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A mere 10% increase in manufacturing investment in South Africa would result in a gross domestic product (GDP) contribution increase of 13% in South Africa, along with a 9% increase in fiscal revenue and an 8% increase in employment creation, Pan African Investment and Research Services economist Dr Iran Abedian has said.

“Manufacturing in South Africa, given the structure of our economy, has a positive multiplier effect to the tune of 1.3 times because if you inject 10% into manufacturing, the total economy is better off 13%.

“So for every rand that you inject into manufacturing investment, you're going to get R1.30 back,” he said on September 8, in Johannesburg, where he presented a report titled ‘Revitalising South Africa’s Manufacturing Sector’, which was prepared for buy local advocacy campaign Proudly South African (Proudly SA).

Proudly SA commissioned the report to unpack the state of the country’s manufacturing sector and the potential impact of localisation, as well as the multiplier effect thereof on the economy.

The study, which is the third in a series of research pieces by Abedian, surveyed the South African job market, as well as opportunities for job creation in traditionally labour-intensive sectors.

Manufacturing has historically been credited as a key driver of higher-value job creation and for the increase in living standards globally. In South Africa, the sector has been vital to the economy and continues to be important, even though it has become severely depressed in recent years.

Although far less than in years prior, manufacturing still contributes significantly towards South Africa’s GDP. In 2021, the sector contributed 13% towards GDP with a gross value added (GVA) of R523-billion.

Additionally, the sector has one of the highest total turnovers by industry.

The 2021 GVA, although an increase from 2020’s low of R490-billion, was still significantly lower than the pre-pandemic GVA, such as 2019’s GVA of R559-billion.

Before the pandemic, the sector employed about 1.8-million people, which has declined to about 1.4-million.

This highlights the material impact that the Covid-19-induced economic crisis has had and continues to have on the manufacturing sector.

In 2020, an industrialisation intensity index for selected emerging market economies ranked South Africa lowest out of select emerging market countries, including China, Indonesia, Mexico, Poland, Vietnam, India, Turkey, Argentina, Brazil and Bangladesh.

This was owing to South Africa having both low manufacturing value added (MVA) and low technological complexity in manufacturing.

The index was measured by taking the average of the share of MVA in GDP and the share of medium-and-high-technology activities in MVA.

“The manufacturing sector is in urgent need of a turnaround, in terms of its contribution to the economy and its export competitiveness. Investment into manufacturing was at very low levels even in the pre-Covid-19 years, which is part of the problem when it comes to the sector's declining contribution to the economy,” Abedian stated.

An additional side effect of South Africa’s de-industrialisation is a falling tax contribution by the manufacturing sector, from 16.7% in 2017 to 13.2% in 2020, which further impacts on government’s ability to deliver effective services to the population.

As part of the study, Abedian analysed what the economy-wide impact would be of a policy shock to the manufacturing sector, simulating a scenario where a 10% shock is induced on investment to all manufacturing and the sub-sectors of agroprocessing, meat, sugar, furniture, automotive, steel and pharmaceuticals.

Through this 10% shock injection into the manufacturing sector, an estimated 75 300 jobs would be created in manufacturing, with the most being in mining (about 11 500) and in agriculture (about 10 100).

Abedian noted that, over the past 30 years, manufacturing had become increasingly more capital intensive, automated and, therefore, created fewer em...

Newly appointed Energy Council of South Africa CEO James Mackay says he will prioritise initiatives that will help unlock sustainable energy investments in South Africa, which he describes as being at the start of what will be a challenging multidecade transition.

Mackay’s appointment as the council’s inaugural CEO was announced on September 8 and will become effective from October 17.

Established in 2021 following calls by Mineral Resources and Energy Minister Gwede Mantashe for the energy industry to speak with a unified voice, the council’s formation drew some criticism for excluding emerging renewables and storage companies.

All of its founding members represent large incumbent firms, including Anglo American, Sasol, Eskom, the Central Energy Fund, Exxaro, the Industrial Development Corporation, TotalEnergies, Toyota and the Automotive Business Council.

However, chairperson Fleetwood Grobler stressed at the launch that emerging companies had not been excluded by design and promised that the council would be broadened in future to ensure greater stakeholder representation.

Mackay tells Engineering News that the council will be “technology agnostic” and that he has not experienced any “bad blood” towards the formation during recent engagements with those energy sector practitioners whose companies were not included among the founding members.

