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Through the ongoing support of Volkswagen’s Broad-based Black Economic Empowerment (B-BBEE) Initiatives Trust, a former employee of Volkswagen Group South Africa (VWSA) has been able to realise his dream of becoming a business owner – and a supplier to his former employer.

MCR Plastics co-owner and MD Morgan Waterboer has received support from the B-BBEE Initiatives Trust, as well as the Automotive Industry Transformation Fund (AITF) Equity Equivalent Programme, since he started his Kariega-based business in 2019.

“I worked for VWSA from 2002, in the Quality Assurance division, but almost 17 years later I saw a gap in the market,” says Waterboer.

His injection moulding company last year started supplying door covers and fuel filler modules for the Polo built at VWSA’s Kariega plant.

Waterboer runs MCR Plastics alongside his wife Edwina, who has been handling the finances and is currently running the human resources function.

“We are a small team, with four permanent employees and one consultant on board,” says Edwina.

MCR Plastics received bridging finance of R7.5-million from the B-BBEE Initiatives Trust when the company just started up, notes Morgan.

“Their support has been great and it has enabled us to grow.

“It’s not easy to start a business, but the support was very comprehensive. VWSA’s excellent team also supported us in getting the necessary processes in place.”

Through the AITF programme, the company also received funding, as well as assistance with the necessary certification. MCR Plastics was also invited to the 2022 South Africa Auto Week, where the management team could interact with stakeholders across the industry.

“Since 1996 I have dreamed of being a business owner,” says Morgan. “My proudest moment was when we loaded the truck with our very first delivery; that was a happy day for me.”

“We’ve always been Volkswagen fans,” adds Edwina. “We are grateful for them believing in us and helping us to grow our business, which they are still doing. It’s a blessing to see how the company is growing.”

The B-BBEE Initiatives Trust was formed by VWSA in 2016 with the mandate of driving transformation in the South African automotive industry by investing in black-owned suppliers and also offering them post-investment support.

VWSA has also been involved in the AITF – an organisation working with South Africa’s vehicle manufacturers towards transformation in the supply chain and dealer network – since 2020.

“Transformation remains a key goal in the automotive industry, and it is a goal we can only achieve through partnerships and active participation,” says VWSA corporate and government affairs director Nonkqubela Maliza.

“Our support of MCR Plastics is just one example of the success we can achieve by collaborating as an industry to develop black-owned businesses in the automotive value chain.”

The South African government reports that an acting Eskom CEO will be appointed “in due course” following the sudden departure of CEO André de Ruyter.

De Ruyter’s exit more than a month before his expected departure on March 31 was confirmed hours after the airing of an explosive television interview in which he offered startling details about high levels of criminality at the utility and also indicated that a high-ranking “politician” was directly involved in corruption at Eskom.

In a statement issued the day after the Eskom board announced that De Ruyter had been “released from his position with immediate effect”, the Government Communication and Information System (GCIS) reported that Public Enterprises Minister Pravin Gordhan and the Eskom board were finalising the appointment of an Acting CEO and would make an announcement in due course.

“Government assures South Africans that there will be no leadership vacuum.

“The Eskom management team continues with daily operations and work to end loadshedding and secure our energy supply continues in earnest,” the statement reads.

It also “noted” public comments on social media that De Ruyter’s exit from Eskom was linked to the television interview.

“Government emphasises that there are formal channels, for all government entities, that exist between executives, boards, and Ministries, and this includes Eskom.

“Any concerns or challenges experienced by executives can and should be raised via the formal platforms to enable proper discussions and provide solutions,” GCIS stated.

In his interview with eNCA, De Ruyter said he had raised his concerns about “entrenched” criminality and corruption directly with a Minister, who he did not identify, indicating that Eskom had identified four criminal syndicates that had infiltrated its coal value chain.

He estimated there to be ongoing theft amounting to about R1-billion a month relating mostly to coal and fuel oil.

