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A joint letter sent to the Independent Power Producer Office (IPP Office) on September 23 by organisations representing local industry, raised several concerns about the prequalification process launched ahead of the inaugural Independent Transmission Project (ITP) procurement programme. In the letter, the Powerline and Substation Association, the Steel and Engineering Industries Federation of Southern Africa and the Manufacturing Circle described the technical and financial criteria included in the request for qualification (RFQ) as onerous, and also not enabling of participation by local industry.

Following the RFQ submission deadline, which was also September 23, the IPP Office confirmed that 17 entities had made submissions to be prequalified to bid to build the 1 164 km of powerlines and 2 630 MVA of transformation capacity across seven corridors allocated to the first phase of the ITP procurement. It is not immediately clear from the responses, however, what role local industry will play in manufacturing the components required for the projects and in building the infrastructure.

Having confirmed receipt of the letter, the IPP Office told Engineering News Editor Terence Creamer that it would be responding to the three organisations, while also stressing that it was committed to ongoing engagements with all ITP stakeholders, including local industry. In addition, it provided responses to several other questions raised about the potential of the ITP programme, together with the larger Transmission Development Plan, to stimulate domestic industrialisation. The questions posed by Engineering News and the responses provided by the IPP Office are outlined below:

Engineering News: Would you agree that the scale of the capital expenditure required on the grid represents an industrialisation opportunity? And could you quantify the opportunity and indicate how the ITP component of that build programme will seek to leverage this potential?

IPP Office: Absolutely, through the country's ten-year electricity grid infrastructure development drive, about R440-billion ($25-billion) of investment is expected to be injected into the South African economy, thus creating a huge industrialisation opportunity for South Africa. It is government's view that by introducing the ITP procurement programme we have an unprecedented and accelerated opportunity to propel South Africa's industrialisation and reignite local manufacturing, localisation and industrial development.

The estimated quantum of the ITP procurement programme's contribution to the overall electricity grid infrastructure investment will be determined as part of the medium- to long-term ITP procurement programme pipeline that will be announced by the Minister next year. It is also worth mentioning that the ten-year electricity grid infrastructure development will enable the addition of 30 GW and 56 GW of new electricity generation capacity by 2030 and 2034, respectively, thus leveraging another industrialisation opportunity in the electricity generation space.

How would you respond to the letter's claim that the technical and financial qualification criteria in the RFQ can be satisfied only by a handful of international companies, with no single South African company likely to qualify?

As this is the first of its kind private procurement programme for South Africa, the first phase of the ITP programme is designed to leverage the experience of developers who have designed and constructed transmission infrastructure projects within the ITP framework. Having regard to the need to ensure that the programme leverages on this past experience, the technical pre-qualification criteria required that any member of the respondent should demonstrate past experience of having undertaken such projects itself or of having contracted either a third party to perform the functions of an engineering, procurement, and construction (EPC) contractor and/or operations maintenance of transmission infrast...

Engineering News editor Terence Creamer discusses the industrial policy interventions being considered by government to salvage industries, such as the steel and ferrochrome sectors, that are at risk of closure.

Transnet CEO Michelle Phillips has expressed optimism that some locomotives that have been standing idle for years amid a long-running dispute with the China Railway Rolling Stock Corporation (CRRC) may be returned to service.

This, after the State-owned company secured a court order to attach components that have hitherto been held in warehouses.

Phillips told delegates to the Joburg Indaba that the attachment order was in effect and followed an earlier court case in which Transnet succeeded in securing an interdict preventing CRRC from selling or relocating the spare parts it was holding for Transnet at two Pretoria warehouses.

She said a full inventory of the parts was currently under way, with some having been held for locomotives that were not built by the time CRRC's contract, which featured heavily during the commission of inquiry into State capture, was declared "irregular and illegal".

Other components were required for the maintenance of locomotives that had already been integrated into the Transnet fleet.

While there had been various attempts to settle the matter, as was done with other original-equipment manufacturers (OEMs) whose contracts were also declared illegal, concurrent disputes with the South African Revenue Service and the South African Reserve Bank have left the CRRC dispute unresolved.

