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South Africa’s planned $8.5-billion climate finance deal with some of the world’s richest nations could serve as a blueprint for other coal-dependent countries, the head of its negotiating team said.

The potential funding, which will be made available over three to five years, was announced at the COP26 climate talks in Glasgow in November. Under the arrangement, the US, UK, Germany, France and European Union plan to provide finance to help the country cut its use of coal, which is used to generate more than 80% of its electricity.

“We are acutely aware that the eyes of the world are on us,” Daniel Mminele, a former central banker who was appointed to head the talks for South Africa in February, said in an interview in Bloomberg’s Johannesburg office on Tuesday. We would like to see it “at best as a model or benchmark that can be emulated,” he said.

South Africa, the world’s 13th-biggest emitter of greenhouse gases, was seen as an ideal prototype for the climate-funding arrangement because of the advanced age of its coal-fired power plants and its sophisticated capital markets. Commitments the government and state power utility, Eskom Holdings, have made to cut emissions and take the impact of a clean-energy transition on coal-dependent communities into account have also encouraged funders, Mminele said.

Other nations that are in talks to benefit from similar arrangements are Indonesia, Vietnam and India. Mminele, 57, said the aim is to be able to announce considerable progress by the time the COP27 conference takes place in Egypt later this year.

“Initial discussions are taking place and as we go along we will be sharing with countries that may be looking at similar programs,” he said.

South Africa’s battles with energy security have lent urgency to the talks. Africa’s most-industrialized economy was again this week hit with the intermittent power outages that have plagued it for more than a decade.

Even so, a powerful coal mining lobby and a sympathetic energy minister, who once served as a coal-mining union leader, have proved to be stumbling blocks to the rapid roll out of wind and solar energy.

COAL PROPONENT

In a February interview with South Africa’s Newzroom Afrika television channel, Mineral Resources and Energy Minister Gwede Mantashe said the country shouldn’t rush to close its power plants or bow to pressure to rapidly change its energy sources, and that it should be wary of the terms of finance offered. He held up China, the world’s biggest polluter, and Australia, the world’s second-biggest coal exporter, as models to emulate, saying they had taken the needs of their economies into account.

While transitioning electricity generation away from coal will be the focus of the deal, money also may be allocated to kickstart green hydrogen and electric vehicle industries in South Africa, according to Mminele.

“These are the three things which we are going to tackle but it goes without saying that electricity is the key priority area,” he said. “But those other two areas will be developed in parallel.”

Part of the money allocated to electricity provision will need to be apportioned to replacing coal-fired plants with renewable energy on the same sites, protecting communities whose livelihoods depend on coal, and strengthening the grid in areas of the country that while rich in solar- and wind-power potential have weak transmission infrastructure.

ESKOM DEBT

The new funds are expected to come in the form of concessional loans and grants. The structure of the deal, details of which are still being worked out, shouldn’t add to Eskom’s unsustainable R416-billion debt burden.

“I doubt that we could proclaim success if we make it worse and add to what exists,” said Mminele, who has also served as the chief executive officer of one of the nation’s biggest banks. “The debt problems are part and parcel of what the solution is meant to help address. Our partners are well aware of that.”

Ultimately more money will be needed from...

Eskom insists that it is processing budget quotes for independent power producers (IPPs) seeking to connect to the national grid, in line with agreed timelines, and that it is making every effort to debottleneck the process so that much-needed new generation capacity can be introduced speedily.

COO Jan Oberholzer indicated during a load-shedding briefing that the utility was seeking clarity from both the IPP Office and the Department of Mineral Resources and Energy regarding recent statements indicating that financial close on 25 wind and solar projects had been delayed from the end of April to accommodate the issuing of budget quotations by Eskom.

In a note published on April 28, the IPP Office stated: “In line with Eskom timelines for the issuing of budget quotations, the first 14 projects are scheduled to achieve financial close by the end of July 2022, while the remaining 11 projects are expected to achieve financial close by the end of September 2022”.

