Engineering News Online Audio Articles

Audi South Africa (SA) says buy-down trends, high inflation and interest rates have placed significant pressure on the domestic premium car market.

The local arm of the German car maker says these factors have intensified both the affordability pressure on consumers, as well as the pricing pressure on vehicle manufacturers.

"This has prompted buyers to explore alternative options from new brand entrants primarily targeting the price-sensitive volume segment with well-equipped vehicles, despite these brands often having a limited track record, potentially affecting residual values and consumer experience."

Audi SA says the premium-vehicle sector has contracted to nearly a third of its size compared with a decade ago, with 2024 marking the lowest level yet.

"Compounding these challenges is the absence of a regulatory framework and incentive support scheme by the South African government - such as those available for battery electric vehicles (BEVs) in other industrialised nations - further accelerating these market trajectories."

In South Africa, Audi SA says the need exists for a comprehensive automotive strategy, as well as decisive action and support from government, to ease the burden on all automotive players invested in the country.

"While the automotive sector is a critical contributor to the South African economy, the industry continues to face hurdles such as slow and inconsistent policy implementation and insufficient infrastructure investment."

Audi's head office in Ingolstadt said earlier this year that it was backing down on what was a very aggressive BEV strategy.

Now, as part of its product initiative, Audi will launch new electric models, but also a new generation of combustion engine vehicles and plug-in hybrids.

"We will manage the production of our last combustion engine vehicles depending on the various developments in the world markets," the company announced in March.

It added that 2025 "will be a very challenging year for us, but we are renewing our product portfolio, and these new offers are now successively reaching the markets".

Dealerships Affected

In response to the current market changes, Audi SA is "proactively aligning its approach with new market realities and customer expectations".

"To reinforce its retail presence and ensure long-term partner viability, the company has started to implement an optimised footprint strategy that balances meaningful customer experiences with operational efficiency."

Audi SA is not prepared to comment on what "an optimised footprint strategy" means exactly for its customers.

The Motor Industry Staff Association (MISA), however, says it is aware of four Audi branches closing their doors in Durban, eMalahleni, Pietermaritzburg and on the East Rand, respectively.

Keren Energy has made significant progress in the development of its green hydrogen (GH2) production facility near Vanrhynsdorp, in the Western Cape, says CEO George van Rensburg.

The project aims to support South Africa's transition to a low-carbon economy by focusing on small-scale, distributed hydrogen production, tailored for the local industrial, manufacturing, mobility and commercial sectors.

Van Rensburg says the front-end engineering design study and bankable financial model for the project have been completed, with the majority of the permits for the project in place.

The project site has also been secured through a long-term lease.

"Our current priority is engaging with potential offtakers - businesses and sectors seeking to decarbonise through access to green hydrogen," notes Van Rensburg.

"We are also in discussions with investors and funding institutions to support the development.

"Building market awareness and commercial demand are critical to the project's success."

He says the project team aims to reach financial close by the end of this year, with production anticipated to start in the first half of 2028.

The total investment required for the project's full development is around R1-billion.

In the first phase of production, Keren Energy aims to produce about 800 t of green hydrogen a year.

The facility will utilise on-site solar power, supplemented by grid-based renewable energy, to power proton exchange membrane electrolysers that produce green hydrogen in gas form.

The hydrogen will be stored in ISO tube trailers, allowing for flexible, decentralised distribution to end-users, explains Van Rensburg.

This model ensures a cost-effective, scalable and accessible energy solution without the capital costs associated with ammonia or liquid organic hydrogen carriers, which are more suited to large-scale export operations, he notes.

The project in 2023 received Strategic Infrastructure Project (SIP) status from Infrastructure South Africa.

"By providing a reliable, domestic GH2 supply, we intend to help businesses reduce their carbon footprint, thereby mitigating the impact of mechanisms like the EU's Carbon Border Adjustment Mechanism and supporting the competitiveness of South African exporters," says Van Rensburg.

Keren Energy focuses on renewable-energy projects in the solar PV, hydro, biomass and GH2 industries.

Green hydrogen is produced by splitting water into hydrogen and oxygen using electricity derived from renewable energy sources, such as solar or wind, through a process called electrolysis.

This method generates a clean and sustainable fuel option with minimal carbon emissions.