De Ruyter also revealed that he had reported to a Minister that a senior politician was actively involved and that the response of the Minister had been to turn to a senior official and say: “I guess it was inevitable that it would come out”.

South Africa’s 2023 Budget includes tax incentives worth R9-billion to support businesses and households invest in renewable energy, including rooftop solar, in a bid to offset the impact of intensifying power cuts.

In addition, the National Treasury announced that it would amend the bounce-back loan scheme, initially set up to support the recovery of businesses from the Covid-19 pandemic, to help address energy-related constraints.

Finance Minister Enoch Godongwana said the decision to incentivise renewables investments had been taken to enable customers to alleviate pressure on the grid, but also stressed that it was not an open-ended incentive.

He announced that the tax incentive available for businesses to promote renewable energy would be temporarily expanded beyond its current design, which allowed businesses to deduct the costs of qualifying investments over a one- or three-year period, creating a cash flow benefit in the early years of a project.

Businesses are currently able to deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 MW, biomass and photovoltaic (PV) projects above 1 MW. Investors in PV projects below 1 MW are able to deduct 100% of the cost in the first year.

“Under the expanded incentive, businesses will be able to claim a 125% deduction in the first year for all renewable-energy projects with no thresholds on generation capacity.

“The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025.

“For a business with positive taxable income, the deduction will reduce its tax liability,” the Budget Review states.

The National Treasury shows that a renewables investment of R1-million, for instance, would qualify for a deduction of R1.25-million. Using the current corporate tax rate, this deduction could reduce the corporate income tax liability of a company by R337 500 in the first year of operation.

A rooftop solar incentive for households is also proposed, whereby individuals will be able to receive a tax rebate to the value of 25% of the cost of any new and unused solar PV panels.

“To qualify, the solar panels must be purchased and installed at a private residence, and a certificate of compliance for the installation must be issued from 1 March 2023 to 29 February 2024,” the Budget Review states, adding that the rebate is available only for solar PV panels, and not inverters or batteries, to focus on the promotion of additional generation.

“It can be used to offset the individual’s personal income tax liability for the 2023/24 tax year up to a maximum of R15 000 per individual. For example, an individual who purchases 10 solar panels at a cost of R40 000 can reduce their personal income tax liability for the 2023/24 tax year by R10 000.”

Meanwhile, the National Treasury would seek to make amendments to the bounce-back scheme by May so as to allow for government to guarantee solar-related loans for small and medium-sized enterprises.

Under the repurposed arrangement, commercial banks will be permitted to borrow directly from the scheme to facilitate the leasing of solar energy equipment to small businesses and small businesses installing solar will be able to borrow finance for working capital.

In April 2022, Godongwana approved the reduction of the government loan guarantee scheme to R20-billion as a result of lower-than-expected take-up. Of this amount, R8-billion will be used for the new bounce-back scheme.

The Minister also announced that fuel levies would be held steady to limit the effect of high fuel prices, resulting in R4-billion in foregone revenue.

In addition, the diesel fuel levy refund available to the farming, forestry, fishing and mining sectors has been extended to manufacturers of foodstuffs in a bid to limit the impact of power cuts on food prices.

“In light of the current electricity crisis, a similar re...

The R254-billion Eskom debt-relief package unveiled by Finance Minister Enoch Godongwana in his 2023 Budget includes a sweeping set of conditions that will restrict the State-owned utility’s capital expenditure to transmission- and distribution-related investments and could also result in coal-fired power stations being concessioned to private operators.

In addition, the National Treasury confirmed that the package had been proposed with the assumption that the recent tariff increases of 18.65% in 2023/24 and 12.74% in 2024/25 approved by the regulator would be implemented, as “without these increases, the debt-relief arrangement is not sustainable”.

This, despite an appeal made by President Cyril Ramaphosa earlier this year for the hikes to be postponed or moderated. The President later used one of his weekly newsletters to backtrack from that call, but the Democratic Alliance has launched a legal application to have the hikes set aside.

