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Engineering News editor Terence Creamer discusses the positive and the worrying elements outlined in President Cyril Ramaphosa's seventh State of the Nation Address and whether these initiatives will help to end loadshedding.

President Cyril Ramaphosa’s State of the Nation Address (SoNA) was delivered amid a severe crises across critical economic and social spheres in South Africa, with industry respondents recognising both the good and the bad ideas contained in government’s plans.

Business Unity South Africa (Busa), firstly, expressed concern about the President likening the Covid-19 crisis to that of the energy crisis and saying that the nation will emerge resilient and ever hopeful, when in fact the energy crisis is not a result of natural disaster, but of poor governance and a lack of decisive leadership.

Busa adds that the energy crisis has been exacerbated by a weak State that is hesitant to work in real partnership with business, despite several offers by business to support and work with government.

The organisation adds that SoNA lacked detail of how government plans to work with stakeholders going forward, which Ramaphosa may respond to during the upcoming SoNA debate.

While Busa is concerned about many elements of the SoNA, it welcomes the more positive changes such as the launch of spectrum, the lifting of the ceiling on embedded energy and government going to market to procure a further tranche of renewable energy.

However, the organisation says these developments should have been announced and implemented years ago already.

“If the embedded energy ceiling had been lifted four years ago, when business called for it, the energy environment would look very different today. Nonetheless, business will commit to bringing 3.6 GW of power to the grid in the next two years from investments in embedded energy,” Busa notes.

The organisation has urged government to demonstrate its commitment to working with business. “Implementation through bilateral initiatives will help develop a workable social compact that is anchored on practical implementation, rather than mere words on paper,” Busa points out.

Financial services provider Nedbank says the President should have placed more emphasis on curbing crime and corruption, since these have been the root causes behind the failures of the State, Eskom and other State-owned enterprises.

“It seems impossible to us to end loadshedding without rooting out all forms of criminal activity entrenched and surrounding Eskom’s operations. Equally, government’s ability to deal with poverty and unemployment would be greatly amplified if fewer scarce resources were lost to corruption, if infrastructure could be protected from theft and sabotage and if citizens felt safe and secure from violence.”

ELECTRICITY MINISTER

Commenting on Ramaphosa’s announcement that a new Minister of Electricity will be appointed to oversee the electricity crisis, Busa says it is a bad idea that will add to the confusion and turf war already present across the Ministries of Public Enterprises and Energy.

Busa deems the move as another example of failure on government’s part to take bold decisions and opting instead for the soft, but expensive, option of adding another Ministry, rather than holding the existing Ministers accountable.

The Organisation Undoing Tax Abuse agrees, saying the appointment of another Minister only adds weight to an already bloated and lacklustre Cabinet. The civil rights organisation questions who will be accountable for what between the three Ministers of Public Enterprises, Mineral Resources and Energy, and Electricity.

Business Leadership South Africa (BLSA) suggests that the President delineate clear responsibilities between the different Ministers. The organisation hopes that the new Minister will be able to accelerate the processes needed to address both the short-term imperative of stopping loadshedding and the longer-term need to accelerate the country’s electricity generation capacity.

Trade union the Association of Mineworkers and Construction Union comments that the appointment of a new Minister ushers in a new opportunity for cadre deployment and marks an expansion of a Cabinet that is already bloa...

President Cyril Ramaphosa’s State of the Nation Address (SoNA) on February 9 has evoked mixed responses from trade unions, industry associations, academia and businesses, with some taking to the courts against the State of Disaster declaration in respect of the country’s electricity crisis.

Political party the Democratic Alliance (DA) and trade union Solidarity have announced that they will challenge the declaration in court, describing the declaration as irrational, unnecessary and possibly unconstitutional.

“We dare not allow a repeat of government’s abuse of power that occurred during the Covid-19 State of Disaster. Everything the President announced in the SoNA can already be implemented using existing legislation, but no amount of legislation will be able to rectify incompetence.

“A State of Disaster will not end the energy crisis any faster, but it opens the door to major abuse once again,” says Solidarity CEO Dr Dirk Hermann.

