Ford South Africa (SA) is on schedule with its R15.8-billion expansion programme to significantly boost its exports from the Silverton plant in Pretoria as from next year, says Ford Motor Company Africa president Neale Hill.

Ford SA will produce the new-generation Ranger pick-up at the Tshwane plant, starting in 2022.

The local arm of the US vehicle maker produced about 732 000 units of the current Ranger model from 2011 to 2021.

“The expansion of the production facility will enable us to build 200 000 vehicles a year – 32 000 units more than before,” says Hill.

The vast majority of these vehicles will be exported.

“The next-generation Ranger . . . will be produced for more than a hundred left- and right-hand-drive markets globally, including markets across Africa,” notes Hill.

To realise the new production targets, the Silverton assembly line has undergone extensive transformation focused on modernising the facility, enhancing efficiency and improving production quality throughout the plant.

Additionally, Ford is currently constructing a new body shop and stamping plant on the Silverton site, along with an in-house frame line in the newly developed adjacent Tshwane Automotive Special Economic Zone (TASEZ).

“Our entire focus is on being world-class and comparable with the best Ford manufacturing plants globally,” says Hill.

“This is essential as we work towards delivering the required production volumes and achieving the highest quality levels for our customers.”

The expanded Ranger production programme will help create 1 200 incremental Ford jobs in South Africa, increasing the local workforce to 5 500 employees, while also adding an estimated 10 000 new jobs across the automaker’s local supplier network, bringing the total to 60 000 jobs, notes Hill.

Ford will also build a new vehicle modification centre, as well as a new training centre, with the latter to ensure all Ford employees are equipped with the knowledge and skills required to maximise the efficiencies of the enhanced Silverton facility.

Expanded production at the Silverton plant will include the new Volkswagen Amarok bakkie, as part of a global agreement between Ford and the German automaker, and will account for some of the added capacity at the facility.

New Rail Link, Africa

Ford continues to work closely with all three spheres of government and relevant State-owned entities, such as Transnet, in developing the Gauteng Province (GP) to Eastern Cape Province (EC) High-Capacity Rail Freight Corridor, says Hill.

This corridor is set to be a full-service line linking the Silverton assembly plant and the TASEZ with Port Elizabeth, which is home to Ford’s Struandale engine plant and the Coega Special Economic Zone.

The GP-EC High-Capacity Rail Freight Corridor will channel all of Ford’s inbound and outbound logistics exclusively through Port Elizabeth to support the facility’s higher production volumes, says Hill.

“It is projected to create thousands of jobs within the value chain.”

Moving to the Port Elizabeth corridor means that Ford will avoid the increasingly congested and underperforming port of Durban, in KwaZulu-Natal.

When looking at the broader African context, Hill notes that it is crucial that the US carmaker aligns its business with the implementation of the African Continental Free Trade Agreement (AfCFTA), as this will “play an important role in developing a winning strategy for Ford across Africa”.

“AfCFTA is a key component of the African Union’s (AU’s) Agenda 2063, which aims to boost the continent’s socioeconomic growth,” he adds.

“It would do so by accelerating the industrialisation of Africa, integrating regional markets, stimulating growth, and supporting the welfare of its people.

“Underpinning that is the role of faster, easier, more economically viable trade and trade networks.”

After the World Trade Organisation, AfCFTA is the world’s largest trade agreement, with 54 signatories, says Hill.

“This holds great promise, for not only the conti...

Judge Jody Kollapen has ordered that Eskom’s revenue application for the 2022/23 financial year be decided by the National Energy Regulator of South Africa (Nersa) by February 25 and that it be adjudicated in line with the multiyear pricing determination (MYPD) methodology published in 2016.

The ruling follows Eskom’s application to have Nersa’s decision to reject the utility’s revenue application set aside as unlawful.

Eskom formally lodged its MYPD5 application on June 2, but the Energy Regulator rejected it on September 30 on the basis that it was prepared using a methodology that it deemed to have expired.

No replacement methodology was in place, however, with Nersa instead initiating public consultations on the “principles” that should govern any new methodology.

