South Africa’s gross domestic product (GDP) for 2021 increased by 4.9% in 2021, compared with a contraction of 6.4% in 2020.

Statistics South Africa (Stats SA) statistician-general Risenga Maluleke on March 8 said the growth was the result of the country moving out of the Covid-19 pandemic environment in 2021.

However, despite growing at a rate of 4.9%, he highlighted that the economy was still sitting at a similar level to that of the third quarter of 2017.

Meanwhile, GDP increased by 1.2% quarter-on-quarter in the fourth quarter of 2021.

Expenditure on real GDP increased by 1.3% in the quarter.

Household final consumption expenditure increased by 2.8% in the fourth quarter, contributing 1.8 percentage points to total growth. The highest growth rates were reported for expenditures on durable and semi-durable goods.

In the fourth quarter of 2021, the personal services industry increased by 2.7% quarter-on-quarter, contributing 0.4 of a percentage point to GDP growth.

Increased economic activities were reported for community and other producers.

The manufacturing industry increased by 2.8% in the period, contributing 0.3 of a percentage point to GDP growth. Eight of the ten manufacturing divisions reported positive growth rates in the fourth quarter.

The petroleum, chemical products, rubber and plastic products divisions made the biggest contributions to the increase in the quarter.

The food and beverages division and textiles, clothing, leather and footwear division also made considerable contributions to growth, Maluleke said.

The trade, catering and accommodation industry increased by 2.9%, contributing 0.3 of a percentage point to GDP growth.

Increased economic activities were reported for retail trade, motor trade and catering and accommodation services.

The agriculture, forestry and fishing industry increased by 12.2% and contributed 0.3 of a percentage point to GDP growth. The increase was mainly owing to the increased production of animal products.

The transport, storage and communications industry increased by 2.2%, contributing 0.2 of a percentage point. Increased economic activity was reported for land transport and transport support services.

The main detractors from growth were the electricity, gas and water industry (owing to reduced consumption), while mining experienced lower production, particularly for iron ore, gold and coal.

COMMENTARY

PPS Investments portfolio manager Reza Hendrickse says that overall, 2021 was a strong year, with full year GDP growth reaching 4.9%.

"Much of this was due to 2020’s low base from which to rebound, while the favourable global growth backdrop was also a tailwind. Despite this, the size of the SA economy remains below pre-COVID levels. Going forward the outlook is more muted, with a return to trend growth, which is closer to 2% per annum," she notes.

Hendrickse says that the outlook for growth is stable, and the economy should continue to heal as the pandemic effects fade.

"Although monetary policy is tightening, conditions remain accommodative as we transition to more normal policy rates amid benign local inflation. The fiscus is also on a better footing, given improved tax collections, as well as gradual reform. The main risk to growth currently is the geopolitical backdrop, where the conflict between Russia and Ukraine has the potential to impact global growth, as well as the inflation outlook, particularly given the spike in energy and agricultural commodity prices.

For now, we continue to view South African growth assets as being relatively cheap, being priced to deliver good returns going forward. As a result, our multi-asset portfolios are overweight South African equities as well as foreign, while also retaining a meaningful weighting in South African government bonds, with their high yields building in a large risk premium. We continue to favour growth assets in general, provided the situation between Russia and Ukraine can be contained," indicates Hendrickse.

Non-pr...

State-owned utility Eskom says it is still in the process of quantifying the likely impact of surging diesel prices on the cost of producing electricity at its open cycle gas turbine (OCGT) facilities but has cautioned that continued steep price rises will be difficult to absorb in light of its financial constraints.

Eskom had been relying heavily on its OCGT plants, as well as those operated by independent power producers, ahead of its most recent decision to implement Stage 2 load-shedding on Monday – a decision that has since been extended to 5:00 on Saturday March 12.

COO Jan Oberholzer said that by March 7, Eskom was having to produce electricity across all 20 OCGT units available in South Africa after several coal units tripped in quick succession, resulting in the loss of an additional 4 500 MW of capacity during the course of Monday.

