Business Leadership South Africa (BLSA) says it disagrees with those calling for the resignation of Eskom CEO André de Ruyter and his leadership team following the most recent intense period of load-shedding.

In a statement, BLSA noted that the State-owned utility had had ten CEOs in ten years, creating instability that “only served to make a bad situation worse”.

“We simply cannot afford to again lose the momentum built by this leadership team over the last 20 months, bearing in mind the extremely difficult circumstances they inherited and under which they are operating.

“Causing a renewed leadership crisis would set us further back in the challenging task of securing the country’s power supply,” BLSA, an association that includes some of the largest domestic and foreign enterprises operating in South Africa, said.

In an earlier statement, representative business body Business Unity South Africa (Busa) also rejected calls for the resignation of the Eskom CEO and board, saying it would not help to exacerbate the ongoing operational crisis by creating a leadership and governance crisis.

Likewise, the Minerals Council South Africa labelled the resignation calls as “unhelpful”.

These were initially led by the Black Business Council, which described the Eskom leadership as “completely overwhelmed, inept and out of its depth”.

The resignation call also found support among various labour unions, including the National Union of Mineworkers – a member of the African National Congress-aligned Congress of South Africa Trade Unions, which did not make a similar call.

Finance Minister Enoch Godongwana added to the uncertainty, telling the Sunday Times that De Ruyter was allowed more latitude than previous CEOs to implement planned maintenance, before saying it was “not his place” to pronounce on his removal.

Godongwana did stress, however, that the solution to the crisis required more than a narrow focus on fixing Eskom and would involve non-Eskom investment – a position strongly supported by the utility’s current leadership, as well as organised business.

As with Busa, BLSA stressed its concern about the negative economic and social effects of load-shedding, which it attributed to “massive underinvestment in maintenance over an extended period of time compounded by years of maladministration and outright corruption at Eskom during the State capture era”.

“More than R6-billion was stolen from Eskom alone according to figures before the State capture commission,” BLSA said.

NEW CAPACITY NEEDED

The independent big business association also underlined the urgency of adding new generation capacity into the system, a shortfall that Eskom currently estimates to be between 4 000 MW and 6 000 MW.

It encouraged government to expedite Bid Window 6 (BW6) of the Renewable Energy Independent Power Producer Procurement Programme, following the recent conclusion of BW5, during which 25 preferred bids were selected, representing nearly 2 600 MW of wind and solar capacity.

BLSA lamented that BW6, which government initially signalled would be launched in September, had not yet been announced, with indications that bidding was now only likely to be launched in January.

“Bid Windows 7 and 8 should also already be scheduled by now, given the urgency of the crisis. Better yet, bid windows could be abolished altogether and renewable energy procured on an ongoing basis as the situation demands,” BLSA said.

The association also argued that Eskom’s 8 GW renewables project pipeline, unveiled as part of its just energy transition strategy, should be expedited, with private sector involvement.

It added that the $8.5-billion financing package secured during the recent COP26 summit would give a major fillip to this plan.

“BLSA supports the steps being taken by the current management and its stated strategy and encourages the leadership team not to deviate from the focus on restoring the stability of the grid.”

Peugeot has unveiled its newest addition to the local market in the form of the Landtrek one-ton pickup.

“The new Landtrek enables Peugeot to make a comeback in a market where it has a very strong heritage, fuelled by numerous racing victories. It personifies the DNA of legendary models such the 404 wagon and the 504 pickup,” says the French vehicle manufacturer.

“As light commercial vehicles (LCVs) account for more than 25% of the South African new-vehicle market, the Landtrek is a key launch for Peugeot in a key market.”

In preparation for the launch of the Landtrek, the French vehicle maker covered more than two-million test kilometres across all terrains and in all conditions, including African roads.

The Landtrek is available in South Africa in a 4x2 and 4x4 diesel double-cab derivative.

It offers up to three tons of towing capacity and has a payload that exceeds one ton.

The vehicle is sold with more than 28 dedicated accessories.

Inside the vehicle, Peugeot says it has paid special attention to the three rear passengers, with the backrests tilted to 23° for greater comfort.

