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Engineering News Editor Terence Creamer discusses some of the highlights from Finance Minister Enoch Godongwana's Medium-Term Budget Policy Statement, which was delivered to Parliament on October 26.

Better-than-expected revenue collection enabled Finance Minister Enoch Godongwana to report an improvement in government’s fiscal position relative to the one forecast in the February Budget.

However, slowing global and domestic growth together with ongoing power cuts pose a risk to the fiscal outlook, as does the prospect of a higher-than-budgeted public-service wage settlement.

The National Treasury had already lowered its gross domestic product (GDP) growth forecast for 2022 to only 1.9%, having projected growth of 2.1% in February. GDP growth is also expected to average only 1.6% over the coming three years.

Revenue collections during the first half of 2022/23 were 9% higher than the same period of the prior year as the positive impact of high commodity prices continued.

The gross tax revenue estimate for 2022/23 was, thus, projected to be R83.5-billion higher, at R1.68-trillion, than the R1.59-trillion forecast in February.

Godongwana said government would use a portion of this revenue to reduce the budget deficit, with the consolidated budget deficit projected to narrow from 4.9% of GDP in 2022/23 to 4.1% next year, 3.9% in 2024/25 and 3.2% in 2025/26.

However, spending on health, education, local government free basic services, infrastructure, and policing would also be increased, along with support for Denel, Sanral and Transnet.

Additional new expenditure of R37-billion was outlined for 2022/23, comprising R54.1-billion in spending increases, partially offset by projected underspending.

SANRAL, TRANSNET, DENEL SUPPORT

Sanral would receive an additional R23.7-billion to pay off government-guaranteed debt, which is said to be conditional on a solution to Phase 1 of the Gauteng Freeway Improvement Project (GFIP).

In addition, Godongwana announced that a decision had been made to transfer Sanral’s R47-billion debt relating to the GFIP to the national and Gauteng governments in a bid to resolve the long-standing e-toll issue.

He also revealed that the Gauteng provincial administration would assume responsibility for the cost of maintaining the 201 km of highway and associated interchanges, as well as any future investments.

Seventy percent of the debt, or R32.9-billion, would be absorbed by the national government, while the Gauteng provincial government would take on the 30% balance, or R14.1-billion.

Another R5.8-billion would be directed to Transnet, half to repair infrastructure damaged by the April floods in KwaZulu-Natal, and half to increase locomotive capacity, which together with theft of cable and lines was undermining the performance of some key export corridors.

Transnet Freight Rail has confirmed that it has over 300 locomotives currently out of service, owing to a long-running dispute with its Chinese supplier, which has refused to provide the utility with locomotive spares. A recent in-principle settlement agreement is expected to clear the way for both the delivery of spares and additional locomotives.

Arms manufacturer Denel would receive R3.4-billion to complete its turnaround plan and R204.7-million to reduce contingent liabilities arising from its weak financial position.

The Minister said that discussions were still under way to consider options for a replacement for the temporary Covid-19 social relief of distress grant, which was currently being distributed to 7.4-million people.

“No final decision has been made about a replacement or how it would be financed. As a result, the temporary grant will be extended for one year until March 2024.”

PRIMARY SURPLUS

Godongwana also announced that government expected to achieve a primary budget surplus, with revenue exceeding non-interest spending, of 0.7% in 2023/24.

However, he did not provide details of what was expected to be a R200-billion debt-relief package for Eskom, announcing that the scale and the structure of the programme would be unveiled only in February.

Gross debt is now projected to stabilise at 71.4% of GDP in 2022/23, representing a mater...

Finance Minister Enoch Godongwana has confirmed that government will take over between one-third and two-thirds of Eskom’s R400-billion debt, as intense loadshedding, which government expects to persist for 18 months, contributed to a downward revision to the country’s growth outlook.

The National Treasury is now forecasting real gross domestic product growth of only 1.9% for 2022, having projected growth of 2.1% in the 2022 Budget Review published in February.

Delivering his Medium-Term Budget Policy Statement (MTBPS) to Parliamentarians in the Cape Town City Hall during ongoing power cuts, Godongwana said details of the debt-relief package, along with the conditions, would be outlined during the 2023 Budget, in February.