Load-shedding was officially implemented at 17:00 on Monday, partly to preserve diesel and pumped storage reserves.

By Tuesday morning, more than 22 000 MW of capacity was not available, including from the new Medupi and Kusile units, owing to a combination of unplanned breakdowns of nearly 16 000 MW and 5 500 MW of planned maintenance.

Generation executive Phillip Dukashe reported that 17 operating units, representing a combined 8 700 MW, were facing various risk factors as of Tuesday morning, with about 2 000 MW of that considered to be at “high risk”.

CFO Calib Cassim did not make a direct link between surging diesel prices and the risk of load-shedding, saying the threat of rotational cuts would depend mainly on the performance of the coal fleet. Nevertheless, he stressed that there was “no blank cheque” for buying fuel and that Eskom could “get to a point where we just don’t have funds to pay for additional diesel”.

Eskom was granted R1-billion in diesel revenue through the regulated tariff for the current financial year and has spent about R6-billion on the fuel to operate its own plants and has purchased about R3-billion in electricity from the diesel-fuelled private Avon and Dedisa facilities.

For the upcoming financial year, the National Energy Regulator of South Africa has granted about R3-billion for diesel against a request for R6.5-billion.

Retail domestic diesel prices have already breached the R21/l level, with the prospect of more steep increases again in April, owing to the market’s reaction to the Russian invasion of Ukraine, which saw oil prices reach a 14-year high this week of close to $140/bl.

Cassim said Eskom had, for some time, been investigating hedging strategies to mitigate the impact of rising diesel prices and that discussions were under way on possible hedges. He acknowledged, however, that “the timing couldn’t be worse”.

“[So], if the price of oil has to double, I think it's going to impact in terms of the energy that we can produce from diesel going forward,” Cassim said.

Eskom was also analysing the impact of the Ukraine conflict on its other energy inputs, including coal and fuel oil, the price of which had risen sharply in recent weeks.

"Obviously with the war in Ukraine we are all seeing that oil and gas prices are escalating [and] that would still need to be factored in on our side.

"But as a bottom line, we only have a certain amount that we can afford from a liquidity perspective, so this will put pressure [on Eskom]."

The Motor Industry Staff Association (Misa) has warned its nearly 53 000 members that the next few weeks will require South Africans to dig deep into their pockets and save money where they can.

South Africa’s economy has hit a double whammy with the recent steep fuel price increase, says economist Dr Roelof Botha.

Not only will everyone have to pay more to fill up their tanks, everything in the value chain will also become more expensive in the next few weeks.

“The reality is that families will struggle with less money in their budgets to spend.”

Misa operations CEO Martlé Keyter notes that the fuel price increase will also have a negative impact on the thus-far positive new-vehicle sale predictions for 2022.

“These predictions will be impacted by how long the war between Russia and Ukraine lasts,” says Keyter.

If it is only a few weeks, we will see the fuel price dropping. If the situation drags on for months, it will have a devastating impact on the cash flow of individuals and on vehicle sales,” says Keyter.

The oil price has rocketed after Russia invaded Ukraine earlier in March, with Russia one of the world's largest producers of oil and natural gas.

Botha says the impact would have been much worse if the rand had not showed positive movement against the US currency in recent weeks.

Bureau for Food and Agricultural Policy director Dr Ferdi Meyer says the rise in the price of diesel impacts on every aspect of the input cost of the farmer, from the machinery used to plant, the price of fertiliser (which has doubled over the past year), to transportation.

“Road transport is used for most goods, making it even more expensive. The impact would have been less severe if South Africa had a proper functional railway service making transport much cheaper,” says Meyer.

According to Meyer more than a third of South African households spend between 40% and 50% of their monthly income on food.

The price of wheat increased by 8.43% since the beginning of 2022.

Russia and Ukraine account for 35% of the world’s wheat exports.

“There is no room for cutting corners. Families will have to manage their budgets very effectively to muster the storm,” says Meyer.