To ensure a tariff decision was made in time for implementation on April 1, 2022, Nersa proposed that Eskom prepare a new application incorporating those principles, which were finalised on November 25, but which had not yet been formally communicated to Eskom by the date of the court hearing on December 1.

In his judgment, published with reasons on December 3, Kollapen ruled that Nersa’s proposed option for determining the tariff was “both unlawful as well as impractical”.

“It is unlawful in that it proposes a route directly in conflict with the obligation created for Eskom by Section 42(2) of the Municipal Finance Management Act (MFMA) and it is impractical in that it proposes a tariff determination be submitted and decided upon, including public comment thereon, on the back of a non-existent methodology.”

The MFMA section referred to compels Eskom to give the National Treasury and the South Africa Local Government Association clear notice of an intention to increase the price of electricity and the opportunity to comment thereon – a process that typically take 40 days.

The judgment also rejected Nersa’s assertion that the MYPD4 methodology was timebound, arguing that history points to the fact that the methodology endures until it is changed or replaced.

“Given the need to at all times have a methodology in place for the reasons already given, Nersa’s suggestion that MYPD4 is timebound is not sustainable.

“It does not make any business sense, it is impractical and leads to a legal lacuna.”

Kollapen also states that Eskom has made a prima facie case “that it is not only entitled to but obliged to apply for a tariff determination for 2022/23 and further, that it was justified in doing so on the basis of MYPD4”.

“Whatever the merits of the Eskom' tariff application may be it must follow that if the application is not dealt with legally and in accordance with the prescribed procedures there must be a real risk of irreparable harm to Eskom in their attempts to secure a tariff that accords with the principles set out in the Electricity Regulation Act.

“This is turn has consequences for the viability of Eskom’s operations as well as its liquidity.”

In his order, Kollapen also set out a timetable for the determination of the 2023/23 tariff, which states that:

Eskom’s revenue application submitted on June 2, 2021 be published on December 8, 2021;

the public have until January 14, 2022, to make representations on the content of Eskom’s application;

public hearings on the merits of Eskom’s revenue application be held between January 17 and 21, 2022; and

that Nersa shall make a final decision on Eskom’s application by February 25, 2022.

The timetable is in line with the requirement to table a final determination in Parliament before March 15, 2022, in accordance with the requirements of the MFMA.

While the contents of Eskom’s 2022/23 application have not yet been made public it has been reported that the utility would be seeking a tariff increase of about 20% for the coming year. However, the utility rarely receives a tariff in line with its request.

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the latest legal wrangle between Eskom and Nersa, why Eskom is seeking to have Nersa's decision on its latest revenue application set aside and when an outcome is expected.

Automotive company Ford Motor Company on December 2 announced an investment of R600-million into its Struandale engine plant, in Gqeberha (formerly Port Elizabeth).

This investment will support the launch of a new 3 litre V6 turbodiesel engine, as well as upgrades to the existing assembly line for the 2 litre single turbo and 2 litre bi-turbo diesel engines, which will be offered in the company’s recently unveiled next-generation Ford Ranger pick-up, slated to launch next year.

The announcement was made during a media site visit to the Struandale engine plant. Speaking at the event, Ford South Africa Operations VP Ockert Berry said the investment was part of the company’s drive to modernise and enhance its local operations and that it would showcase the quality of South Africa’s manufacturing capabilities, with quality products for both the local export market.

This investment follows Ford’s R15.8-billion investment into the Silverton assembly plant and supplier tooling, that was announced in February to support production of the next-generation Ranger.

Through the R600-million investment, Ford is introducing a third diesel engine to the Struandale operations, with the new 3 litre V6 turbodiesel engine that will power selected next-generation Ranger models when production begins next year.

The majority of the investment will be used to expand and modernise the current assembly line that has produced the existing 2.2 litre and 3.2 litre Duratorq TDCi engines since 2011.

Milestones from this line include 792 000 engines assembled to date, for both South Africa and various export markets.

Moreover, Ford Struandale engine plant manager Shawn Govender highlighted that, to date, the plant has produced more than 3.81-million engines, comprising ten different engine programmes, since opening in 1964.