The rear bench offers the possibility of folding the backrest in 60/40, or 100%.

In addition, the rear-seat cushions can also tip-up in a 60/40 split, to allow for more flexible loading configurations.

When folded down, the backrests can support a load of up to 100 kg.

In addition, the rear bench offers two Isofix fasteners to ensure the safety and docking of child seats.

The Landtrek also offers automatic dual-zone air conditioning, a ten-inch touch screen compatible with Apple CarPlay/Android Auto, and a ten gigabyte hard drive.

Safety features include six airbags, an electronic stability programme, hill-descent control, hill-start assist, trailer-swing control and lane-departure warning.

The bakkie is also fitted with rear reverse cameras and parking sensors.

An off-road camera (in the passenger rear-view mirror) and 360° panoramic vision support the driver when negotiating obstacles or narrow lanes on the 4Action 4x4 derivative, further aided by additional front obstacle sensors.

The Landtrek is powered by a 1.9-litre turbodiesel engine that delivers 110 kW power and 350 Nm of torque thanks to a variable turbine geometry with 16 valves.

The vehicle adapts to the prevailing terrain through manual, sport, or eco modes, and offers up to 235 mm of ground clearance.

The Landtrek is covered by a five year/100 000 km warranty and service plan, with maintenance intervals at every 10 000 km, “with a view to optimising reliability and running costs”, says Peugeot.

Pricing for the Allure double-cab 4x2 is R579 900, with the 4Action double-cab 4x4 priced at R 669 900.

The Council for Scientific and Industrial Research (CSIR) says the tariffs achieved during the fifth bid window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) confirm its previous analysis showing that renewable energy is the lowest cost generation option available for South Africa.

In late October, Mineral Resources and Energy Minister Gwede Mantashe announced the names of 25 preferred bidders to build 13 wind and 12 solar projects with a combined capacity of 2 583 MW.

The weighted average price across the projects came in at an impressive 47.3c/kWh, the lowest yet to be achieved in South Africa. The cheapest wind project was bid at 34.4c/kWh, while the cheapest solar PV project came in at 37.4c/kWh.

The CSIR shows that the actual tariffs achieved under the REIPPPP since 2011 have fallen a dramatic 78% for new wind, from R1.90/kWh to 49.5c/kWh and 91% for solar PV, from R4.60/kWh to only 42.9c/kWh.

The price decline since the most recent previous bidding round of 2015 is equally impressive, with the solar PV tariffs bid this year coming in 45% cheaper and the wind tariffs 36% cheaper.

CSIR Energy Research Centre head Dr Clinton Carter-Brown says the continued cost reductions of renewable energy options align with the CSIR’s modelling, as well as its analysis pointing to a need for further renewable energy deployments to address power system constraints and the debilitating impacts of load-shedding.

“The CSIR’s analysis has confirmed that South Africa is in a fortunate position to be able to transition to renewable energy sources as part of a least-cost power system.

“The REIPPPP outcome is aligned with our analysis of job creation opportunities and how renewable energy deployment can contribute towards economic growth and a just energy transition from coal to a blend of renewable energy complemented by energy storage and demand response,” Carter-Brown said.

As Eskom exited one of its most intensive periods of load-shedding on Friday November 12, CEO Andre de Ruyter promised greater transparency in future on both the state and performance of the power system given the likelihood that the risk of disruption will persist for the coming three to four years.

The State-owned utility suspended its latest bout of load-shedding – initially implemented at Stage 2 on November 5, but then swiftly escalated to Stage 4 before being trimmed back to Stage 2 almost a week later – early on Friday morning.

Eskom also offered a favourable prognosis for the weekend and the coming week, owing to the return to service of several coal units and a reduction in unplanned partial and full load losses to about 11 200 MW.

At points over the past two weeks total breakdowns stood at above 17 900 MW.

That said, the utility was still burning about 17 000 litres a minute of diesel on Friday morning as it operated its open-cycle gas turbines at the Ankerlig power station in Cape Town well beyond their intended operating profile to ensure supply stability. In addition, it was buying electricity from two units at the private Avon facility, north of Durban, which also produces electricity using diesel.