JSE-listed paper and packaging group Mpact has reinstated a final dividend of 50c apiece for the year ended December 31, 2021.

It did not declare a dividend for 2020 in order to exercise caution over capital following the outbreak of Covid-19 in South Africa and the resultant lockdowns.

For 2021, the company generated 13% higher revenue from continuing operations at R11.5-billion. Underlying earnings before interest and taxes (Ebit) grew by 56% year-on-year to R948-million in the reporting year, while underlying earnings a share increased by 93% year-on-year to 360c.

Mpact’s return on capital employed increased to 17.8%, reflecting the company’s resilience and solid market demand for sustainable packaging.

CEO Bruce Strong says the year brought with it unprecedented supply chain constraints globally and across sectors, which impacted on the availability and price of raw materials.

The prices of paper, plastic polymers, electricity and several process chemicals escalated well above inflation in the year under review.

However, the supply chain challenges have led to increased demand from customers for locally produced products, from which Mpact benefitted. Strong mentions that Mpact has also benefited from increased demand as a result of uncertainties around imports amid the Ukrainian crisis.

Strong tells Engineering News that the supply chain constraint situation will not likely change in the next six months and, as a mitigating measure, Mpact has started holding more stocks of raw material and sourcing products from other markets wherever possible.

Robust customer demand helped to offset the significant increase in the cost of inputs, including raw materials, electricity and fuel.

Strong reports that the paper business enjoyed strong local containerboard and cartonboard demand. This while the paper converting division benefited from the recovery in the industrial and quick service restaurant sectors, and growth from new product sales.

The paper business contributed R875-million to underlying Ebit.

The plastics business contributed R200-million to underlying Ebit, thanks to good demand in the bins and crates segment and a recovery of volumes in the preforms and closures segment; however, this was offset by lower demand in the fast-moving consumer goods segment.

In the year under review, Mpact decided to disclose the Versapak business – part of the plastics business – as a discontinued operation, after deciding to sell it as a going concern.

The company believes Versapak’s products are not fully aligned with Mpact’s strategy. Mpact is in the early stages of discussion with potential buyers and expects the sale to take several months to complete.

Meanwhile, Mpact expects to continue benefitting from strong global containerboard and carbonboard demand, as well as increased demand, overall, for locally-produced products.

The company remains cautious over consumer spending, as monetary policy may tighten and as the effects of Covid-19 persist.

Mpact also expects the upward inflationary pressure arising from global supply chain disruptions, exacerbated by the Ukrainian conflict, to continue for the foreseeable future.

Strong says he remains confident about the company’s prospects in the South African market, thanks to a strong fruit exports industry, and other strong exporting industries.

Despite these immediate challenges, the company is working on the successful implementation of several projects and growth opportunities totalling more than R700-million to support customer-focused growth, innovation and sustainability, and to build on Mpact’s integrated business model (based on a circular economy).

Strong says these projects include continuous investment in renewable energy – the company will have 12 MW of solar plants commissioned by year-end, building on the 5 MW of generation capacity that came online in 2021.

It aims to have 25 MW of renewable energy online by 2027.

Other investments will include improvements in bins and cra...

Eskom is currently unable to service South Africa’s electricity demand and is unlikely to do so in the foreseeable future, says Stellenbosch University (SU) Faculty of Engineering’s Chair in the Internet of Things Professor Thinus Booysen.

This short supply is problematic not only for the economy, but also when considering the strong global move towards electric vehicles (EVs) evident in markets such as Europe, he notes.

Booysen is part of a consortium led by Transitec and consisting of the SU, Oxford University and Nodalis, with the aim of evaluating the impact of decarbonising South Africa’s minibus taxi sector through the electrification of internal combustion engine (ICE) vehicles.

An earlier South African government-funded study has indicated that the country’s minibus taxi fleet may be an ideal target for the impending change-over to electric propulsion.