As a result, hundreds of locomotives that require maintenance have been rendered inoperable, owing to the fact that the spare parts were not being released.

"So, the hope is that once we have completed [the inventory] process, we would then be able to use some of those parts to get some of these long-standing locomotives back onto the network."

Transnet has appointed BT Alstom, which is also delivering new locomotives of its own to Transnet, as a "step-in" OEM to assist it in returning the long-standing CRRC locomotives to service.

"We have, in fact, put some of those locomotives into the network already.

"The challenge has been that, as we are putting locomotives in, some of them are coming out, particularly the Chinese ones … [and] the hope is that these parts that we've now attached can be used to get even more locomotives into the system," Phillips said.

Electric vehicle (EV) full maintenance lease business Everlectric has opened shop in Cape Town.

Businesses can lease commercial EVs from the company, which will also provide the charging infrastructure and software support required to ensure the work horses do not run out of juice.

Everlectric co-founder Wesley van der Walt says the EV-as-a-service company, which has its roots in Pretoria, decided to expand to the Western Cape in support of its customer base.

Client companies include UPD, Nightwing Couriers, DSV, FedEx and Woolworths.

At this point, Everlectric largely supplies its clients with the smaller Maxus panel van - the eDeliver3 - from Chinese manufacturer SAIC Motor.

"This is our bread-and-butter product," notes Van der Walt. "The typical, real-life range on an eDeliver3 before it needs recharging is 250 km."

As the evolution of EVs continue, however, larger commercial EVs, like 4 t or 8 t vehicles, are also becoming increasingly attractive, he adds.

Everlectric's business owners are also the official Maxus commercial vehicle distributor in South Africa.

Everlectric currently manages a fleet of 200 vehicles nationwide, with about 40 of these operating in Cape Town.

Van der Walt says Durban will most likely be the next expansion node for the company, which opened its doors in 2020.

"Companies typically start with us with one vehicle, investigating whether EVs make sense," he notes.

"Now we find that they are coming back to electrify the rest of their fleet."

A number of Maxus panel vans in the Everlectric fleet have already traveled more than 150 000 km, "with no problems at all", says Van der Walt.

"We expect them to go to at least 400 000 km."

But what happens once the vehicles in the Everlectric fleet hit that 400 000 km mark?

"We expect the usable range to decrease to perhaps 200 km," says Van der Walt.

"We can then look for uses for EVs with this range, or we can deploy the batteries as storage, or we can recycle the batteries."

Van der Walt says Everlectric's goal is to have a vehicle parc of about 1 000 by 2030.

A new report by the Centre for Development and Enterprise (CDE) calls for additional policy reforms to tackle the country's "unemployment catastrophe", which is excluding more than 12.5-million people who want to work from participating in the economy.

As things stand, fewer than four in every ten working age adults is employed, the report shows.

The proposed reforms include politically sensitive proposals in relation to labour-market rules, including halting the extension of bargaining council agreements to firms not party to them, as well as the scrapping of sector education and training authorities (Setas) in favour of private training initiatives.

The proposals largely contradict those contained in the African National Congress' (ANC's) most recent economic policy statement, unveiled a day earlier by President Cyril Ramaphosa, with the CDE especially critical of the ANC's proposal to scale up public employment programmes.

In fact, CDE executive director Anne Bernstein argues that such schemes, which offer temporary work opportunities, tend to divert the focus away from the structural reforms required to create the millions of permanent jobs needed to address South Africa's jobless crisis.

"Work opportunities are not real jobs," she asserts, noting that it takes 2.8-million such positions to result in 250 000 full-time jobs.

The two reports are also at odds in relation to small business development, with CDE arguing that at least half of existing yearly funding, which it pegs at R6-billion, should be redirected to the private sector to support enterprise development by means of a competitive process.

The recommendations included in the CDE report are captured under the four themes of labour-market reform, fixing the skills system, unleashing the dynamism of small business, and removing obstacles to informal sector growth.

