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The South African National Roads Agency Limited (Sanral) and its N3 toll concessionaire (N3TC) recorded almost R100-million in losses and damage during the July civil unrest in KwaZulu-Natal, and some other parts of the country, says outgoing Sanral CEO Skhumbuzo Macozoma.

He says Sanral suffered R50-million in lost toll income during the period, with N3TC losing R30-million in toll income.

The damage to infrastructure and additional security costs over the period reached R12-million.

N3TC recorded R7.5-million in damage, largely at the Mooi River toll plaza.

“We asked [National] Treasury for an unseen budget adjustment allocation of R62-million to cover the costs we have incurred.

“We also processed the force majeure application for N3TC for them to be able to claim their losses from insurance,”says Macozoma, who requested, and has been granted, a leave of absence from November 17 until his contract ends on November 30.

Sanral has appointed Lehlohonolo Pitse, the company’s current chief audit executive, as acting CEO, with effect from November 17 and until a new CEO takes up the position. The board is said to be at an advanced stage of the CEO recruitment process.

Macozoma says the “history of targeting key Sanral facilities came in very handy” as the agency worked to absorb the events in July.

The Mooi River toll plaza and parts of the N2 North Coast are frequent targets during incidents of civil unrest.

The history related to these events assisted Sanral in responding to the July unrest “a lot more rapidly than would have been the case otherwise . . . because we had existing platforms to take advantage of.

“Established systems for surveillance of incidents on national roads and at toll facilities also enabled the collection of real-time data – and evidence – that we were then able to use in our response plan.”

Macozoma also praises local and provincial government, Sanral concessionaire partners and toll operators for their part in addressing the unrest as it spilled over onto KwaZulu-Natal’s freeway network.

Sanral’s routine maintenance contractors were also instrumental in assessing damage to the road infrastructure, while tow-truck operators were deployed to remove blockages from the road as rapidly as possible.

The bill from the July unrest added to the one Covid-19 had already delivered to Sanral, with the roads agency recording a R640-million loss in toll revenue during the earlier, more strict lockdowns.

However, says Macozoma, the “bounceback was a lot more positive that we expected”.

“Once the lockdown reached levels 3 and 2, we got a lot more traffic, and by level 2 were at well over 95% of pre-Covid travel on our roads again.”

Macozoma spoke at an October Transport Forum event

The South African government is set to establish a high-level technical workstream, which will work under the direction of a Cabinet subcommittee, to evaluate possible concessional finance offers that could be made in support of the country’s just energy transition strategy.

The workstream is yet to be formally assembled, but Forestry, Fisheries and the Environment Minister Barbara Creecy says it will include finance specialists from the National Treasury, the Department of Public Enterprises, the Department of Forestry, Fisheries and the Environment, Eskom and possibly others.

The workstream will advise the Cabinet committee on whether the climate finance offers that could arise, after South Africa tables its proposed ‘Just Energy Transition Financing Facility’ with potential funders on the sidelines of the main COP26 climate talks, are “good or bad” for the country and Eskom.

The debt-laden utility is hoping to raise R400-billion over the coming ten years for transition projects in generation, transmission and distribution.

Cabinet has endorsed the facility, first proposed by Eskom, but has broadened its focus beyond the State-owned utility and the electricity sector to include transition projects in the automotive and hydrogen sectors.

The Cabinet subcommittee is made up of Ministers drawn primarily from the economic cluster and includes Creecy, Finance Minister Enoch Godongwana, Mineral Resources and Energy Minister Gwede Mantashe, Public Enterprises Minister Pravin Gordhan, Science and Innovation Minister Blade Nzimande and Trade, Industry and Competition Minister Ebrahim Patel.

Creecy tells Engineering News & Mining Weekly that the finance workstream is one of five established under the aegis of the Cabinet subcommittee, with the others focusing on Eskom, green hydrogen, electric vehicles and the regulatory and policy support needed for the transition.

The finance workstream, Creecy says, will seek to ensure “synergy” across government on its approach to any possible concessional finance for the transition and ensure that National Treasury has ongoing visibility and input on any possible transactions.

