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Ever since global inflation started heading north at an alarming rate, much of the conventional wisdom on the causes of this trend has pointed to energy prices, especially gas, oil and petroleum, says Dr Roelof Botha, economic adviser to the Optimum Investment Group.

Also, when analysing the composition of the basket of goods and services that form the basis for the calculation of the consumer price indices (CPIs) in South Africa and most of its key trading partners, these prices certainly stand out, as do some food prices, he adds.

However, when comparing the current upward phase of the commodity price cycle during the first six months of the year with the previous surge in prices that was recorded between 2011 and 2013, it becomes clear that oil is not the culprit.

Rather, it is the cost of shipping commodities such as oil, petroleum and all other traded goods from one port to another that is to blame, notes Botha.

“Oil from Saudi Arabia has to travel almost 10 000 km before it reaches the Port of Cape Town.”

Logistics data tracked by the United Nations Conference on Trade and Development estimates that the oceans carries more than 80% of the world’s traded goods by volume and 70% by value, most of which sail inside 40-foot-long steel containers.

There are dozens of container ships that are the length of four soccer fields and the world’s largest one, the Ever Alot, is the height of a 22-story building and can carry 240 000 t of cargo.

The ongoing supply chain disruptions caused by the Covid pandemic and now exacerbated by the Russian invasion of Ukraine, have provided a stark reminder of the strategic economic importance of maritime container trade, says Botha.

“The lockdown restrictions induced by the pandemic not only blocked supply chains in ports around the globe, but it also did so in an errant manner.

“When one port reopened, some of its destination ports had been closed and this pattern kept on repeating itself for the better part of two years.”

Since the gradual demise of harsh lockdowns, pent-up demand from economic stimulus programmes was simply too much to handle.

The results were fairly predictable, namely long delays in getting goods to customers and an increase in the cost of getting them shipped.

However, the extent of the cost increases caught the whole world by surprise, says Botha.

Ultimately, too few ships and an explosive recovery of demand conspired to send freight costs into orbit, with the Statista Freight Rate Index (SFRI) increasing from $1 262 a container during the third quarter of 2019, to $10 362 in the third quarter of 2021 – an unheard of increase of 721%.

The cost of shipping bulk commodities spiked even more, notes Botha.

Research by the International Monetary Fund (IMF) shows that the inflationary impact of these higher shipping costs is not likely to recede before the end of the year.

A little bit of good news is the fact that shipping costs have come down since the fourth quarter of 2021, with the SFRI standing at $7 051 at the end of June this year.

Research by the IMF confirms that the trend of rising shipping costs has affected inflation in some countries more than others, says Botha.

In general, countries with a high import propensity and a relatively high trade deficit are bound to witness larger increases in inflation, while land-locked countries and low-income countries are also likely to see a higher turning point for their respective CPIs.

This correlation provides a hint to South Africa’s current CPI, which is significantly lower than that of many of its key trading partners, notes Botha.

South Africa is classified as an upper-middle income country and has experienced record trade surpluses since 2020. Despite a need to enhance their efficiency, the country also has six major commercial ports.

No To Higher Interest Rates

An understanding of the nature and causes of both domestic and global inflation is crucial for the determination of appropriate monetary and fiscal policy re...

Request for proposal (RFP) documentation for private sector participation in the container terminals at the ports of Durban and Ngqura will be issued this month with the goal of having partnerships in place by January 2023, Finance Minister Enoch Godongwana reports.

Delivering Operation Vulindlela’s latest progress update, Godongwana described the RFPs as a major step forward in enabling experienced international terminal operators to invest in the expansion of infrastructure and improve the management of port operations.

The bidding process follows a market-testing process whereby private operators where asked to respond to a request for information relating to the Durban Container Terminal (DCT) Pier 2 operation, as well as the Ngqura Container Terminal (NCT).

Both DCT Pier 2 and NCT have been operating well below their nameplate capacities of 2.4-million twenty-foot equivalent units (TEUs) and 1.3-million TEUs respectively.

The Operation Vulindlela report also highlighted progress being made in opening Transnet Freight Rail’s (TFR’s) network to third-party operators, noting that bidding for an initial 16 slots on the Durban-City Deep and Pretoria-East London lines would close at the end of August.

