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President Cyril Ramaphosa used the fourth South Africa Investment Conference to reassure investors that steady progress was being made on implementing the economic reforms that are regarded as crucial for raising levels of growth and employment.

In his opening address he highlighted the reform progress that had been made in the areas of electricity, digital communications, freight logistics and in opening up the country to skilled professionals to work and do business.

These ranged from the ongoing restructuring of Eskom and the legislative efforts under way to facilitate a competitive market for electricity generation, through to the recent spectrum auctions and Transnet’s preparations for providing third-party access to its freight rail network.

“These reforms are not insignificant. Nor are they superficial.

“These reforms are contributing to an economy that, despite the setbacks of the last two years, is developing and transforming,” the President averred.

He acknowledged, however, that the country’s challenges were many and complex and stressed that he was “not here to pretend that these challenges are not real”.

“But we are neither defined by these challenges, nor are we daunted by them.

“Rather, we are dedicated to surely, steadily and decisively overcoming them.”

Discovery CEO Adrian Gore, who spoke on a panel that followed the address, argued that there was little disagreement between stakeholders on the reform agenda, which continues to be canvassed in line with Ramaphosa’s appeal that a new consensus be reached within 100 days of his State of the Nation Address, which took place on February 10.

“I don’t think there is debate about the six workstreams that have been set up, but we need to expedite, move quickly and execute . . . [and] I think business can and must be a critical part in helping government in that regard,” he said, adding that recent experiences in securing Covid vaccines should serve as powerful reminder of what could be achieved when the social partners worked together.

Gore also called for a change in the narrative about South Africa's future prospects, reminding delegates that Discovery, which is now present in 30 markets, was warned of the "exact same chapter headings" of political uncertainty, the potential civil unrest and economic risk when it was founded in 1992.

Meanwhile, the conference itself included its usual pageantry of investment pledges in response to Ramaphosa’s 2018 target of securing R1.2-trillion in new investment over five years.

Ahead of the 2022 gathering, which was delayed from 2021, partly owing to Covid concerns, a total of R774-billion in investment commitments had been made, across 152 projects.

The President said that 45 projects had been completed, while 57 were under construction and 15 on hold.

African Development Bank (AfDB) president Dr Akinwumi Adesina says the development finance institution is ready to support South Africa’s transition from coal to renewable energy and announced that a just energy transition facility was being created by the bank to support the country’s transition efforts.

Speaking at the fourth South Africa Investment Conference in Johannesburg, Adesina said the bank, which had previously supported the financing of Eskom’s Medupi coal-fired power station, was now ready to support the utility’s shift to renewable energy, as well as South Africa’s drive towards net-zero emissions.

He reported that the AfDB was preparing to approve $400-million for Eskom’s own transition to renewables, while it was also supporting public and private solar and wind projects in the country.

“[But] net-zero cannot be achieved with zero financing,” he stressed.

“The African Development Bank, working in partnership with international partners, especially the G7 countries, plans to establish a just energy transition facility that will support South Africa to raise at least $27-billion to support its energy transition into renewable energy.

“We will do it, Mr President, without South Africa getting into debt,” Adesina said, addressing President Cyril Ramaphosa directly, but without providing specifics.

South Africa, he added, had the potential to be a global energy transition leader and deliver social and employment benefits in the process.

“If you move South Africa away from coal into renewable energy, it will reduce pollution and the negative externalities and impacts of carbon emissions on health and the environment.

“It is an excellent opportunity to recalibrate the Southern African economy to generate thousands and thousands of green jobs and power new green industries for a more competitive economy.”

Adesina also applauded the $8.5-billion offer made by the European Union, France, Germany, the UK and the US at COP26 in Glasgow, Scotland, to support South Africa’s just energy transition.

Speaking from the same platform, Ramaphosa reiterated that the Presidential Climate Finance Task Team, which is headed by former Reserve Bank deputy governor Daniel Mminele, had been established specifically to lead the mobilisation of funds being offered.

“This partnership will involve repurposing and repowering some of the coal plants that are reaching the end of their lives and create new livelihoods for workers and communities most impacted by this change,” Ramaphosa said.

Eskom CEO Andre de Ruyter said the energy transition, if implemented well, could provide an economic stimulus that could yield new industrial opportunities, together with 160 000 net additional jobs, including jobs for workers and communities currently linked to the coal value chain.

