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Engineering News Editor Terence Creamer talks about power utility Eskom's summer outlook and the risk of further load-shedding and the rising cost of keeping the lights on.

The sales statistics for August indicate that “some form of stability” is returning to the new-vehicle market, says WesBank.

August delivered the second-best performing sales month for the year (similar to last year), with 47 420 new-vehicle registrations – 14.2% higher than the same month in 2021.

“It is interesting to note the correlation in market performance this year against 2021,” says WesBank marketing and communications head Lebogang Gaoaketse.

“Last year, August put in the second-best selling month at the time, with March 2021 being the best sales month. Coincidentally, March 2022 sales have also, so far, been this year’s best sales month.”

If this could be defined as a trend, the market prospects for the remainder of the year could hold further promise, notes WesBank, as August 2021 sales were surpassed by September and November volumes last year.

“August sales are also reassuring in the sense that the volume increase comes off a relatively high base,” notes Gaoaketse. “[Also], the interest rate hike in July appears not to have dampened market demand.”

While more interest rate increases are inevitable this year, demand in the new-vehicle market continues to grow.

“Applications for finance continue to show a growing demand for vehicle replacement, with WesBank’s book showing strong double-digit growth, driven by applications for new vehicles,” says Gaoaketse.

National Automobile Dealers’ Association chairperson Mark Dommisse echoes this sentiment, noting that the appetite for new vehicles in South Africa continues to surprise motor industry pundits and forecasters alike, “as buyers show remarkable resilience in the face of tough economic pressures”.

August new-passenger-car sales expanded by 14.6%, to 31 269 units, compared with the same month last year.

Bakkie, van and minibus sales were up 13.1%, to 13 281 units, which was a far better performance than the 9 552 units sold in July.

These numbers were boosted by the Toyota plant in Durban returning to production in August, following flooding in April.

Toyota South Africa Motors (TSAM) notes that it has “started to bounce back” to pre-flood sales figures, posting a total of 11 138 sales for August.

The company’s latest sales are 4 028 units up compared with July, with August numbers “certainly propped up by the resumption of operations at the Prospecton Plant, albeit still in ramp-up phase”.

“The resilience of the Toyota brand in South Africa was put to the test when production ceased for a few months following the devastating floods that caused damage to our plant in Durban,” says TSAM sales and marketing senior VP Leon Theron.

“We are truly pleased to have models such as Hilux, Hiace, Fortuner, Corolla Cross and Quest rolling off the production line again.

“However, we still have an extensive backlog of orders that we have to clear, and we continue to ask for patience on the part of our customers. There is indeed light at the end of the tunnel.”

Year-to-date, total new-vehicle sales in South Africa are up 13.8%, to 344 244 units.

Used-Car Market Waning

“The appeal of the pre-owned market appears to be waning, likely due to price inflation and the increasingly limited availability of good stock,” says Gaoaketse.

“Where the pre-owned market has been offering affordability solutions for cost-conscious consumers, the average deal size on a used car has now increased over 10% year-on-year, while the value of finance agreements on new vehicles over the same period is static.”

This will fuel the new-vehicle market as the replacement cycle comes under pressure and motorists require new mobility solutions to combat the rising operating costs of older vehicles.

Dommisse says that another trend worth noting is the manner in which imported cars are now finding acceptance in a market previously dominated by locally-made models, especially in the more affordable vehicle segments.

There is also a clear indication that good quality cars from China, such as Chery and Haval, are n...

State-owned railways utility Transnet Freight Rail (TFR) has confirmed that applications were received by the August 31 deadline for the slots being made available for sale to third-party operators on the Container Corridor from Gauteng to Durban and the South Corridor from Gauteng to East London.

TFR did not immediately indicate how many bids had been received, however.

The sale process for 16 slots across both corridors was initiated on April 1 and a bid submission deadline of May 31 was initially announced.

However, following the April floods in KwaZulu-Natal, which severely damaged parts of the rail network, the deadline was postponed to the end of August.

TFR did not provide a timeframe for bid evaluation, saying only that the applications would be evaluated over the next few months, with winning bidders to be announced once that process had been concluded.

Ahead of the deadline for bids, some concern had been expressed about aspects of the slot-sale framework, including the two-year time limit, which was seen as insufficient for private operators to secure a return on their capital-intensive investments.

However, Transnet stressed that slot sales would become an ongoing part of the TFR business model as envisaged in the Draft White Paper on the National Rail Policy and said that further slots would be released in 2023.