“It is important to recognise that this is only the first step in enabling third-party access to the freight rail network,” Godnongwana said.

He added that the passage of the Economic Regulation of Transport Bill in the coming months would establish an independent Transport Economic Regulator to enable nondiscriminatory access to the network beyond these slots.

The Presidency’s project management office head Rudi Dicks said that Operation Vulindlela was aware of market concerns about the design of the slots sale, including the fact that these were limited to a two-year period.

However, he indicated that TFR had hosted several engagements with potential bidders to discuss their concerns, during which 19 potential operators had expressed an interest in the slots.

He said it was premature to say how many of those companies would enter a bid.

Godongwana stressed that the logic of the port and rail reforms was to sustain State ownership, “while encouraging and enabling competition in operations to improve efficiency and leverage private sector investment”.

“During the next quarter, we will prioritise reforms in the transport sector with the same degree of urgency with which we have responded to the energy crisis during the previous quarter,” the Minister added.

Minister in the Presidency Mondli Gungubele says the reforms under way in the electricity sector – including the removal of the 100 MW licensing threshold for distributed generation projects and the expedited procurement of new capacity from renewables, gas and battery storage – will “supercharge our efforts to modernise and transform the electricity sector”.

“Most importantly, these changes will create the conditions for a boom in private fixed investment in the coming years, which will lift our economic growth overall,” Gungubele said during the release of Operation Vulindlela’s latest progress update.

“Construction of new energy projects and associated economic activity will create jobs, while increased energy security will encourage even further investment across the economy,” he added.

The Presidency’s project management office head Rudi Dicks said that the “swift and full implementation of the energy action plan” unveiled by President Cyril Ramaphosa on July 25 would be prioritised by Operation Vulindlela during the current quarter.

He reported that Operation Vulindlela would work with the recently established National Energy Crisis Committee (NECOM) to ensure implementation of the plan, which seeks to facilitate a significant improvement in the operation of Eskom’s fleet and support the introduction of private generating capacity.

The report outlined nine electricity reforms that would receive priority attention before the end of the year, including:

overseeing financial close of Bid Window 5 (BW5) renewables projects between August and September, with the end of July deadline for the close of the first 14 projects having been missed;

receiving proposals in September for BW6, which has been enlarged from 2 600 MW to 5 200 MW;

the issuance of a request for proposals for battery storage also in September;

amending, between September and October, Schedule 2 of the Electricity Regulation Act to remove the 100 MW licensing threshold for embedded generation;

tabling, in September, special legislation in Parliament to reduce or remove red tape;

establishing a one-stop shop for all energy-related applications during August and September;

appointing, in August, a board for the transmission entity being unbundled from Eskom;

completing, by December, the unbundling of the Eskom generation and distribution entities; and

introducing, during September, the Electricity Regulation Amendment Bill to Parliament.

Gungubele said that electricity reforms had been prioritised during the second quarter and would remain a key focus given that load-shedding remained the largest impediment to growth and investment in the South African economy.

Operation Vulindlela is overseeing 26 structural reforms in total across the energy, transport, telecommunications, water and tourism sectors.

Finance Minister Enoch Godongwana said that nine reforms had been completed, while another 11 were “progressing well”.

“A minority of these reforms, such as improving Eskom’s energy availability factor and completing digital migration, are not on track.

“As demonstrated with the formation of NECOM, however, we are taking decisive action to get these reforms on track as quickly as possible,” Godongwana said.

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the clarity that has been provided about what will be prioritised at Eskom as part of government's new energy strategy; the uncertainty that remains on the energy procurement side; the need for clear communication and flexibility as the strategy is implemented; and the persisting threat of load-shedding.

The Department of Mineral Resources and Energy (DMRE) has confirmed September 22 as the new bid submission deadline for Bid Window Six (BW6) of the Renewable Energy Independent Power Producer Procurement Programme following its expansion from 2 600 MW to 5 200 MW.

Prior to the doubling of the size of the round as part of a package of interventions announced by President Cyril Ramaphosa on July 25, the BW6 closing date had been set as 17:00 on August 11.

Earlier, Mineral Resources and Energy Minister Gwede Mantashe announced that the deadline would be extended in the interest of “fairness”, after which the Independent Power Producer Office (IPPO) communicated the new date for prospective bidders.