The workstream will have to answer the “complex questions” on whether or not the offers are truly concessional in nature, as well as conditionalities and whether the mix between grants, concessional loans and commercial finance is appropriate in the context of South Africa’s current debt-to-gross domestic product ratio, which has breached the 80% level.

It will also have to assess whether or not the funding can be absorbed under the current Eskom guarantees envelope, should the lenders demand government guarantees.

Creecy, who will lead the South African delegation at COP26, stresses that she does not expect to return from Glasgow, Scotland, with signed and sealed deals.

She does, however, intend to have several meetings with potential donor governments and multilateral lending institutions where she will outline the “first phase” of the financing facility, which will have a strong Eskom bias as a result of the work the utility has already done to prepare a pipeline of transition projects.

The facility has been conceptualised as a multitranche, multiyear facility, funded by a multilender syndicate, designed to secure concessional loan finance for decarbonisation projects, as well as grants that could be used to support workers, communities and firms that are vulnerable to a transition away from coal.

Creecy says that South Africa aims to ensure that climate finance instruments include a mix of grants, concessional loans and private investment that avoids further exacerbating either the national debt or Eskom’s debt.

While South Africa remains unhappy with the scale of climate finance being made available to support mitigation and adaptation projects in developing countries, it nevertheless believes such finance could become more accessible after COP26.

The country’s proposed facility has also reportedly received a positi...

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the final countdown to COP26, the South African government's negotiating stance and its plans to canvass a just energy transition financing facility.

The intensifying semiconductor shortage will slow the post-Covid-19 global recovery of light-vehicle sales over the next two years, says S&P Global Ratings in a newly published report.

"In our revised scenario, we now expect light-vehicle sales will increase more moderately by about 2% to 4% in 2021, year-on-year, compared with the projections of 8% to 10% we made earlier this year," says S&P Global Ratings credit analyst Vittoria Ferraris.

This translates to sales just below 80-million units in 2021, compared with between 83-million and 85-million units in S&P Global Ratings’ previous projection.

“We expect the chip shortage will extend into 2022, which has lead us also to revise downward our projection of light-vehicle sales for 2022 to 84-million units, from 87-million in our projection earlier this year,” says Ferraris.

“We nevertheless assume supply constraints will ease gradually, leading to a recovery of light-vehicle sales to 90-million units by the end of 2023.

"In our view, the crisis highlights the critical importance of supply-chain management for original equipment manufacturers [vehicle manufacturers] and has exposed areas of vulnerability.”

Despite a slower sales recovery overall, Ferraris adds that S&P Global Ratings projects that electrification will accelerate to make up between 7% and 10% of the global light-vehicle fleet in 2021, and between to 15% to 20%, in 2025.

The spot rate of booking a 40-foot container from Shanghai to Los Angeles hit $10 229 the first week of August, up 238% from the same time a year prior, according to Drewry, a maritime research consultancy.

This is not a function of insufficient capacity, but rather of a severely imbalanced system, says Investec business logistics and pricing analyst Denys Hobson.

“This is due largely to the Covid-19 pandemic.

“You have around 12.5% of global shipping capacity sitting waiting outside ports.

“It’s not that there isn’t enough capacity or containers – it is about where those containers and capacity are in the world.”

Consumer demand in the US market has surged during the Covid pandemic, with people spending a larger portion of their income on goods in lieu of activities such as travel, explains Hobson.

A large percentage of these goods come from China.

This time of the year is also the peak shipping period, ahead of Christmas and Black Friday.

Yet another challenge is that China is suffering from power rationing as the country battles high emission levels, increased demand from manufacturers, coal supply constraints and rising costs, says Hobson.

This has removed a significant portion of manufacturing capacity from the value chain.

Another significant problem, however, is that a large amount of the world’s shipping container population is caught up in the US.

Around 70 vessels are, on average, waiting outside the Port of Los Angeles to discharge their cargo, for example.