“I think there is a broad acknowledgement that the energy transition is going to be difficult and that there is a need for a national organisation to take a leadership role in this space.”

He says the activities of the council will be guided by three key principles, including:

an acknowledgment of the threat posed by climate change and the need for South Africa to contribute to humanity remaining within "planetary boundaries”;

an acceptance that technology and innovation will shape the future energy landscape and that, while remaining technology agnostic, the council will favour solutions that are aligned with climate resiliency, business sustainability and social justice; and

that access to finance will be critical to ensuring that the energy transition is implemented at a pace and scale required for security of supply, business and environmental sustainability and greater social equity.

The council, he adds, will be data driven in its decision-making and will seek to play a constructive role in ensuring that South Africa has a vision for the energy transition that is supportive of accelerated investment.

“There's only one real thing that's going to move the dial on energy and that's investment.

“And so, our biggest focus and primary focus is going to be on unlocking investment in energy at all levels,” he says, adding that he is also determined to ensure that more attention is given to demand-side investments.

Mackay will be the council’s first formal employee and he will temporarily lead the organisation from office space donated by Sasol at its head office in Sandton.

“We are acutely aware of our need to be independent, so we will be appointing our own employees and setting up our own offices soon,” he stresses.

Mackay, who has professional qualifications in engineering and finance, has over 20 years of diverse experience in the public and private sectors and has worked extensively across Africa.

He is currently the PwC energy lead with specific focus on energy strategy and net zero and acknowledges that the decision to take up the new role was a difficult one, as he was only recently appointed as a partner.

“It was a tough decision to resign, but the leadership at PwC support me in taking up this new role.”

He tells Engineering News that he is looking forward to engaging with, and supporting all energy stakeholders, and promises to adopt a “listening attitude” as he does so.

“I'm very committed to being open to opinion, to listening and to understanding how we can work together with all of the other organisations,” he concludes.

The nine solar car teams which aim to participate in the 2022 Sasol Solar Challenge have all successfully completed the scrutineering process.

This process, which took place at Red Star Raceway, in Gauteng, from September 4 to 7, was conducted in partnership with the Council for Scientific and Industrial Research, as well as with the help of 12 volunteers from across the world.

The teams’ solar cars were lined up at the scrutineering area in the early hours of Sunday, taking turns to clock in at each station.

On Tuesday all the teams had gone through the testing stations and were given the green light to proceed to the second phase of the process and, subsequently, the starting line, on September 9.

The teams competing in this year's race are: SolarFlair; Tshwane University of Technology; Central University of Technology; University of the Free State; Agoria (Belgium); Brunei (The Netherlands); Genuine IV; the Northwest University and UniChamps (Unisa).

“Scrutineering is the most important part of the Sasol Solar Challenge, and the process is conducted in order to ensure that all the solar cars meet the event’s requirements and sporting regulations to assure safety of the drivers, as well as the spectators along the route,” says Sasol Solar Challenge director and owner Robert Walker.

“It’s great that all teams were successful and passed all the tests. We now look forward to travelling with them on the road during the eight-day-long challenge.”

The scrutineering process is divided into two categories – static scrutineering, which includes the testing of the mechanical, electrical and energy storage systems (including the testing of signage, body and sizing, driver operations, lights and vision, battery and safety), and dynamic scrutineering, which tests the speed and stability of the solar cars.

The teams are now set to race across five provinces from Johannesburg to Cape Town, from September 9 to 16, demonstrating the power of the sun and showcasing their engineering skills in 18 towns.

The challenge has an almost brand-new route from the previous years’ races, with new towns, roads and communities.

New towns include Brakpan, Trompsburg, Willowmore, Kirkwood, Jeffreys Bay, Riversdale and Caledon.

The race is a distance-based race, and not a timed race, with the team to harvest the most kilometres from the sun during the event declared the winner.

The RMB/BER Business Confidence Index (BCI) fell from 42 to 39 in the third quarter, with 61% of the 1 200 senior executives surveyed in August unsatisfied with prevailing business conditions.

Confidence among retailers and wholesalers remained comparatively high, while a notable improvement in sentiment among new vehicle dealers partly offset a 17-point deterioration in building confidence.

The manufacturing BCI remained at a low level and eased further during the period to 26.

The slump in the index below 40 came as Statistics South Africa reported on Tuesday that the gross domestic product (GDP) contracted 0.7% in the second quarter, a period that was negatively affected by load-shedding, floods in KwaZulu-Natal and industrial unrest.