Production of the 2 litre single turbo and bi-turbo four-cylinder turbodiesel engines has hit the 175 000 unit mark since it was launched in 2019 for the current Ranger pick-up.

The extensive changes to this assembly line would enable the Struandale engine plant to run a flexible format, as it will produce the new 3 litre V6 turbodiesel engine alongside the Duratorq TDCi engines.

There are 40 stations on the line that will be common to both engines, with a further 25 stations unique to the 3 litre V6.

The plant will have a yearly installed capacity of 21 000 units of the 3 litre V6 turbodiesel engine when production begins in mid-2022.

The combined installed capacity for this line is 130 000 engines a year. However, it has been designed to allow the split between the two engine programmes to be adjusted based on future demand.

The plant will encompass Ford’s production technologies, including the latest tooling along with advanced camera and transponder systems that are fully integrated into Ford’s global Quality Management System, as used in its modern assembly line for the 2 litre single turbo and 2 litre bi-turbo engines.

Berry explained that this would allow the company to record and validate every step of the assembly operations to capture the entire history of each engine, to ensure quality control.

Further to the assembly operations, the Struandale engine plant will also be responsible for machining the cylinder heads for the 3 litre V6 diesel engine.

The investment programme includes new equipment, as well as retooling, upgrading and redeployment of existing machining operations for the cylinder head.

The machining line has an initial installed capacity of 42 000 cylinder heads a year for the V6 engine and it has also been designed to accommodate higher volumes in future should demand necessitate.

Further to to the new 3 litre V6 engine programme, Ford is modernising and upgrading the existing assembly line for the 2 litre single turbo and 2 litre bi-turbo engines to accommodate design changes for the next-generation Ranger.

Moreover, the updates being introduced on this assembly line would facilitate greater complexity with ad...

South Africa's food security is linked to the competitiveness of its agricultural production. Therefore, improving productivity through innovation and global best practices will support food security amid challenges such as climate change, and local electricity and water supply constraints, as well as logistics challenges, outgoing agricultural business organisation Agricultural Business Chamber (Agbiz) CEO Dr John Purchase has said.

Providing an overview of agricultural business in South Africa during the launch of Agbiz/Industrial Development Corporation Agribusiness Confidence Index for the fourth quarter of this year, he gave the example of how higher maize yields from 2 t/ha to 5 t/ha over the past two to three years has enabled South Africa to maintain its competitiveness, compared with Brazil, although both were below US yields.

This enabled the industry to maintain its competitiveness and remain a net exporter, and trading export parity is slightly below international prices owing to the costs of logistics to export. The competitiveness of this sector of the agricultural industry allowed higher value-adding agricultural sectors, such as meat and poultry, to also remain competitive, produce food at a relatively cheap price and make it available to the population at affordable prices.

"Competitiveness is one of the key pillars of food security and we must keep driving productivity improvements. This is true of almost all agricultural sectors," Purchase said on December 2.

The work Agbiz does, especially with the Agriculture and Agroprocessing Masterplan (AAMP) initiative, is to ensure food security and the competitiveness of the agricultural value chains, he added.

The South African agricultural sector managed to grow investments, productivity and value, and increased its exports during the year. In 2018, South Africa exported $10-billion worth of agricultural products, and Agibz is confident this will reach $11-billion for 2021, and achieve a trade balance surplus of $5-billion.

"The sector is garnering attention from government because this competitiveness underpins the rand and food security. But can we sustain this? If we do not have specific interventions into agrofood systems and address constraints, such as electricity, water and logistics costs and barriers, the industry will not grow and remain competitive," said Purchase.

INDEX FINDINGS

Agbiz chief economist Wandile Sihlobo highlighted that the turnover subindex improved by ten points to 92 owing to a good 2020/21 season harvest in field crops and horticulture, and higher commodity prices for grains and oilseeds.

"Importantly, this large harvest coincided with sustained higher prices. South Africa is well integrated with global markets and benefitted from these prices. The higher prices may partly offset some of the rises in input costs, including 30% higher fertiliser and 40% higher agrochemicals costs, which is one reason why the net operating income subindex increased by one point to 85 in the fourth quarter," he said.