Distribution GM Agnes Mlambo added that Eskom’s records indicated that it remained on schedule and “aligned to the timelines that we agreed with the IPP Office”.

She noted that most of the grid connections arising from Bid Window 5 (BW5) of the Renewable Independent Power Producer Procurement Programme were in the form of self-build projects, but that Eskom still needed to approve the designs.

“If all the information is submitted on time, and there are no delays from Eskom’s side, we are still on course to approve on time and be aligned to those timelines.”

CEO André de Ruyter, who has been calling for the urgent injection of up to 6 000 MW to decrease pressure on the load-shedding-prone network, said Eskom has “absolutely no incentive to delay the issuing of budget quotes” and had also beefed up the capacity of its grid access unit, which had historically handled very few applications.

However, he also stressed that a budget quote represented a binding commitment that could be made only once the designs were approved.

“In some instances, the IPPs do not provide sufficient information for our engineers to complete their designs as quickly as the IPP would expect.

“So, there are inefficiencies in the process from that perspective, and we can’t willy-nilly give budget quotes based on inadequate information because, eventually, we as an organisation have to pick up the tab.”

De Ruyter said the utility was making every effort to ensure it was not the bottleneck and made an appeal for IPPs to approach Eskom directly to address any problems rather than venting frustrations anonymously on social media.

He also stressed that Eskom executives had a fiduciary duty to ensure that the power purchase agreements (PPAs) arising from procurement processes, such as BW5 and the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), were not onerous.

Financial close for the RMIPPPP projects has been shifted four times and DMRE director-general Jacob Mbele told lawmakers this week that the new date was now the end of May.

“We certainly have no aspiration to be declared delinquent directors by signing contracts that contain provisions that may be onerous in future years.

“Therefore, we do take a lot of care to ensure that, when those PPAs are signed, they meet the requirements of good corporate governance and that we can hand on heart go to the shareholder and say that as a board we have done our duty towards the entity.”

Controversial matters, he added, could take some time to resolve, but “we really would like to make sure that these agreements, which are more than 20 years in duration, are done properly and that we don't have any comebacks afterwards”.

De Ruyter also stressed that while the most recent delays might be adding months to the process, they would not delay projects by years, as had been the case when Eskom refused to enter into new PPAs and effectively halted any new procurement from 2014 until the launch of BW5 in 2021.

“And that's the real problem - that...

New-vehicle sales, although dented by the impact of the recent floods in KwaZulu-Natal, managed to remain in positive territory in April, says Naamsa | The Automotive Business Council.

Domestic new-vehicle sales in April increased by 4.3%, to 37 107 units, compared with the same month last year.

The new-passenger-car market reached 26 653 units in April – a 12.9% jump on the same month last year, with the car rental industry accounting for 12.5% of car sales.

In stark contrast to this, the sale of new bakkies, vans and minibus taxis declined by 11.9%, to 9 558 units.

April medium-truck sales dropped by 9.4%, reaching 475 units, while heavy-truck and bus sales declined by 4.6%, to 1 421 units.

New-vehicle exports from South Africa delivered some cheer, improving by 16%, to 30 788 units.

Year-to-date vehicle exports are now 2.7% above the level of the corresponding period last year.

The April floods caused severe supply chain disruptions in port, rail and road traffic, as well as the temporary closure of the Toyota South Africa Motors plant in Durban, says Naamsa.

The industry body says the shock of the disaster “will be felt for some time to come”.

“The domestic automotive industry is expected to continue a stop-start recovery in 2022 in view of prevailing Covid-19-related supply chain disruptions, insufficient stock, and escalating energy and transportation cost increases,” Naamsa adds.

The Department of Mineral Resources and Energy (DMRE) told lawmakers on Tuesday that the postponement of financial close on 25 wind and solar projects selected as preferred bids in October was the result of delays in the issuance of budget quotations from Eskom for connection to the grid.

Bid window five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was scheduled to close at the end of April, but the decision to delay the signing of power purchase and implementation agreements was confirmed by the IPP Office on April 28.