Once generated, the green hydrogen is stored in ISO tanks and transported to various industry sectors.

Hydrogen plays a vital role in fuel cells. Currently, South Africa primarily produces hydrogen from fossil fuels, mainly through the steam methane reforming process.

According to the Hydrogen Society Roadmap, the goal is to produce 500 000 t of green hydrogen a year in South Africa by 2030.

The Vanrhynsdorp project is an independent project developed by Keren Energy in the Western Cape, and is not part of the Boegoebaai or Northern Cape Corridor initiatives.

Engineering News editor Terence Creamer discusses power utility Eskom's plans to set up a new renewable energy business and the tender it has issued to find a partner for the venture.

The immediate impact of a raft of new import tariffs on direct component exports from South Africa to the US is most likely to be felt there first, rather than here, says National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal.

"It can take 12 to 15 months for US importers to change their supply of components.

"This means that, at least in the short-term, the US will need to absorb the price increase, ultimately causing inflation there."

From a vehicle export perspective, however, there may likely be a more immediate impact here in South Africa, notes Moothilal.

"This will be determined by the original-equipment manufacturers (vehicle manufacturers, or OEMs) on whether they will continue exporting to the US from South Africa, and if US consumers are willing to pay more for the specific vehicles coming out of South Africa, or any other destination, given the widespread global application of tariffs."

In the long term, however, if the US market remains inaccessible, the South African auto sector can expect to see a loss of local production volumes for some OEMs and component suppliers that were previously exporting to the US, says Moothilal.

"This will harm employment and investment, and impact the competitiveness of the sector, which is heavily dependent on the economies of scale generated through a combination of domestic demand and export production.

"The US's African Growth and Opportunity Act (Agoa) and other preferential trade arrangements have been one of several motivating factors for investment in the South African automotive industry over the last two decades, so with these US tariffs overriding Agoa benefits, this will negatively impact future investment decisions.

"The extent of the long-term impact will be determined by the ability of the US to build the necessary capacity domestically to source all components it is now tariffing," adds Moothilal.

Last year South Africa exported R24-billion in vehicles to the US, and R4.3-billion in components.

Auto component trade between South Africa and the US is not a one-way street, however, with the US at a trade surplus. Last year, R16-billion of auto components were imported into South Africa from the US.

"For context, after Germany, the US is South Africa's second largest component export destination," explains Moothilal.

He believes there are a number of mechanisms that could cushion the impact of increased US tariffs on the local automotive sector.

"The first is to try and establish a mutually beneficial bilateral relation with the US to reduce the current tariff burden and maintain the US as a key trade partner.

"Secondly, we must actively assess alternative markets for our products to maintain current production volumes.

"A third consideration is the protection for our own domestic market. Most countries around the world are currently looking for alternative markets to replace the US. This poses a risk of increased product dumping and South Africa should be cognisant of this."

The New York Times reported this week that European leaders are fearing the arrival of a flood of cheap goods from China that could undermine its local industry as the Asian giant races to seek alternative markets for its manufactured goods in the midst of US president Donald Trump building his tariff wall.

Moothilal adds that the trade crisis is also an opportune time to tweak automotive industrial policies such as the South African government's Automotive Production and Development Programme "to be even greater in terms of incentivising higher localisation rates by domestic OEMs".

"With an average of less than 40% of components being produced in South Africa for the basket of vehicles produced here, there are so many opportunities to increase that percentage.

"Component manufacturers ultimately require OEM volumes, irrespective of market," says Moothilal.

"Just a 5% upward move in the South-Africa based OEMs' rate of localisation would...

JSE-listed coal and energy group Exxaro Resources and State-owned electricity producer Eskom have announced they will collaborate on research initiatives and projects to reduce carbon emissions and cut air pollution.

The two entities, which both have net-zero by 2050 targets, formalised their collaboration through a memorandum of understanding (MoU), signed on April 14.

The agreement covers both direct and indirect emissions, with Exxaro particularly keen to find solutions for its Scope 3 emissions, especially those generated by Eskom when it burns Exxaro coal to produce electricity.

No specific interventions were announced at the ceremony, but Exxaro CEO Ben Magara highlighted the need for solutions to improve coal efficiency, control carbon emissions, potentially through carbon capture, storage and utilisation, and to reduce air pollutants such as dust and sulphur dioxide.