Godongwana’s decision to delay an announcement on the structure and scale of the relief package was unexpected, given the broad-based expectation that the package, which has been on the cards for years, would be finally unveiled during the MTPBS.

These expectations were reinforced by the July 25 address of President Cyril Ramaphosa, when he signalled that debt relief would be part of the interventions being pursued to tackle intensifying loadshedding.

Alexforbes chief economist Isaah Mhlanga, who expected a R200-billion debt-relief package, said that markets, investors, and credit rating agencies expected some solution so that they could properly assess South Africa’s fiscal position and, therefore, its credit rating.

The Minister described the matter as complex and requiring consultation with bondholders before it was implemented.

He said the intervention, once finalised, should permanently ease financial pressure on the utility, so as to enable it to implement its unbundling into three units of generation, transmission and distribution, while freeing up resources for investment by these units.

It would also be designed to ensure that the utility – identified as the largest long-term risk to the economy, owing to its high debt levels and unsustainable business model – no longer relied on government bail-outs.

“While the selection of the relevant debt instruments and the method of effecting the relief is still to be determined, the quantum is expected to be between one-third and two-thirds of Eskom’s current debt,” he said, indicating that both guaranteed and non-guaranteed debt was being considered.

He stressed, too, that the relief was unlikely to be implemented in a single fiscal year.

In 2019, government announced a R230-billion support package for Eskom and R140-billion of that package had already been disbursed, with another R21.9-billion injection earmarked for the 2022/23 financial year.

In addition, Eskom represented a large component of the contingent liabilities outlined in the national accounts, which stood at R758-billion and were expected to breach the R1-trillion level in 2024/25.

The National Treasury’s guarantee exposure increased from R567-billion in 2020/21 to R594-billion by March 31, driven largely by further drawdowns by Eskom, which accounts for 78% of guarantees to State-owned companies.

“The National Treasury is leading a process to finalise a debt relief programme designed to restore Eskom to efficiency and financial sustainability.

“The specifics of the programme, including the selection of the relevant debt instruments and the method of effecting the relief, are still being finalised.”

STRICT CONDITIONS

Nevertheless, the National Treasury insisted that the programme would include “strict conditions” on Eskom and other stakeholders before and during the debt transfer.

The identity of the other stakeholders was not provided, but is expected to include the National Energy Regulator of South Africa, whose decision to exclude a R69-billion National Treasury injection from Eskom’s allowable revenue in a tariff determination neutralised the effectiveness of the injection in stabilising the utility’s finances. That decision was subsequently overturned by Eskom in the courts.

“These con...

Finance Minister Enoch Godongwana announced on Wednesday that a decision had been made to transfer Sanral’s R47-billion debt relating to the Gauteng Freeway Improvement Project (GFIP) to the national and Gauteng governments in a bid to resolve the long-standing e-toll issue.

In addition, the Gauteng provincial administration would assume responsibility for the cost of maintaining the 201 km of highway and associated interchanges, as well as any future investments.

The Gauteng administration, the Minister said, would have the power to decide whether the maintenance and any future investments would be funded through the existing electronic toll infrastructure, new toll plazas, or any other revenue source within their area of responsibility.

Godongwana announced that 70%, or R32.9-billion, would be absorbed by the national government, while the Gauteng provincial government would take on the 30% balance, or R14.1-billion.

He described the protracted uncertainty surrounding the GFIP as having had major negative implications for road construction in the country.

“We need to move on from the debates of previous years and find solutions to this challenge.

“To resolve the funding impasse the Gauteng provincial government has agreed to contribute 30% to settling Sanral’s debt and interest obligations, while national government covers 70%.”

He also used his Medium-Term Budget Policy Statement address to announce that government was proposing to make an initial allocation of R23.7-billion to Sanral to support it with its immediate debt commitments.

The money, he added, would be disbursed on strict conditions.

The decision to pursue a debt transfer, as well as to transfer responsibility for the roads back to the province, had been taken so as to improve Sanral’s balance sheet and enable it to “do what it does best, which is to build and maintain roads”.