Combined, all of these factors mean that US retailers are struggling to stay ahead of domestic demand while maintaining their ideal inventory levels, especially with the year’s peak shopping period just around the corner.

This also means that shipping lines are releasing capacity from other trade routes to try and feed US demand.

“The vessels sitting outside Los Angeles equate to around 500 000 twenty-foot equivalent units (TEUs),” notes Hobson. “They are delayed for around two weeks, and the transit time from Shanghai to Los Angeles is about two weeks, so lead times are now doubling.

“A lot of ports in China are also experiencing longer dwell times.

“When these containers finally do get offloaded in the US, there are not enough truck drivers to deliver the goods, and/or there is significant railway and port congestion. This means that container circulation back to China for new exports to the US is not happening fast enough, which means that we have this continuous imbalance.”

The situation is exacerbated whenever a Chinese port closes owing to Covid-19 cases, with vessels then having to wait longer to load and offload cargo and empty containers.

“What some shipping lines then start to do is to omit ports, as they are not willing to wait outside a port for that length of time as they try to maintain their sailing schedule,” explains Hobson.

“They need to save on costs and to recover their schedules, so they go to another port where they load export containers, and offload import containers.

“This, however, creates unpredictable and often erratic shipping schedules.”

What About South Africa?

“We have not won anything during this period,” says Hobson. “We have, in fact, seen that shipping lines have taken out capacity on the South African trade route, phasing out larger vessels for smaller ones, or removing services altogether.”

“And, with our biggest trade route also being to the Far East, we are also caught up in this global imbalance.”

The recent spate of looting in July, the subsequent cyberattack on Transnet, and poor port efficiency, especially at Durban, have, however, all added impetus to the move to cut shipping capacity to South Africa.

“The Far East trade route to South Africa is on an eight-week rotation," says Hobson.

“The looting and cyberattack all served to delay vessels in discharging their goods.

“This means that these vessels were then also delayed going back to China.”

“To try and catch up time and deliver time sensitive cargo as speedily as...

The continued absence of a long-term vision for South Africa’s energy sector is creating a policy “vacuum” and undermining investment, the 2021 edition of the South African Energy Risk Report states.

Published by the South African National Energy Association (Sanea), the report highlights that the country still has no overarching policy that offers an integrated approach to the energy sector.

Neither an integrated energy plan, or a gas plan had yet been finalised making it impossible to align these with other key policies, including the Integrated Resource Plan (IRP), the country’s revised Nationally Determined Contribution (NDC) on decarbonisation and the emerging just energy transition plan.

“This drives high levels of uncertainty in the market and discourages investment (foreign and local), hampering decision making and allowing parochial interests to slow progress because of conflicting stakeholder objectives.”

The resulting lack of focus, the report adds, means that South Africa’s limited economic resources are sparsely distributed across too many initiatives, some of which are not viable or scalable.

The consequence is “shallow change in numerous areas, rather than deep change in a select few areas” that could help shift the energy sector on to a new trajectory and realise the “new gold rush” in green energy identified in the 2020 edition of the report.

“Integrated infrastructure plans are not in place, meaning that sector coupling, one of the key opportunities of the energy transition to lower-carbon technologies, is not being prioritised.

“For example, to retain jobs in the manufacturing sector, the energy-transportation nexus should be highlighted as a key mechanism for clean molecule development and localisation of new value chains.”

The expert group assembled by Sanea to review the prevailing energy risk environment, in light of changes that had arisen in the environment since 2020, said that uncertainty had escalated over the past year.

The report attributed this escalation primarily to Covid-19, which dramatically lowered global and domestic energy demand in 2020.

“Covid-19 has increased the levels of uncertainty and its effects will be felt for years to come. The opportunity for post Covid-19 economic stimulus, using clean energy and its access to capital markets, has not been sufficiently leveraged.”

That said, the report, which is the fourth to be published by Sanea, also points to some areas of progress over the past 12 months.

These include the regulatory reform enabling distributed electricity generation plants of up to 100 MW to be built without a licence, the publication of the National Climate Change Bill, the release of the 2019 IRP and the depositing of an updated NDC with the United Nations Framework Convention on Climate Change.