Eskom estimates that some 68 000 MW of mostly new variable renewable-energy capacity would have to be added to cater for the 22 000 MW of coal that the utility would be retiring by about 2035, as well as to cater for any growth in demand.

The cash-strapped utility saw itself contributing only 8 000 MW of that capacity, leaving 60 000 MW for private and municipal generators, which would require policy certainty and a level playing field to invest.

"We are going to set up an independent transmission system and market operator precisely to give investors the confidence that their bids into the power pool will be fairly adjudicated.

"So from our perspective, we are all systems go to make sure that this transition happens, that it happens quickly and that it is just," De Ruyter said.

ENERGY INVESTMENT PLEDGES

The President also formally received five investment pledges from energy companies and energy component manufacturers, including:

R16-billion by Scatec, of Norway, which will be invested in solar PV and storage projects in the Northern Cape as part of the Risk Mitigation Independent Power Producer Procurement Programme.

R3-billion from African Rainbow Energy, which would be in...

Asset finance group WesBank forecasts that around 525 000 new vehicles will be sold in the local market this year, up from the 464 122 units sold last year.

However, growing inflation, increasing fuel prices, low and stagnant economic growth, rising interest rates, the continued semi-conductor shortage, a volatile rand:dollar exchange rate, low investor confidence and the rising unemployment rate may all influence the market negatively going forward, warns WesBank Motor CEO Ghana Msibi.

He notes that inflation is not being nudged along by consumers splurging on luxury items, but rather by increased living costs.

“Consumers are spending more just to stand still. The growth in disposable income is not keeping pace with the cost of living.”

This leads to a continuing buying-down trend in the domestic car market, with only a small portion of consumers able to weather the storm and still buy into the premium sector, says Msibi.

Simply put, the local market is not producing financially fit customers for the automotive industry at the rate at which the local industry wants to sell vehicles, he notes. This demand problem will also not necessarily be solved should the war in the Ukraine stop tomorrow, or if computer chips start flowing readily again, as it is proving to be more systemic in nature.

The industry can no longer merely extend the payment period for vehicles or offer higher balloon payment options in an effort to lure consumers, adds Msibi.

This affordability conundrum also means that the automotive industry is “fertile for disruption” – a challenge which is compounded by the changing face of the average car buyer, he notes.

A substantial crop of younger buyers – expanding as baby boomers exit the market – wants to pay for the use of a vehicle, rather than its ownership, and also prefers a digital, rather than in-person acquisition route. They are also not loyal in terms of business relationships but are willing to ask: “What’s in it for me?”.

South African consumers also do not look to the rest of Africa for their mobility solutions, but rather to Europe and how mobility is evolving there, says Msibi.

This means that the future of the domestic automotive retail environment may have to include new innovations such as dealer-based vehicle rental offerings, a rewards/points system for return business, as well as an auction system where consumers can sell their vehicle to a range of bidding dealers.

“The last big creative thing we had in our industry was the balloon payment, in my opinion,” says Msibi.

“I believe we’ll still have dealers and [vehicle manufacturers] in future, but their role will evolve. And unless we are proactive in defining this role, we’ll have to fit into a mould that others have invented.”

Msibi spoke at a National Automobile Dealers’ Association conference held on Tuesday.

Following a R15.8-bilion investment in its Silverton assembly plant and major supplier factories, as announced in 2021, Ford Motor Company Southern Africa is geared up to support production of the next-generation Ford Ranger, which is expected to be released locally later this year, along with the new next-generation Ford Everest.

This was indicated by the company during a media tour of the upgraded Silverton plant on March 22, during which the media was afforded a first look at pre-production prototypes of the new Ranger and Everest vehicles.

Ford Africa MD Neale Hill told media the upgraded facility, once it reaches full operation, will have an installed capacity to produce 200 000 vehicles a year, compared with 168 000 units a year before.

He noted that, at full capacity, the plant will produce one new Ranger off the line every two minutes.

Moreover, the plant also will manufacture Volkswagen (VW) pickup trucks as part of the Ford-VW strategic alliance.