He described as “political” the decision not to implement the user-pay principle, which had met with overwhelming resistance not only from motorists but also politicians, including the African National Congress in Gauteng.

The debt transfer comes as government moved to pursue a similar, but far larger, transfer of a portion of Eskom R400-billion debt.

Godongwana said details of that debt transfer would be announced in the February Budget.

The Organisation Undoing Tax Abuse (OUTA), which was initially established to fight against the implementation of e-tolls in Gauteng, described the MTBPS address as "a clear indication that the e-tolling of the Gauteng freeways will be halted".

"OUTA has fought for over a decade to bring an end to the failed e-toll scheme, which was a battle fought through courts, through official inquiries, across social media, in protests on bridges and outside government offices, through millions of unpaid e-toll bills and the defence by OUTA of thousands of summonses by Sanral chasing debt," CEO Wayne Duvenage said in a statement.

He described it as a "massive victory for civil society" and a "significant message to government never to ignore the voice and the power of the people".

Duvenage stressed, however, that ending e-tolls had two aspects: establishing the alternative funding solution for the GFIP, and the legal dismantling of e-tolls.

"The Minister of Transport, Fikile Mbalula, should now announce the way forward to legalise the situation for users of the Gauteng tolled roads.

"OUTA believes that Sanral and the Department of Transport must now retract the notices which declared the GFIP roads as toll routes, which enabled tolls to be charged."

The organisers of this year’s inaugural Ilanga Cup Solar Challenge say the event will be back next year, albeit in a somewhat different format.

The 2023 edition will return to the Red Star Raceway, in Delmas, on July 5 and 6.

“We are thrilled to officially launch the highly anticipated Ilanga Cup Solar Challenge for 2023,” says race director Robert Walker.

“The inaugural event made great impact on the region. We have received lots of interest from schools and universities across Southern Africa that want to participate in the solar challenge.

“As the event focuses on driving the innovation of renewable energy within the transportation sector, it is important that we get young people involved and give them the platform to experiment with different energy concepts in order to contribute towards sustainable mobility,” adds Walker.

The Ilanga Cup Solar Challenge is Southern Africa’s first closed track endurance challenge.

The event has been created for teams to put their solar vehicles to the test in a controlled environment, designed to measure the vehicles' performance, efficiency and durability.

Next year’s event will incorporate some new features for the solar car teams.

Among other changes, the event is moving from an eight-hour to a 24-hour endurance challenge.

This will see teams truly test their vehicles, as well as push the limit of solar technology during both day and night settings.

“The Ilanga Cup is the first-ever solar challenge in Africa to conduct a 24-hour solar event,” notes Walker.

“We believe that, with this format, the participating teams will be able to gather useful data for the development and further improvement of solar technologies for sustainable transportation.”

Registration for the 2023 Ilanga Cup Solar Challenge is now open.

Transnet Freight Rail (TFR) CEO Sizakele Mzimela reports that the group’s plan to procure new locomotives will be put on hold in light of the recent in-principle agreements reached between Transnet and two original equipment manufacturers with which it has been in legal dispute – CRRC E-Loco, of China, and Alstom, which recently acquired Bombardier Transportation (BT).

Speaking during a briefing held to outline the progress TFR was making to recover from a recent strike, Mzimela reported that the agreements were likely to result in TFR securing both much-needed spares, the absence of which had left 311 locomotives standing idle, as well as the outstanding locomotives procured in 2015 under the so-called 10-64 contract, which was the subject of intense State-capture scrutiny during the Zondo Commission.

The inquiry found that the increase in the price of the procurement of the 1 064 electric and diesel locomotives from R38.6-billion to R54.5-billion was based on misrepresentations by senior executives and was to the detriment of Transnet, which had subsequently declared the contracts unlawful.

Under the contract, which was split between four suppliers, General Electric was awarded a contract to supply 233 of the 465 diesel locomotives, while China North Rail was contracted to supply the 232 balance. China South Rail was awarded a contract for 359 of the 599 electric locomotives ordered, with BT to supply 240. The two Chinese firms subsequently merged under CRRC.

In August, Transnet and CRRC E-Loco announced an in-principle agreement in relation to legal disputes between the companies, with a similar agreement reached with Alstom in early October.