In addition, Operation Vulindlela has identified third-party access to the freight rail network as a priority reform for supporting higher levels of economic growth.

President Cyril Ramaphosa also highlighted the reform in a recent address to the Business Unity South Africa annual general meeting, where he described the return of rail and port operations to full capability as “essential for the recovery and future growth of our economy”.

“The Economic Regulation of Transport Bill, once finalised, will provide for open and non-discriminatory third-party access to the rail network and the establishment of a Transport Economic Regulator.

“In the interim, proposals are due from private operators for 16 slots made available by Transnet on the Durban-City Deep and Pretoria-East London lines,” Ramaphosa said.

Transnet said it anticipated that the learnings drawn from the sale of these slots would provide key insights to the development of reforms set out in the National Rail Policy.

If South Africa does not start “to shift and change” to support the increased local production of new-energy vehicles (NEVs) in the next 18 months, the future of the industry is “absolutely under very serious threat”, says Naamsa | The Automotive Business Council CEO Mikel Mabasa.

NEVs include hybrids, plug-in hybrids and battery electric vehicles. South Africa’s biggest new-vehicle export markets are the UK and Europe, with these centres set to ban internal combustion engine vehicle sales from 2030 onwards.

Only two vehicle manufacturers out of the seven in South Africa currently produce hybrids and plug-in hybrids in South Africa.

Speaking at the launch of the South African (SA) Auto Week in Johannesburg on Thursday, Mabasa noted that South Africa was currently the twenty-first-biggest vehicle manufacturer in the world, with the other 20 markets rapidly positioning themselves to take their up their place in the global NEV manufacturing chain.

He said many of these markets had moved much faster than South Africa to develop policies around NEV sales and manufacturing.

South Africa is still working towards finalising its NEV support policy.

Mabasa said the main aim of the Auto Week was for the event to act as an engagement platform on NEVs for government, the local automotive industry, trade unions and all other key stakeholders, in order to “preserve the manufacturing base in the country”.

“The main goal of the Auto Week is to accelerate and enhance our discussions around the future of the auto industry in South Africa.”

The theme of the 2022 Auto Week is: ‘Reimagining the Future together | The Rise of the African Auto Industry: investing in new-energy vehicles, infrastructure, and people.’

The event will be hosted at the Kyalami convention centre in Johannesburg from 26 to 29 October.

The Auto Week is endorsed by the International Organisation of Motor Vehicle Manufacturers, which will also host their general assembly during the occasion.

The business-to-business event will include the Naamsa Accelerator Awards, a captains of industry dinner, a driving carnival and a three-day conference, with the latter acting as the anchor event.

One of the “critical topics” on the conference agenda was how to “derisk” the local automotive industry’s logistics chain, noted Mabasa.

This comes as Durban port, which is by far the industry’s main import and export hub, suffered from a number of stoppages owing to riots and floods over the last 18 months.

Engineering and contracting group Murray & Roberts (M&R) says its Southern Africa-focused business platform, which has shrunk materially and has been lossmaking for a number of years, is at the point of a “breakthrough”, underpinned by South African renewables and transmission activities that are starting to gain momentum.

Known as the power, industrial and water platform, the unit is the smallest of the JSE-listed group’s three platforms by far and is also the only one leveraged entirely to project activity in M&R’s home market of South Africa and to the Southern Africa region.

The platform’s order book of only R400-million is dwarfed by the R37.2-billion backlog of M&R’s energy, resources and infrastructure platform, which operates under the Australian Clough brand. It is also insignificant relative to the mining platform, which has a R21.9-billion order book.

M&R has faced persistent questions about the platform’s ongoing relevance, particularly as it struggled in recent years to replenish its order book as construction activities at Eskom’s Medupi and Kusile coal projects tapered, and losses began mounting.

However, CEO Henry Laas is optimistic that the platform, which reported a R155-million loss in 2022, could finally return to profitability during the 2023 financial year, particularly if projects associated with South Africa’s disrupted and delayed renewables procurement programme reach financial close.

M&R has secured several contracts related to Bid Window Five of the Renewable Energy Independent Power Producer Procurement Programme, which were initially scheduled to reach financial close in April, but which had the deadline postponed after preferred bidders experienced delays in receiving grid connection budget quotes from Eskom.

Platform CEO Steve Harrison says there is an expectation that at least some of the 25 preferred bidders will reach financial close during September and reports that the company has already started with early works for three wind farms and at a substation linked to the programme.

The contracts are not yet reflected in the platform’s order book but are represented in what it describes as near orders worth R1.9-billion.