In an update to bidders, the IPP Office indicated that financial close had been delayed to “accommodate the issuing of budget quotations by Eskom”.

It added that, in line with Eskom timelines, the first 14 projects were now scheduled to close by the end of July, while the remaining 11 would reach financial close only at the end of September, which would be after the closing date for submissions under BW6.

The BW6 request for proposals (RFP) was released on April 6.

Eskom, which has been calling for the introduction of between 4 000 MW and 6 000 MW of new capacity to reduce the ever-present risk of load-shedding, did not immediately respond to a request for comment on the reasons for the delay in the issuance of budget quotes.

In response to a question posed by the Democratic Alliance’s Kevin Mileham regarding confirmation of yet another delay to the conclusion of the more controversial Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), deputy director-general Jacob Mbele noted that the RMIPPPP was not the only postponement, with BW5 of the REIPPPP having now also been delayed.

“What is pending is for Eskom to sign the contracts with the IPPs in both programmes,” Mbele said, adding that the most recent delay to the signing of RMIPPPP contracts had been at the request of Eskom.

A signing ceremony had initially been scheduled for the end of March, following three prior postponements.

Despite a new legal application to have licences granted by the National Energy Regulator of South Africa (Nersa) to three Karpowership projects selected under the RMIPPPP reviewed and set aside, Mbele expressed optimism that the new deadline of the end of May would be met.

This, despite ongoing warnings over the flawed design of the RMIPPPP, which critics warn will tie consumers into exorbitant contracts for the coming 25 years.

Regarding concerns that several of the RMIPPPP and BW5 projects were being held up as a result of difficulties in meeting local content commitments, Mbele said that the bidders were well aware of the processes that they needed to follow to resolve such difficulties.

“They made a commitment to meet the requirements as per the RFP and if they hit a problem, they know the process that they have to follow, which is to consult the project officer.

“And they also know the process that they have to follow at the Department of Trade, Industry and Competition to apply for exemptions [from local content].”

Mbele and several other officials, including acting director-general Patricia Gamede, were responding to questions posed following DMRE’s presentation of its 2022/23 Annual Performance Plan (APP) and its Budget Vote to the Parliamentary Portfolio Committee on Mineral Resources and Energy.

Lawmakers were told that the APP included the following planned targets for electricity:

the issuance of an RFP for 513 MW of energy storage;

an RFP for 2 600 MW of additional renewable energy under BW6;

the development of an RFP for 1 600 MW of renewable energy under BW 7;

the issuance of an RFP for 1 500 MW from new coal;

the release of an RFP for 3 000 MW of gas to power;

securing concurrence from Nersa for a Section 34 determination in line with the Integrated Resource Plan of 2019 (IRP 2019);

Approving the Renewable Energy Sector Master Plan;

Electrifying 15 000 additional households through non-grid technology

monitoring and verification of the implementat...

Global tier-one supplier of vehicle flooring, acoustic and fibre-based products, Auria Solutions, and Feltex Automotive, a regional manufacturer of automotive textiles and acoustic components, have announced a joint venture (JV) that will serve selected automotive original equipment manufacturers (OEMs, or vehicle manufacturers) in the region.

Feltex forms part of the JSE-listed KAP Industrial Group.

Feltex has acquired a minority stake in Auria South Africa, a wholly-owned subsidiary of Auria Solutions.

The subsequent JV will continue to be called Auria South Africa, and will operate out of a new manufacturing facility that was launched in East London in the third quarter of last year.

The JV will manufacture numerous vehicle interior products, including flooring systems, dash insulators, trunk trim and parcel shelves for certain locally produced global OEM platforms.

The strategic partnership should combine the global automotive manufacturing and engineering capability of Auria, with the local raw material and vertical integration capabilities of Feltex.

“Feltex has a strong reputation and deep roots in this regional automotive hub, and we are excited about the combined strength and growth opportunities our strategic partnership brings to this new joint venture,” says Auria Solutions president and CEO Brian Pour.