“Now that we have an in-principle agreement that has been reached with both [CRRC E-Loco] and with BT-Alstom we believe that this will allow us to have sufficient locomotives to carry us through at least for the next three to four years,” Mzimela stated.

“So, at this stage, while we still have intentions to again go for an open-market tender for additional locomotives that will now be held back until we have received the full order from the Chinese and from BT.”

Prior to the agreements, Transnet CEO Portia Derby indicated that the group was preparing to procure about 400 new locomotives to close the gap given that Transnet had taken delivery of 595 locomotives under the 10-64 contract. The tender was initially expected for release in July, but never materialised.

Mzimela also reported that the agreement opened the way for TFR to receive the spares it required from CRRC E-Loco to return 311 idle locomotives to service, which would alleviate the capacity constraints on several corridors, most notably the North Corridor, which transports export coal.

Ahead of the strike, the Minerals Council South Africa estimated an export loss of R50-billion on an annualised basis this year for iron-ore, coal, chrome, ferrochrome and manganese exporters as measured by delivered tonnages by TFR against contracted rail tonnages.

TFR said the iron-ore had recovered well since the strike and that it had not revised its 60-million-ton export-coal target for the 2022/23 financial year, notwithstanding the fact that the corridor had been seriously disrupted during the recent strike.

“The in-principle agreement that has been reached with the Chinese will result in them helping us to bring back to service the long-standing locos first, but also to complete, once everything has been finalised, the supply of the outstanding number of locomotives that would have been part of the initial order,” Mzimela said.

The spares are required for the 53 Class 20E and 67 Class 21E locomotives.

It is anticipated that the agreement with Alstom will similarly allow for the completion of that contract, with Transnet having revealed recently that 85 of the BT locomotives had been delivered to date.

Overall, it is understood that Transnet has taken delivery of 595 locomotives arising from the 2015 contract, representing 56% of th...

Saudi developer, investor and operator of power generation, water desalination and green hydrogen plants ACWA Power and South Africa’s State-owned development finance institution the Industrial Development Corporation (IDC) have signed an extensive memorandum of understanding (MoU) exploring a partnership in the development of green hydrogen production and its derivatives in South Africa.

This partnership coincides with the State visit of President Cyril Ramaphosa to the Kingdom of Saudi Arabia.

The agreement was digitally signed by ACWA Power CEO and vice-chairperson Paddy Padmanathan; ACWA Power chief investment officer Clive Turton; IDC industry planning and project development head Rian Coetzee; and IDC legal services manager Russell Wallace, with agreement copies exchanged at a gathering attended by executive dignitaries.

This is the first agreement of its kind between ACWA Power and the IDC, but the parties have previously collaborated for equity in a renewable energy plant in South Africa.

The potential value of this MoU is estimated at $10-billion. ACWA Power will function as the developer for green hydrogen and its derivatives in South Africa, with the IDC acting as co-developer and equity partner in the proposed projects.

South Africa has set a 2050 net-zero target and plans to become a significant producer and exporter of green hydrogen and its derivatives.

Accordingly, the South African government has mandated the IDC to lead the development and commercialisation of the green hydrogen economy. The IDC, in partnership with the Green Hydrogen Panel, is in the process of finalising the South African Green Hydrogen Commercialisation Strategy (GHCS).

“The IDC recognises the substantial value and benefits that the green hydrogen economy will bring to South Africa. The green hydrogen economy presents new economic, skills, employment and community opportunities for the country. We are pleased to explore potential partnership opportunities with ACWA Power, given its pedigree and expertise in this industry,” says IDC COO Joanne Bate.

Given ACWA Power’s experience in the South African renewable energy industry and in green hydrogen projects abroad, the company posits that it can play meaningful role in supporting the objectives of the GHCS.

The parties will carry out a feasibility study, potentially cooperate, jointly develop and co-invest in projects in the green hydrogen value chain in South Africa. This MoU with ACWA Power will support the implementation of the GHCS and is expected to contribute towards the country’s green hydrogen production targets.