Harrison reports that it is also receiving enquiries weekly with regards to distributed renewables projects, interest in which has increased significantly after President Cyril Ramaphosa lifted the licence-exemption cap. The cap was initially raised from 1 MW to 100 MW, but has since been lifted entirely.

He also expects orders to begin to flow in light of the increasingly urgent need to strengthen the Eskom transmission grid, particularly in the Cape provinces where South Africa’s best wind and solar resources can be found.

The platform is also eyeing a major public-private partnership in the area of water treatment, a market where significant pent-up demand has also developed.

Overall, however, the group’s prospects are leveraged primarily to the fortunes of its mining and its energy, resources and infrastructure platforms, whose activities are focused mostly in markets outside of Southern Africa.

In fact, only 17% of M&R’s R59.5-billion order book is located in Southern Africa, with all of the energy, resources and infrastructure platform’s R37-billion backlog located in international markets.

In addition, most of its revenue and earnings will continue to arise from outside Southern Africa. In 2022, the group’s revenue increased to R29.9-billion, from R21.9-billion, and Laas said it would continue to rise and that he expected revenue to increase to about R40-billion.

Nevertheless, Laas described the investments in developing utility scale renewables as an opportunity in South Africa “which we haven't had for a long period of time”.

Electricity utility Eskom told lawmakers on Wednesday that the risk of load-shedding remained high for the upcoming summer season, while confirming that there had already been 91 days of load-shedding during 2022.

Eskom’s summer ‘base case’ is premised on there being 13 000 MW of onging unplanned breakdowns in addition to any planned maintenance, which rises substantially in the lower-demand summer months.

Under that base scenario, the model shows that there will be 22 days of Stage 1 load-shedding for the period from September to the end of March.

The monthly cost of generating electricity using the diesel-fuelled open-cycle gas turbines (OCGTs) to cover for the underperforming coal fleet will range from R517-million to R2-billion over the period.

The risk of rotational cuts rises substantially, however, when stress-tested using unplanned breakdown scenarios of 14 500 MW and 16 000 MW respectively – thresholds that were breached during the winter period, particularly during an illegal strike at some coal stations in June and July.

Under the 16 000 MW scenario, the Eskom outlook indicates that Stage 3 rotational cuts could have to be implemented on most days between September and March. In addition, monthly diesel costs could theoretically surge to between R3.9-billion and R8.9-billion.

However, Eskom system operator GM Isabel Fick, who presented the outlook during a joint meeting of the portfolio committees on Public Enterprises and Mineral Resources and Energy, noted that the physical limitations of moving diesel to the OCGT stations meant that it was not possible to use more than R2.4-billion of diesel in a month.

Notwithstanding recent difficulties in securing diesel, the load factor for Eskom’s OCGT plants for the year-to-date stood at 16.4%, massively above the 1% load factor at which the plants were initially designed to operate.

The load factor of the private OCGT stations has been 9.9% and would have been higher had it not been for diesel-supply difficulties.

There were also 24 wind generation curtailment events during those periods of high wind availability and low night-time demand.

Fick said that all reliability maintenance required in the 12-month planning period had been accommodated in the plan, which she described as “tight”.

“Any significant outage slips will have a knock-on effect that will influence the plan from that point forward.”

She also stressed that the plan did not cater for difficulties that could arise as a result of industrial action or protest action.

In June and July, Eskom instituted Stage 6 load-shedding for the first time since 2019 partly as a result of an illegal strike, which Eskom estimated at the time to have added two stages of load-shedding.

Fick also stress the uncertainty of the plan, with Eskom having operated above worst-case scenario levels for 42.5% of the time during winter.

During the period, unplanned outages over the evening peak averaged 14 864 MW.

Eskom told lawmakers that the load-shedding risk could be “greatly reduced” over the coming 36 months if all the initiatives announced by President Cyril Ramaphosa as part of the Energy Action Plan were implemented.

The plan includes actions aimed at improving the performance of Eskom’s coal fleet, including the new-build power stations, as well as initiatives to introduce new private generation and reduce demand.

Fick said that some 3 514 MW of additional capacity could be injected over the coming six month as a result of plant performance improvement (1 814 MW) and the introduction of new generation (1 700 MW), including the commissioning of units at the Kusile power station.

Over a 36-month period, more than 8 000 MW could be added from a combination of new build, Just Energy Transition (JET) projects, plant performance improvements and demand response.

CEO André de Ruyter said that repowering activities at decommissioned coal stations, together with the Eskom land-release programme were designed to facilitate the introducti...