Hill said the expanded production would create 1 200 incremental jobs in South Africa, increasing the local Ford workforce to 5 500 employees, and adding an estimated 10 000 new jobs across Ford’s local supplier network, bringing the total to 60 000.

The R15.8-billion investment constituted R10.3-billion for extensive upgrades to Silverton, and R5.5-billion to upgrade tooling at the company’s major supplier factories. A new Ford-owned and operated chassis line is also being built in the Tshwane Automotive Special Economic Zone for this new vehicle programme.

The Silverton plant upgrades included construction of a new body shop with the latest robotic technology and a new high-tech stamping plant, both of which are located on-site for the first time, which Hill said would streamline operations, improve efficiencies and reduce costs.

The new stamping plant will use a high-speed line to produce all the major sheet metal components for the new Ranger.

Extensive upgrades also included the box line, paint shop and final assembly to improve vehicle flow within the plant, along with the expansion of the container and vehicle yards.

New vehicle modification and training centres were also created, with the latter developed to ensure all Ford employees are equipped with the knowledge and skills required to maximise the efficiencies of the enhanced Silverton facilities.

Moreover, Ford also aims to achieve “Island mode”, taking Silverton off-grid entirely and becoming entirely self-sufficient and carbon neutral by 2024 – which Hill said would make it one of the first Ford plants globally to achieve this.

Upgrades therefore also include the construction of solar carports for 4 200 vehicles at the Silverton plant, which is well under way.

Notably, Hill pointed out that, with these investments and enhanced production capacity, as well as the new jobs created directly in the supply chain and in the SEZ, Ford will be able to contribute about 2% to South Africa’s gross domestic product.

Also highlighted during the event was that both the Ranger and Everest will offer Ford’s new 3.0 ℓ turbodiesel V6 engine.

Depending on the market, the next-gen Everest offers a choice of powertrains that includes new 3.0 ℓ turbodiesel V6 and 2.0 ℓ turbodiesel engines and, from 2023, the 2.3 ℓ EcoBoost petrol engine for select markets.

Also depending on the market, the next-gen Ranger offers a choice of petrol and diesel powertrains, including the addition of Ford’s V6 turbodiesel and ten-speed transmission.

Hill mentioned that both vehicles were designed to cater to customer requests and feedback. This is also evidenced in the engines of both, with customers indicating that they wanted more power and torque, hence the choice of the 3.0 ℓ turbodiesel V6 engine.

‘SUPER EIGHT’ OFFERING

Meanwhile, Ford South Africa has also recently introduced a ‘Super Eight’ offering, eight new key focus areas designed to modernise the customer experience for customers who buy new and pre-owned Ford vehicles, and which the comp...

A financial model that enables the building of public renewables assets using funds from citizens, who receive ongoing inflation-adjusted payments in return that are linked to the asset’s power purchase agreement (PPA), is being proposed for integration into South Africa’s planned just energy transition.

The mechanism is being promoted by energy specialist Clyde Mallinson, who believes the approach could help allay the fears of those stakeholders who remain sceptical of wholesale private ownership of generation assets, while also delivering tangible security-of-supply and financial benefits to municipalities along with annuity payments to citizen investors.

The model, he says, could be best deployed by district municipalities, which execute some of the functions of several local governments within a municipal district and which have the mandate to supply bulk electricity.

Such entities would provide the land, secure the permits and oversee the professional teams that will develop, construct, operate and maintain the solar, wind or hybrid assets.

The funding, meanwhile, would be raised through the issuance of dividend-paying coupons underpinned by a 20- to 25-year PPA that escalates in line with consumer inflation and payments would be made monthly in line with PPA payments.

Coupons would be available to residents and businesses alike and Mallinson believes that the poorest residents within the district should receive concessional loans, possibly supported through climate finance or low-cost South African Reserve Bank loans, to buy the coupons.

The annuity coupon dividends would be sufficient to pay back the loans, with an ever-increasing surplus margin over time.

The model would enable district municipalities to raise the necessary finance for solar, wind and storage assets, which will be built and operated by “tier one” renewables engineering and operational companies that train local people to operate the plants.

The PPAs with the local government or private offtakers could be structured such that 80% of the energy being produced is sufficient to repay the coupon, while the balance will generate a surplus for the district municipality.