No details have been provided as to the allocation between wind and solar photovoltaic (PV) since the doubling of the round, with the previous split having been for 1 600 MW of wind and 1 000 MW of solar PV.

It was not immediately clear what other changes might be made to accommodate the larger allocation.

However, the DMRE said further communication would be provided through the IPPO.

South Africa’s Transnet National Ports Authority (TNPA) has initiated a preliminary process for the proposed development of a new deep-water port at Boegoebaai in the far Northern Cape near the Namibian border, which has been earmarked as a possible hub for the production and export of green hydrogen and derivative products.

The State-owned port landlord has released a request for qualification (RFQ) for the design, funding and construction of the proposed greenfield port and rail infrastructure as a precursor to a possible future request for proposals (RFP).

TNPA says the RFQ is intended to obtain information to shape the final solution as well as identify and select qualifying developers who could undertake the design, funding and construction of the port and associated infrastructure, including a rail solution to connect the port to mining and industrial hubs in the Northern Cape.

It indicates that a submission of an RFQ response, together with meeting the minimum capability criteria, is a compulsory requirement to participate in any subsequent RFP.

TNPA has set November 2 as the closing date for responses and will conduct a briefing session on August 16.

“The information sought through the RFQ is necessary for TNPA to chart a way forward in line with our strategic objective to operationalise a port in the region by 2026,” TNPA programme director Magenthran Ruthenavelu says.

He adds that the development of a port is a first step towards realising the country’s ‘Green Hydrogen Strategy’.

Although Boegoebaai has been identified as a key hub by President Cyril Ramaphosa for the development of a green-hydrogen sector, it faces competition from other domestic and regional locations, including Saldanha Bay in the Western Cape, Nelson Mandela Bay in the Eastern Cape, an emerging Hydrogen Valley linking Mogalakwena, Johannesburg and Durban and Lüderitz, in Namibia.

Boegoebaai has been earmarked as a Strategic Integrated Project by the Presidential Infrastructure Coordinating Commission Council, however, and Sasol, which has material green hydrogen ambitions of its own, confirmed last year that it had signed an agreement with the Northern Cape Development Agency to lead a feasibility study to explore the potential of the site as an export hub for green hydrogen and ammonia.

“Over and above the catalytic effect of new port and rail infrastructure to the local economy, the investment could also provide an additional, cost-effective channel to market for manganese exporters in the province,” Ruthenavelu says.

“It will bring much-needed relief to emerging miners who are currently restricted by high road transportation costs and no access to current export channels due to capacity constraints.”

A new R235-million wax flooding facility has started operations at the Volkswagen Group South Africa (VWSA) plant in Kariega, in the Eastern Cape.

The team responsible for implementing the project had to collaborate across four countries and over a period of two-and-a-half years, punctuated by Covid-19 restrictions, to establish the new facility.

The wax flooding facility promises to improve the efficiency and environmental impact of the wax flooding process for locally built Volkswagen Polos and Polo Vivos.

This process, which serves to protect vehicles from corrosion in the cavities of the vehicle body, is now performed in a building covering 5 350 m² across four levels, located in the VWSA plant’s former electro-coating facility.

It is this same process that enables Volkswagen to sell vehicles with a 12-year anti-corrosion warranty.

To establish the facility, employees across VWSA, Germany, Croatia and Czech Republic worked remotely from January, 2020, to conceptualise the project, using three-dimensional laser scans, models and virtual navigation in the design phase.

The international suppliers working on the project, first visited the Kariega plant in July, last year, when the manufacturing of components for the facility had already begun.

Now, a year later, the facility is operating across three shifts, matching the plant’s daily production volume of 680 vehicles a day.

It is, however, capable of meeting the demands of the VWSA plant’s full installed capacity of 710 vehicles a day. In fact, at its full capacity the wax flooding facility will be able to process 747 vehicles a day.

The process of wax flooding follows after the body of a vehicle has been painted, as certain cavities in the body are inaccessible during the painting process.

First, the vehicle body is put on a hanger and heated to 60˚C in a pre-heating oven, to prevent the wax from solidifying too quickly when it is injected.