He, like many other private sector executives, believe the private sector should be allowed and enabled to alleviate the energy crisis without excessive government regulation.

In turn, the DA is seeking to have the State of Disaster declaration tested for its constitutionality, also owing to fears about possible abuse of power and corruption. This sentiment is echoed by the African Christian Democratic Party and Freedom Front Plus parties.

The Organisation Undoing Tax Abuse (Outa) also agrees, stating that a State of Disaster declaration is not the mechanism to provide South Africa with energy security. Outa believes the decision is intended to give an impression that action is being taken, when the reality is that government’s plan is weak.

The organisation is considering legal action against government, particularly as the declaration “will not make previously inept officials and Ministers suddenly competent and willing to do their jobs”.

National Employers Association of South Africa points out that the same team who systematically, over many years, caused the disaster, will be the team in charge of the recovery.

“The same ideology, the same hostility towards real private enterprise, the same craving for self-enrichment, will still be prevalent in the team. Unless that changes, recovery will remain a struggle. After years of disappointment, we will be naive to give them, once again, the benefit of the doubt,” the association states.

Business Leadership South Africa (BLSA) seconds Solidarity’s view that many of the solutions to the energy crisis can be implemented effectively without a State of Disaster and that government should limit the use of extra power it has granted itself purely to address the loadshedding crisis.

BLSA is concerned about the State of Disaster having overreach and undermining citizens’ rights, as was the case during the Covid-19 State of Disaster, as well as potential massive corruption linked to tenders.

Trade unions the Association of Mineworkers and Construction Union and Uasa say the State of Disaster will provide fresh opportunities for officials to loot State resources through relaxed regulations as experienced during the Covid-19 pandemic, and that it is merely another ploy to exercise undue control over citizens’ lives.

The Agricultural Business Chamber is one of few entities to have welcomed the declaration of a State of Disaster, saying it represents a clear statement to move forward with greater speed in addressing the energy crisis.

However, the organisation warns that this needs to be done in a focused manner, without unnecessary disruption to business or society at large.

“The declaration, with immediate effect, will allow government to access more comprehensive financial resources in a short timeframe to help cushion a national emergency,” adds the Motor Industry Staff Association.

North-West University Business School economist Professor Raymond Parsons was also among those who responded positively to the declaration, noting that it may well speed up dec...

The Presidency’s Rudi Dicks, who also heads the National Energy Crisis Committee (NECOM) secretariat, believes the controversial decision to classify the electricity crisis a National State of Disaster will support an acceleration of the implementation of the Energy Action Plan and ensure greater security of electricity assets currently exposed to crime, vandalism and sabotage.

Speaking after President Cyril Ramaphosa confirmed in his State of the Nation Address that the ‘Impact of the Severe Electricity Supply Constraint’ had been declared a disaster with immediate effect and that an Electricity Minister would be appointed “to assume full responsibility for overseeing all aspects of the electricity crisis response”, Dicks argued in favour of the more “centralised” approach being pursued.

Speaking during a webinar hosted by the South African National Energy Association, he said a state of disaster was particularly important to allow Eskom to speed up the procurement of those goods and services required to enable it to improve the performance of the coal stations, as well as to buy “dispatchable emergency energy”.

Ramaphosa announced in his speech that Eskom would “procure emergency power that can be deployed within six months to close the immediate gap”, raising fears about the potential for corruption.

“We need to ensure that Eskom management has the ability to make quick decisions . particularly when it comes to the ability to fix the power stations and deal with some of the constraints that are there on their internal procurement processes,” Dicks said, adding that there was also definitely a need to speed up certain regulatory processes, without providing specifics.

While promising that the state of disaster would not infringe on the rights of citizens, Dicks nevertheless underlined the security aspect, which he said was important for dealing with the current sabotage, crime and corruption, particularly as it related to coal, spare parts and fuel oil at some power stations.

Energy Intensive Users Group CEO Fanele Mondi expressed circumspection, however, saying clarity was still required as to what powers would be granted under the state of disaster.