RMB chief economist Ettienne le Roux described the decline in the BCI as “disappointing”, but said it was unlikely to point to another “outright contraction in real GDP”.

Confidence among retailers and wholesalers remained well above long-term averages, which “speaks to the surprising resilience of consumer spending” at a time when falling inflation in due course should ease the pressure on disposable income.

Simultaneously, underlying activity in the building as well as the manufacturing sector is stronger than third quarter confidence figures seem to imply.

In addition, fixed investment in manufacturing, after a temporary drop in the second quarter, resumed its upward trajectory to a level that is now close to its long-term average.

“None of this is to say that the economy will experience strong growth in the year ahead,” Le Roux stressed.

“External headwinds are mounting, interest rates will continue to rise while the danger of summer power outages is ever present.

“But suggestions that the economy is now in the throes of a protracted recession after yesterday’s GDP release, is an overstatement.”

The Transnet National Ports Authority (TNPA) board has approved plans that open the way for various expansions at the Durban and Richards Bay ports, including a new berth for handling liquified natural gas (LNG) at the Port of Richards Bay.

TNPA, which has been established as an independent subsidiary of Transnet, says the expansions form part of the R100-billion KwaZulu-Natal Logistics Hub Programme.

The programme seeks to position the Port of Durban, whose competitiveness has slumped in recent years, as an international container hub able to handle of 11.4-million TEUs and with an automotive capacity exceeding 900 000 units.

In 2022, Transnet reported that it handled 4.1-million TEUs across all its container terminals and 719 114 automotive units.

The Port of Richards Bay, meanwhile, is being positioned as a dry bulk hub port, as well as an LNG hub.

TNPA received 19 responses to a recent request for information to assess market interest in the design, development, construction, financing, operation, maintenance and transfer of an LNG terminal in the port’s South Dunes precinct.

It was expected to issue a request for proposals in July, but the tender has not yet been published.

TNPA says its plans for Richards Bay are aligned with the Department of Mineral Resources and Energy’s strategic plan for gas-to-power.

Mineral Resources and Energy Minister Gwede Mantashe is currently seeking concurrence from the National Energy Regulator of South Africa for a Ministerial determination for the procurement of 3 000 MW of gas-to-power capacity before 2028.

However, there is opposition to the development of gas-to-power plants in Richards Bay, with environmental justice groups having mounted legal challenges against the awarding of environmental authorisations for proposed projects in the region.

Meanwhile, TNPA reports that some dry bulk terminals and minerals-handling facilities are also earmarked for relocation from the Port of Durban’s Island View and Maydon Wharf precincts to the Port of Richards Bay.

It adds that the board approval follows two major milestones in relation to the KwaZulu-Natal Logistics Hub, including a detailed validation process for the Port of Durban by the KZN Logistics Hub programme, carried out under the supervision of the World Bank by international independent consultants.

The validation process, which was conducted by Maritime and Transport Business Solutions and PDRW Consulting Port and Coastal Engineers, reportedly confirmed the feasibility of TNPA’s plans.

The world cannot decarbonise without Africa’s production of green hydrogen, hydrogen fuel cell company Hypowa CEO and trade association African Hydrogen Partnership SG and cofounder Siegfried Huegemann has said.

“It is just not possible,” he said during the second yearly Hydrogen Economy Discussion conference, in Johannesburg, on September 6.

Huegemann told attendees that Europe would be unable to meet its own green hydrogen demand as it sought to decarbonise its economy further, and would therefore become a net importer of hydrogen – much of which would have to come from Africa.

“There will be regions in the world that will become green energy importing regions – and Europe is one of those regions,” he pointed out.

Huegemann said that, as it stands, more than 80% of the European Union’s (EU’s) primary energy consumption is based on fossil fuels and nuclear energy. The EU still relies on more than 50% of its energy being imported, with more than 90% of its oil and petroleum, as well as about 90% of its natural gas also being imported.

To fully decarbonise, the EU would have no choice but to rearrange its energy mix to be based on batteries, on the one hand, and green hydrogen on the other.

“We can’t do it without hydrogen. It’s the only solution,” he said, emphasising that only hydrogen could produce enough clean energy at the scale required to run energy-intensive industries such as the steel, cement, mining and long-distance heavy trucking logistics industries.