Feltex Automotive CEO Ugo Frigerio says “the Auria team brings with it strong global manufacturing and technical know-how in an industry that is transitioning towards new technologies and production methods”.

The new Auria East London facility comprises 11 200 m2 of manufacturing space with equipment for the production of floor carpets, trunk trim, dash insulators and parcel shelves.

Manufacturing processes within the plant include compression molding, polyurethane back foaming, high frequency welding, waterjet cutting, injection molding and sequencing.

Toyota South Africa Motors (TSAM) says it is following a “systematic and meticulously phased plan” to restart production at its Prospecton assembly plant, south of Durban, after the facility suffered extensive flood damage two weeks ago.

TSAM says the approach is designed to ensure a safe start-up, without any potential secondary issues.

Clean-up operations are progressing at pace, notes the local arm of the Japanese manufacturer.

The first three phases in the return-to-production plan include the establishment of temporary utilities at the plant, cleaning up and then powering up the machinery.

Once the trial power-up stage is reached, certain areas of the facility will be able to move to phase four, which involves “an accurate assessment and equipment check”.

“It is only once we commence with this phase that we will be able to adequately judge the realistic lead time to resume production,” says TSAM president and CEO Andrew Kirby.

“As you can imagine, there will be a mountain of repairs to be made along with many parts that will need to be ordered. It would, therefore, be irresponsible of us to call a start-up date until we have the full picture. We anticipate firming up dates within the next week.”

Kirby expresses his gratitude for the support Toyota has received from its dealers, suppliers, local and national government, as well as its staff.

He singles out parent company Toyota Motor Corporation (TMC) for its swift response to this emergency.

“TSAM’s recovery is currently the number-one priority for TMC as demonstrated by more than 50 maintenance and engineering experts on site, with more arriving next week.”

On the sales front, TSAM senior VP Leon Theron confirms that while delivery of locally built models will be impacted in the short term, plans have been put into place to prioritise existing orders.

“We really appreciate the patience exhibited by our customers. Yes, [locally made] Hilux, Fortuner, Corolla Cross and Quest orders are going to take a little longer, but please be assured that they will be filled the moment our new supply kicks in.

“As far as imported models go, it’s business as usual. In fact, we have requested extra units to compensate for the temporary lack of availability on locally built models.”

Swedish energy storage specialist Polarium has opened a lithium-ion battery assembly plant in Montague Park, Cape Town.

The facility is the group’s third in the world, with a plant each in Mexico and Vietnam.

The Cape Town plant will employ 200 people, and will supply mainly the local and rest-of-Africa telecommunications tower market.

The facility has a capacity of 300 000 batteries a year, equivalent to 4 GWh, to be assembled on three lines from imported cells.

More than 90% of production will be exported to the rest of the continent.

The factory will be powered by a combination of solar power and Polarium’s energy storage solutions, making it a net contributor to the South African power grid.

The opening of the Cape Town facility follows a multimillion-dollar bulk purchase agreement between American Tower Corporation (ATC) Africa and Polarium, signed last year.

ATC has been switching steadily from diesel generators and traditional lead-acid battery storage to lithium-ion systems in Africa, explains ATC South Africa CEO Anne Mclaren.

“We often have to provide uptime in markets with low power-grid availability, so we have generators that run to the side of our towers. Lithium-ion batteries are more sustainable and offer a longer lifecycle than other solutions.”

Mclaren notes that the switch has allowed ATC Africa to save on the use of 95-million litres of diesel since 2018.

ATC is active in six African countries outside South Africa, and has around 22 000 tower sites on the continent.

“Being connected is being included,” says Mclaren.

Polarium CEO Stefan Jansson says Polarium signs contracts with its customers to retrieve the company’s batteries at the end of their lifecycle, with 95% of the material in the old batteries recycled into a new batteries.

Risk and advisory services firm PwC South Africa has flagged the impact of the floods, especially on manufacturing and transport; rising labour costs; and inflation as the key factors affecting the country's economic outlook.