Asked what lessons had been drawn from the period, during which the Eskom CEO had also been forced to stare down calls for his resignation and even threats to his personal safety, De Ruyter said the value of being “as open and transparent as possible” had been reinforced.

Eskom instituted daily briefings about halfway through the latest crisis; briefings that were suspended on Friday along with the rotational power cuts.

The practice would be reinstated, however, should load-shedding be implemented in future and Eskom also intended being more “proactive” in signalling system stress to the public ahead of time.

“Eskom is a complex beast and the more that we inform people of these complexities and the various issues that can potentially affect the availability of electricity I think the better, and the more understanding there will be, frustrating as load-shedding is for the people of South Africa,” De Ruyter explained.

Solving the problem comprehensively required the introduction of between 4 000 MW and 6 000 MW of new capacity, as well as between three and four years of reliability maintenance of the coal fleet to address a backlog that had developed.

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the key highlights from Finance Minister Enoch Godongwana's maiden mini-Budget, the spending pressures ahead of the February budget and the Minister's approach to State-owned companies.

Government’s rising debt service costs, at about R1-trillion over 2022/23 to 2024/25, are crowding out spending on service delivery functions.

Debt service costs will, on average, consume 21c of every rand collected in revenue over the medium term. These costs will average R334-billion a year.

Additionally, elevated debt redemptions will further reduce fiscal space over the medium term, as R423.4-billion of debt borrowed in previous years matures.

Much of government debt incurred since early 2020 related to Covid-19 impacts and mitigation measures; however, public debt has increased seven-fold from R577-billion in 2007/8 to over R4-trillion in 2021/22.

Government’s debt service costs will increase by 10.8% over 2021/22 to 2024/25, while spending on social development will decrease by 5.9% over the same period.

The Medium Term Budget Policy Statement (MTBPS), presented by Finance Minister Enoch Godongwana on November 11, earmarks R687-billion for economic development, R654-billion for peace and security and R209-billion for general public services.

Overall, national government is contracting non-interest expenditure resources of national departments by 1.8% a year, provincial resources by 0.7% a year and local government resources by 4.1% a year, over the next three years.

Government is allocating 48% of non-interest expenditure to national departments, 42% to provinces and 9.6% to local government.

A net addition of R59.4-billion to main budget non-interest spending is proposed in the MTBPS. Total main budget non-interest expenditure is projected to increase by R31.9-billion in 2022/23 and by R29.6-billion in 2023/24.

The 2021/22 fiscal framework includes a R3-billion contingency reserve for more vaccines and R11-billion as a provisional allocation to Sasria for risk coverage, after the public violence outbreak that resulted in damage to infrastructure in Gauteng and KwaZulu-Natal, in July. Related to this, R2.3-billion is allocated in 2021/22 to help businesses rebuild, of which R1-billion is being reprioritised from the departments of Trade, Industry and Competition and Small Business Development.

Other proposed revisions to non-interest expenditure for 2021/22 include R20-billion for wage bill adjustments, R2.9-billion for State-owned defence group Denel to settle a portion of its guaranteed debt, and R32-billion in public violence and Covid-19 fiscal relief package allocations.

Godongwana says government remains committed to narrowing the budget deficit to stabilise the debt-to-gross-domestic product ratio, mainly by controlling non-interest expenditure growth.

He admits that the fiscal outlook is highly uncertain, with major risks including the durability of the economic recovery, the legal process associated with public service compensation and future wage negotiations.

This while many State-owned enterprises and municipalities have insufficient funds to cover operational expenses.

Godongwana expects the budget to see a primary surplus – where revenue is higher than non-interest spending – by 2024/25. Gross loan debt is forecast to stabilise at 78.1% of gross domestic product in 2025/26.

The MTBPS envisions debt service costs falling below 22% of main budget revenue by 2026/27.

For context, government expenditure has exceeded revenue in every year since 2008/9. The consolidated budget has grown from R712.8-billion in 2008/9 to R2.1-trillion in 2021/22 – an average increase of 8.8% a year.