Given the sharp decline in renewable costs, Mallinson estimates that the buyers of the bulk electricity from the district municipality’s plant could generate significant yearly savings relative to the tariffs being paid to Eskom, whose bulk electricity tariffs are continuing to rise ahead of inflation.

Mallinson has already canvassed the model with a district municipality in the Western Cape, which is currently in the process of securing “shovel-ready” project sites from renewable developers.

The model is likely to be adapted somewhat for the first project to enable businesses in the region to be the first investors so as to prove the concept before it is broadened to individual citizens.

Local businesses will have the added benefit of being able to procure green electricity, essential for exporters, with the introduction of border carbon-adjustment taxes looming.

“The beauty of the model is that it allows people to own the new fleet.

“Yes, they're going to own the new fleet by owning the debt, but it's going to be good debt; in other words, debt where money is invested for a return, rather than borrowed to buy groceries.

“If successful on a larger scale, there is even potential for these payments to augment or replace social grants, because millions of people will be earning an income from the dividends they receive from the new fleet,” Mallinson concludes.

African Refiners and Distributors Association (ARDA) executive secretary Anibor Kragha believes the fossil-fuel price and supply disruptions unfolding following Russia’s invasion of Ukraine underline the urgency of Africa investing in indigenous capacity to improve security of supply.

He cautions that the availability of liquid fuels and gas in Africa could come under strain in the coming months as fuel supplies that would previously have been available for consumption across the continent are diverted to European countries seeking to wean themselves off Russian energy.

The European Commission's recently published REPowerEU plan aims to reduce demand for Russian gas by two-thirds in 2022 and make Europe independent from Russian fossil fuels by 2030.

The plan includes diversifying gas supplies from non-Russian sources, and accelerating the reduction of fossil fuels by boosting energy efficiency, increasing renewables and electrification, and addressing infrastructure bottlenecks.

Kragha, who is in South Africa this week for ARDA Week 2022, which is under way in Cape Town, says these disruptive developments underline the importance of finalising an energy transition roadmap for Africa that both ensures security of supply and reduces the environmental impact of fossil-fuel use.

He argues that, despite the rise of renewables and electric mobility, liquid fuels will remain an important part of the continent’s energy mix for some time and that priority should, thus, be given to financing and implementing investments to enable African refineries to produce cleaner fuels.

The current fleet of refineries currently produces fuels that far exceed the maximum sulphur content permitted in other jurisdictions and Kragha believes there is an urgent need to adopt a continent-wide standard that is aligned with the 10 parts per million maximum allowed in Europe.

A recent study calculated that an investment of at least $15.7-billion would be required to upgrade the continent’s existing refineries to produce fuel to such a standard, which has yet to be adopted at the level of the African Union (AU).

Kragha is optimistic that the AU will finalise the standard by 2023, but also acknowledges that there is a limited appetite among banks to support such projects, owing to climate change concerns.

He argues that Africa’s small historical emissions contribution of about 2.7% could not be ignored, nor could the fact that energy demand was poised to rise further as Africa’s population grew.

“The first pillar of Africa’s energy transition, therefore, has to be cleaner transport and cooking fuels,” Kragha asserts, adding that cleaner fuels can only be delivered through upgrading refineries, while cleaner cooking could be achieved by replacing biomass with liquid petroleum gas.

“And in light of what's going on globally right now . . . and the impact that is having on the global oil and gas supply chains, I also believe it is becoming increasingly imperative that Africa has its own energy ecosystem.”

Water and Sanitation Minister Senzo Mchunu on March 22 said the Department of Water and Sanitation (DWS) is fast-tracking the activities of the Anti-Pollution Task Team to deal with all water quality pollution challenges in the country.

“As a department, we have acknowledged that our country’s water resources are on the decline in both quality and quantity,” he said during a keynote speech as the United Nation’s World Water Day got under way.

The 2017 Water Quality Management Policies and Strategies for South Africa identifies pollution from wastewater treatment plants and mine operations as main sources of pollution.

While the challenges facing the country are not owing to policy gap policies, he said, highlighting that the standards to deal with pollution in these sectors are generally in place, non-compliance to existing policies and standards remains a challenge.

Compliance monitoring and enforcement is one of the key tasks of the Anti-Pollution Task Team.