Eskom’s debt currently stands at R423-billion and is widely considered unsustainable to the point where it has become a direct cause of daily power cuts, which are undermining the country’s growth and development prospects.

The National Treasury officially lowered its 2023 growth forecast to 0.9% from 1.4%, largely as a result of loadshedding. The South African Reserve Bank is forecasting growth of only 0.3% this year.

The debt-relief package itself – which will be implemented over the coming three fiscal years and involves the National Treasury assuming responsibility for Eskom’s capital and interest payments of R168-billion and R86-billion respectively – diverges fundamentally from the debt-transfer proposal signalled by the Minister when he released the Medium-Term Budget Policy Statement (MTBPS) in October.

Swapping Eskom debt for National Treasury debt was said to be technically difficult to implement and could have also led to litigation by bondholders.

Instead, government has opted for a debt-to-equity conversion that did not require any specific engagement with bondholders in the first phase, as Eskom will be provided with advances of R78-billion in 2023/24, R66-billion in 2024/25 and R40-billion in 2025/26 to cover payments as they fall due. In 2025/26, however, government will directly take over up to R70-billion of Eskom’s loan portfolio, which will require consultation.

The funds will be advanced as an interest-free subordinated loan, to be settled in Eskom shares rather than cash, with the loan advances conditional on the repayment of pre-identified Eskom debt instruments.

These amounts will be financed through the R66-billion Medium-Term Expenditure Framework (MTEF) baseline provision that was outlined in the 2022 MTBPS, as well as through R118-billion in additional borrowing over the three-year period.

Largely as a result of the Eskom debt relief, government’s borrowing requirement will reach R555-billion in 2025/26, while gross loan debt will grow to R5.84-trillion in the outer year of the MTEF period.

Debt is now expected to stabilise at 73.6% of gross domestic product in 2025/26 compared with the 71.4% in 2022/23 estimated in the 2022 MTBPS.

The package marks a decisive shift from the previous approach taken by government to support the debt-laden utility; one that has involved regular injections since 2008/9, which have collectively resulted in bailouts amounting to R263.4-billion, and loan guarantees.

It also reflects an acceptance by government that Eskom’s operational failures, which have triggered an intensification of loadshedding that poses a threat to both growth and social stability, are intertwined with its unsustainable financial position.

“[Previous] allocations have failed to stem the collapse of Eskom’s balance sheet and operations.

“The utility imposes an enormous drain on the economy and its debt stands at an unsustainable R423-billion.

“Government guarantees R350-billion of this debt, which is at risk of default – a contingent liability that raises South ...

Engineering News editor Terence Creamer gives an overview of the 2023 Budget delivered by Finance Minister Enoch Godongwana, including the announcement of a R254-billion Eskom debt-relief package and the conditions that apply to that package; the assumption that it would only work in tandem with tariff hikes and the user-pays principle being honoured; and the announcement of renewables tax incentives and loan support for small firms.

With no light discernible at the end of the Eskom tunnel, mobility group Motus will spend R250-million over the next 18 months to install alternative energy generation sources, such as solar power, at its facilities.

A global shortage of batteries meant that it was impossible to implement a solution sooner, said CEO Osman Arbee as he delivered his company’s financial results for the six months ended December 31 on Tuesday.

He said that Motus had already spent R100-million on alternative energy sources, as it had become clear that there was no short-term solution to Eskom’s power woes.

Motus saw revenue for the six months under review increase by 14%, to R51.2-billion, compared with the same period in 2021. Operating profit was up 22%, to R2.6-billion.

The numbers were boosted by two recent acquisitions in the six-month period, one local and one in the UK.

During October last year, Motus acquired UK-based auto parts distributor Motor Parts Direct, with the aim, among others, to reduce the group’s dependency on new-vehicle sales.