These reforms were not always backed by “timeous implementation”, however, reducing the impact of the changes.

The expert group, which included members from both the private and public sectors, also identified two new uncertainties that had emerged during 2021, namely regional geopolitics and the outlook for energy storage technologies, including green hydrogen and other clean molecules.

The group concluded that unless the identified risks were addressed urgently, several adverse impacts could arise, including continued weak economic growth; a failure to meet energy demand; an inability to raise sufficient capacity for investment; a threat of carbon tariffs being imposed on exports; a deepening skills deficit; a rise in parochial interests; and escalating civil unrest.

Several opportunities could flow from managing the risks, however.

These ranged from reduced emissions and higher levels of localisation and beneficiation, through to improved investor confidence and the repositioning of South Africa as a leader in new and emerging markets, such as green hydrogen.

South Africa aims to meet with other governments and multilateral finance institutions on the sidelines of the upcoming COP26 gathering to progress talks on raising concessional funding, in phases, for a Cabinet-endorsed ‘Just Transition Financing Facility’ to fund green projects in the electricity, automotive and hydrogen sectors.

As part of the first phase, South Africa is proposing a multitranche, multiyear facility, funded by a multilender syndicate, to fund decarbonisation and green projects.

Cabinet has decided that the facility will support the transition from coal to renewable energy in the electricity sector, expand and strengthen the country’s transmission and distribution grids, as well as Eskom’s repowering and repurposing plans for decommissioned coal stations.

In addition, it will be used to stimulate a shift in the domestic automotive sector’s manufacturing profile from internal combustion engine vehicles to electric vehicles (EVs), as well as to initiate the development of a large green hydrogen industry.

Forestry, Fisheries and the Environment Minister Barbara Creecy says the facility does not feature as part of South Africa’s formal COP26 negotiating mandate, which will focus on seeking a breakthrough for the financing of both mitigation and adaptation projects in developing countries, as well as resolving a series of outstanding issues arising from the 2015 Paris Agreement.

However, the Just Transition Financing Facility will be a key feature of South Africa’s informal engagements during the event, which will take place in Glasgow, Scotland.

“The informal agenda relates to what we are able to achieve for our own just transition and our own country through the wide variety of governments, multilateral finance institutions and other institutions that will be present at COP,” Creecy explained during a meeting of the Presidential Climate Commission (PCC) on Thursday.

She said South Africa’s revised Nationally Determined Contribution (NDC) had already indicated the country’s willingness to play its part in addressing the global threat of climate change.

“But in that context, we have a specific national interest and the specific national interest we have in this instance is to try and secure access to multilateral financing to assist us to achieve the ambitious target that we have set as a country.”

South Africa has made a progressive revision to its NDC ahead of COP26, with a new 2030 range of 420- to 350-million tons of carbon dioxide equivalent (Mt CO2-eq) for 2030, which represents a marked improvement on its 2015 pledge of 614 Mt CO2-eq to 398 Mt CO2-eq.

Creecy stressed that South Africa’s ability to reach the lower figure outlined would depend largely on the level of concessional funding, both grants and loans, it was able to secure from developed countries.

Eskom had already published a just energy transition project pipeline that included generation, transmission and distribution projects with a combined value of R400-billion and The Presidency’s Rudi Dicks indicated that the cost of a transition to the manufacture of EVs could involve an initial investment of R150-billion in the automotive sector.

Another $119-billion to $145-billion would have to be invested over the coming 15 to 25 years to develop a large-scale green-hydrogen sector.

For the electricity component, which is the most advanced, South Africa is proposing staggered disbursements under the facility, through three tranches, spread over a 15-year period from 2022 to 2039.

Disbursements would also be performance based and governed by a use-it-or-lose-it principle so as to prevent funds being sterilised when projects failed to materialise.

The lender group could also choose to opt in or out so as to ensure that no project is declined should there be a conflict with a lender mandate, including possible restrictions on investing in gas projects, which feature in Eskom’s pipeline.