“We will have to proceed with caution, because I think our recent experience with the Disaster Management Act, especially around Covid procurement, was unbecoming.

“We also think that the issue of abuse of power ... has got to be monitored quite closely.”

In addition, Mondi had questions about the decision to appoint a new Electricity Minister.

The EIUG welcomed the development “insofar as it indicates urgency from the side of the government, as well as the need for leadership and commitment to the action plan”.

“Our concern, obviously, is the overlapping roles that may exist [with other Ministers] which we hope the government will try to find a way of managing carefully.”

In addition, the “gravitas” and experience of the individual appointed to the post was highlighted as key, as an appointee that is not knowledgeable of the industry, could actually slow down implementation.

“[The individual] has got to be able to hit the ground running.”

Both the State of Disaster and the proposed appointment of an Electricity Minister have been heavily criticised by opposition political parties, as well as organised business formations, with Business Unity South Africa (Busa) indicating that it was “not convinced that declaring a State of Disaster will help address the crisis”.

“It must be seen as a low point in the life of our society that mismanagement and lack of governance has created circumstances in which a State of Disaster has to be declared,” Busa CEO Cas Coovadia said.

“Business is concerned about the potential of a repeat of corruption we saw under the Covid-19 State of Disaster, although we welcome the announcement that the Auditor-General will oversee use of resources.”

Coovadia described the appointment of a Minister for Electricity in the Office of the President as “a bad i...

President Cyril Ramaphosa announced that he would be appointing a new Minister of Electricity in The Presidency coordinate the response to the electricity crisis, which has now officially been declared a “national disaster” with immediate effect.

In his seventh State of the Nation Address on February 9, which was initially disrupted by the Economic Freedom Fighters, the President acknowledged that the country was “in the grips of a profound energy crisis”, which was not only stymying the economic recovery from Covid but also threatening social stability and food security.

“We are therefore declaring a national state of disaster to respond to the electricity crisis and its effects,” Ramaphosa said, announcing that a Gazette classifying the severe electricity supply constraint a national disaster had been published by the Department of Co-operative Governance prior to his speech.

“To deal more effectively and urgently with the challenges that confront us, I will appoint a Minister of Electricity in The Presidency to assume full responsibility for overseeing all aspects of the electricity crisis response."

The Minister would focus full-time on ending loadshedding and ensuring that the Energy Action Plan announced in July last year “was implemented without delay”.

"To deal more effectively and urgently with the challenges that confront us, I will appoint a Minister of Electricity in the Presidency to assume full responsibility for overseeing all aspects of the electricity crisis response, including the work of the National Energy Crisis Committee."

Responding indirectly to criticism that declaring the electricity crisis as a national disaster could facilitate procurement corruption similar to that which was experienced during the Covid lockdowns, Ramaphosa said the Auditor-General would be brought in to ensure “continuous monitoring of expenditure in order to guard against any abuses of funds needed to attend to this disaster”.

Outlining the rationale for the state of disaster, the President said it would enable government to implement practical measures needed to support businesses in the food production, storage and retail supply chain, including for the roll-out of generators, solar panels and uninterrupted power supply.

“Where technically possible, it will enable us to exempt critical infrastructure such as hospitals and water treatment plants from load shedding.

“And it will enable us to accelerate energy projects and limit regulatory requirements while maintaining rigorous environmental protections, procurement principles and technical standards.”

In response, Eskom said it would study the detail in the Government Gazette to understand the implications of the declaration before it would provide any further comment. It also did not comment on the plan to appoint a Minister of Electricity.

Ramaphosa also used his address to indicate that shareholder responsibility for Eskom would remain with the Public Enterprises Minister and would not be shifted to the Mineral Resources and Energy Minister, despite indications that the African National Congress had decided to move State-owned enterprises (SOEs) to their line departments in a National Executive Committee resolution that had yet to been formally published.

"So as to remove any confusion, the Minister of Public Enterprises will remain the shareholder representative of Eskom and steer the restructuring of Eskom, ensure the establishment of the transmission company, oversee the implementation of the just energy transition programme, and oversee the establishment of the SOE Holding Company."