The eThekwini metropolitan municipality reports that most of its 1 152 formal businesses were impacted by the flooding.

Data from the Google Community Mobility initiative indicates that, on April 13, workplace activity in KwaZulu-Natal was 6% below the pre-pandemic levels. Workplace activity across the rest of the country was, on average, 8% higher, reflecting the negative impact that the flooding had on the province’s business activity relative to the rest of South Africa, PwC said in its 'South African Economic Outlook' report, published on April 28.

The disruption to business and consumer activity in the province has a notable impact on the overall South African economy. KwaZulu-Natal is the second largest provincial contributor to the national economy after Gauteng and had 2.4-million employed workers at the end of last year.

"eThekwini is a large contributor to the KwaZulu-Natal economy, accounting for more than half of the provincial gross domestic product and providing jobs to 1.5-million people. Within this metro lies the Port of Durban, which is the largest harbour and busiest port in the country, handling 60% of total container traffic to and from South Africa," PwC highlighted.

"Manufacturing and transport have been the hardest hit, while costs are still being counted. N3 road transport remains at half the normal volumes as Port of Durban works to clear container backlog. The damage from the floods is much larger and more widespread, with destruction to both public and private infrastructure. The provincial government currently estimates an infrastructure repair bill of R17-billion," it said.

"Business disruptions will add additional pressure to elevated consumer and producer price inflation. Manufacturing and transport combined account for 45% of eThekwini’s economy and 30% of the provincial economy. These are the two sectors that will feel the biggest negative impact on activity in the short- to medium-term.

Further, State-owned logistics agency Transnet estimated that it would take seven weeks to resume operations on its damaged main railway line between Durban and Cato Ridge. Rail operations between Cato Ridge and the north and south coast lines have been halted. The rail, port and pipeline company has among the largest areas of property in the region's flood plain.

Additionally, the Road Freight Association reported that, in the immediate aftermath of the flooding, road traffic between Durban and Gauteng was at half the normal rate. The N3 between Durban and Johannesburg is the busiest road in the country for ferrying exports and imports. Public Enterprises Minister Pravin Gordhan commented that the Port of Durban had a backlog of up to 9 000 containers that would take more than a week to clear, PwC said.

"Supply disruptions caused by a slowdown in port and road traffic and the permanent closure of factories and other places of business due to a lack of insurance or other financial support, will disrupt the flow of food and consumer goods within the economy. While there is certainly no concern about national food security at this stage, there will likely be some short-term negative impacts on the supply of food products and hence higher prices," PwC stated.

KwaZulu-Natal is an important producer of agricultural products. Data from the Bureau for Food and Agricultural Policy (BFAP) shows that up to a third of the national dairy herd is in the province and that more than 10% of the country’s chicken eggs are produced there. The cost of poultry and eggs is already on the rise owing to higher international commodity prices, stemming from the Russian invasion of Ukraine, impacting the cost of chicken feed. The Port of Durban is also a major conduit for the import of foodstuffs.

The disruptio...

Civil society organisation the Organisation Undoing Tax Abuse (Outa) has filed a review application in the North Gauteng High Court to have the decision by the National Energy Regulator of South Africa (Nersa) to grant floating gas powership company Karpowership-linked independent power producers (IPPs) generation licences, set aside.

Outa's advocate Stefanie Fick told media during an April 28 briefing that the application sought for the granting of the licences to be reviewed and set aside, as well as a court order for Nersa to reconsider and review the applications.

Nersa stated in a media release that it had yet to receive the court application.

It added that, once it received the application, it would study it and advise whether it would oppose the application.

Meanwhile, Outa's affidavit states that Nersa's decision-making was procedurally unfair. "The process was premature and lacking in transparency, with significant portions of the licence applications redacted," Outa said.

Outa CEO Wayne Duvanhage said the regulator did not have the necessary information, on issues such as ports authorisations, environmental authorisations, a range of gas pipeline and storage licences, to reach a correct decision, and neither did the public as the process proceeded.