South Africa’s Transnet and China’s CRRC E-Loco announced on Wednesday that an in-principle agreement had been reach “towards the resolution of all current legal disputes between the two companies, to enable support to enhance Transnet Freight Rail’s (TFR’s) ability to serve customer demand on an urgent basis”.

In a short statement, the two companies said that the next steps would be to finalise a definitive settlement agreement and complete the resolution of the current legal disputes.

Moves towards a settlement follow a high-level meeting between the leadership of the two organisations, with the Transnet delegation having been led by CEO Portia Derby.

The announcement also follows Transnet’s launching, in mid-August, of a High Court application to seek an order compelling CRRC E-Loco to release spare parts and components required to return 120 locomotives to service.

Transnet said the parts and components had been imported to service and maintain the 95 20E and 100 21E locomotives acquired from CRRC in 2012 and 2014 respectively.

Access to the spare parts and components, the utility added, would allow it to bring back to service 53 Class 20E and 67 Class 21E locomotives, which have been standing idle as a result of the inability to access the required spares and components.

The standoff with CRRC arose following Transnet’s 2019 decision to halt the so-called 10-64 contract, for 465 diesel and 599 electric locomotives, in which CRRC participated along with three other original equipment manufacturers.

Transnet deemed the contracts, which featured during proceedings at the State Capture commission, to be “irregular and illegal”.

The cancellation of the contracts has left TFR with a locomotive shortfall, which Transnet aims to address through the issuance of a new tender later this year.

It has been amplified, however, by CRRC’s refusal to provide Transnet with the spares required to maintain those locomotives already supplied to the utility.

Several TFR customers have expressed dismay at the poor performance of the rail business over the past few years, owing to a shortage of locomotives, as well as ongoing theft across the rail network, with TFR having lost a total of 1 500 km of overhead copper wire to theft in 2021/22.

Motus has “a big focus” on growing its aftermarket business over the next two years, says CEO Osman Arbee.

Speaking at the company’s annual results presentation in Johannesburg on Wednesday, he noted that the internal combustion engine (ICE) aftermarket still had “a lot of road to run”, despite the global move to electric vehicles (EVs).

The aftermarket business, in general, is also cash generative, asset-light once purchased, and not dependent on the sale of new vehicles.

Motus is active in the UK, Australian and South African vehicle retail, rental, import and aftermarket arenas.

Arbee noted that the changeover from ICE vehicles to EVs “won’t happen tomorrow”, especially as current ICE fleets would continue to run – requiring parts to do so.

South Africa has an ICE fleet of 12-million vehicles, the UK 35-million, and Australia 20-million.

“It is a big market still,” said Arbee.

He added that Motus expected the global supply of new vehicles to stabilise towards the middle of next year (calendar year), with the group’s South African importers – Hyundai, Renault, Kia and Mitsubishi – to finally have more stock available to customers.

Vehicle supply continues to be under pressure owing to a shortage of semi-conductors, as well as the impact of the war in the Ukraine.

Arbee also noted that the vehicle rental business was expected to stage a strong comeback towards Christmas and Easter, as the tourism sector started to stabilise after the worst of the Covid-19 pandemic.

Motus anticipated a 20 000-unit market boost from the rental sector in the next 12 months.

Arbee said the group’s own rental business was starting to return to normal, with its fleet at around 17 000 cars, up from 8 000 during the peak of Covid-19.

He expected a swing back to 25 000 units as the ultimate fleet-size, roughly 2 000 units short of pre-Covid numbers.

As for the used-car market, Arbee said the used-car price bubble had started to burst in July and August, with values now normalising following hefty hikes during the Covid-19 peak.

Motus saw a 17% drop in used-car sales from the 2021 financial year to the 2022 financial year, largely driven by muted flow-through from the rental car sector.

New-vehicle sales were up 13%.

Motus’ other numbers for the financial year ended June 30 were equally healthy, with revenue up 5%, to R92-billion, compared with the previous financial year, and operating profit up 31%, to R5-billion.

The group attributed the increase in operating profit to the recovery in the automotive and car rental sectors, coupled with increased margins owing to inventory shortages and disciplined cost management.

The KwaZulu-Natal floods, along with the associated disruption in the movement of automotive components and vehicles via the Durban port, as well as the ongoing global semiconductor shortage, have all taken a significant toll on South Africa’s second-quarter new-vehicle export and production numbers.