The restructuring of Eskom was also reaffirmed in the speech, with the President announcing that the National Transmission Company South Africa (NTCSA) would soon be operational with an independent board.

The separation of the NTCSA from Eskom generation and distribution is seen as key to leveling the playing field for private and municipal generators and to ensuring that there is adequate ...

ArcelorMittal South Africa (AMSA) expects initial construction work on a 200 MW renewable-energy plant in Vanderbijlpark, Gauteng, to begin during the fourth quarter of 2023, with a feasibility study into the solution nearing completion.

The solar photovoltaic project is expected to cost R4-billion to construct and the facility will be built and operated by a special purpose vehicle (SPV) owned by AMSA and the ArcelorMittal Group, which has agreed to support the funding of the project.

The SPV will contract with the Vanderbiiljpark mill and will be funded by a combination of 20% equity and 80% debt and will supply about 40% of the plant’s electricity demand at a tariff that will be “substantially cheaper” than the Eskom tariff.

CEO Kobus Verster says the project, which will be built mainly on AMSA land adjacent to the mill and connect to the grid infrastructure already on site, has been necessitated by ongoing unreliable electricity supply and rising tariffs and he anticipates that the investment will begin delivering “meaningful cost reduction benefits by 2024/5”.

“The decision has been made to construct one large 200 MW plant at Vanderbijlpark as this will yield the greatest operational and commercial benefit,” reported Verster, noting that it had initially been considering a 100 MW wind farm in Saldanha Bay and a 100 MW solar project at Vanderbijlpark.

“Work is also progressing on closing power purchase agreements with third-party renewable energy providers,” Verster confirmed when releasing the JSE-listed group’s results for the year ended December 31, 2022.

There is potential, for instance, to supply wheeled wind electricity from a third party to the Newcastle operation.

The investment decision has been made against the backdrop of South Africa having experienced its worst-ever year for rotational power cuts last year, when over 200 days were affected by loadshedding and energy-intensive companies such as AMSA were regularly directed to implement load curtailment. Loadshedding has continued at high stages in 2023, with cuts having been implemented on every day of the year so far.

While power curtailment interrupted production, AMSA attributed the 62% fall in headline earnings to R2.6-billion last year to weaker prices in the second half of the financial year and softer domestic demand.

Nevertheless the revenue and cost impact of power disruptions during the year was estimated to be about R275-billion.

Earnings before interest, taxes, depreciation and amortisation slumped by 50% to R4.3-billion, as the “negative price-cost effect impacted margins”.

The group stressed that a reliable electricity supply was vital to the sustainability of the steel value chain, and reported that several Eskom and municipal equipment failures had been experienced in the second half of 2022.

“The company has made progress on operational planning and scheduling to better accommodate electricity disruptions.

“However, load curtailment may still interrupt production of rolling and finishing mills, which, in turn, can affect production and delivery to customers, especially of high-demand products,” AMSA warned.

Besides investing in its own electricity supply, AMSA is also studying the viability of pursuing a third-party rail solution, given that its operations are continuing to be negatively affected by the collapsing performance of Transnet Freight Rail (TFR).

Ongoing rail disruptions were a feature of “the entire financial year” and led to plant closures and affected sales deliveries, which had a net negative impact on earnings of about R1.3-billion.

“Daily briefings to the CEOs of ArcelorMittal South Africa and TFR have been beneficial, but overall performance remains well below service design.

“At the same time as offering support to TFR and Transnet Port Terminals, the company has completed the prefeasibility study with its specialist rail operator adviser into the commercial viability of third-party rail access.

“It has been agreed to prog...

European wind turbine original equipment manufacturer (OEM) Nordex says South Africa remains a key market despite the disappointment of the country’s most recent renewables bidding round when not a single wind project advanced to preferred-bidder status, owing to grid constraints in the Cape provinces.

Nordex Energy South Africa MD Compton Saunders tells Engineering News that the development has prompted a reassessment of the country’s future wind-turbine potential by the company, which has an estimated 32% domestic market share.