The task team is mandated with the coordination and integration of the management of water resources quality in South Africa and provide high level guidance to ensure protection of water resources and identify remedies to mitigate pollution impacts.

According to Mchunu, the main source of pollution emerges from domestic wastewater treatment, which includes the leaking or malfunctioning of the wastewater collection systems designed to transport wastewater to South Africa’s wastewater treatment works (WWTWs), as well as the works themselves, and from mining operations.

“Currently, there are 1 013 municipal WWTWs in the country and of these, 544 (54%) have authorisations in place, with 23% (236) that are unauthorised or operate under expired authorisations,” he explained.

The department is progressing with verification of the authorisation status of a further 141 works, the remaining 14%.

Since 2014, the DWS has investigated a total of 598 cases related to WWTWs, which were mainly as a result of complaints received from the public.

“Enforcement actions were taken by DWS against those municipalities which were found to have violated the water legislation in relation to WWTW; enforcement actions taken include administrative, civil and criminal actions.”

South Africa is not the only country facing the water quality challenges, he said, pointing out that the 2019 World Economic Forum Global Risks Report noted that water and environmental concerns are more prevalent than ever.

Ensuring water supply is highly reliable is another key focus of the department, as it continues to explore all options of ensuring South Africa’s water security, including groundwater.

“As a department and as a country, we are committed to exploring ground water as an alternative water source to ensure water security in communities affected by water supply challenges in our country,” he commented.

Groundwater contributes about 13% of the national total water supply, and 100% in some areas, playing an important role in ensuring there is water security in South Africa.

Amid the impact of climate change and growing water demand, groundwater will become more and more critical.

Climate change and increased demand for water across multiple sectors have already impacted surface water storage throughout Southern Africa, which, by 2025, is predicted to have insufficient water supplies to meet human and ecosystem needs, resulting in increased competition for scarce resources, constrained economic development and declining human health.

As South Africa’s surface water resources are fully allocated, its water supply needs are supplemented by international transfers from the Lesotho Highland Water Transfer Scheme, which is approaching its second phase.

“In order to meet the increase in water demand, we have gradually increased groundwater use through the groundwater development scheme. There is an increasing trend for individual community members to drill boreholes for self-supply in response to water supply challe...

The International Energy Agency (IEA) has released a 10-point plan for speedily cutting oil demand in response to the emerging global energy crisis triggered by Russia’s invasion of Ukraine.

The agency calculates that, if implemented by all advanced economies, the plan will reduce demand by 2.7-million barrels a day within four months, equivalent to the oil demand of all the cars in China.

“The measures would have an even greater effect if adopted in part or in full in emerging economies as well,” the IEA states.

The 10-point plan includes the following proposals:

reduce speed limits on highways by at least 10 km/h, which would save about 290 000 b/d of oil use from cars, and an additional 140 000 b/d from trucks;

working from home up to three days a week where possible, with one day a week saving about 170 000 b/d and three days saving about 500 00 b/d;

introducing car-free Sundays in cities, to save 95 000 b/d over a month;

making use of public transport cheaper and incentivising micromobility, walking and cycling, which could save around 330 000 b/d;

alternate private car access to roads in large cities, which could reduce consumption by about 210 000 b/d;

increasing car sharing and adopt practices to reduce fuel use to save about 470 000 b/d;

promoting efficient driving for freight trucks and delivery of goods to save some 320 000 b/d;

using high-speed and night trains instead of planes where possible, to save about 40 000 b/d;

avoiding business air travel where alternative options exist, to save around 260 000 b/d; and

reinforcing the adoption of electric and more efficient vehicles to save about 100 000 b/d.

“These efforts would reduce the price pain being felt by consumers around the world, lessen the economic damage, shrink Russia’s hydrocarbon revenues, and help move oil demand towards a more sustainable pathway,” the IEA asserts.

It adds that, while the actions would help mitigate a short-term emergency, they could also place oil demand into a structural decline consistent with a pathway towards net-zero emissions by 2050.

The IEA plan comes as South Africa’s National Treasury and the Department of Mineral Resources and Energy (DMRE) are considering options for mitigating the expected hikes in petrol and diesel prices that are likely to arise as a result of the conflict in Ukraine.

The Automobile Association has warned that all grades of fuel could increase by R2/litre in April, with inland fuel prices having already breached R21/litre.