“I don’t think there is a point in saying that EVs are not coming,” says Booysen. “It’s very clear they are coming and, if we don’t adapt, we may be cut off from the market, especially in terms of vehicle and component manufacturing.”

The problem, however, is that South Africa can only rely on 24 GW of readily available energy, despite Eskom’s installed capacity of 48 GW, owing to plant breakdowns and other failures, says Booysen.

Also, around 70% of Eskom’s energy production is coal, which largely negates the notion of zero-emission EVs.

When considering that a typical minibus taxi travels around 228 km a day (as per the Western Cape-based study); that they have an aggregate stop period of 7.7 to 10.6 hours a day during which to recharge; and that a charger of 32 kW or more would be required to keep an electric taxi going during the desired operating hours; South Africa’s fleet of minibus taxis would use around 10% of Eskom’s installed generation capacity, says Booysen.

The taxi fleet is currently estimated to be between 250 000 and 300 000 vehicles in size, out of a vehicle parc of roughly 12-million vehicles in the country.

Installing solar panels at taxi ranks will also not solve this energy conundrum, as half a tennis court of solar panels, without storage, would only be sufficient for one average taxi’s energy requirements, 50% of the time.

Without storage, there is a temporal mismatch, notes Booysen, especially as renewable energy is normally not available when charging is needed, with one exception being the middle of the day.

Booysen also believes it is unlikely that minibus taxi owners will charge their vehicles during low-demand periods, such as night time, as they would probably do so as soon as they arrive home, similar to what he expects private EVs users to do – unless municipalities implement time-of-day charging or charging controllers to force EV owners into more energy-friendly behaviour patterns.

Closer Scrutiny

The migration from ICEs to EVs is indeed gaining traction, adds Intelligent Transport Society of South Africa (ITSSA) CEO Dr Paul Vorster.

“One opportunity often highlighted to reduce emissions and grow the EV fleet is to electrify South Africa’s minibus taxi fleet.

“However, with precarious electricity supply and rolling black-outs already so prevalent prior to an expected increase in EVs, the potential stress this will place on South Africa’s electricity grid requires much closer scrutiny. “

The charging requirements of an EV minibus taxi fleet also point to the urgency of “dramatically ramping up” a stable and reliable supply of clean solar energy, notes Vorster.

“Without this, the grid risks being swamped by EV charging.”

Higher Education, Science and Innovation Minister Dr Blade Nzimande on March 4 said all 21 sector education and training authorities (Setas) have committed to achieving the skills development interventions planned for the 2022/23 financial year, especially those interventions aimed at enabling government's Economic Recovery and Reconstruction Plan (ERRP).

"There is agreement and commitment by Setas to the need to significantly expand the participation of young people in skills development programmes and workplace-based learning opportunities and this is given practical effect in each of their 2022/23 performance plans. The artisans produced are urgently needed to implement the ERRP," he noted during a media briefing following his engagements with the Setas.

The skills development and training intervention also seeks to strengthen and support the district development model aimed at improving the provision of services and socioeconomic development in each of the 44 districts and metros, he added.

COMMUNITY COLLEGES

Further, all Setas committed to using part of their discretionary grants to support the offering of some of their programmes through community education and training sites, most of which are former adult education centres.

"The Department of Higher Education and Training (DHET) will host a national summit on March 8 and 9 for the community education and training sector to engage strategic partners on using community education and learning centres to massify skills development programme provision," said Nzimande.

The summit would identify priorities for dedicated community education and training infrastructure, accreditation of programmes, lecturer capacity, partnerships and the information management systems for proper monitoring and reporting, he said.

"We are transforming the former adult education centres to community education and learning colleges focusing on a broader range of skills in addition to adult education.

"For example, the Education, Training and Development Practices (ETDP) Seta will offer some of their early childhood development programmes in the colleges, and will also assist through capacity building for the colleges.

"The Finance and Accounting Services SETA will offer financial literacy and entrepreneurial development in some of the colleges," he illustrated.