A month later Motus acquired three Mercedes Benz passenger dealerships and one commercial vehicle dealership in the northern suburbs of Gauteng, which should generate vehicle, panel, parts and workshop revenue.

The acquisitions carried a R4.4-billion price tag.

“We remain confident that the group’s integrated business model will generate cash, which will allow us to continue to invest in growth opportunities in South Africa and abroad,” noted Arbee.

Motus’ passenger and commercial vehicle businesses, including those in the UK and Australia, retailed 66 147 new units (down from 66 705), and 43 422 pre-owned vehicles (down from 47 533) during the six-month period.

Importer brands Hyundai, Kia, Mitsubishi and Renault struggled with stock availability, but Arbee said new shipments arrived in January, which should aid sales in the second half of the financial year.

Overall, stock shortages were a thing of the past, he added, apart from selected models.

Looking ahead, Arbee said the South African new-vehicle market should reach between 540 000 and 560 000 units this year, up from 528 963 units last year.

He said this growth would not necessarily flow from “the man in the street”, but from rental companies and corporates returning to the market after Covid-19.

It was expected that consumer and business sentiment would remain under pressure over the short to medium term.

Supply chain constraints, albeit easing, increasing global interest rates and inflation were also set to continue, impacting the cost of vehicles and parts in the short term.

Coal quality and mining productivity problems continue to negatively affect production at Sasol’s Secunda Operations, in Mpumalanga, where only between 6.6-million tons and 6.9-million tons will be produced this financial year.

Such output is well below both the group’s initial production guidance for the year of between 7-million and 7.2-million tons, as well as historical output levels of better than 7.5-million tons.

Production, which fell 2% in the interim period to about 3.2-million tons, was also affected by a total planned shutdown of the East factory, which reduced output by about 150 000 t during the period.

The lower volumes were offset during the six months to December 31 by higher energy prices, which enabled the JSE-listed group to sustain earnings before interest and tax at R24.2-billion, in line with the prior period.

Production at the Secunda Operations will be higher during the second half but will continue to be weighed down by the coal-related difficulties.

CEO Fleetwood Grobler reports that ensuring a recovery in the output of Secunda Operations is now a key focus area for the group, which is pursuing several initiatives to address low coal volumes and quality.

Coal remains the main feedstock to produce synthetic fuels and chemicals at Secunda Operations, which also uses some gas as a feedstock.

Grobler says a ‘full potential’ programme has been launched at its Syferfontein operation and will be extended to its other collieries over time.

In the short term, however, volumes mined internally will need to be further supplemented by third-party purchases to sustain a stockpile of sufficient size (above 1.5-million tons) to improve Secunda Operations’ security of supply and to facilitate blending to the correct quality.

Sasol is also considering “destoning” initiatives to further improve coal quality in the short term.

Various longer term feedstock options are also under review, including by opening the brownfield Alexander mine, with a final investment decision likely to be made this year.

The group is also pursuing the prospect of increasing the volume of natural gas used in Secunda’s production process, which would also support Sasol’s decarbonisation efforts.

The group has made a commitment to reduce its greenhouse gas emissions by 30% by 2030 and transition to net-zero by 2050.

Sasol is also pressing ahead with plans to displace coal-fired electricity with renewables, confirming during its interim results that it had signed power purchase agreements with independent power producers in South Africa for a total of 500 MW and was continuing with plans to secure 1 200 MW.

The renewable electricity will initially displace purchases from Eskom but will in time also enable Sasol to shut down its own coal-fired generation capacity, which will help it to reduce its yearly coal consumption.

It was also investing to sustain gas supply from Mozambique, with CFO Hanré Rossouw telling Engineering News that it was investing some $1-billion to ensure an extension in its gas supply plateau from South Africa’s neighbour until at least 2028.

The group’s well stock in Mozambique had been expanded from 19 to 24 and Sasol was on track to add two more wells in the coming months.