Creecy reported that a finance workstream, guided by Cabinet Mini...

A transition away from fossil fuel-based electricity to renewable-based electricity in South Africa can contribute significantly to job creation, growth and increased availability of electricity to support other commercial activities, four investment and energy specialists noted during a discussion on October 19.

Investment management company Futuregrowth portfolio manager and head of unlisted credit Paul Semple said the move away from reliance on a monopolistic and coal-based energy sector to new sources of generation located around the country would need to involve the private sector, which has capital to invest in the energy sector.

South Africa has rich renewable energy resources and lower seasonal variation of its renewable energy sources of wind and solar compared with many other countries, which makes the integration of these sources into the national electricity grid easier. This presents an opportunity to include large amounts of variable renewable sources into the grid cost-effectively, added Futuregrowth investment analyst Bongile James.

Beyond conducive renewable energy resources, the country also has significant mineral resources, such as vanadium, nickel, copper and aluminium, besides others, that can create new opportunities for industrialisation in the country, he noted.

EE Publishers founder and energy expert Chris Yelland highlighted that energy generation distributed across South Africa, especially in areas that have seen little investment owing to limited energy availability and affordability concerns, would enable commercial activity to be developed in these regions, which could contribute significantly to enabling commercial activities, such as agriculture and agroprocessing, as well as the design, manufacture, installation, operation and maintenance of renewable energy generation plants.

"Small and medium-sized businesses have higher job intensity per kilowatt (kW) than most other generation technologies. This means that the job creation potential of a transition is enormous," he said.

Yelland added that the world was undergoing a revolution in energy technology, and that things were changing faster than ever before. This meant that South Africa should not lock itself into technologies that may be obsolete or lead to stranded assets, but should also not dismiss energy technologies out of hand, such as nuclear energy.

However, costs remain important. Renewable energy and energy storage technologies form the dominant parts of the Integrated Resources Plan (IRP) 2019, and are the least-cost options.

While flexible generation capacity to mitigate the variability of renewable energy does add costs, when combined with the low cost of wind and solar, it is the least-cost option to deliver the energy needs of South Africa for the next ten years.

"Apart from the uncertainty around 1 500 MW of new coal power and 2 500 MW of hydropower set out in the IRP 2019, a blend of renewable sources, energy storage and flexible generation sources is the least-cost option, fulfils environmental needs, including having the lowest water use of IRP 2019 technology choices and supports South Africa's commitments to the Paris Climate Accord, and is the right solution for South Africa," Yelland said.

James further pointed out that the levelised costs for a combination of wind, solar and battery storage were about R1.55/kWh, while solar photovoltaic and battery storage costs were about R1.88/kWh, compared with nuclear at a cost of R2.50/kWh and coal at R1.68/kWh.

"This shows that a combination of renewable energy generation and storage can be an affordable solution," he said.

Yelland added that costs had to be considered in the context of long-term sustainability and affordability, highlighting that the R1.50/kWh bid by offshore natural gas providers under the Risk Mitigation Independent Power Producer Procurement Programme was linked to various indices including the rand:dollar exchange rate and the dollar price of liquefied natu...

The National Energy Regulator of South Africa (Nersa) has confirmed the receipt of Eskom’s High Court application, through which the utility is seeking to have the regulator’s decision to reject its fifth multiyear price determination (MYPD5) revenue application reviewed and set aside.

However, Nersa has yet to decide whether it will be opposing the application.

Eskom approached the courts on October 15 after the regulator voted, on September 30, to reject its MYPD5 submission, which covers the three financial years from 2022/23 to 2024/25.

Nersa rejected the application on the basis that it would be overhauling the MYPD methodology used as the basis for preparing the application, which was submitted to Nersa in June.

On September 24, Nersa released a consultation paper on a possible new methodology, indicating that the current methodology had failed to provided price stability and that a new approach was also required owing to changes under way in the electricity supply industry, including the impending unbundling of Eskom.