Further, the DHET is also working to improve lecturer qualifications by offering advanced diplomas in adult and community education and training as part of capacity building. This is being driven by the ETDP Seta and offered by the Durban University of Technology.

"To facilitate this transition from learning to working, we continue to establish partnerships domestically and internationally, as we are doing with the German government, to improve our capacity to train," Nzimande noted.

The DHET and the Setas have committed to ensuring that the South African skills development system will offer more than 100 000 education and training opportunities during the 2022/23 financial year through learnerships, apprenticeships and internships, besides other opportunities, Nzimande said.

Further, the DHET has begun the process of crafting a national skills masterplan to gain a complete picture of the skills the country has and needs and what interventions are necessary to address the gap between them. The process will also promote the development of more efficient and effective mechanisms for country-wide skills planning.

WORKPLACE-BASED BENEFIT

Meanwhile, each of the Setas have committed to place between 500 and 1 500 unemployed technical and vocational education and training (TVET) college graduates within their sectors at workplaces from April 1.

Nzimande said the DHET and the Setas were working to surpass this number, as set out by President Cyril Ramaphosa in his State of the Nation Address, but emphasised that each Seta had to prioritise placing TVET graduates to complete their training and, thereby, facilitate the "all important transition fr...

Eskom has announced the deferral of a project to replace three steam generators at Koeberg Unit 2 to August 2023 following a review, conducted together with Framatome, which indicated that the replacements were unlikely to be completed within the six-month timeframe allocated for the project.

COO Jan Oberholzer said that certain facilities, including the completion of the building that would house the radioactive steam generators being removed, were deemed to be not fully in place to ensure that the replacement could be completed to expected quality and schedule parameters.

The decision to defer, he added during a briefing on Friday, was made late on Thursday, March 3 and against the backdrop of ongoing supply pressures, which continued to pose a load-shedding risk.

The decision was, thus, based largely on a desire to ensure that the unit’s 920 MW were available for at least part of the high-demand winter months.

The six-month maintenance schedule had not been shortened as a result of the deferral, however, as several other long-duration maintenance projects were scheduled to take place in parallel and were proceeding, including the replacement of the reactor pressure vessel head.

Unit 2 was shut for refuelling and an extended maintenance – which included the steam generator replacement programme – on January 18 and would be returned to service in June.

Chief nuclear officer Riedewaan Bakardien reported that Eskom planned to proceed with the replacement of Unit 1’s three steam generators in September, when the next batch of replacement units was scheduled to begin arriving in South Africa.

Framatome had indicated to Eskom that the first replacement steam generator for Unit 1 would be delivered in September, with the other two arriving in October and/or November.

The much-delayed R20-billion replacement of the six steam generators is core to Eskom’s decision to extend the life of the Koeberg station beyond the 2024 and 2025 current operating life of the two respective units.

The utility has initiated a process to secure a life extension to 2044 and 2045 respectively and the National Nuclear Regulator (NNR) received an application from Eskom on May 10, 2021, for an extension of Koeberg’s operating life.

The NNR expected to receive Koeberg’s Long Term Operations, or LTO, application safety case by July 2022, after which an adjudication would take place, along with public consultations.

Several stakeholders have raised objections to the life extension and have questioned whether it is prudent for Eskom to be proceeding with life-extension investments in the absence of a licence.

Bakardien said that Eskom understood what was required for securing life-extension approval, including the need to replace the six steam generators.

Oberholzer indicated that he had requested Framatome to provide him with a detailed outline of what was required for Koeberg to be fully ready for the next outages, as he did not want the life-extension project jeopardised by delays.

“Although there is time, up until the middle of 2024 and 2025, for [securing] the life extension licence, I would like to make 100% sure that we don't push everything right until the end,” Oberholzer said.

The cost implications of the deferral were yet to be determined.

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the National Energy Regulator of South Africa's decision on the electricity tariff for 2022/23; the discussions at various local energy sector gatherings; South Africa's just energy transition; and the volatility in energy prices amid Russian's invasion of Ukraine.

