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Ford Motor Company Africa president Neale Hill has taken over the reins at Naamsa | The Automotive Business Council until 2023. He succeeds Toyota South Africa Motors president and CEO Andrew Kirby.

The new manufacturing original equipment manufacturers (OEMs) VP at the automotive industry body is Isuzu Motors South Africa president and CEO Billy Tom, with Kia South Africa CEO Gary Scott elected as retailing OEMs VP.

UD Trucks Southern Africa MD Filip van den Heede has been elected as the VP for heavy commercial vehicle OEMs.

In his yearly presidential report, Kirby noted that the sharp drop in global and domestic market demand through the early part of last year, caused by the abrupt and widespread stoppage of trade and economic activity owing to Covid-19, has “severely impacted” the globally integrated South African automotive value-chain.

As a result, the automotive industry’s contribution to the fiscus declined by 23.4%, to 4.9%, in 2020, compared with the 6.4% contribution to gross domestic product in 2019.

Measuring the industry’s progress for the year-to-date September, shows that new-vehicle sales have increased by 30.3% in the first nine months of the year; with exports up 19.6%; vehicle production up 21.7%; and imports up 34.4%, compared with the corresponding period last year.

“While we welcome this progression for the year under review compared to 2020, we are still not out of the woods yet, because our year-to-date domestic new-vehicle sales numbers are still 13.3% below the recorded numbers for 2019 year-to-date [pre-Covid],” said Kirby.

“Export and import sales also reflect a decline of 25.4% and 8.8%, respectively, compared with 2019 year-to-date.

“Our domestic production numbers also show a 22.8% drop compared with the same period in 2019.

“Our Naamsa team predicts that a full market recovery is likely to be protracted until around 2023.”

Kirby added that year-to-date domestic sales of electric vehicles, plug-in hybrids and traditional hybrids have grown by 28.8% compared with the same period last year, and have also increased by 13.4% compared with the 2019 pre-Covid-19 statistics.

A new National Business Initiative (NBI) study offers support for gas as a transition fuel in South Africa’s shift from coal in the production of electricity and synthetic fuels (synfuels).

The study stresses, however, that this role should be confined in the electricity sector to the provision of flexible balancing capacity for the country’s growing fleet of variable renewable-energy generators rather than to offer so-called baseload. In the manufacture of synfuels, meanwhile, it is regarded as a lower-carbon replacement for coal, until cleaner solutions, such as green hydrogen, are fully commercialised.

The study, which has been conducted jointly with Business Unity South Africa and the Boston Consulting Group, is one in a series of reports being produced to assess just transition decarbonisation pathways for various domestic sectors, including electricity, mining, chemicals and agriculture.

In releasing the findings, NBI head of environment Stephen Nicholls said that it was not ideal to include a fossil fuel as a solution to South Africa’s decarbonisation, but that its analysis indicates gas to be the lowest-cost and least-risk immediate solution for accelerating South Africa’s transition away from coal.

He added that if gas was introduced in a way that did not lock it into the country’s electricity and synfuels sectors for the long term, the fuel’s use would also not undermine a transition to a net-zero emissions economy by 2050 – a target that currently remains an aspiration rather than a firm policy commitment.

Boston Consulting Group project leader Keshlan Mudaly confirmed that leveraging gas could result in a carbon lock-in, but that such a risk could be addressed by ensuring that the gas infrastructure could be repurposed, including to use green hydrogen.

It could be further mitigated if the infrastructure was financed with an expectation of a drop in competitiveness over time and if the country set specific phase-out targets, as well as incentives or disincentives.

To lower the lock-in risks the study proposes that South Africa pursue a multi-hub strategy for the importation of liquefied natural gas (LNG) to meet yearly demand that could rise from 180 PJ to between 228 PJ and 552 PJ by 2030.

Such infrastructure should be developed in parallel, the study argues, at Richards Bay, Coega and Saldanha Bay, as well as possibly Matola, in Mozambique.

The foreign exchange outflow of such a strategy would be higher than developing the domestic resources discovered at Brulpadda and Luiperd, or the building of a pipeline to South Africa from the Rovuma gasfields, in northern Mozambique. However, the lock-in risk would be materially lower.