That exercise confirmed there to be ongoing growth potential, albeit at a slower pace than would have been the case had the 3 200 MW allocated to wind during the sixth bid window been procured.

The assessment also indicated that the South African wind market is no longer likely to be dominated by public procurement, with the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) poised to experience competition from private procurement initiatives.

In fact, this reality came into sharp relief during the most recent bid window, when private developers moved swiftly to secure access to the very same grid capacity that the 23 wind bidders were proposing to use for their REIPPPP-linked projects.

Saunders insists that Nordex is entirely “agnostic” regarding whether procurement is public or private in nature. Nevertheless, the prospect that private projects will play at least an as important role as the REIPPPP in future has implications for the OEM.

For instance, private developers are likely to prioritise speed and cost of deployment rather than the community upliftment, transformation and localisation goals that have also been key considerations for REIPPPP bidders.

This changing dynamic is likely to result in Nordex adopting a more flexible stance regarding the use of either steel or concrete towers, for instance.

The company has hitherto pioneered concrete towers under the REIPPPP, largely given the solution’s local-content advantages and relative jobs intensity.

Analysis conducted by the company shows that concrete towers, which are typically manufactured at facilities set up in close proximity to wind-farm sites, have three times more value to the domestic economy than steel towers and create significantly more jobs.

Saunders stresses that Nordex will continue to deploy concrete towers, including on private wind projects. But the decision to use concrete or steel will be based primarily on logistics and commercial considerations, including the prevailing steel price, rather than on attempts to increase the use of labour or the local content of a project.

“That’s not to say private developers won’t also insist on local content, but the procurement rules will be project-specific,” Saunders explains.

This could also have implications for the yet-to-be-finalised South African Renewable Energy Masterplan, or SAREM, which aims to create industrial activity around South Africa’s renewables roll-out and which was initially conceived when the REIPPPP was the dominant procurement mechanism.

Saunders says the conditions for higher localisation remain consistent levels of procurement, regardless of whether this arises from private or public programmes.

Therefore, the failure of wind projects to progress during the most recent REIPPPP bidding round is likely to result in some reticence among OEMs to consider local investments, particularly given that OEMs require consistent volumes and procurement rules and this is not the first disruption experienced in the South African market.

The REIPPPP programme was disrupted for seven years between 2014 and 2021 after the previous Eskom leadership refused to sign power purchase agreements for projects procured in 2014, leading to the closure of some local manufacturing capacity, including a wind tower facility in the Eastern Cape.

“Fortunately we have a fairly well-established team in South Africa that is able to understand the dynamics and look thr...

Law firm Cliffe Dekker Hofmeyr (CDH) says the incoming Draft Block Exemption Regulations (BER) for small, medium-sized and microenterprises (SMMEs) holds opportunities for small agricultural businesses to enter into joint procurement arrangements or buyer groups, and enjoy discounted procurement rates.

Trade, Industry and Competition Minister Ebrahim Patel in August 2022 published the draft regulations for public comment. The regulations are aimed at exempting certain categories of agreements or practices of SMMEs from the application of Sections 4(1) and 5(1) of the Competition Act, thereby enabling collaboration between SMMEs that would otherwise contravene the Act.

“The draft BER assists in creating certainty that SMME firms will not be prosecuted for contraventions of the Competition Act in circumstances where broader economic considerations, such as their effective participation in the economy, are deemed more important,” CDH notes.

Section 4(1) of the Competition Act prohibits outright competing firms from colluding to fix a buying or selling price or other trading conditions; and collusive tendering and dividing markets by allocating customers, suppliers, territories or specific types of goods and services.

The regulations propose the exemption of seven categories of agreements or practices of SMMEs, including research and development agreements; production agreements – for production of a good or the provision of a service, or toll manufacturing by one firm to another; joint purchasing agreements, which may include collective purchasing by a subset of firms in a market; and joint selling prices of goods or services to and through intermediaries or other business customers, by a subset of firms in a market.