Battery-based energy solutions – such as renewable energy technologies – would not be sufficient and would need to be heavily supported by hydrogen, he said.

“The EU is aiming to import ten-million tonnes a year of renewable hydrogen by 2030. That is a very ambitious goal. Even if it's only two-million or three-million tonnes a year by 2030, that is great progress,” Heugemann said.

For Africa, this would present significant opportunities, as the continent has a plethora of natural resources to produce green hydrogen at scale.

Not only would the export opportunity and the foreign direct investment provide a massive boost to Africa’s economy, but there would also be significant local demand for hydrogen as a clean energy source.

Hugemann said a series of challenges would, however, have to be overcome. These include a reduction in the cost of hydrogen production, which would require advancements in hydrogen production technology.

Further, a more stable and functional sociopolitical environment would have to be created, in addition to more efficient and focused economic processes and policies on which to build the African hydrogen economy.

“Africa has the leading potential [for hydrogen production] in the world, as a whole. If we all work together, it will drive down the cost, which is what we need to focus on for large-scale commercialisation,” he said.

The African Association of Automotive Manufacturers (AAAM) says it fully supports the government of Ghana as it continues to implement the provisions in its new Automotive Development Policy (ADP).

The policy has, since its inception in 2019, seen three new plants start the assembly of Volkswagen, Toyota, Nissan and Peugeot models.

This is in addition to Ghana’s own assembler, Kantanka.

Now, Hyundai, Kia and Isuzu models are to be added to the line-up before the end of the year, says the AAAM.

The association adds that it has been able to interest a number of component manufacturers in considering partnerships to invest in manufacturing capacity for the aftermarket, to be followed by the production of original equipment manufacturer parts.

This has seen Ghana add an automotive component manufacturing policy to the ADP.

“The government of Ghana is to be applauded for implementing the APD,” says AAAM CEO David Coffey.

“The government has also committed to developing vehicle financing schemes to support the purchase of locally assembled vehicles.”

“A progressive automotive policy is essential for any country wishing to attract significant investment from international companies for either component or vehicle manufacturing, and Ghana was the first to do so after the established vehicle manufacturing countries of Morocco and South Africa,” adds Coffey.

“Egypt has recently announced their new automotive policy and we are working with a number of other African countries to do the same.

“The automotive industry is gaining traction in Africa, where we will see trading between assembly hubs across the continent, with Ghana being a hub in West Africa.

“Ghana is on a very exciting path that will have profound economic benefits in the medium and long term,” notes Coffey.

Reports of significant fuel price decreases in September are a “welcome breath of good news”, says the Road Freight Association (RFA).

Current data estimates decreases of R2.35/l for ULP95, R2.18/l for ULP93, 77c/l for 50 ppm diesel, and 87c/l for 500 ppm diesel.

Illuminating paraffin is set to drop by an estimated 87c/l.

RFA CEO Gavin Kelly says any decrease in fuel costs will have a “tremendous positive effect” on South African transport and supply-chain costs.

“South Africans will now pay less for fuel than they did in June.”

“This will go a long way in placing downward pressure on inflation.

“There would, obviously, be a greater positive/downward effect on freight logistics if the price of diesel was to drop as dramatically as petrol has, as the majority of road freight logistics vehicles are diesel vehicles.”

Kelly says the effects of the decline should be felt in the coming quarter.

“[It] will certainly make life slightly easier for consumers towards the end of the year.”

Kelley notes it must be remembered that fuel price fluctuations are driven by the cost of oil on the international market and the rand/dollar exchange rate.

“Concerns remain around the effect global instability has on these two factors and the long-term effect high fuel prices will have on the South African economy.”

Kelly adds that the RFA calls on the government to speed up programmes to make South Africa less reliant on fuel imports, while also ramping up the introduction of suitable electric vehicle (EV) programmes.

Trade, Industry and Competition Minister Ebrahim Patel insists that South Africa’s New Energy Vehicle (NEV) Roadmap is taking shape amid warnings that, absent urgent government decisions on the future support framework, the domestic automotive manufacturing sector is at serious risk.

He has also indicated that the NEV support framework would seek to use and build on the architecture in place under the second phase of the Automotive Production and Development Programme (APDP2) and would be production- rather than consumption-led.

In a presentation to the Presidential Climate Commission, Patel released details of what he described as a roadmap “working document”, which was premised on there being a “compelling” case for South Africa to make the strategic shift to NEVs.