Next, the body is lowered onto a wax flooding frame where wax (heated to 110 ˚C) is injected and flooded into the cavities.

Finally, the vehicle is tipped at a 15o angle to allow excess wax to run off for reuse.

The wax used for the process is shipped from Germany in the form of tablets weighing 4.26 kg each, which are then melted down on site.

Using this new facility has allowed the VWSA plant to increase the volume of vehicles moving through the wax facility, while also reducing the environmental impact of the process.

The new facility uses 25% less energy for heating, and – as it uses liquefied petroleum gas – has reduced carbon dioxide emissions for the process by 55%.

“This investment from the Volkswagen group is a massive vote of confidence in VWSA as a production plant,” says VWSA production director Ulrich Schwabe.

“The modern facility will allow us to keep building and delivering high-quality Polos and Polo Vivos for local and export customers, while prioritising our commitment to continuously finding more environmentally responsible ways to do so.”

To enable South Africa’s mining and resources sector to remain competitive, it is imperative the country pursues a safe, competitive, responsible, integrated and intelligent heavy haul system, powered by rail 4.0, by 2030.

This was emphasised by industry organisation the South African Heavy Haul Association (SAHHA) chairperson Brian Monakali, speaking during the first day of the SAHHA 2022 conference on August 2.

He explained that South Africa needed to be competitive in terms of its mining industry and resources, and to do so, needs to move hauling from road to rail.

Moreover, this requires a value chain system that accommodates this, to ensure that mining companies stay in the country and do not defer to competing countries where rail is more cost effective.

Monakali said that key to achieving this would be technology and innovation. He added that with capital being scarce, there was a need to use limited resources safely and efficiently, to engender maximum benefits.

Therefore, he said there needed to be an integrated approach from the hauling industry in terms of technical advancement, operations planning and execution.

Monakali lauded the conference as an “important occasion”, as it considered the completion of the value chain by including mines and ports, with SAHHA launching a new scope.

He informed that this was the outcome of a conference held in Norway in 2019, where a key lever that was identified for the sector moving forward was the value chain.

Moreover, he said the conference forms part of endeavours to ensure stakeholders plan and work together.

Expanding on the vision for 2030, Monakali said integration was essential.

He added that it was important that the rail industry strive for no derailments or safety incidents and for the industry to identify potential infrastructure failures before they occur and take steps to fix the infrastructure quickly.

With regard to sustainability, he said the sector wanted to make full use of the energy forms available to it, as well as to pursue other decarbonisation options.

Operationally, Monakali said trains should be controlled predominantly by technology, with human supervision to ensure it is running properly. This, he said, would ensure safety, as well more advanced skillsets for labour, while ensuring jobs were not lost to technology.

Monakali also emphasised the need for continued collaboration moving forward, with the conference as one vehicle to drive this.

Also speaking at the conference was Transnet CE Portia Derby, who said the National Rail White Paper was an important first step towards improving the positioning and competitiveness of rail in the economy.

She enthused that there were clear opportunities for growth in overall rail volumes and in rail market shares that could be accessed if the level of investment in rail and associated infrastructure could be raised.

Derby informed that Transnet was aiming, through a series of partnerships, to expand the capacity of key rail market segments, including coal, iron-ore, manganese, chrome and ferrochrome.

Moreover, she said Transnet was exploring mechanisms to access government funds for rail infrastructure expansion and modernisation.

Derby explained that a key challenge for the entity was that, previously, it had entered into long-term contacts with mining houses, because it needed access to private investment owing to a lack of capital.

However, she said exclusion would be created if the entity continued in this vein, with emerging miners unable to get access to the heavy haulage system.

This, she noted, goes against the inclusive economy that is being aimed for.

Derby noted that track expansion needed to be funded by government as well, to prevent this. Transnet was also reviewing the length of contracts, she indicated.

Derby said the system was moving in the right direction, but she stressed that this had to be dealt with appropriately and sustainably, to ensure that those with entrenched jobs in the sector w...

Toyota South Africa Motors (TSAM) says its Prospecton plant, in Durban, should be back to full production at the end of September.

Assembly operations were suspended on April 12 owing to severe flooding at the factory and surrounding areas.