Mudaly defended the introduction of higher levels of gas into the power, industrial and synfuel sectors largely on the basis that such a switch could save costs and reduce cumulative emissions.

For power generation, the analysis shows that emissions across the entire LNG value chain would be 20% lower than coal, while in the synfuels sector the reduction would be more dramatic at about two times.

By replacing diesel with gas at the country’s open cycle gas turbines, meanwhile, operational-cost savings of between R14-billion and R28-billion could be achieved, depending on gas prices, pre-2035.

“As South Africa decarbonises it economy, gas can, if affordably supplied, play a key transition role by providing flexible capacity in the power sector and substituting coal as a lower-emission energy source in industry and as a lower-emission feedstock in the synfuels sector until greener alternatives become commercially viable,” Mudaly explained.

With a potential increase in gas demand of 30% by the end of the decade, however, the study urges South Africa to actively and urgently manage its gas strategy to mitigate the risk of unconstrained demand and to ensure the resiliency of supply infrastructure given a likely drop in demand between 2040 and 2050.

President Cyril Ramaphosa has announced that South Africa has signed a political declaration with the governments of France, Germany, the UK and the US, as well as the leadership of the European Union, to establish a partnership to mobilise an initial $8.5-billion, or R131-billion, over the next three to five years through a range of instruments, including grants and concessional finance, to support the implementation of South Africa’s revised Nationally Determined Contributions (NDC) through a just transition to a low-carbon and climate-resilient economy.

The political declaration represents a first-of-its kind partnership to turn these commitments into reality and a model for similar forms of collaboration globally.

In preparation for COP26, South Africa submitted a revised NDC to reduce domestic carbon emissions to within a target range of between 420-million and 350-million tonnes of carbon dioxide equivalent by 2030.

This revised target is compatible with the ambitious goals of the Paris Agreement and represents the country’s best effort to confront climate change, which will have a devastating impact on sub-Saharan Africa without large-scale mitigation and adaptation efforts, the Presidency says.

The highly concessional finance that will be mobilised through this partnership will accelerate investment in renewable energy and the development of new sectors such as electric vehicles and green hydrogen.

This will provide a significant boost to investment and growth while ensuring power utility Eskom can access resources to finance repurposing of coal-fired power stations scheduled for decommissioning over the next 15 years.

“Climate change is an existential challenge that confronts us all, and South Africa is committed to playing its part in reducing global emissions. The partnership that we have established today is a watershed moment not only for our own just transition, but for the world as a whole.

"It is proof that we can take ambitious climate action while increasing our energy security, creating jobs and harnessing new opportunities for investment, with support from developed economies,” Rampahosa says.

He adds that “bold and ambitious actions” are required from all countries to confront climate change and South Africa has consistently argued that developed economies must support a just transition in developing economies.

At the heart of this partnership is the importance of a just transition, which includes support for workers and communities affected by the transition away from coal and enables the creation of quality green jobs.

For the transition to be just, the political declaration said that decarbonisation must be implemented in a manner that promotes and sustains employment, livelihoods and economic inclusion for historically marginalised communities and sectors of our society.

A joint taskforce will be established to take forward the partnership over the coming months.

State-owned freight logistics group Transnet reported a loss of R8.4-billion for the year to March 31, 2021, and also received an audit qualification for the period relating to its ongoing irregular-expenditure problem.

The loss, which is the first to be reported by the group for more than a decade, was attributed largely to the lockdowns introduced by the South African government at the start of the Covid-19 pandemic, which severely knocked business activity.

Revenue fell by 10.5% to R67.3-billion during the year, while earnings before interest, taxes, depreciation, and amortisation slumped by 42.8% to R19.5-billion as rail, port container and petroleum volumes contracted by 13.7%, 11.5% and 26.4% respectively.

The loss represented a sharp turnaround from the R2.9-billion profit reported in 2020 and arose despite a 14.3% pullback in capital investments, which declined to R15.9-billion.