The export volumes subindex increased by six points to 79 owing to the sizable harvest from the field crops and horticulture and cooperation among the logistics stakeholders and Transnet in facilitating exports, as well as normalisation in export activity.

Further, the employment conditions subindex, while showing a drop of 4% between the second quarter and the third quarter, improved by two points to 62 during the fourth quarter, with around 829 000 people employed in primary agriculture. This employment figure is 3% higher than fourth quarter of 2020, Sihlobo said.

"Besides indicating that about 5% of working people are employed in primary agriculture, employment remains above the long-term average of the past ten years," he said.

The employment subindex benefitted from general improvement in agricultural activity, including from favourable rainfall and the estimated 5% year-on-year improvement in summer crop plantings, as well as a gener...

The Altron Fintech Household Financial Resilience Index (Afhri) for the second quarter has confirmed that the average household in South Africa enjoys a more advantageous disposition towards incurring and managing debt than before the Covid-19-pandemic.

The results of the Afhri index released in August also showed this, meaning that the long-term upward trend in the index is likely to continue in 2022.

The purpose of the Afhri index is to assess the state of micro-lending in South Africa from the perspective of the ability of borrowers to repay their loans. The data provides more clarity on the financial disposition of households and their ability to cope with debt.

Optimum Investment Group economic adviser Dr Roelof Botha says the results of the second-quarter Afhri show a consistent improvement in the ratio of South African household income to debt costs, with an improvement of 20% over the past two years, and the recovery of household disposable income since the first quarter of this year – a 3.3% gain.

“Although most of the constituent indicators of the Afhri have continued to recover in the second quarter, it is a point of concern that total private sector credit extension remains on a downward trajectory.

“This raises questions over the recent decision by the South African Reserve Bank to raise short-term interest rates at a time when insufficient progress has been made with a recovery of job losses.

“Owing to the strong positive correlation between private sector credit extension and gross domestic product (GDP) growth, it has become a matter of urgency for government to reconsider the undue regulatory burden that has been placed on the formal microfinance sector,” Botha explains.

He adds that, unless lower-income groups are allowed easier access to credit, the pace of employment creation in South Africa will remain muted.

Some of the Afhri indicators include pension lump sums, unit trust assets, annuities, civil debt defaults, household income to debt cost ratio and long-term insurance claims.

Following the predictable sharp downturn in the Afhri during the second quarter of 2020, a fairly swift recovery of most key economic sectors since the third quarter of 2020 has assisted the Afhri trend line in returning to a positive growth trajectory.

A V-shaped recovery has been evident in a number of other key economic indicators, especially GDP, retail trade sales and the Reserve Bank’s composite leading business cycle indicator. The latter indicator reached an all-time record high during the first quarter of this year.

Since the base period for the index, which spans more than seven years, only three of the 20 indicators have recorded negative outcomes, two of which are marginal. This confirms a systemic improvement in the ability of the median household in South Africa to incur and service debt.

Between the first and second quarters of this year, only six of the 20 indicators recorded declines, which is an indication of further progress with the recovery of the financial disposition of households.

Compared with the second quarter of 2019 (pre-Covid), seven of the indicators have recorded double-digit rates of improvement. Although half of the indicators are still languishing in negative territory, only one of them (credit impairments by banks) still has a meaningful negative trend, with the overall AFHRI having returned to growth mode, albeit marginal.

Unfortunately, the four indicators that possess the largest weighting in the index have not yet recovered from the effects of the Covid-19 pandemic. These are employment (public and private sectors) and salaries (public and private sectors).

Altron Fintech MD Johan Gellatly says the index was developed with the key purpose of providing the market with critical insights on the level of resilience of those who apply for credit. It has specific relevance to the provision and state of micro-credit, an important segment of the overall credit market, and often the only option f...

Stronger policies and raised climate goals leading into COP26 are driving renewables to new records, but faster deployment across all key sectors is needed to reach net zero, the International Energy Agency (IEA) says in a new report.