TSAM’s catalytic converter exhaust export facility was the first assembly line to return to production following mop-up operations, with work restarting on May 9.

The Hino truck plant followed on May 24, the Hiace minibus line on July 15, with the Hilux and Fortuner lines resuming operations on July 21.

Corolla Cross production restarted at the end of July.

Corolla Quest assembly is scheduled to resume operations this month.

It is envisaged that the plant will return to full production – matching pre-flood levels – by the end of September.

TSAM sold 7 110 new vehicles in July – out of an industry total of 43 593 units – registering a market share of 16.3%.

While still being number one in the market, this percentage is significantly smaller than Toyota’s usual share, which is normally closer to 25% of the market.

“The incredible loyalty shown by our customers over the last few months has helped to re-energise and motivate us,” says TSAM sales and marketing senior VP Leon Theron.

“We are truly grateful to our colleagues at Prospecton in Durban for their massive efforts in reviving our plant.

“We are thankful to our fleet owners and the rental companies for their continued support in these trying economic times. We are also grateful to our dealer network, as well as all Toyota staff, for their sterling efforts in making Toyota such a competitive brand.”

Public Enterprises Minister Pravin Gordhan reports that Eskom will seek the exemptions it requires to immediately buy up to 1 600 MW of surplus electricity generation that it believes could be available immediately from existing independent power producers (IPPs) and those private South African businesses with their own generation capacity.

He also announced that a further 100 MW to 200 MW could be purchased in the short-term from Botswana and Zambia through the Southern African Power Pool, while a further 150 MW of gas-fired electricity could be purchased from Mozambique.

To purchase any local surplus, Eskom requires an exemption from Mineral Resources and Energy Minister Gwede Mantashe, who has the authority to issue Ministerial determinations or exemptions from such determinations, that are still required to allow for the procurement of additional new generation capacity.

Once secured, Eskom would extend a standard offer to buy any surplus electricity available across mines and industry and would also be able to mop up electricity that is currently being curtailed by renewables IPPs when they generate electricity above that which is catered for under the terms of their power purchase agreements with Eskom.

Speaking during the inaugural briefing of the newly established Energy Crisis Committee, Gordhan said the 1 600 MW threshold had been suggested by Eskom itself and was seen as sufficient to ensure that any electricity that is currently available domestically is secured as soon as possible.

He also announced that the utility would seek Public Finance Management Act-related exemptions from Finance Minister Enoch Godongwana to ensure that it was able to acquire the spares it needed for the accelerated maintenance announced as part of President Cyril Rmaphosa’s July 25 energy action plan to tackle the load-shedding crisis, as well as to enter into contracts with original equipment manufacturers (OEMs).

Such exemptions are viewed as key to intensifying and expanding maintenance across six Eskom power stations, where it is believed the energy availability factor can be recovered most rapidly. The six stations identified for priority maintenance include Kendal, Majuba, Tutuka, Kusile, Duvha and Matla, Gordhan said.

He described the expanded maintenance effort – which would initially be funded through Eskom’s R8-billion budget for generation plant maintenance, but which may need to be enlarged by a further National Treasury-supported R2-billion – as the first component in a three-part package to end load-shedding and create the basis for long-term supply stability.

“The first step is about how many more megawatts we can get by maintaining the current plant better [and] by ensuring that we have the right skills both at the leadership level of the power stations and at the operator level.”

The Minister said that a team of former Eskom power station managers and senior managers was being assembled to assist the incumbents (who had all the qualifications but lacked experienced) to improve plant performance.

The second part of the package involved securing the exemptions needed to buy surplus electricity and contract for spares and OEM services.

The third component, Gordhan said, involved removing any residual red tape in the way of investments by the private sector into additional generation capacity, either through the formal procurement processes run by the Department of Mineral Resources and Energy, or through the lifting of restriction on distributed generation and solar rooftop installations.

Such new capacity could be introduced in a period of between 12 months and 36 months and would be key to laying the basis for long-term energy security and a decarbonised electricity sector.

Mineral Resources and Energy Minister Gwede Mantashe indicated that, while the next renewables bidding round would be delayed by between 45 and 60 days to cater for its doubling from 2 600 MW to 5 200 MW, he was committed to ensuring additional non-E...