The long delay in the release of the results, however, was attributed mainly to attempts to have the irregular-expenditure matter settled in a manner that allowed Transnet to avoid the audit qualification.

The delay was also prolonged by a cyber-attack on the company in July, which negatively affected Transnet for a three-week period.

The results presentation itself was also delayed for several hours on October 29 as a result of an unsuccessful attempt by Transnet to have the irregular expenditure ring-fenced from the results such that an audit qualification could be avoided.

In the event, however, no such settlement could be reached with the National Treasury or the Auditor General of South Africa ahead of its annual general meeting.

Transnet, thus, eventually released audited financial results with yet another qualification and reflecting irregular expenditure of R104-billion, down from the R131-billion recorded for 2019/20.

The audit qualification resulted in a breach of loan covenants with an outstanding balance of R19.1-billion as of September 30, 2021, and Transnet said it would engage with affected lenders to request waivers of their right to accelerating debt repayments consistent with the prior years.

A clearly exasperated Portia Derby, who is group CEO, stressed that the qualification was not as a result of any breach of International Financial Reporting Standards, but related instead to a lack of compliance with the Public Finance Management Act (PFMA).

Only South African government departments and State-owned companies are subjected to PFMA rules, which Derby suggested were undermining Transnet’s ability to compete as a business.

She said that it would continue to pursue a “practical” resolution to the irregular expenditure problem, and indicated that Transnet could well issue an updated notice to the market in the coming weeks dealing with the audit qualification.

Despite the group being more than six months into its new financial year, CFO Nonkululeko Dlamini said she could not offer specific details on the current performance of the company, which was once again in a closed period.

However, she indicated that there had been a recovery in the first six months of the current financial year when compared with the same period last year, part of which coincided with South Africa’s harshest lockdown conditions, known as Level 5.

“What we see in the new year is a significant improvement,” Dlamini said, while stressing that there had not yet been a full recovery to pre-Covid conditions.

Two German automakers this week reported that they have been heavily impacted by the global semiconductor shortage and that the problem is likely to persist beyond this year.

Volkswagen (VW) saw third-quarter vehicle deliveries decline by 26%, to 1.1-million vehicles.

“As expected, following a good first half of the year, it was no longer possible to mitigate the impact of the semiconductor shortage in the third quarter that resulted in substantial production losses and low inventory levels,” noted VW CFO Alexander Seitz as the group announced its results for the third quarter of the year.

Despite the “massive challenges caused by the impact of the Covid-19 pandemic and the ongoing shortage of semiconductors”, he noted that VW was, however, able to improve its performance in the first nine months of the year on the prior-year period.

“Our systematic reduction of fixed costs and intelligent, result-oriented sales management contributed to this result.

“We are anticipating a return to a significantly positive fourth-quarter performance compared with the third quarter,” said Seitz.

VW said it expected semiconductor capacity shortages to persist beyond the end of 2021.

The company also expected this year’s sales to be in line with last year, instead of the healthy growth originally anticipated.

Car and truck manufacturer Daimler also reported considerably lower production and unit sales owing to the global semiconductor shortage.

The group said total unit sales decreased by 25% to 577 800 passenger cars and commercial vehicles in the third quarter of the year, owing mainly to global supply constraints.

Daimler said it remained difficult to deliver an accurate forecast on how the supply situation would continue to develop

The company said it “assumed that strained supply chains and bottlenecks for key components would continue to have a considerable impact on worldwide vehicle production, also in the fourth quarter of the year”.

The group, however, also assumed an improved semiconductor supply situation in the fourth quarter compared with the third quarter, “despite limited visibility and high volatility”.

“The overriding structural shortage of semiconductors is expected to remain an issue in 2022, but should improve compared to 2021.”

Mercedes-Benz Cars noted that it now anticipated slightly lower unit sales for this year compared with the previous year.

South African new-vehicle buyers will have a choice of about 20 battery electric vehicles (BEVs) by 2023. This is a significant jump from the current four models available in local showrooms.

While electric cars have been rapidly gaining traction abroad, especially in Europe and China, South African consumers have been slow in warming to this new technology since the 2013 arrival of the country’s first BEV – the Nissan Leaf.