It adds that the growth of the world’s capacity to generate electricity from solar panels, wind turbines and other renewable technologies is on course to accelerate over the coming years, with this year expected to set a fresh all-time record for new installations.

Despite rising costs for key materials used to make solar panels and wind turbines, additions of new renewable power capacity are forecast to increase to 290 GW this year, surpassing the previous all-time high set last year, the IEA’s annual ‘Renewables Market Report’ shows.

By 2026, global renewable electricity capacity is forecast to rise more than 60% from 2020 levels to over 4 800 GW – equivalent to the current total global power capacity of fossil fuels and nuclear combined.

Renewables are set to account for almost 95% of the increase in global power capacity through 2026, with solar photovoltaic (PV) alone providing more than half.

The amount of renewables capacity added over the period from 2021 to 2026 is expected to be 50% higher than from 2015 to 2020 and is driven by stronger support from government policies and more ambitious clean energy goals announced before and during COP26.

“This year’s record renewable electricity additions of 290 GW are yet another sign that a new global energy economy is emerging,” says IEA executive director Fatih Birol.

He notes that high commodity and energy prices pose new challenges for the renewable energy industry, but points out that the elevated fossil fuel prices also make renewables “even more competitive”.

The growth of renewables is forecast to increase in all regions compared with the 2015 to 2020 period.

China, however, remains the global leader in the volume of capacity additions as it is expected to reach 1 200 GW of total wind and solar capacity in 2026 – four years earlier than previously expected.

India, meanwhile, is set to record the highest rate of growth, doubling new installations compared with the 2015 to 2020 period, while deployments in Europe and the US are also on track to speed up significantly from the previous five years.

These four markets together account for 80% of renewable capacity expansion worldwide, the IEA notes.

“The growth of renewables in India is outstanding, supporting the government’s newly announced goal of reaching 500 GW of renewable power capacity by 2030 and highlighting India’s broader potential to accelerate its clean energy transition,” says Birol.

“China continues to demonstrate its clean energy strengths, with the expansion of renewables suggesting the country could well achieve a peak in its carbon dioxide emissions well before 2030.”

Further, solar PV remains the powerhouse of growth in renewable electricity, with its capacity additions forecast to increase by 17% this year to a new record of almost 160 GW.

Onshore wind additions, meanwhile, are set to be almost one-quarter higher, on average, for the 2021 to 2026 period, compared with the 2015 to 2020 period.

Total offshore wind capacity is forecast to more than triple by 2026.

The IEA expects this record growth for renewables to take place despite current high commodity and transport prices. However, it says that, should commodity prices remain high through to the end of next year, the cost of wind investments will go back up to levels last seen in 2015, with three years of cost reductions for solar PV to be erased.

Further, despite rising prices limiting growth, global biofuel demand this year is forecast to surpass 2019 levels, rebounding from last year’s huge decline caused by the pandemic. Demand for biofuels is set to grow strongly to 2026, with Asia accounting for almost 30% of new production.

India is expected to become the third-largest market for ethanol worldwide, behind the ...

Judge Jody Kollapen has reserved judgment in Eskom’s application to have the National Energy Regulator of South Africa’s (Nersa’s) rejection of its latest revenue application set aside as irrational and unlawful.

Following a virtual hearing on December 1, Kollapen indicated that he expected to publish a determination, along with his reasons, next week.

In its application, Eskom requested that the ruling be made before December 15 – a date that the utility argues needs to be met to allow sufficient time for Nersa to conclude the public consultations necessary for the implementation of a lawful tariff on April 1, 2022.

Should it be made earlier, Eskom advocate Matthew Chaskalson requested that the judgment include an order directing Nersa to publish Eskom’s application for public comment within two days of the ruling to give the public more time to respond.

Besides public consultations on the allowable revenue, the tariff must also be submitted to Parliament by March 15, 2022, to allow Eskom to implement the revised tariff on municipal customers.

Eskom approached the Gauteng High Court in October for an urgent review of Nersa’s September 30 decision to reject its fifth multiyear price determination (MYPD5) application, which the utility submitted to the regulator in June.

Nersa’s rejection was based on its argument that the methodology used by Eskom to calculate its allowable revenue was applicable for the MYPD4 period, which would end on March 30, 2022, and could not be used for a determination after that date.