CDH competition director Andries le Grange explains that the agricultural SMMEs who qualify for these exemptions, as per the draft BER, are medium-sized businesses employing between 51 and 250 people, with a yearly turnover of about R35-million; small businesses employing between 11 and 50 people, with a yearly turnover of about R17-million; and micro-sized businesses employing between zero and ten people, with a turnover of about R7-million a year.

Le Grange says joint purchasing or joint procurement involves buyers cooperating to source all or part of their requirements for products that are either production components which they transform, or goods which they resell.

In turn, buying groups involve procuring products as a group, which enables negotiation to receive products at a discounted rate, and selling products at a competitive rate to consumers in the market.

The benefits of these arrangements include the ability to negotiate bulk price discounts and offering the product or service, in turn, to customers at a discounted rate, particularly as SMMEs often have weak bargaining positions.

Le Grange highlights that the aim of the regulations is to help get small businesses on their feet or give them a leg-up in the market.

Le Grange explains further that the courts have often found a joint purchasing agreement to not have collusive outcomes, and yet it is prohibited in terms of the Competition Act. Therefore, there is room to characterise arrangements as conduct which does not contravene Sections 4 or 5 of the Act.

Although the regulations provide some relief for SMMEs, firms that do not fall within the threshold requirements for SMMEs do not qualify for the exemption. Notably, the exempted agreement must be inclusive of the majority of SMMEs in a market, Le Grange explains.

He adds that, before the publication of the draft BER, there was not much South African jurisprudence which shed light on the circumstances in which joint procurement would result in a contravention of the Competition Act.

Moreover, Le Grange suggests that other firms that are part of buyer groups should carefully consider whether their arrangements are compliant with the law or not.

He says many larger firms may feel at risk once these re...

Pulp and paper manufacturer Sappi recorded a strong performance for the first quarter of its 2023 financial year – well above pre-Covid-19 levels and the best ever first-quarter results, CEO Steve Binnie points out.

Its earnings before interest, taxes, depreciation and amortisation (Ebitda) for the quarter ended December 31, 2022, of $290-million, were 21% higher year-on-year and in line with guidance.

The positive results were underpinned by year-on-year pricing gains for paper products, which offset cost inflation and lower sales volumes to deliver an Ebitda margin of 17.5%, Binnie says.

“The lower profits relative to the record levels in the prior quarter were reflective of the slowing global economy, which led to a softening in demand for our products, driven by the volatile and uncertain macroeconomic context including ongoing geopolitical turmoil, rampant inflation, rising interest rates and an underperforming Chinese economy, as well as rapid downstream inventory accumulation in all our major product categories,” Sappi outlines.

“Factoring in the protracted macroeconomic uncertainty, and coming off three quarters of outperformance, we anticipate a return to a normalised level of earnings in full-year 2023.

“The second quarter will likely be the most challenging with a recovery in earnings expected later in the financial year. Ebitda for the second quarter of full-year 2023 is expected to be below that of the first quarter,” Binnie warns.

Sappi posted a net profit of $190-million for the quarter under review, compared with a profit of $123-million in the first quarter of the prior financial year, while net debt decreased to $1.24-billion, from $1.92-billion in the prior comparable quarter.

Sappi notes that recent improvements in global supply chains resulted in a reduction in delivery lead times and a surge in customer inventory levels.

The same market dynamics of elevated retailer stock levels and general concerns over negative consumer sentiment adversely impacted on demand for all textile fibres, placing pressure on the hardwood dissolving pulp market price which decreased to $900/t by quarter’s end.

Despite this pressure, Sappi’s net average sales price for the pulp segment was 9% higher than a year ago, although this was offset by an 8% reduction in sales volumes.

Underlying demand in the packaging and speciality papers segment remained relatively stable. Selling price realisation more than offset the lower sales volumes and supported year-on-year margin expansion for the segment. Sales volumes were down 14% compared with the prior comparable quarter, driven primarily by the large customer inventory build.