ACWA Power has had a footprint in South Africa since 2016 and currently has two solar energy plants – Bokpoort and Redstone – in the country. Both projects use concentrated solar power technology.

Mobility platform Uber has about 20 000 drivers and delivery people earning an income through the Uber and Uber Eats apps in South Africa, which has more than 2.1-million active platform users, says newly appointed Uber sub-Saharan Africa GM Kagiso Khaole.

Uber, and Uber Eats, which focuses on restaurant deliveries, have collectively reached more than 30-million riders and eaters in sub-Saharan Africa since 2013, he adds.

Uber is available in more than 61 cities across seven countries in sub-Saharan Africa, namely South Africa, Ghana, Nigeria, Ivory Coast, Kenya, Uganda and Tanzania.

Drivers on the platform have recently completed one-billion trips in Africa.

“As we gear ourselves to mark our tenth anniversary next year, we are excited about moving into more cities, enabling people to go anywhere or get anything,” says Khaole.

In the last month, Uber has become operational in Owerri and Akure, in Nigeria; Eldoret, Kisumu, Nakuru and Naivasha, in Kenya; and Tamale and Sunyani, in Ghana.

“Every country is unique, so we take the time to understand each market’s needs so we can be responsive and adapt accordingly,” says Khaole.

“This has seen us launch new products across sub-Saharan Africa.”

These products includes UberX Share in Ghana and Nigeria, and Uber ChapChap Share in Kenya, all aimed at reducing rider costs and increasing demand for drivers.

These shared rides offerings allows users to save up to 30% of the trip fare when matched with a co-rider heading in the same direction. Where a match is not possible, users will still be able to save 5% from their ride.

“The introduction of UberX Share allows us to demonstrate the power of our platform – understanding the ability to match rider destinations while delivering convenience and affordability,” explains Khaole.

“We are a global company that builds locally. In Ghana and Nigeria we tapped into the local culture of car-pooling when moving around, which makes this product a great fit for the market.”

The new UberXL and UberVAN offerings also allow a number of people to travel together.

UberXL, launched in Nairobi, Kenya, provides seating for up to six people.

In South Africa, riders can now reserve their group travel 30 days in advance with UberXL Reserve and UberVAN Reserve.

“Core to introducing this product was the understanding that the lifting of Covid restrictions has fuelled local and international travel,” says Khaole.

“In South Africa, the convenience of booking your ride in advance, at the same time as booking for your flight, enhances one's travel experience.”

Uber Comfort, which is currently only available in South Africa and Côte d’Ivoire, is set to expand to Ghana.

“This bespoke offering is designed for riders looking for an upgrade to their everyday ride with extra comfort,” says Khaole.

“Uber Connect is one of the app’s most popular products available in South Africa, Kenya, Nigeria, Tanzania, Uganda and Ghana,” he adds.

“Uber Connect is an on-demand delivery solution that allows users to send and receive packages with speed. The feature comes built-in with a pin verification, providing users peace of mind that their package is being delivered to the right person.”

Congestion, Safety Concerns

As one of the fastest-growing regions in the world, African cities present very real challenges when it comes to congestion, says Khaole.

“Safety is another challenge that we continue to face on the continent, which is why we are continuously looking at ways to innovate in response to the safety risks that come with moving around.”

Some notable safety features available in South Africa include the Emergency Assistance Button and Follow My Ride.

“We are also piloting our new Audio Recording feature that allows drivers and riders to record their trips and submit the recording to our support team in the event of a safety incident,” notes Khaole.

“We also have an incident response team which is available 24/7 to respond immediately to any reported incidents, and a law enforc...

South Africa lost the opportunity of moving R65.3-billion worth of goods during the recent 11 days of industrial action at the country’s ports, says South African Association of Freight Forwarders (SAAFF) CEO Dr Juanita Maree.

“Some of that will possibly move later, but the rest is gone – and gone forever.”

In contrast to this, the wage increase cost – if adopted across the board for all workers at Transnet – is R1.5-billion.

SAAFF represents more than 300 clearing and forwarding agents, accounting for more than 80% of the trade goods moving in and out of South Africa.