Therefore, the regulator said that Eskom’s MYPD5 application, covering the three financial years from 2022/23 to 2024/25, had been made prematurely.

Nersa indicated that the utility should resubmit a one-year application for 2022/23 based on a new, yet-to-be-determined methodology, the principles of which were being canvassed as part of a belated public consultation process.

During Wednesday’s hearing Chaskalson described the situation as “Kafkaesque”, arguing that it was not possible for Eskom to make a new submission based on “amorphous” principles (which had not been communicated to the utility by the time of the court hearing) rather than on the basis of a clear methodology.

Chaskalson described the argument that the methodology had expired as “wrong in law and in fact”, noting that there had, to date, been only three methodologies approved by Nersa, against four allowable revenue determinations.

Eskom also attacked Nersa’s proposed remedy, which was outlined, together with a timetable, in a letter sent to it by the regulator on November 12.

Dubbed Option 4, Nersa proposed that pricing ‘principles’ – to be finalised before the end of November – should be used by the utility to determine trading tariffs for Eskom’s generation, transmission and distribution units, which are in the process of being restructured into separate businesses.

Eskom claimed not to have received the principles by the start of the court hearing, even though Nersa’s legal representative, Advocate Patrick Ellis, said he had been told by the regulator that these had been finalised.

Chaskalson argued that Option 4 would trigger consultations with the National Treasury and the South African Local Government Association (Salga) in line with the stipulations contained in the Municipal Finance Management Act, which would add a further 40-days to the process, making it impossible for a new tariff to be implemented on April 1.

Ellis acknowledged that a “lacuna” had indeed been created by Nersa’s failure to finalise a new methodology ahead of Eskom’s application, but insisted that the remedy outlined in Option 4 provided the only rational and legal solution.

Ellis argued that the option did not envisage any “reinvention of the wheel” and should, thus, not trigger any consultations with the National Treasury and Salga.

Rather, Eskom would be expected only to repackage its application to take account of the new principles, as well as changes under way bot...

The United Nations Conference on Trade and Development (Unctad) forecasts that global trade will reach about $28-trillion this year – an increase of 23% on 2020 levels, after stabilising in the second half of the year.

It notes, however, that the outlook for 2022 is “very uncertain”.

Global trade growth was about 24% in the third quarter – significantly higher than pre-pandemic levels, with an increase of about 13% relative to the third quarter of 2019.

The quarter-on-quarter growth of trade in goods was about 0.7%, while that of services was about 2.5%.

On a year-on-year basis, the trade growth rate for goods (22%) remains substantially higher than for services (6%).

Unctad notes that both the trend of a slower growth for the trade in goods, as well as a more positive trend for services, will probably continue in the fourth quarter of this year. As such, the organisation expects trade in goods to remain constant at about $5.6-trillion in the fourth quarter, while the trade in services will likely continue to slowly recover.

Overall, Unctad states that 2021 is set to be a strong year for international trade, with the value of global trade in goods and services expected to increase by about $5.2-trillion relative to 2020, and by about $2.8-trillion relative to 2019 – the equivalent of an increase of about 23% and 11%, respectively.

Further, trade in goods is projected to reach a record level of $22-trillion this year, while trade in services should be valued about $6-trillion – still slightly below its pre-pandemic level.

The positive trend for international trade this year is largely the result of the strong recovery in demand as a result of subsiding Covid-19 pandemic restrictions, economic stimulus packages and increases in commodity prices.

2022 UNCERTAINTY

Unctad’s forecast for 2022 remains uncertain as a result of several factors, including a slow economic recovery.

In this regard, Unctad reports that the strong economic recovery of the first half of this year slowed during the second half and that, in particular, China's economic growth in the third quarter was below expectations and lower than in previous quarters.

Rising commodity prices and inflationary pressures may also negatively affect economic prospects and international trade flows. In addition, many economies, including those in the European Union, continue to face Covid-19 related disruptions. These disruptions may negatively affect consumer demand and ultimately be reflected in trade statistics for the upcoming quarters, Unctad states.