Besides halting the practice of extending bargaining council agreements, the CDE's other labour market proposals include a call for an amendment to the Labour Relations Act to allow a 12-month probation period for new workers to make dismissals easier, as well as a recommendation to remove restrictions on labour brokers.

It also repeats an earlier CDE call to establish an experimental special economic zone at Coega, in the Eastern Cape, where some labour-market regulations would be removed to stimulate labour-intensive manufacturing.

Describing the skills outcomes from the country's Setas as "dismal" and expensive, the CDE also proposes overhauling the Technical and Vocational Education and Training Colleges to align them more closely with the needs of business, and replacing the Setas with employer-driven apprenticeships and private training schemes.

The report also calls for a survey of small firms to help inform regulators as to what red tape is hampering their progress so that such regulations could be simplified or removed.

In addition, the CDE says more needs to be done to support informal sector growth, including by encouraging city governments to zero-rate licences for street traders, exploring the provision of transport subsidies to such traders and supporting the densification of cities.

While Bernstein is not opposed to the current partnership between government and business to tackle problems such as electricity insecurity and logistics bottlenecks, she is critical of the lack of transparency surrounding the relationship.

She also believes it is preventing business from speaking out as strongly as it should on the policy issues that are undermining growth and job creation.

"I am certainly not saying that the business-government partnership has no value, and anyone who argues that would be wrong."

However, she believes the business-government partnership has tended to silence business in public about the country's challenges.

"The President is finally saying we're in an economic emergency, we are saying the unemployment situation is catastrophic. In this context, business should be speaking i...

A postponement from incorporating indirect carbon emissions into the European Union's (EU's) calculation of a product's embedded emissions under its Carbon Border Adjustment Mechanism (CBAM) will provide something of a short-term reprieve to South African steel and aluminium exporters, which are heavily exposed to the measure.

The EU intends implementing CBAM from January 1, 2026, and the postponement will continue until at least 2027.

Nevertheless, local industry remains concerned about the threat posed by CBAM to their medium-term competitiveness, warning of possible further deindustrialisation and job losses.

European Commission director-general of taxation and customs union Gerassimos Thomas acknowledged during a workshop with South African stakeholders that CBAM would affect 6% of the country's steel and aluminium exports to the EU, valued at €1.2-billion yearly.

However, he also highlighted the changes made to the scheme in recent months, including the decision not to incorporate Scope 2, or indirect, emissions into the calculation of a product's embedded emissions for at least the first two years of CBAM's implementation.

The EU has also decided to exclude yearly imports of below 50 t from the CBAM to help smaller importers, as well as countries linked to the EU emissions trading system.

Likewise, it has streamlined its certificate management process, removed the obligation to buy CBAM certificates quarterly in 2026, indicating that this will start in February of 2027, and postponed the deadline for submitting yearly CBAM declarations from May 31 to September 30.

In the South African context, the change in approach to indirect emissions is significant, as Scope 2 emissions are high because affected companies rely heavily on coal-derived electricity produced by Eskom.

During the initial phase, Scope 2 emissions will not be taken into account for iron and steel, aluminium, electricity and hydrogen imports into the EU, but will remain in place for cement and fertiliser imports.

Under the scheme, importers are required to purchase CBAM certificates, the value of which is calculated by measuring the embedded emissions of a ton of the product, then subtracting those emissions covered by a free allocation in the EU and/or paid for under a carbon price in the originating country, before multiplying the figure by the volume of the product being imported.

Each CBAM certificate is equal to a ton of a product's embedded carbon.

The CBAM is imposed uniformly on companies rather than countries, making exemptions at a country level improbable.

Thomas argued that the implementation of CBAM would be "very gradual" to allow for companies to adjust and stressed that the objective was to change environmental behaviour, rather than penalise exporters or raise revenue.

He also argued that the direct emissions of South African exporters to the EU compared favourably with companies in other jurisdictions, and could be improved further through investments into cleaner production methods.