"All the necessary facts and information were not available to the public and, therefore, prevented the public from participating effectively," he said.

Fick added that Nersa's lack of transparency on the financial information raised concern about the effect on the public.

"It failed to deal with the issue of price variation in circumstances where prices over the next 20 years will be dependent on the dollar price. This causes uncertainty and may come at tremendous costs for the South African public," she argued.

"Outa is calling for the licensing decisions to be overturned, as we believe Nersa did not act in the interests of South Africa in granting these," she noted.

Nersa also failed to take value-for-money considerations into account, including consideration of more cost-effective options, Outa's affidavit said.

"There are faster and substantially cheaper generation project options available to eliminate load-shedding in the short-term, so the Karpowership projects are not needed," Fick said.

Outa believes high-capacity factor gas power, as proposed by Karpowership, will mostly not displace carbon dioxide-emitting coal-fired power generation as claimed by Nersa in its reasons for decision, but will rather displace the amount of future renewable energy that will be built.

"Nersa failed to consider the climate impact of 20-year generation licences for the Karpowership IPPs, which run on fossil fuels, when cleaner, cheaper and faster electricity supply options are available.

"It will thus result in a higher emitting power sector than what would otherwise have been the case, and undermine the country’s efforts to decarbonise its economy,” said Fick.

ECONOMIC REASONS

Further, Outa stated that the Karpowership projects would impose unnecessary financial, economic and environmental costs on South Africa and that the 20-year contracts carry a "significantly greater risk" to customers, the public and the economy than the available alternatives.

"Nersa has failed to conduct a proper analysis of the project costs and cost risk, and appears to have misconstrued the issues surrounding the electricity pricing formulas, in particular the gas pricing components. This includes the price being significantly exposed to variations in the US dollar to rand exchange rate and global gas prices," Fick said.

The Karpowership bid price in April 2020 was about R1.50/kWh, and Nersa said this would have increased to R2.80/kWh from April 2022.

However, an independent consultant estimates the current price is close to R5/kWh, which is about two- to three-times the cost of alternative generation methods, Outa stated.

"The pricing methodology is such that the Karpowership IPPs could receive 'windfa...

Two new black-owned suppliers have joined the Volkswagen Group South Africa (VWSA) supplier base after completing a mentoring programme offered by the company.

KPL Die Casting and Thekwini Wire, both beneficiaries of VWSA’s Project Ntinga, have begun supplying parts for the Polo and Polo Vivo models, built in Kariega, in the Eastern Cape.

Project Ntinga was launched in 2017 to develop black-owned suppliers to the automotive industry through an intensive mentoring and coaching programme.

Five winners were originally selected to participate from a group of more than 300 suppliers.

“We were fortunate to be trained by the VWSA team, and we also had an automotive expert appointed as our mentor, who guided us to become a more valuable supplier within the automotive sector’s supply chain,” says Thekwini Wire director Bala Moodley.

The Durban-based Thekwini Wire, which opened in 2009, is currently a second-tier supplier, providing parts to one of VWSA’s direct suppliers, which, in turn, provides parts for the Polo.

“The insight from the VWSA production site visits helped us to implement newer ways of working, and improved our ability to streamline our processes,” says Moodley.

“We also gained the confidence to approach other automotive manufacturers and Tier 1 suppliers for work.”

KPL Die Casting has been supplying a component to VWSA for the Polo Vivo model.

“Through Project Ntinga, KPL gained more capacity to respond to market demands, and learned the importance of using globally recognised quality business processes,” explains KPL owner and MD Sally Marengo.

During the Covid-19 pandemic, KPL was also assisted by the Broad-based Black Economic Empowerment (B-BBEE) Initiatives Trust, which was established by VWSA in 2016 with the mandate of driving transformation in the South African automotive industry, by investing in black-owned suppliers and offering post-investment support to these companies.

VWSA is currently at B-BBEE Level 3 status.