The National Treasury has already revised its inflation outlook for 2022 to between 5% and 5.5%, up from the 4.8% forecast in February, and has indicated that the outcome will depend largely on the price of oil and the duration of the war in Ukraine.

The National Treasury and the DMRE are also reviewing the Basic Fuel Price (BFP) methodology, as well as other regulated components in domestic fuel prices, to identify changes that could reduce the cost of fuel.

In a recent presentation, it was shown that, these changes could together facilitate relief of just over a rand a litre.

The DMRE has also indicated other steps may be necessary to reduce consumption, including a lowering of speed limits and encouraging those in a position to do so to work from home.

In a recent presentation to lawmakers the Council for Scientific and Industrial Research (CSIR) pointed to immediate and emerging opportunities to reduce South Africa’s dependence on imported liquid fuels.

In the transport sector, where 24-billion litres of fuel is consumed yearly, improved efficiencies and electrification, direct or through hydrogen, are held up as two primary options for reducing dependency.

Accelerated renewables deployment would be key to achieving this objective and would also help reduce the use of diesel to produce electricity and to support mining operations.

The CSIR calculates that the increased use of diesel-fired peakers cost the South African power system an additional R10.8-billion in 2021.

It has al...

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the impact of rising fuel prices on domestic inflation and what options South Africa is considering to limit that impact; security of supply concerns and the big decisions that need to be made with regard to South Africa's oil refining fleet; and what the country needs to do over the medium term to reduce its exposure to fuel price shocks.

Metair delivered a record financial performance in 2021, despite severe supply-chain challenges.

The JSE-listed group is an international manufacturer, distributor and retailer of automotive components and energy storage solutions.

Metair saw group revenue for the financial year ended December 31 increase by 23%, to R12.62-billion, noted CEO Riaz Haffejee as he announced the group’s financial results on Thursday.

Group operating profit rose by 107%, to R1.16-billion, with the operating margin at 9.2%, compared with 5.5% in 2020.

“Energy Storage performed exceptionally well and ahead of our recovery plan, by capturing all-round increases in market demand,” noted Haffejee.

“The recovery in Automotive Components was more protracted, with the strong growth in customer volumes in the first half not repeated in the second half, due to supply chain-related disruptions and other once-off production interruptions.”

Metair was forced, for example, to spent R150-million in unbudgeted emergency air-freight costs, owing to shipping delays, to secure the necessary materials on time, mostly in the Automotive Components business.

Before the computer-chip shortage and the current global supply-chain crunch, the company had perhaps spent a few hundred thousand rand on air freight, and only on one or two occasions, said CFO Sjoerd Douwenga.

Supply-chain disruptions and component shortages also saw South African new-vehicle production end the year at 503 000 units, which is a 21% improvement on 2020 levels, but well below 2019 levels and expectations – a fact which also impacted on Metair’s expected component delivery for the year.

The impact of global supply-chain disruptions also saw a portion of Metair’s capital expenditure roll over into the 2022 financial year. Expected capital expenditure for 2022 is R1.2-billion.

Metair last year ultimately decided to employ a greater inventory holding strategy to mitigate shipping delays and growing freight costs, with net working capital increasing by 18% in the year as a result, to R2.2-billion.

Some good news was that Haffejee expected supply chain woes to ease towards the end of the year.

“What we are hearing makes us think there are incremental improvements that are happening. However, it is not enough. It is still very volatile and now we have problems in the Ukraine and that brings added air-freight costs. You also have Covid-19 outbreaks in China that could potentially bring higher costs.”

Metair’s Energy Storage vertical recorded an 18% increase in sales of automotive batteries, to 8.8-million units, for the 2021 financial year, with revenue of R7.5-billion showing the same level of increase.

Operating profit at the vertical increased by 51%, to R887-million.

The Automotive Components vertical saw revenue jump by 36%, to R6.7-billion, with operating profit soaring by 191%, to R257-million.

Operating profit in this vertical, however, still significantly lagged 2019 pre-Covid-19 levels, while Energy Storage was well ahead of 2019 numbers.

Looking ahead, Haffejee said Metair should surpass all 2019 levels this year.

He added that the group should start rolling out solar power rooftop solutions across its international production network this year, including Europe, owing to rising energy costs.