A closing date for written comments has been set at October 22 and Nersa hosted its first virtual public consultation workshop on the proposed new methodology on October 18, with another one planned for October 22.

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

Eskom is 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 the 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.

Eskom argues that the interim relief sought by Eskom is of national importance because without a validly determined tariff for 2022/23, Eskom will be financially unsustainable, as it will have “zero revenue” for the 2022/23 financial year.

“The required revenue to allow Eskom to continue operating will be more than the total allowable revenue for the 2021/22 financial year of over R260-billion.

“Moreover, because more than R350-billion worth of Eskom debt is linked to over R900-million in interlinked national government guarantees, if Eskom’s finances collapse, the finances of the entire national government are at risk,” the utility’s affidavit reads.

In response, Nersa says it is studying the application and will “advise whether it will be opposing the judicial review application within the required time frame and process”.

The lack of reliable electricity supply is not only leading to lost production and increased costs across South Africa’s shrinking manufacturing sector, but has left enterprises unable to plan, invest and grow, Manufacturing Circle executive director Philippa Rodseth warned on Tuesday.

Speaking at the start of a two-day electricity forum hosted jointly with the Industrial Development Corporation to discuss collaborative solutions to the ongoing problem, Rodseth said load-shedding remained an area of great concern, as did inadequate investment and poor maintenance by municipal distributors.

She homed in specifically on the deterioration of services in the Gauteng industrial hub of the Vaal Triangle, where the Emfuleni local municipality was currently under administration.

The region was at a “tipping point” and at risk of becoming a “rust belt”, with significant plant closures, rising unemployment and crime, as well as low rates of investment.

The electricity crisis, and its implications on manufacturing, featured strongly during the forum’s opening panel discussion, with Actom CEO Mervyn Naidoo arguing that supply disruptions have dampened demand for manufacturing products, which had resulted in factory closures and job losses.

Actom itself had been forced to downsize and was currently employing 2 000 fewer people than it did four years ago, when about 8 500 people worked for the group.

He warned, too, that industrial capacity would not automatically recover if demand increased, as factories required specialist skills that had been lost as a result of the electricity-induced economic slump.

Navitas Energy’s Mike Levington, who also represents business in various energy policy forums and is a member of government’s green hydrogen panel, attributed the ongoing failure to address the electricity crisis to a lingering gap between “our political economy and our real economy”.

“I think everyone knows that we have a shortfall of 4 000 MW to 5 000 MW of electricity supply but even though we Gazetted the Integrated Resource Plan in October 2019, we are yet to procure a single new megawatt of electricity.

“Now, we have very clear policies and processes by which we procure and yet there seems to be a set of agendas that . . . stop what would be obvious for the economy from proceeding.”

ANY JUST TRANSITION RELIEF?

Eskom GM Mandy Rambharos saw part of the solution lying with the utility’s emerging just energy transition strategy, which had received Cabinet backing and would be presented to climate financiers at the upcoming COP26 climate talks as a compelling decarbonisation investment proposition.

Eskom would use the event to highlight that it would be cheaper, at $7/t, to implement decarbonisation projects in South Africa than would be the case in Europe, where the cost of mitigating a ton of carbon dioxide had increased to above $200/t.

The reason, Rambharos explained, was because the electricity sector, which was still dominated by coal in South Africa, was cheaper to decarbonise than the harder-to-abate sectors of mobility and green industry, which were emerging as investment focus areas in many developed countries currently.

Eskom had identified a R400-billion pipeline of transition projects across generation, transmission and distribution, including R120-bilion for 8 000 km of transmission lines and R30-billion for the strengthening of critical distribution corridors.

“Much of the funding for the Eskom financing facility that we've put out to climate financiers is not for generation but for distribution and transmission . . . because you can build all the generation capacity you want, but if you don't have the infrastructure to evacuate it there's no point.”

National Cleaner Production Centre CEO Ndivhuho Raphulu said the transition had to be underpinned by efficiency and competitiveness, which were prerequisites for manufacturing productivity.

Ensuring such an outcome would require greater integration of policies, planning and i...