Gas production from Mozambique is expected to be between 111-billion and 114-billion standard cubic feet during the current financial year.

Sasol CEO Fleetwood Grobler announced on Tuesday that the JSE-listed group had signed a total of five power purchase agreements (PPAs) in South Africa to date, increasing the company’s procurement of renewable energy for its South African operations to 550 MW.

He added that further agreements would be concluded this year in line with its goal of procuring 1 200 MW of renewable electricity by 2030.

Speaking during the release of the company’s interim results, Grobler confirmed that a further 260 MW of wind and solar electricity had been procured in partnership with Air Liquide, which operates 16 oxygen production units at Sasol’s Secunda complex, in Mpumalanga.

In a joint announcement, Sasol and Air Liquide reported that PPAs for wind and solar electricity had been signed with TotalEnergies and its partner Mulilo, which would build a 140 MW wind project and a 120 MW solar project and that the generators would be operational in 2025.

In January, the two companies also signed two PPAs with Enel Green Power for 220 MW of wind capacity as part of a commitment to jointly procure 900 MW, with Sasol procuring 500 MW and Air Liquide the 400 MW balance. To date, Sasol and Air Liquide have now jointly procured 480 MW.

Also in January, Sasol signed a PPA with the Msenge Emoyeni Wind Farm, in the Eastern Cape, for the supply of 69 MW to its Sasolburg site, in the Free State, where Sasol will use the renewable electricity to produce green hydrogen from water using an electrolyser.

The six-ton-a-day electrolyser is expected to be operational later this year and aims to use the green hydrogen produced to pilot various use cases, including various transport applications.

“Once these renewables projects are operational, they could reduce our Scope 2 emissions by approximately 1.8-million tons per annum,” Grobler told investors.

He also reported that Sasol and Topsoe had signed a memorandum of understanding to establish a 50/50 joint venture (JV) in 2023 to develop sustainable aviation fuel (SAF) solutions.

“The JV will develop, build, own and operate ventures producing SAF based on Sasol’s Fischer Tropsch technology and Topsoe’s relevant SAF technologies,” Grobler said.

Meanwhile, CFO Hanré Rossouw announced the establishment of Sasol Ventures, a chemicals-focused venture capital fund through which the group would invest €50-million over the next five years.

Sasol has partnered with Emerald Technology Ventures on the initiative and Sasol Ventures will pursue investments in startup and early-stage technologies that could support the South Africa group’s decarbonisation ambitions.

Sasol has committed to reducing its greenhouse gas emissions by 30% by 2030 and has set a goal of becoming net-zero by 2050.

Eskom has confirmed that it is in the process of reviewing the current framework that governs loadshedding amid renewed concern that the State-owned utility may need to implement rotational cuts beyond the Stage 6 level that has already been declared several times this year, and possibly even beyond the eight stages catered for under the current framework.

CEO André de Ruyter offered an assurance on Monday that the utility was not expecting to have to move beyond Stage 6 loadshedding this week, despite a severely constrained system, indicating that the intensity of loadshedding should be reduced to Stage 4 by Thursday morning.

He also said that contingencies were in place to prevent a total blackout even if Eskom was forced to implement higher stages of loadshedding.

However, GM in the system operators office Isabel Fick confirmed that Eskom was in the process of reviewing the loadshedding framework, which is outlined in a National Energy Regulator of South Africa (Nersa) document.

“We are currently in the process of reviewing the document that governs loadshedding, NRS048-9, which is a Nersa document . and we are looking at the different stages of loadshedding, “ Fick confirmed during a briefing on the state of the system.

No further details were provided, but it is understood that the document proposes more stages of loadshedding than which are currently outlined, possibly even doubling the number of stages.

The new document is reportedly being canvassed with key stakeholders, but will also be released for public comment by Nersa at some point.

In the meantime Fick stressed that “contingencies” were already in place should Eskom need to move beyond Stage 8.