The companies said the initial focus of the collaboration would guide the necessary investments and mobilise the stakeholders needed to find technology-based solutions to the challenges associated with the transition to a low-carbon economy.

Magara described the collaboration with Eskom as a way to "accelerate practical and scalable solutions" that not only decarbonised and reduced air pollution, but also delivered socioeconomic benefits to communities in line with the Just Energy Transition.

In parallel, Exxaro would push ahead with initiatives to reduce direct emissions, with its renewable-energy subsidiary, Cennergi, having already built 229 MW of renewables capacity, and with the 68 MW Lephalale solar PV project to be commissioned later this year to supply renewable energy to its Grootegeluk mine in Limpopo.

It was also partnering with G7 Renewable Energies on a 140 MW wind project, which will supply wheeled electricity to Northam Platinum

Eskom CEO Dan Marokane said the State-owned utility was moving to identify the latest developments and strategies to reduce carbon emissions and other air pollutants, highlighting a recent visit to China by senior officials to study interventions being made by utilities in that country.

He argued that Eskom did not have a coal problem, but an emissions problem and that Eskom was investigating various ways to reduce its emissions and ensure that it's coal-fired power stations operated within the "prescripts" of environmental legislation.

Eskom was recently granted exemptions from minimum emission standards (MES) for eight power stations that would otherwise have been forced to close on April 1, including Duvha, Kendal, Lethabo, Majuba, Matimba, Matla, Medupi, and Tutuka.

The exemptions were granted following an application made in terms of Section 59 of the National Environmental Management: Air Quality Act, and followed the granting last year of permission allowing Eskom to continue to operate the aged Hendrina, Grootvlei, Arnot, Camden and Kriel at existing MES plant limits until their decommissioning on March 31, 2030.

The latest exemptions were granted by Forestry, Fisheries and the Environment Minister Dr Dion George alongside several conditions, and Marokane said Eskom was in the process of preparing a detailed response.

He would not be drawn on whether that response would include an indication that Eskom would seek to extend the lives of some of its stations beyond their scheduled decommissioning dates.

However, he made an assertive case for the group's strategy of establishing a new 'Renewable Energy Business' to accelerate the deployment of renewable-energy solutions, primarily on land surrounding its coal-fired power stations.

Eskom has issued a tender through which it is seeking private partners to support its renewables business, which he said had a near-term pipeline of projects involving 2 GW of solar and wind capacity.

"We will do this with others on our lands, with our people who are skilled and will also leverage the balance sheet of others to de-risk ourselves going forward.

"So we've entered an e...

Eskom CEO Dan Marokane has appealed for the State-owned utility to be given "space" to implement its renewable-energy strategy, insisting that it is not designed to "crowd out" private competitors and is in line with the country's Just Energy Transition strategy of protecting vulnerable coal workers and communities.

Speaking during the signing of a memorandum of understanding with Exxaro aimed primarily at helping to support the coal miner to reduce its Scope 3, or indirect, carbon emissions, Marokane also stressed the utility's renewables strategy would be pursued in partnership with the private sector.

Eskom has issued a tender seeking private partners for a separate 'Renewable Energy Business', to accelerate the deployment of renewable-energy solutions, primarily on land surrounding its coal-fired power stations.

The tender indicates that the utility is seeking to partner with entities with proven credentials in establishing renewables businesses in South Africa, including participation in at least three independent power producer (IPP) reference projects.

"The objective for the new subsidiary will be to operate independently of the main Eskom entity to allow for greater governance agility, competitive market positioning, and enhanced public-private partnerships for a period of 12 months," the tender, which was issued on April 9 with a May 7 closing date, states.

Marokane dismissed concerns about Eskom's ability to compete fairly and cost-effectively with IPPs, saying it had already earmarked 2 GW of near-term opportunities to be pursued in partnership with the private sector.

"We will do this with others on our lands, with our people who are skilled and will also leverage the balance sheet of others to de-risk ourselves going forward.

"So we've entered an era of partnership, and it's a space that Eskom has to play in," he said, adding that it had been studying similar moves by other global utilities that were also moving into renewable energy.

"There is no reason why we should be questioned as to why we should be playing in the space and not giving it to others.