On the positive side, gross tax revenue is expected to be R120-billion higher than projected in the national Budget, in 2021/22, with corresponding improvements of almost R70-billion and R60-billion expected in 2022/23 and 2023/24, respectively, which remain below pre-pandemic levels.

Finance Minister Enoch Godongwana offered no new insight in his maiden address to lawmakers into how government intended approaching the issue of Eskom’s R400-billion debt burden, which has been labelled unsustainable by the utility, and also refrained from making any new provisions for distressed State-owned enterprises (SOEs).

Instead, he said that he would be adopting a “tough love” stance towards SOEs, albeit with the caveat that government would most likely support those entities regarded as “strategic”, such as Eskom, Transnet and Denel.

Delivering his address to lawmakers against the backdrop of an intensive period of load-shedding by Eskom, Godongwana also made a distinction between saving the utility itself and supporting the electricity supply industry as a whole.

He lamented the focus, over the past 13 years, on “fixing Eskom” rather than ensuring security of supply across the industry.

Additional capacity, beyond what Eskom could supply, was urgently needed, he said, particularly given that 11 000 MW of coal capacity would be decommissioned by 2030.

The resumption of independent power producer procurement was viewed as a positive, but would still leave a gap until 2024, which might be partly closed by the reform allowing 100 MW distributed plants to produce and sell electricity without a licence.

"The amended regulations will further enable municipalities to self-generate or procure power directly from independent power producers."

The Minister added that South Africa had also begun to reduce its reliance on Eskom by diversifying its primary energy sources, notably through the Renewable Energy Independent Power Producer Procurement Programme.

"The 25 projects that are part of the latest round of Bid Window 5, will generate more than 2 500 MW of power at a weighted average price of 47.3c/kWhr. This is the cheapest rate achieved in the history of the programme and is among the lowest rates achieved worldwide."

Work was, nevertheless, under way to address Eskom’s debt, but no solution had yet been found.

The utility had been allocated R230-billion over a ten-year period to enable it to avoid default, of which R132-billion had already been injected by the National Treasury.

Godongwana indicated that his tough love approach also did not preclude support for other SOEs, with Denel set to receive a R2.9-billion injection as part of an in-year spending adjustment to settle repayments that were falling due.

Government extended a R5.9-billion guaranteed debt facility to the State armaments manufacturer in 2020/21, and the new allocation arose as a result of that guarantee being called.

However, Godongwana did not discount the possibility of refusing help to less "strategic” SOEs, some of which could close as a consequence.

"Going forward, the restructuring of State-owned companies, informed by an assessment of their strategic relevance, is a priority," the Minister said.

"We must be prepared to consolidate some of our State-owned entities and let go of those that are no longer considered strategically relevant."

The National Treasury argued that its strict enforcement of minimum criteria before guaranteeing SOE debt had led to a decline in bailout requests, yet it conceded that the risk of bailouts remained.

Finance Minister Enoch Godongwana indicated on Thursday that government regarded the revenue windfall that had arisen as a result of higher commodity prices as temporary and confirmed that fiscal consolidation would, thus, be sustained to reduce the Budget deficit and stabilise the national debt.

However, he also announced that, barring any major new shocks or unbudgeted spending commitments, the consolidation would yield a primary fiscal surplus in 2024/25, bringing fiscal consolidation to an end.

But over the coming three years, debt-service costs, which are estimated at R1-trillion for the period on a debt stock of R4-trillion, will be the fastest growing spending item, rising at a yearly nominal average of 10.8%, and crowding out spending on service delivery.

Debt-service costs are expected to rise from R269.2-billion in 2021/22 to R365.8-billion in 2024/25, becoming larger than the health and police budgets.

The easing of Covid lockdown restrictions, together with a spike in commodity prices, allowed Godongwana to present his maiden Medium-Term Budget Policy Statement (MTBPS) against the backdrop of an economy that had recovered more quickly than anticipated, despite the setback of the July riots.