A series of price increases in the previous year neutralised the impact of cost inflation and lower sales volumes in the graphic papers segment. Margins remained healthy but reduced relative to the highs of recent quarters. Sales volumes were down 31% compared with the prior comparable quarter as a result of production rates having been optimised to match sales.

The profitability of Sappi’s operations in the European region improved substantially compared with the prior year as pricing gains offset cost inflation. Lower demand occurred across all product categories and there was a significant inventory build. Selling prices remained stable quarter-on-quarter, which protected margins, Sappi notes.

The North American region delivered another strong performance, with first-quarter Ebitda of $114-million. Selling price gains offset significant cost inflation but sales volumes were negatively impacted on by a broad-based softening in paper demand towards the latter part of the quarter.

SOUTH AFRICAN OPERATIONS

Significant year-on-year cost inflation and slightly reduced sales volumes negatively impacted on the profitability of the South Africa region, despite the higher average dollar selling price for Verve – Sappi’s dissolving pulp brand – and a significant rand:dollar exchange rate benefit on the rand selling pri...

The South African Revenue Service (Sars) is emerging after State capture allegations and has made progress in several areas; however, there is still considerable work to be undertaken to get the institution to where it needs to be, Sars Commissioner Edward Kieswetter said on February 7.

Speaking during financial advisory network PSG Konsult’s “Future of Taxation” episode of its Think Big Series, he said that taxpayers should hold the institution accountable when it occasionally drops the ball.

“We should not hide behind any of our inefficiencies,” he emphasised.

In terms of some measurable progress, Kieswetter outlined that there had been improvements in revenue collection, compliance trends and trade facilitation – with all of these on a positive upward trajectory, showing encouraging signs of growth.

However, he said that comparing these improvements against the challenges and constraints still faced showed that there was still much to be done.

Some of the constraints included Sars presenting itself as an attractive employer, with the private sector able to offer higher remuneration and benefits. Kieswetter said Sars was, however, slowly reclaiming its position as an employer of choice, thereby enabling it to attract the skills it required.

He pointed out that the revenue service had appointed 500 additional employees skilled in technical areas during 2022 and that it was also employing the first 50 of a cohort of new service consultants.

“We're doing multiple interventions to improve our attractiveness in order to improve our efficacy as a revenue administration, thinking about the level of data science, technology and artificial intelligence we need,” Kieswetter said.

He also pointed out that there were opportunities to improve revenue collection, such as addressing the many levels of noncompliance.

Kieswetter said that what would provide real benefit was growth in the “compliance dividend”, with additional revenue coming, notwithstanding the economic climate, from focused efforts by Sars employees to collect every available rand.

“The bad news is we have low levels of compliance in relative terms. The good news is it provides us low hanging fruit to work on.”

Kieswetter also highlighted Sars’s efforts in risk profiling and using artificial intelligence. He pointed out that, last year, the institution prevented the outflow of R42-billion in fraudulent refund claims.

Kieswetter pointed out that loadshedding would have a material impact on Sars’ ability to collect revenue, with economic growth severely impacted and many companies, especially small businesses, closing.

Also, he said that during times of crisis, people tend to be ultraconservative, and where there was an opportunity, tempted to withhold taxes, which required additional efforts by Sars.

He emphasised that Sars did not do this out of desperation, nor to become heavy-handed with taxpayers, noting that staff needed to be held to the highest level of professionalism.

Rather, he said that Sars knew that collecting every rand available would reduce the need to borrow in a difficult market.

Kieswetter also said the aim remained to not raise taxes, but that this could not be completely dismissed later if pressures rose.

“Right now, I think our collective mindset is rather on improving administrative competence, and not on increasing the burden on taxpayers,” he indicated.

With regard to tax incentives being offered for people keen to explore alternative energy sources, to alleviate pressure on the grid, Kieswetter said the National Treasury should be reviewing what additional provisions could be made to provide some relief and provide an incentive for people to make an investment and become more self-sufficient.

However, he pointed out that using tax as a way to correct a particular behaviour in society was often not the most effective way to achieve a target.

Kieswetter also touched on the emigration issue, noting that this had been overstated.

“Last year, just mor...