February’s new-vehicle sales have brought an interesting statistic to light, says National Automobile Dealers’ Association (NADA) chairperson Mark Dommisse.

The combined sales of electric, plug-in hybrid and traditional hybrid vehicles rose by 535% on a year-to-date basis, from only 34 in the first two months of 2021, to 216 units in the same months this year.

“This can be partly attributed to the strong take-up of the new Toyota Corolla Cross, which was South Africa’s best-selling car in February, and where there is encouragingly high demand for the hybrid variant of this model.

“Of course, the introduction of many new electric models from premium brands such as Audi, BMW and Mercedes will only add to this tally going forward.”

The rising fuel price, linked to a crude oil price that is now well above $100 a barrel on the back of Russia’s invasion of Ukraine, will undoubtedly see the importance of fuel efficiency take centre stage when buying decisions are made, notes Dommisse.

“The conflict unravelling in Europe is very worrying and together with the fuel price shock this month will, in all likelihood, affect sales going forward.

“But, we see a sweet spot in the passenger-car sector, namely the competitive sub-compact segment, where the wide range of models available use small capacity engines that are light on fuel.

“This segment should continue to see even stronger growth in the future,” says Dommisse.

February saw booming new-vehicle sales in South Africa as the monthly total soared by 18.4%, to 44 229 units, compared with the 37 369 units retailed in the same month a year ago.

Freight services and banking group Grindrod will spend its share of R1.8-billion to upgrade the Matola drybulk terminal at the Port of Maputo.

The JSE-listed Gindrod holds a 65% share in the Matola Terminal joint venture (JV), with energy and commodities group Vitol the other shareholder.

Grindrod Freight Services CEO Xolani Mbambo tells Engineering News Online that the project will run over the next three to five years.

The JV moves largely magnetite through the terminal, with coal making up between 10% and 20% of the cargo.

“Our in-house view on demand in the magnetite market is upbeat, with the long-term fundamentals quite positive, driven by infrastructure expansion in the US and China,” says Mbambo.

While coal is fighting a relevance battle in the face of a strong global move toward green energy, prices are at record highs.

Mbambo says the expansion project will see capacity at the terminal increase from the current 7.3-million tons a year, to 12-million-tons-plus a year.

The focus will be on upgrading the quayside to introduce a second ship loader, which will have to match the existing 5 000 t/h one.

“We’ll also expand our capacity so that we can receive more trains going forward, while also introducing a separate area where we can receive trucks at the terminal,” says Mbambo. “So we’ll have trains and trucks going into the terminal.”

Work on the expansion project has already started, specifically to understand the ability of the quay to accommodate a second ship loader.

“We expect to complete this by the fourth quarter,” says Mbambo. “Then we’ll start with the physical procurement of the ship loader.”

The completion of the project should enable the terminal to load a vessel in less than a day.

Building a possible second berth at the single-berth terminal is part of a longer-term phase-two expansion project.

Trading Profit up 32%/

Grindrod on Thursday announced its financial results for the year ended December 31.

The company saw core revenue increase by 9%, to R5.2-billion, compared with the 2020 financial year. Core trading profit jumped by 32%, to R1.8-billion.

Grindrod CEO Andrew Waller said the results showed that the group was “starting to get some traction” following the unbundling of the shipping business and a decision that the group should focus on its freight services and banking divisions.

Work continues to streamline the group. The disposal of the car carrier business is complete, with the disposal of the fuel carrier businesses still ongoing.

Grindrod also sold its Grindrod Shipping shares, generating proceeds of R338.1-million.

Grindrod continued to work with the Marine Fuels management team and its co-shareholder to exit this investment, said Waller.

Grindrod’s private equity portfolio now consists of only two significant investments.

The disposal of the offshore real estate investment was concluded during November last year for £17.4-million, in addition to several smaller investments.

The strategy is to exit the remaining two investments “at the right valuations”.