There are many reasons South Africans have been hesitant to invest in BEVs, including the limited travel range on first- generation electric cars, uncertainty about power supply from State-owned power utility Eskom, limited model choice and availability, as well as pretty steep price tags, compared with internal combustion engine (ICE) vehicles.

Now, however, the BEV has finally moved beyond the quirky and into the mainstream. Driving range has improved to 400 km and more, and battery prices are coming down as economies of scale are becoming a reality.

It is no longer a question of if, but rather when South Africans will drive and own their first electric vehicle.

Limited Range

There are currently only four BEVs that South Africans can buy from the showroom floor, says uYilo eMobility Programme director Hiten Parmar.

These are the BMW i3, Jaguar I-Pace, Mini Cooper SE, and Porsche Taycan. (Even though Volvo Car South Africa earlier this year received a limited order of the XC40 P8 Recharge sports-utility vehicle (SUV), there are currently no vehicles available to local customers.)

The uYilo eMobility Programme was established in 2013 as a multistakeholder, collaborative programme focused on enabling, facilitating and mobilising emobility in South Africa. uYilo is an initiative of the Technology Innovation Agency, which is an entity of government’s Department of Science and Innovation.

Parmar says South Africa sold a total of 710 BEVs from 2013 to the end of June this year. Plug-in hybrid vehicle (PHEV) sales for the same period numbered 690 vehicles. Mild hybrid-electric vehicles (MHEV) sales have reached 5 116 units.

(For the purpose of this article, the term electric vehicle, or EV, refers to PHEVs, MHEVs and BEVs.)

In comparison, in Europe, the BEV market in the European core regions grew by 147% year-on-year in the first six months of 2021, with a total of 336 000 units sold, while PHEV sales increased by 248%, to 350 000 units.

In July, Norway achieved monthly car sales volumes of 4.4% for petrol and diesel vehicles, while BEVs made up 63.2% of the sales mix, PHEVs 21.2%, and MHEVs 7.2%.

China is moving as rapidly as the European Union (EU), with the US also inching in the same direction under the leadership of Democratic Party President Joe Biden.

Vehicle maker Ford has, for example, unveiled the Ford F-150 Lightning pickup truck, the all-electric version of the most popular vehicle in the US.

The main driver of surging global EV sales is a strong move towards cleaner air and pollution reduction, supported by the necessary legislation. The EU, for example, aims to ban all nonelectric cars from 2035 onwards.

Why is SA Lagging?

Affordability has been noted as the main factor inhibiting local BEV sales, says Parmar.

Other factors include the need to create greater awareness about BEVs and BEV charging options.

For example, it is possible to charge a BEV at home most of the time, and not at public charging stations, owing to the rapidly increasing BEV travelling range.

Also, charging at night could mitigate the risk of restricted power supply from Eskom, owing to load-shedding.

“On the note of affordability, currently, customs and excise duties for ICE vehicles imported from the EU are at 18%, while EVs from all regions are 25%,” says Parmar.

“Additional to this is ad valorem duty and value-added tax.”

BEVs abroad are often sold with a number of incentives, such as tax breaks.

Another problem, adds Parmar, is that the current local BEV offerings are all premium passenger vehicle models, which means th...

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about Eskom's latest R178-billion Transmission Development Plan for 2022 to 2031, why it is important for Eskom to invest so much in the transmission grid and the risks that could hamper the implementation of the plan.

Mineral Resources and Energy Minister Gwede Mantashe finally ended a destructive near seven-year disruption to the procurement of renewable energy in South Africa, when he announced the names of 25 wind and solar preferred bidders on Thursday night.

The bidders are expected to build 2 583 MW of new generating assets, and introduce these into the country’s power-stressed grid within the coming 36 months.

The projects have a combined investment value of R50-billion and the weighted average price across both wind and solar photovoltaic (PV) projects came in at an impressive 47.3c/kWh, the lowest yet to be achieved in South Africa.

The solar PV projects had a weighted average price of 49.5c/kWh, while the wind projects came in at a weighted average price of 42.9c/KWh.