That conclusion was reached following a cost-benefit analysis, showing that it would be more advantageous to transition South Africa’s manufacturing focus away from internal combustion engines (ICEs) to NEVs than to seek to capture a larger slice of the remaining ICE markets as international vehicle manufacturers began upscaling their NEV strategies.

The analysis shows that it will be challenging to secure new ICE export markets that will offset the decline in its main current export markets of the UK and the European Union (EU), which currently absorb 45% of South Africa’s yearly passenger vehicle production.

The UK and the EU have already announced that they will bar sale of ICE vehicles and soft hybrids (cars that use an electric motor alongside a combustion engine, but which cannot run on electric power alone) from 2030 and 2035 respectively. In addition, both are planning to introduce carbon taxes on imports.

Shifting to NEVs, Patels said, would mean that South Africa could either retain or potentially grow an industry that currently contributed between 4% and 5% of gross domestic product and a value chain that employed 100 000 people directly.

Government also estimates that the support programmes it currently uses to incentivise local production have been “roughly fiscally neutral over the last five years”.

“So, we have not closed our eyes to the other options; we have looked at them and we have concluded that it would be in South Africa’s best interest to move to electric vehicles.”

Patel reported that, having reached that conclusion, government was currently focusing on the development of a “competitive support package” to create an enabling environment for the domestic production of NEVs.

He said that there was growing convergence within government on the package, but stressed that it was a “complex” and “challenging” discussion given the country’s fiscal constraints and the many competing needs for scarce Budgetary resources.

“We have moved from a set of costing exercises, to a point that there is a growing convergence within government on what is required for the enabling environment for NEV production in South Africa.”

The fiscal implications of the NEV support package would be announced by Finance Minister Enoch Godongwana, who recently met with local automotive executives to outline the principles that would govern the National Treasury’s approach to the matter.

Patel also reported that government would opt for a production-led model, rather than the consumption-led strategy advocated by various industry stakeholders, whereby growth in domestic demand, supported by lower tariff barriers, triggered investment.

“Our approach is led by a focus on the ‘at-risk export’ markets.

“Let’s get production of EVs right, export to those markets where there is both the spending power and the regulatory incentives to encourage consumption.

“And then off the back of bringing down the prices through what we have been able to achieve through export runs, sell an increasing quantity in the domestic market and, at an appropriate point, look at incentives that will get motorists to shift to EV consumption.”

Government will also seek to build on the APDP2 architecture ...

Mineral Resources and Energy Minister Gwede Mantashe has published for public comment proposed changes to South Africa’s electricity regulations, exempting distributed generation facilities of any size from applying to the National Energy Regulator of South Africa (Nersa) for a licence.

The majority of the exempted facilities will still need to be registered with Nersa and will have to comply with either transmission or distribution codes.

Hitherto, facilities below 100 MW have been exempt from licensing in line with a reform announced jointly by President Cyril Ramaphosa and Mantashe in June 2021, lifting the licence-exemption threshold from 1 MW to 100 MW.

However, on July 25 Ramaphosa announced that the 100 MW cap would be lifted as part of a series of initiatives aimed at tackling load-shedding, which has been implemented by Eskom on 91 days this year already.

The proposed changes to the exemption rules are contained in a draft Licensing Exemption and Regulation Notice, under section 36(4) of the Electricity Regulation Act, and published in the Government Gazette of September 2.

“The Licensing Exemption and Regulation Notice seeks to give effect to the various measures to address South Africa’s electricity challenges as announced by President Cyril Ramaphosa in July 2022,” the Department of Mineral Resources and Energy said in a statement.

“It outlines a set of electricity generation activities that are exempt from licensing, and those that in addition to being exempt from licensing must also comply with the Code (distribution code, transmission code, or any code approved by the Regulator) and must be registered with the regulator.”

Interested persons and organisations have been given 30 days to submit written comments on the proposed changes.

Since the initial lifting of the threshold to 100 MW, several companies have announced investments, or investment intentions, in distributed generation facilities, including facilities that will wheel electricity to third parties using either Eskom or municipal grid infrastructure.

Ramaphosa told business leaders this week that the necessary amendments were being made to remove the licensing threshold for embedded generation.

He also announced that over 500 MW of private renewable power generation projects had been registered with Nersa to date, and that the pipeline of such projects, which were at various stages of development, stood at over 6 000 MW.