, transparency, pragmatism and patience".

While acknowledging that "deadlines for the establishment of a written declaration of commitments and actions have not been met", he said he had nevertheless witnessed encouraging moves towards social compacting.

He highlighted, in particular, the pledge made by CEO to work with government to tackle the electricity, logistics and crime crises.

Business Unity South Africa CEO Cas Coovadia said that business supported a move toward compacting on programmes where there was the greatest scope for collaboration rather than "trying to reach grand social compacts".

"Our success during Covid-19 was a sterling example of social compacting," he said.

Coovadia also called for a reform to the way Nedlac operated and argued that on public policy matters, the body should "facilitate as much agreement as possible amongst stakeholders but must not try to reach consensus at all costs".

"Where appropriate, Nedlac must recognise and appreciate progress on matters through bilateral engagements and seek to add value to those," he added.

He agreed that South Africa was facing a poly-crisis, of low growth, coupled with high debt, joblessness and inflation, which was being exacerbated by loadshedding, a collapse in freight rail services, deteriorating security conditions, and extreme weather events.

This "toxic mix" had resulted in South Africa no longer being an attractive investment destination.

"All of this must challenge us to reflect deeply on our model of engagement as social partners.

"How can we continue with the same mode of engagement when things are falling apart?" Coovadia asked.

Labour convenor Gerald Twala, of the Congress of South African Trade Unions, argued that the economy would "not grow by some miracle with a business-as-usual approach nor will it rebound with an approach that chokes the State of the resources it needs to provide quality public services".

"2024 will be unchartered waters, it is incumbent upon this leadership here to help steer the nation.

"Some may be tempted to grandstand and offer slogans, others may prefer to lament, neither will create a single job or rebuild a single public service," Twala argued.

The global head of renewable-energy group Scatec is "extremely enthusiastic" about the market opportunities in South Africa, where he says variable wind and solar generation offer the cheapest and quickest route to injecting electricity into the loadshedding-prone grid.

It is also where the company is building an enormous hybrid project that is poised to demonstrate the competitiveness of solar and batteries relative to conventional dispatchable technologies that take far longer to deploy.

Scatec CEO Terje Pilskog, who was in South Africa this week for the Norwegian-listed firm's board meeting, reports that the R16.4-billion Kenhardt hybrid project, which spans a ten-by-three-kilometre site in the Northern Cape, is on track to begin producing later this year.

The largest renewable hybrid facility on the continent, the facility is combining 540 MW of solar photovoltaic (PV) capacity, comprising nearly one-million panels, with 225 MW/1 140 MWh of battery energy storage, to produce 150 MW of dispatchable electricity daily from 5:00 until 21:30.

Despite being the last project to be selected as a preferred bidder under the much-delayed 2020 Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), Kenhardt is the only project named under the 20-year scheme to have achieved financial close to date and has been under construction since July 2022.

Two additional RMIPPPP hybrid projects recently signed project agreements with the aim of achieving financial close before the end of the year, while Karpowership, which secured the lion's share of the scheme's 2 000 MW allocation, continues to express optimism that it too will proceed with its three projects. This, despite government having indicated that it does not want the floating gas-to-power vessels to operate for longer than five years.

Pilskog says South Africa was selected to host Scatec's latest board meeting partly to expose its directors to the innovative Kenhardt project and partly offer them greater insight into the South African business, which entered the market in 2010 and currently employs some 300 people.

During that period, South Africa has assumed the position of the group's engineering hub from Germany and also houses Scatec's control and monitoring centre, which provides 24/7 plant performance management.

"South Africa is currently at the forefront of what we are doing globally," Pilskog says, indicating that the country has provided engineering expertise to its projects across the world.

Scatec has a global operating portfolio of more than 3 300 MW in emerging markets in Africa, Asia, the Americas, and Europe as well as a project pipeline of 15 700 MW.

It's equity investment in South Africa stands at about R26-billion currently, which has been used, together with bank finance, to build Kalkbult (75 MW), Linde (40 MW), Dreunberg (75 MW), the 258 MW Upington Solar Complex (which was recently sold to Stanlib) and Kenhardt.

The group has also achieved financial close on the 273 MW Grootfontein projects secured under government's fifth renewables bid window and where construction will begin in 2024.

INSPIRATIONAL SITE

Describing Kenhard as an "inspirational site", Pilskog says it will prove that solar is not only competitive as a variable provider of electricity but also competitive "as baseload".

That competitiveness, he argues, will be sustained even in areas of South Africa that are not located in the regions with the country's best solar and wind resources and which are currently grid constrained.

"Obviously, when renewable energy is competing against renewable energy, we will always seek out the best project locations.

"But renewable energy is competitive in most places in South Africa . . . and you can continue to build that renewable energy on a decentralised basis and overcome some of the limitations that you have currently with the grid."

Scatec would consider participating in grid development projects should that help facilitate its generati...

G7 Renewable Energies has withdrawn its High Court review against Eskom's Interim Grid Capacity Allocation Rules (IGCAR), following what it describes as "meaningful industry engagements" that have resulted in an "amicable resolution".

On June 17 Eskom unveiled the interim rules, which sought to address the prevailing scarcity of grid connections by shifting the allocation methodology from the 'first come, first served' approach that had applied previously to a 'first ready, first served' arrangement.

On July 17, G7 Renewable Energies launched a two-part application to, firstly, interdict the implementation of the rules and, secondly, to have the rules reviewed and set aside.

On July 31, the Johannesburg High Court dismissed the interdict application, but indicated that the second part of the application would be heard on September 11.

In the meantime, Eskom indicated that it would implement the rules, while engaging with industry on possible adjustments, given that various participants had expressed disquiet with the IGCAR.

The utility also indicated that it would also be seeking to have the final rules approved by the National Energy Regulator of South Africa.

In a statement, G7 reported that the industry engagements had resulted in an adjustment to the manner in which the IGCAR will be implemented and had provided much needed clarity to the process.

"The High Court review application has accordingly been withdrawn, with each party bearing its own legal costs.

"We are looking forward to seeing all projects that have been awarded grid capacity finalising their financing and contracting matters so that they can swiftly bring much needed new generation to the grid as a long-term solution to end loadshedding."

Engineering News editor Terence Creamer discusses State-owned Transnet's financial and operational results; the response of government and the new Transnet chairperson; and potential developments in the months ahead.

Government is negotiating with BYD, the Chinese automaker and the world's largest electric vehicle (EV) manufacturer, to possibly open a manufacturing plant in South Africa, Cabinet announced last week.

"This is in addition to the opening of the Beijing Automobile International Corporation (BAIC) manufacturing plant (another Chinese automaker) in South Africa," said the statement.

The BAIC plant, located in Coega, in the Eastern Cape, and with a reported capacity of 100 000 vehicles a year, has, however, not yet produced any vehicles, eight years after it was launched in 2016.

South Africa's Industrial Development Corporation (IDC), also State-owned, is a joint venture partner in the multibillion-rand development.

The IDC opted not to comment on the progress towards production, if any, at the BAIC plant.

BYD, or Build Your Dreams, is China's overall best-selling car brand, having overtaken Volkswagen this year. It focuses on producing hybrids and EVs.

In South Africa, the brand has already supplied Golden Arrow Bus Services with two electric buses for local testing.

The company launched in South Africa earlier this year, with the ATTO 3 passenger EV available at R768 000.

BYD declined to comment on the announcement made by Cabinet.