Some projects with tariffs well below the overall weighted average were not selected, however, owing to there being no grid capacity to accommodate them, with the Northern Cape and Western Cape grids said to have been “saturated”.

The projects, which are expected to reach financial close within six months, were procured under bid window five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which was officially launched in April.

By the bid-submission closing date of August 16, 63 solar PV bids and 39 onshore wind projects were submitted, with a combined capacity of 9 644 MW.

This represented a significant over-subscription relative to the 1 000 MW allocation for solar PV and the 1 600 MW allocation for onshore wind under BW5.

Some commentators suggested that the high level of over-subscription was an opportunity for government to procure more than the 2 600 MW allocated to BW5, to help ease the country’s supply constraints and to lock-in prices bid ahead of supply-chain pressures that had since placed upward pressure on key components.

However, Independent Power Producer (IPP) Office CEO Bernard Magoro said that the procurement was always bound by the allocation outlined in the bid documentation and no consideration was, thus, given to procuring above that allocation.

“The documents were very specific,” Magoro said, noting that government limited itself to the 25 projects as adding even one more would have resulted in the 2 600 MW threshold being breached.

Mantashe added that government looked forward to more competition and reduced prices in BW6, when another 1 600 MW of onshore wind and 1 000 MW of solar PV would be sought.

The following projects were named as preferred bidders:

Coleskop Wind Energy Facility;

San Kraal Wind Energy Facility;

Phezukomoya Wind Energy Facility;

Brandvalley Wind Farm;

Rietkloof Wind Farm;

Wolf Wind Farm;

Beaufort West Wind Facility;

Trakas Wind Facility;

Sutherland Wind Facility;

Rietrug Wind Facility;

Waaihoek Wind Facility;

Dwarsrug Wind Facility;

Grootfontein PV 1;

Grootfontein PV 2;

Grootfontein PV 3;

Grootspruit Solar PV Project;

Graspan Solar PV Project;

Sannaspos Solar PV Project;

Du Plessis Dam Solar PV 1;

Kentani Solar Facility;

Klipfontein Solar Facility;

Klipfontein 2 Solar Facility;

Leliehoek Solar Facility;

Braklaagte Solar Facility; and

Sonoblomo Solar Facility.

“A noticeable development is that we have preferred bidder projects in provinces not in previous renewable-energy bid windows,” Mantashe said, highlighting that seven of the projects are located in the Free State and one KwaZulu-Natal.

LONG WAIT & MORE DELAYS

The 25 projects are also the first to be procured under the REIPPPP framework since 2014, when 27 IPP projects were last formally procured.

Those developments did not reach financial close until 2018, however, after Eskom’s then leadership refused to sign the required power purchase agreements (PPAs) on the basis of a claim that the utility had returned to a surplus operating position.

Eskom, which remains the single buyer of the electricity procured under the REIPPPP, currently estimates the supply deficit to be between 4 000 MW and 6 000 MW.

The utility’s current l...

The Department of Transport (DoT) anticipates that foreign nationals will soon be unable to drive South African registered trucks while in possession of foreign professional driving permits (PDPs).

The DoT in April published an amendment to the Road Traffic Act regulations, which incorporates a provision that a PDP issued by a foreign country will only be applicable to a vehicle registered in that country.

“Once this regulation comes into effect, a foreign national will, therefore, not be permitted to drive a South African registered truck using a foreign PDP.

“The amendments to the regulations are now before Parliament for comment as required by law, and we anticipate publishing amended regulations by the end of November.”

The DoT responded to the renewed closures of national roads (the N9, N10 and N3) by South African truck drivers and small truck operators this week, in protest against the employment of foreign nationals as truck drivers at South African companies.

In addition to the amended regulations, the DoT says it is also strengthening the process of validation and verification of immigration documents, work permits and foreign drivers’ licences.

“In the case of drivers’ licences, a synchronised process between countries is proposed. This will ensure that operators are afforded the same treatment in the dispatching and receiving countries.”

“Our national Road Traffic Act requires foreign operators to make use of an operator permit/card,” adds the DoT.