"We have a 42 000-person workforce that needs to be transitioned.

"It's our responsibility to ensure that when we transition we are actually transitioning our workers for their livelihoods going forth," Marokane added.

He also argued that Eskom had hitherto not been allowed to participate in the renewables sector, but that its shareholder and board had now cleared a path for it to do so, using a workforce that was capable of doing so and a business model that was agile and competitive.

"I know that this question is sometimes being asked because we are being seen like we're crowding out the private sector.

"Eskom is a State-owned entity and it needs to focus on the requirements of everyone in the country, and we bring along this part of our business to ensure that, in our provision of electricity to South Africans of all walks of life and affordability, nobody's left behind."

Meanwhile, Eskom was also considering ways to extend the life of its existing coal stations beyond the decommissioning dates outlined in the current version of the Integrated Resource Plan, which was recently used as the basis for another air-pollution exemption announced by Forestry, Fisheries and the Environment Minister Dr Dion George.

On March 31, George announced that two of the stations, Duvha and Matla, had been granted exemptions until their decommissioning dates in 2034 while Kendal, Lethabo, Majuba, Matimba and Tutuka were granted five-year exemptions until April 1, 2030.

The new Medupi power station, meanwhile, was granted a five-year exemption until April 1, 2030 to achieve full air-pollution compliance, implying the possible retrofit of flue gas desulphurisation by that date.

Marokane refused to be drawn on any changes to the decommissioning schedule, saying only that Eskom had 30 days to respond to George's decision and that it was preparing a "comprehensive" response.

Meanwhil...

Aspirant independent power producer (IPP) FlexED is developing a 1 000 MW gas-engine project in Mpumalanga to provide the flexible generation and ancillary services that will be required as the share of variable renewable-energy generation in South Africa's electricity system rises.

Known as Khanyazwe Flexpower, the project is being developed near Malalane, in Mpumalanga, in close proximity to the National Transmission Company South Africa's (NTCSA's) Khanyazwe substation and with confirmed access to the Rompco gas pipeline from Mozambique to South Africa.

CEO Wayne Glossop tells Engineering News the company, the name of which is pronounced 'flekst', is backed by investors that have grasped the importance of flexible generation - whether in the form of gas to power, pumped hydro or battery storage - to South Africa's future electricity mix.

This perspective is based on extensive power-system analysis that shows that variable renewable energy, together with flexible generation, has emerged as the most cost-effective way to provide energy security, with cheap solar PV and wind providing the bulk of the electricity and the more expensive flexible generators closing any supply gaps that may arise as a result of their variability.

"Increasingly, the old equation of baseload, plus mid-merit, plus peaking to provide the suite of power supply and services needed for electricity security no longer applies.

"The new equation for delivering the most affordable, as well as reliable, electricity is a combination of renewable energy and flexibility, with the latter derived from multiple technologies of which FlexED's focus is on gas, batteries and/or pumped hydro," Glossop, who has been involved in power-system analysis for decades, explains.

This emerging equation is also partly reflected in the design of South Africa's inaugural Gas Independent Power Producer Procurement Programme (GASIPPPP), the bid submission deadline for which has been delayed from March 25 to October 31, 2025.

Glossop says the GASIPPPP, which is premised on the 2019 version of the Integrated Resource Plan (IRP), indicates a desire from the NTCSA's system operator to use the gas-to-power capacity flexibly, albeit with a load factor range of 25% to 65%. In addition, it wants the selected IPPs to provide it with ancillary services to maintain system frequency and voltage.

FlexEd believes the GASIPPPP design is attuned to the use of gas reciprocating engine technology, which is able to meet the dispatch requirements, with negligible water consumption, including between 730 and 1 460 starts yearly, or two to four daily starts.

He believes the design is sound, and expresses concern over lobbying efforts to delay the tender further and restructure it for a baseload-like profile, which some are arguing is required to provide the "anchor demand" to unlock a new liquefied natural gas (LNG) terminal.

FlexED is keeping its legal options open should such changes be made, arguing that a baseload solution would involve an entirely separate business case and government would also have to provide a reasonable justification, given that a baseload solution would be more expensive for consumers.

FLEXIBLE VS BASELOAD COSTS

Glossop has calculated the differential by comparing what it would cost to supply a 1-kW consumer, with a consistent demand profile, with electricity generated from renewables and flexible gas, as compared with electricity arising from a baseload-gas generator.