Real gross domestic product (GDP) is now forecast to grow by 5.1% in 2021, up from the February projection of 3.3%, while output is expected to return to pre-pandemic levels in 2022 rather than 2023.

However, growth of only 1.8%, 1.6% and 1.7% is forecast for 2022, 2023 and 2024 respectively, which is short even of market expectations and suggestive of limited scope for the structural reforms to begin having a significant growth impact over the coming three years.

The backdrop to the MTBPS was also buoyed by the recent rebasing exercise undertaken by Statistics South Africa, which raised nominal GDP in level terms, which automatically improved deficit and debt ratios to GDP, despite actual revenue, expenditure and debt stock having not changed. On average, nominal GDP increased by R489.8-billion between 2016/17 and 2020/21, triggering a “mechanical decline” in the debt-to-GDP ratio, from 78.8% to 70.7% in 2020/21.

The MTBPS also indicates that gross loan debt will stabilise at 78.1% of GDP in 2025/26, compared with a 2021 Budget estimate of 80.5% of GDP, while the consolidated deficit will narrow from 7.8% of GDP in 2021/22 to 4.9% in 2024/25.

The surge in commodity prices significantly improved the revenue outlook, with the gross tax revenue estimate for 2021/22 having been revised up by R120.3-billion, to R1.49-trillion, compared with the projection in the 2021 Budget. Corporate taxes, underpinned by higher mining industry profits, will contribute R75.5-billion of that additional R120.3-billion.

Collections remain well below pre-pandemic expectations, with revenue from 2020/21 through 2022/23 forecast to be R284.7-billion below the 2020 Budget projections

SPENDING ADJUSTMENTS & PRESSURES

That windfall had already enabled government to announce a R37.9-billion fiscal package following the July riots, which included the reintroduction of the temporary R350-a-month special Covid-19 social relief of distress grant until the end of March, as well as additional expenditure for insurance claims, security expenses and small business support.

Godongwana acknowledged that calls had been made for the R350 grant to be extended beyond the end of March 2022 and transformed into a basic income grant, which at the current level would add R40-billion to yearly expenditure.

He stressed that should such a choice be made, it could not dislodge the fiscal framework and would, thus, need to be funded either by new revenue sources, or through a reprioritisation of spending within the current envelope.

He added that the call for a basic income grant was not the only spending pressure being faced, with the National Treasury dealing with many other requests outside of the current spending plans, that amounted to about R67-billion.

“Critical to the f...

Eskom CEO Andre de Ruyter reports that the State-owned utility has already taken some initial steps to ensure that the $8.5-billion political declaration signed at COP26 in early November is urgently converted into a practical commercial agreement to support its just transition programme.

Addressing the second of what have become daily briefings on the state of the system, which has once again succumbed to an intensive period of load-shedding, De Ruyter reported that follow-up discussions had been held on Wednesday with one of the multilateral lenders involved in the declaration to assess whether the flow of funds could be accelerated.

On November 2, South Africa, France, Germany, the UK and the US, along with the European Union, announced a ‘Just Energy Transition Partnership’ to support South Africa’s decarbonisation efforts over a three- to five-year period.

A funding commitment of $8.5-billion was announced, which Eskom described as the first step in a partnership that could be extended, particularly given that Eskom alone required R400-billion ($26-billion) to support the generation, transmission and distribution investments required to facilitate a shift from coal to renewables.

While the government-to-government declaration covered not only electricity but also the manufacture of electric vehicles and the development of green hydrogen assets, De Ruyter nevertheless confirmed that the lion’s share of the initial funding would be directed to Eskom.

The utility has developed a pipeline of energy and social upliftment projects, including several that are directly linked to the repowering and repurposing of coal stations that are scheduled for decommissioning in the coming decade.

“There's a lot of urgency also from the lender group to ensure that this does not remain an empty political commitment . . . [and] we now need to translate that into a practicable commercial agreement that will allow us to make use of these funds to start our just energy transition process.

“Earlier today I already had the first engagements with one of the lenders to see how we can accelerate getting that money on the ground and ready to do some good work for South Africa as soon as we can,” De Ruyter said during the briefing.