Maree says there is a need in the country for growing maturity in resolving matters amicably, in a timely and efficient manner, and to strengthen the partnerships between government and strategic stakeholders through early consultation to enable prevention rather than cure, “as risk mitigation is our joint responsibility to the smooth running of our national economy”.

“We must learn the stark lessons provided by these operational disasters, or we are going down an endless spiral with the worst possible outcome,” warns Maree.

“If goods can't move, the economy stops. And if the economy stops, the impact is hugely negative for anything related to the movement of cargo – including time, cost and service reliability.

“With the economy's circular flow, ordinary South Africans will suffer in the end – the very individuals who went on strike against a wage offer way below the inflation figure.”

One Day Strike Action = Ten Days Recovery

Maree says while SAAFF is” very pleased” that a wage agreement has finally been reached in the ports sector, the association must stress that the hard work only starts now.

“According to our consolidated reports, most port terminals are operating at productivity levels that are somewhere between medium and normal.

“So, although it might seem that we are making a return to full operational status, we are certainly not there yet,” she emphasises.

“In the aftermath, beyond the strike, barring any further destruction, a complete restoration of normal functionality will only happen in early 2023, as the consequences of one day's worth of stoppage have been shown to result in anything up to ten days needed for recovery.”

SA Can Do Better

South Africa must learn from this experience and adopt better operational practices to improve the country’s logistics performance, notes Maree.

“We reiterate that this can only be achieved by close collaboration between all the parties – business, labour and government.”

Maree proposes a number of solutions to grease the wheels of the South African logistics sector.

“We need backup port facilities to evacuate the ports.

“We have a high freight demand, therefore, only a multi-modal approach – with all parties operating efficiently – will have a chance of satisfying our demand.”

This means South Africa needs a robust functional rail sector, especially when moving goods from the country’s ports.

The country also needs precise policy alignment to allow for the practical execution of moving goods.

“The functioning of the supply chain, nor the economic extent of policies and actions that affect it, is clearly not fully understood by decision-makers,” says Maree.

“The government often asks the private sector to assist in picking up the cost, such as increased taxes and levies, but this help must be reciprocated with the private sector's . . . meaningful involvement in operations.”

Maree adds that South Africa needs port efficiency to improve in terms of the time, cost, and service reliability involved in moving goods.

“This approach must include inter and intra-port competition, and all functions must be overseen by a strong, independent ports regulator.”

All role-players are also to be held accountable for their performance, including business, labour and government, notes Maree.

In the end, South Africa needs to “evolve and mature as a nation” she adds.

“We cannot allow for ideology and self-interest to drive th...

The board of the South African National Roads Agency Limited (Sanral) has announced the appointment of Reginald Lavhelesani Demana as the entity’s new CEO.

Demana’s appointment is subject to standard clearance and verification procedures.

Sanral has been without a permanent CEO since November last year.

Demana is currently a divisional executive at the State-owned Industrial Development Corporation (IDC), where he is responsible for a portfolio that covers the mining, metals, infrastructure and energy sectors.

He is a trained engineer and has more than 20 years’ working experience, including in the investment banking sector.

Demana’s expertise includes mergers and acquisitions, the structuring of empowerment deals, capital raising and general strategic corporate finance.

He was also the former CEO of JSE-listed coal mining and trading company Wescoal, which was recently renamed Salungano.

Demana began his professional working career as a mining engineering trainee with Anglo American Platinum, and then as a mine health and safety inspector with the Department of Mineral Resources and Energy.

He holds a BSc in Mining Engineering from the University of the Witwatersrand and a, MSc in Mining Engineering (with distinction) from Exeter University in the UK.

The Sanral board believes Demana will contribute towards the stabilisation of the road agency’s finances, particularly the toll portfolio, and that he will continue implementing the company’s mandate to plan, build and maintain the national road network “with the excellence associated with Sanral”, given his “impressive educational qualifications, experience in senior strategic positions and the leading roles he has played in corporate finance in general”.

Current acting CEO Lehlohonolo Memeza will continue in her role until Demana assumes responsibility.

“As soon as formal communication is received from the Minister of Transport, the board will finalise all processes relating to the appointment,” notes board chairperson Themba Mhambi.