Nevertheless, the South African government, together with industry and trade analysts, remains strongly opposed to the implementation of the CBAM, and wary even of the concessions and simplifications made in recent months.

Trade and Industrial Policy Strategies economist Seutame Maimele said during the workshop hosted by the German Embassy and the European Union Delegation to South Africa that the 50 t/y exclusion threshold might help exporters in other parts of Africa. But it was unlikely to be effective for South African companies, which typically exported at volumes exceeding that yearly level.

Maimele also remained concern about the cost to companies of establishing and maintaining the measurement, reporting, and verification systems required to collect and report emissions data under the CBAM and also questioned why the EU had not made greater concessions upfront in its carbon-pricing framework for developing countries.

TIMING MISMATCH

While acknowledgi...

Industry organisation the Steel and Engineering Industries Federation of Southern Africa (Seifsa) has established itself as a key player in the national dialogue, and is now well-capacitated to tackle challenges facing the sector and country, serving as a cornerstone for future industrialisation.

This was highlighted during Seifsa's yearly breakfast, held in Johannesburg, on October 3.

Incoming president Mervyn Naidoo pointed out that the sector, economy and country faced a "highly volatile" environment with myriad challenges.

He emphasised the need to bolster industrialisation and localisation, noting that the country had the means to do so.

With Africa set to boast the largest youthful economic population by 2050, and endowed with vast mineral reserves and uncultivated, arable land, the region had potential to turn around its fortunes, Naidoo said.

He highlighted infrastructure development as the "central issue of our time", stressing that reliable energy systems, modernised logistics networks, rehabilitated ports and secured water supply were key.

Naidoo called for Seifsa to be a driving partner in these endeavours, championing a "bold industrialisation agenda" under his new leadership.

Outgoing president Elias Monage said Seifsa had made importance strides as an authoritative voice of industry.

He highlighted that the organisation was regularly consulted by the Presidency and government departments; had enhanced its collaboration with labour, government and business organisations; and had strengthened its advocacy capacity.

Moreover, Seifsa was relied on by members during crises, including the pandemic and energy disruptions, Monage said.

He expressed optimism that Seifsa was well-equipped to manage future challenges, emphasising that the metals and engineering sector remained the cornerstone of the country's future and its re-industrialisation goals.

Meanwhile, keynote speaker Moeletsi Mbeki highlighted the political challenges facing South Africa - unaccountable governance, a non-performing economy and an expensive, incapable State - which had contributed to voter dissatisfaction.

As a result, he said, the country was seeing an end to more than 100 years of nationalism. Mbeki stressed that Seifsa and other stakeholders must address the changes that follow, to mitigate the governance vacuum that was emerging.

He also emphasised the need to re-modernise the country's economy.

Eskom is again warning that municipal debt and electricity theft could undermine its nascent recovery. Terence Creamer unpacks this and some of the other key messages emerging from the State-owned entity's results.

Allowing Eskom Generation to classify the primary energy used by its coal power stations as fixed costs will undermine the objective of using the upcoming launch of the South African Wholesale Electricity Market (SAWEM) to usher in a competitive supply industry.

This stark warning was delivered by Jenna Harris, an experienced energy professional, who was also founder and the former CEO of a licensed electricity trader, during recent regulatory hearings into the National Transmission Company South Africa's (NTCSA's) application for a Market Operator licence.

While making no objection to the licence application itself, Harris urged the National Energy Regulator of South Africa (Nersa) to pay closer attention to the proposed SAWEM structure and the Market Code, which will set the rules for participation and engagement.

SAWEM could be launched by April next year, but is likely to be delayed in light of the various approvals still required, including an approval of the Market Code, which has been widely canvassed but which is yet to be submitted to Nersa for public participation and adjudication.

In her presentation, Harris noted that Eskom Generation is expected to be the dominant participant in SAWEM at its launch and is seeking to recover much of its fixed costs and its fuel costs through regulated tariffs and vesting contracts, independent of SAWEM prices.