In addition, 2022 is expected to be influenced by disruptions of logistic networks and increases in shipping costs; after this year was impacted by large and unpredictable swings in demand, which have resulted in an increased stress on supply chains.

Logistic disruptions and high fuel prices have further contributed to supply shortages and spiralling shipping costs. In particular, the backlogs across major supply chain hubs that have characterised most of this year could continue into 2022 and therefore negatively affect trade and reshape trade flows across the world.

Also, an ongoing global semiconductor shortage, if it persists into 2022, could continue to negatively affect production and trade in many manufacturing sectors.

Geopolitical factors and the regionalisation of trade flows could also weigh on trade in 2022, while governmental policies had the probability of affecting international trade.

In this regard, Unctad notes that governments are becoming increasingly supportive of domestic socioeconomic and strategic goals, with efforts towards a more socially and environmentally sustainable economy having the possibility of affecting international trade.

Unctad also notes that the additional borrowing of governments to sustain their economies during the Covid-19 crisis could pose continuous risks of financial instability, especially in the case of global inflationary pressures. As such, rising interest rates and obligat...

Pharmaceutical company Aspen’s wholly-owned South African subsidiary, Aspen SA Operations, has signed a nonbinding term sheet with Janssen Pharmaceuticals and Janssen Pharmaceutica NV, two of the Janssen Pharmaceutical Companies of Johnson & Johnson, that will form the basis for the negotiation of a definitive agreement on the manufacture and sale of an Aspen-branded Covid-19 vaccine throughout Africa.

The agreement will expand the existing technical transfer and manufacturing agreements between the parties to grant Aspen South Africa the rights to manufacture finished SARS-CoV-2 Covid-19 vaccine product from drug substance supplied by Johnson & Johnson; and to sell the finished form vaccine under Aspen branding to public sector markets in Africa through transactions with designated multilateral organisations and with national governments of member States of the African Union.

In addition, Johnson & Johnson is expected to grant Aspen an intellectual property licence for this purpose.

Aspen plans to launch this vaccine under the brand name Aspenovax.

The term of the grant of rights and supply of drug substance, subject to the signing of the definitive agreement, would be until December 31, 2026.

In a webinar on November 30 to discuss this deal, Aspen Pharma Group Strategic Trade group senior executive Stavros Nicolaou said this was “ground breaking” for African manufacturing and a milestone in the fight against Covid-19.

Johnson & Johnson Global Public Health Programs & Policy Global Strategy VP Dr Adrian Thomas added that the agreement would aid in addressing vaccine inequity in Africa and provide quality vaccine for Africa from a company based on the continent.

He highlighted that it comes at a pivotal time, when vaccination rates in the continent are much lower than in some developed countries.

He reiterated the company’s support for an African vaccine manufacturer, as well as its support for Aspen.

Thomas said it was pleasing to have reached an advanced stage of discussion, and is hopeful that once finalised, it would quickly allow Aspen to produce the vaccine with a drug substance from J&J as a first step – “an importance milestone for manufacturing in Africa”.

However, he emphasised that more had to be done, and called on the global community to prioritise a clear plan to scale up investment across Africa, especially in vaccine manufacture that includes local skillsets; with J&J committed to supporting this.

World Health Organisation (WHO) Africa regional director Dr Ngozi Okonjo-Iweala highlighted the that WHO was pleased to have played a role in facilitating this agreement, by providing a platform for collaboration and discussions.

Other speakers reiterated this as an important milestone for the continent, and noted that the deal will make a significant contribution to vaccine manufacture in Africa, and is an important step towards a reality in which the continent manufactures quality Covid-19 and other vaccine products itself, without relying on others.

It was also noted production of the vaccine under licence by Aspen now provides security of supply for Africa, as well as flexibly for the continent.

Aspen Group CE Dr Stephen Saad indicated that this agreement showcases that world class facilities exist in Africa; and dispels myths that Africa cannot be a manufacturing hub.

He said the agreement provided speed of access for IP.

He also thanked all the stakeholders for their efforts in ensuring that the continent could not be ignored and would get a seat at the table.