Rudi Dicks, who is programme management officer in the private office of President Cyril Ramaphosa, has indicated that South Africa will be seeking to negotiate “highly concessional” terms.

“It shouldn’t be equal to or just below the kind of financing that we could secure on the open bond market,” he said during a briefing at COP26 this week.

The declaration makes provision for the establishment of a task force, comprising representatives from South Africa and the international partners, to finalise the funding mechanism.

The task force would negotiate, over the coming six months, the ratio of grants to loans, as well as give greater definition to the nature of the concessional loan terms and their tenure.

De Ruyter said the negotiations would commence “very shortly” to ensure that the funds were released.

The announcement has received a mixed reception locally and some confusion has also arisen about South Africa’s commitment to the deal in light of statements made by both Forestry, Fisheries and the Environment Minister Barbara Creecy and Mineral Resources and Energy Minister Gwede Mantashe.

Creecy confirmed that South Africa had not taken part in a pledge, signed by 40 countries and institutions, to end coal financing, while Mantashe told oil and gas investors that Africa should resist developed-country attempts to pressurise Africa to move away from all forms of fossil fuels.

De Ruyter said that the Just Energy Transition Partnership was a “completely separate issue” from what was being referred to by the two Ministers.

“[Their statements have] got nothing to do with the loan agreement . . . it's got to do with a commitment not to pursue further coal projects,” De Ruyter explained, refusing to be drawn on the policy de...

Information and communications technology (ICT) group Vodacom Group plans to acquire a strategic stake in Community Investment Ventures Holdings’ (CIVHs') fibre assets under a newly formed InfraCo entity.

The InfraCo will hold all material assets currently owned by CIVH subsidiaries carrier-grade dark fibre provider Dark Fibre Africa (DFA) and fibre network operator Vumatel, as well as certain Vodacom-owned fibre assets.

Vodacom Group will hold a co-controlling 30% equity interest, with option to acquire an additional 10% stake in InfraCo to bring its share to 40%.

“Our agreement with CIVH aligns with Vodacom Group’s strategy to build high quality and resilient fixed and mobile networks with and through selected strategic partnerships across the African continent. It also supports Vodacom’s purpose-driven plan to assist the government in rebuilding the economy post-Covid-19,” said Vodacom Group CEO Shameel Joosub.

The deal, subject to regulatory approvals, is expected to transform Vodacom’s South African fibre business and accelerate the purpose-led group’s ambition of connecting people for a better future.

“The transaction will enhance and scale Vodacom’s fixed offerings across both the consumer and business segments and leverage a shared cost model to accelerate the provision of open-access infrastructure in South Africa,” he explained.

“The South African consumer will benefit from the fresh capital injection and shared cost approach as it will significantly scale-up the fibre reach of the InfraCo’s various fibre brands, including smaller towns. This is expected to have a positive impact on both Vodacom’s and the country’s network quality and resilience, which in turn, will help fast-track South Africa’s connectivity rate.”

CIVH Group CEO Raymond Ndlovu said the milestone investment will boost its ambitious fibre roll-out programme across South Africa and assist in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of our society.

“Ultimately, it will result in much needed inclusive economic growth.”

Vumatel, which builds, owns and operates a high-speed fibre-to-the-home (FTTH) network using a wholesale open-access model that passes more than 1.2-million homes, has deployed over 31 000 km of fibre infrastructure across South Africa.

In terms of the agreement, Vumatel’s fibre network will be merged with Vodacom’s FTTH and fibre-to-the-business (FTTB) assets.

DFA specialises in building, installing, and operating a national metropolitan fibre network, which currently spans 13 000 km and 37 000 connected circuits, supplying a range of dark fibre and actively managed fibre products to enterprise customers.

Vodacom will pay for the transaction through a combination of R6-billion cash and the contribution of its FTTH, FTTB and business-to-business transmission access fibre network infrastructure to the InfraCo, at a valuation of R4.2-billion, in return for new shares in InfraCo.

Vodacom will acquire further secondary shares from CIVH sufficient to increase its shareholding to at least 30% in the InfraCo at a pre-agreed formula.