Should that be the case, the coal-fired power stations would then bid marginal costs into the SAWEM that would be artificially low, possibly at between 20c/kWh and 30c/kWh, with its far higher total costs recovered through a fixed-cost pass through in the regulated tariff charged to customers by Eskom Distribution.

Such "low-ball prices" would make it impossible for independent power producers (IPPs) to raise finance to build new capacity to bid into SAWEM, as they would need to be able to recover their full costs. These would be between 50c/kWh and 85c/kWh for utility scale solar PV and about 100c/kWh for wind.

Harris argued that, under these conditions, the SAWEM, promoted as a platform for broad multi-party participation, risks functioning in practice as little more than Eskom trading with itself.

Eskom's proposed vesting contracts for the SAWEM guarantee their cost recovery, even as private buyers increasingly source power from IPPs. To offset lost sales, Eskom is expected to push more costs into fixed charges - a shift that Harris said would erode IPP competitiveness and discourage new investment. With no clear sunset on these protections, consumers risk paying for coal costs they don't need.

A more cost reflective price would emerge, however, if Eskom Generation were to include its primary energy costs and environmental taxes and levies into its marginal cost bid into the SAWEM. Harris argued that this would then support a meaningful investment case for private sector participation.

She, thus, urged Nersa to reject the suggestion that Eskom Generation's coal costs be classified as fixed costs purely on the basis that they were procured under long-term contracts.

"This is completely inappropriate with respect to global norms and accounting practices," she said, arguing that it would result in the SAWEM being little more than a charade masquerading as liberalisation.

Harris also called on the regulator to place time limits on the phase-out of vesting contracts to prevent customers from having to fund uncompetitive generation capacity that the market no longer required.

A failure to do so, could entrench coal's current market dominance, delay the scheduled decommissioning of more than 20 GW of coal-fired capacity in the 2030s and undermine the business case for the much-needed renewables and flexible generation investments required to replace coal in line with the just energy transition.

She also argued that government should immediately halt the public procurement of new renewables that will enjoy a cost pass-through into the regulated tariff.

"It is more appropriate f...

Eskom veteran Monde Bala has been appointed as CEO of the National Transmission Company South Africa (NTCSA), effective October 1, having served in the position on an interim basis for the past two months.

Bala took over from Segomoco Scheepers, who played a central role during the separation of the NTCSA from the rest of Eskom, and who will retire from the State-owned entity at the end of December.

Chairperson Priscillah Mabelane expressed confidence in Bala's ability to lead the NTCSA into its next chapter, highlighting his experience, which includes 27 years in the electricity sector.

The appointment comes amid questions about the final structure of the NTCSA, which is operating as an independent subsidiary of Eskom Holdings but has not been fully separated from the group.

Asked by Engineering News whether NTCSA would be fully unbundled with its assets, Eskom Group CEO Dan Marokane said that an announcement on the "end state" was still pending.

"You will recall that the Electricity Regulation Amendment Act (ERRA) provides for the NTCSA to be the transmission system operator for the next five years whilst the end state, or the approach for establishing an independent system operator and independent market operator, is being evaluated.

"That work has been done, and it's been the subject of intense review and contrasting of options," Marokane said at the recent results presentation, while also suggesting that there was no universal way to approach the matter.

This, amid reports that the NTCSA might be required to lease the transmission assets from Eskom Holdings, raising questions about its future independence, which is viewed as key to levelling the playing field in the electricity supply industry.

Marokane said that the board had deliberated on the recommendation and that the proposal was now being "socialised with the appropriate structures above us, which is the shareholder Minister".

"What is very clear is that either way the objectives of the ERRA will be fulfilled.

"How that gets to be fulfilled is really a matter of choice that takes our own situation into account," Marokane said.

Prior to his appointment as NTCSA CEO, Bala had served in various senior leadership roles at Eskom, including as group executive for Eskom Distribution since 2019.

He holds a BSc in Electrical Engineering from the University of Cape Town and a Master of Engineering from the University of the Witwatersrand.

The announcement also follows confirmation that CFO Calib Cassim will be retiring from his position in October next year.