The April floods shut down Toyota South Africa Motors’ (TSAM’s) plant in Durban until its full reopening in August.

The Japanese car maker is the market leader in South Africa, with around one in every four vehicles sold domestically a Toyota. TSAM is also a significant exporter.

According to Naamsa | The Automotive Business Council’s newest business review, South African vehicle production dropped by 17% in the second quarter of this year compared with the same period last year.

Light-commercial vehicle (LCV) production was especially hard-hit, as Toyota also had to halt production of South Africa’s best-selling vehicle, the Hilux bakkie, at its Prospecton plant.

This saw overall domestic LCV production drop by 37.3%, to 41 109 units, in the second quarter of this year compared with the same quarter last year.

Naamsa also notes that overall second quarter new-vehicle exports from South Africa dropped by 15.3% (77 340 units) compared with the corresponding quarter last year (91 349 units).

This decline was again attributed to the KwaZulu-Natal floods, as well as “the ongoing repercussions” of Russia’s invasion of the Ukraine, hampering export volumes to key markets such as Europe.

Some good news is that second-quarter new-vehicle sales increased by 4.7%. However, this number was down 13.8% on the first quarter of this year.

New-energy vehicle sales also declined by 47.3%, from 1 401 units in the first quarter, to 738 units in the second quarter.

The Tyre Importers Association of South Africa (TIASA) has applied to court to compel the International Trade Administration Commission of South Africa (Itac) and the South African Tyre Manufacturers Conference (SATMC) to disclose what it says is “critical information that is being withheld” regarding SATMC’s application for the implementation of anti-dumping duties on imported tyres.

The aim is also to challenge the manner in which Itac is conducting the investigation.

SATMC, which includes Continental, Bridgestone, Goodyear and Sumitomo, has applied to Itac for the implementation of additional duties of between 8% and 69% on passenger, taxi, bus and truck vehicle tyres imported from China.

Current import duties levied on tyres range from 25% to 30%.

“We are operating in the dark when it comes to this application for additional duties, and the stakes are high for South Africa,” says TIASA chairperson Charl de Villiers.

“If ITAC decides to impose the maximum duty percentage requested by SATMC, we could see price increases range from 41% for taxi tyres, 38% to 40% for passenger tyres and an average of 17% for truck and bus tyres.

“These increases will have dire consequences for commuters, the transport sector, and consumers, who are struggling with climbing inflation.”

TIASA adds that domestic manufacturers are unable to produce the full range of tyres required locally, which sees them import a number of tyres to meet demand.

“SATMC concedes that, in addition to manufacturing tyres locally, it also imports tyres, but refuses to disclose what they import, from where, and for what reason,” notes the importers association.

“This information is critical, as causality is a foundational principle of an anti-dumping case,” notes XA Global Trade Advisors CEO Donald MacKay.

“In other words, it’s necessary to prove that any injury to the local industry must have been caused by the dumping, and not by something else. If SATMC members are importing a significant volume of tyres themselves, they would be inflicting their own injury, which would need to be offset for any injury they claim.

“They would, therefore, need to demonstrate a compelling reason for the imports.”

“This is not confidential information, and it is material to their import duty application and their rationale,” says MacKay.

“For example, we know Continental and Goodyear import 100% of truck and bus tyres, yet these domestic producers are importing these tyres instead of purchasing them from the other domestic producers who do manufacture them locally. Why?

“SATMC has refused to share any of this information with TIASA, and Itac has accepted this.”

Itac Process ‘Flawed’

According to TIASA Itac received “an enormous response” to its investigation, from more than 60 companies, but decided to only review a small sample of submissions as the basis for its final decision.

Furthermore, there was no consultation in respect of the sampling, with Itac refusing to allow TIASA to make any comment or input on the sampling methodology, notes the association.

“With a complex product like tyres, where the local market sells over 3 000 different models, it is almost impossible to select a truly representative sample,” says Mackay.

“To base a duty decision on such a flawed process is deeply concerning.”

TIASA says it is, therefore, asking the court to direct Itac to remedy its sampling, to provide TIASA with SATMC’s import data, as well as the reasons for their imports, and to allow TIASA sufficient time to make a submission to Itac before it takes any decision on the imposition of duties.

“If the current process is not corrected, it’s likely that Itac will impose provisional duties without SATMC’s import information, or indeed TIASA’s submissions which have, to date, been excluded from consideration by Itac,” notes De Villiers.

“This will be a clear impingement on the rights of affected parties to meaningfully participate in this process.”

SATMC Responds

SATMC says it “has received TIA...