“The rationale for such a provision is to enable government to manage situations where an operator does not follow the relevant laws in South Africa.

“These cards will have a one-year validity period and non-compliance with relevant laws will result in the deregistration of the operator in question.”

Transport Minister Fikile Mbalula has expressed his appreciation for “the peaceful manner in which the [truck drivers] conducted their protests”.

“We have invited their leaders to sit around the table in order for them to have a better appreciation of the measures we are putting in place in addressing their demands.

“We are committed to ensuring that the interventions, which also affect other sectors in a similar manner, will be given the necessary impetus within the confines of the law.”

President Cyril Ramaphosa has mandated an inter-Ministerial committee, led by Minister of Employment and Labour Thulas Nxesi, to address the concerns raised by the protesting parties.

“In tackling these challenges, we are mindful of the economic impact of any disruption on supply chains, and freight logistics across the country and the Southern African Development Community region,” notes the DoT.

The department says it has made “a firm commitment” to address the matter in a sustainable manner.

“Some of these interventions may, however, require a longer runway as they may require legislative amendments.”

The National Energy Regulator of South Africa (Nersa) has notified the Gauteng division of the High Court that it will oppose Eskom’s application to have the regulator’s decision to reject the utility’s fifth multiyear price determination (MYPD5) revenue application reviewed and set aside.

Eskom approached the court on October 15 after the regulator voted, on September 30, to reject Eskom’s MYPD5 submission for the three financial years from 2022/23 to 2024/25.

The application was submitted to Nersa on June 2 and, prior to the rejection, was expected to be adjudicated before year-end, for implementation on April 1.

Nersa’s rejection was based on the fact that the MYPD methodology had expired and should be changed ahead of the next tariff adjustment to reflect developments in the electricity supply industry, including the impending unbundling of Eskom.

Nersa said Eskom's MYPD5 application was based on the MYPD4 methodology, "whose applicable control period is ending on 31 March 2022".

“After due consideration of the rationality and legality of applying an expired MYPD4 methodology and whether this was in the public interest, the Energy Regulator rejected Eskom’s MYPD5 application," Nersa said in a statement.

Nersa then requested Eskom to submit a one-year interim application for the 2022/23 financial year, preferably based on the principles of the new methodology that was under consideration.

Ahead of the MYPD5 rejection, Nersa released a consultation paper on September 24 outlining the principles of a possible new methodology, which Nersa said should be premised on a “cost-to-serve approach” and based on the principles of activity-based costing, type-of-service costing, and marginal pricing to set tariffs

The paper stated that the current methodology had failed to provide price stability, with tariffs having surged by 175% over the past decade, in a context where consumer inflation had remained within a 3% to 7% band.

A closing date of October 22 was set for written comments on the methodology, and Nersa also hosted public consultation workshops in October on the matter.

In its submission, Eskom noted that a court process had been initiated to ensure that Nersa made a revenue decision that could be implemented on April 1, using the prevailing methodology.

The utility also appealed for “incremental” changes rather than a “big bang approach” and emphasised the need for transitional mechanisms.

Professor Anton Eberhard, of the Power Futures Lab at the University of Cape Town’s Graduate School of Business, argued in his submission on the paper that it would be “imprudent and destabilising” for Nersa to introduce a radically new regulatory methodology in the midst of an existing MYPD.

“Internationally, regulatory best practice is for consultative papers on regulatory reforms to be introduced a year or two or three before implementation,” Eberhard said, cautioning that Eskom would “almost certainly win its court case”.

In its review affidavit, meanwhile, Eskom described the rejection of its MYPD5 submission as “patently irrational and unlawful” and requested that it be set aside.

Eskom is also asking the court to grant it urgent interim relief in the form of an order directing Nersa to process the 2022/23 revenue application under the existing tariff methodology so that a “lawful tariff” can be determined for its upcoming financial year, which begins on April 1.

Such relief is necessary, Eskom argues, to provide a lawful route to determining an Eskom tariff for the 2022/23 financial year in the limited time remaining before March 15, when that tariff has to be tabled in Parliament in accordance with the requirements of the Municipal Finance Management Act.