She also stressed that there was currently no expectation of any loadshedding declaration above Stage 6.

Eskom was also reassessing its base case for unplanned outages ahead of the release of its winter plan, owing to the fact that breakdowns have far exceeded the 13 000 MW base case assumed in the summer plan.

“We will review the performance and then adjust the baseline as necessary.

“From what we can see right now there is a possibility that the baseline will be moved up to a higher level.”

On Monday, more that 20 000 MW was unavailable as a result of full and partial load losses, as well as losses associated with coal quality or coal handling problems.

Naamsa | The Automotive Business Council has proposed the “provision of a direct, fixed new-energy vehicle purchase subsidy” as the most appropriate incentive model to support South Africa’s move to electrified vehicles (EVs).

EVs include battery electric vehicles (BEVs), hybrid electric vehicles (HEVs) and plug-in hybrid vehicles (PHEV).

Naamsa says the subsidy is necessary given the “price sensitivity of the South African market”, as well as the substantial price gap that exists between NEVs and internal combustion engine (ICE) vehicles.

“The value of the subsidy will be determined by the type of new-energy vehicle (NEV) being subsidised,” says Naamsa.

“An incentive of this kind would optimise support for entry-level NEVs, with less benefit for more expensive NEVs.”

Governments around the world have used subsidies of various forms to boost EV sales in support of reducing their carbon footprint.

Naamsa on Monday released its thought leadership discussion document on NEVs for South Africa.

This comes as the local automotive industry still awaits the release of government’s NEV policy, set to guide and support the country’s transition from ICE vehicles to EVs.

The Department of Trade, Industry and Competition (DTIC) in May 2021, released a green paper on NEVs, promising a White Paper in October of the same year.

However, the department has failed to publish the White Paper.

It is now believed that some direction will flow from this week’s National Budget.

“As the President hinted during his State of the Nation Address at the beginning of this month, we are all eagerly waiting [on] the National Budget speech announcement to inform the NEV Roadmap going forward,” says Naamsa CEO Mikel Mabasa.

“Once there is a clear policy directive and commitment from government, this should allow all our original equipment manufacturers [OEMs, or vehicle manufacturers] to act with speed ,and for the DTIC to finalise an NEV White Paper without further delay.”

NEVs sales in South Africa showed a significant year-on-year increase of 431.7% last year, up from 896 units in 2021, to 4 764 units in 2022.

However, this number is negligible as a percentage of total new-vehicle sales, at 0.88%.

Despite lower running costs, the higher upfront price tag of NEVs (linked to higher production costs, mainly related to battery costs) has been the main inhibitor to increased NEV uptake in South Africa, believes Naamsa.

This is exacerbated by value-added tax, an ad valorem excise duty based on a sliding scale up to 30%, import tariffs; and limited product availability, especially in terms of more affordable EVs.

Currently, the average international price gap for NEV models relative to their ICE equivalents is 12% for PEVs, 43% for PHEVs, and 52% for BEVs, reports Naamsa.

‘Rapid Adoption’

Mabasa states that the rapid adoption of newer drivetrain technologies, both in local production and in the domestic sales market, is critical to the South African automotive industry’s long-term success and growth.

“The only way to have a successful automotive manufacturing base is to keep up with technological developments.

“The South African automotive industry cannot be running on one development technology track, whilst the rest of the world is way ahead on the same track.

“If we want to remain globally competitive, we have no option but to play with the big global players who are leading the NEV charge,” he notes.

“Regrettably, South Africa has been painfully slow in finalising its governance and policy transformation priorities.

“We need to urgently enhance existing auto policies to facilitate a high-yielding business environment, including developing an attractive fiscal and regulatory framework that makes South Africa a highly competitive and compelling location for NEV production.

“The rapid technological advancement in the automotive industry and the global commitment by world economies to a greener future, mean the evolution in vehicle production will rapidly develo...