Using the $15/GJ gas price assumed in the draft IRP2024, which he acknowledges to be high, he assumes that the flexible gas generator will produce electricity at a cost of R3/kWh. Under the renewable-plus-flexible gas scenario, where the renewables are costed as 0.50c/kWh and will supply 60% of the load, the daily cost outcome for the 1-kW consumer is R36.

Even under an optimised scenario, where the gas price is lowered to $10/GJ so as to yield a baseload generator cost of R2/kWh, the cost to the 1-kW consumer...

Engineering News editor Terence Creamer discusses the approach being taken by South Africa in trade talks with the US after the announcement of a 90-day pause on America’s so called reciprocal tariffs globally, including 30% on South African imports.

Having received confirmation that the 30% reciprocal tariffs imposed on South African exports by President Donald Trump have been paused, Trade, Industry and Competition Minister Parks Tau says South Africa is moving to finalise its "mutually beneficial" trade offer to the US.

Speaking on Radio 702, Tau said South Africa received confirmation from the US embassy that it had been removed from the reciprocal-tariff list, but that South African exports to the US would still face the 10% base tariffs announced by Trump on April 2.

In addition, the US has sustained the 25% tariffs imposed under Section 232 of the US Trade Expansion Act on all automotives, automotive components, as well as steel and aluminium imports, including those from South Africa.

Tau, who earlier warned that instituting retaliatory tariffs would be "counterproductive", said that South Africa was now preparing to follow up through formal negotiations with the US.

He indicated that government was preparing to make a firm offer that took account of the US's indication that it no longer favoured unilateral trade arrangements and was seeking "arrangements that go both ways".

That stance, he indicated, posed difficulties for the African Growth and Opportunity Act (Agoa) that provided duty- and quota-free access to the US market for products produced by eligible African countries.

African trade ministers would meet in the Democratic Republic of Congo next week to deliberate on their response to that emerging reality ahead of the next round of Agoa discussions, which were scheduled to take place in June or July, ahead of a final review decision by the US Congress in September.

South Africa itself would seek to revive its Trade and Investment Facilitation Agreement with the US in a bid to "normalise relations", Tau said.

In doing so, discussions would have to be broadened to cover prevailing political disagreements between the two countries, including the Trump Administration's misgivings over South Africa's land and black empowerment and international relations policies.

Tau gave the assurance to vulnerable sectors, including the automotive and agricultural industries, that the engagement would be oriented towards finding solutions and to tackling the uncertainty that made it difficult for business to make long-term investment decisions.

South Africa was also alive to the risk of collateral damage as a result of escalating trade tensions between China and America, which were the country's two biggest trading partners.

The US has instituted tariffs of 125% on Chinese imports and China has retaliated with 84% tariffs on US imports.

Tau cautioned that exports from both countries could be redirected to new markets, which could harm domestic industries and increase competitive pressures in export markets, especially Africa.

SEIZE THE MOMENT

North West University Business School's Professor Raymond Parsons noted the "careful and pragmatic approach" that had been adopted by government so far, and urged the authorities to seize the moment created by the pause "to broker a better tariff deal in its trade flows with the US".

"For the automotive and agriculture sectors in particular there is much at stake for South Africa to use the 90-day period to seek to ameliorate the negative impact of high US tariffs on their exports to that country.

"South Africa's negotiation stance should be based on the likelihood that Agoa will not be renewed.

"The probable pain of non-renewal or exclusion must be built into South Africa's strategy," Parsons added.

Tau had indicated previously that Trump's tariff announcements had "nullified" Agoa and that a new bilateral solution was, thus, required.

The Minister had also questioned the basis for the 30% reciprocal tariffs and said South Africa would have to study the outcome given information showing that US imports faced South African tariffs of only 7.6%.

The Trump administration did not use tariff rates to set the reciprocal tariffs, but rathe...

South Africa's trade surplus with the US, which was used to calculate the 'Liberation Day' tariffs announced by US President Donald Trump, has been "hugely inflated", says Professor Lawrence Edwards, of the University of Cape Town's School of Economics.

Speaking during a webinar hosted by XA Global Trade Advisors, Edwards said that, while the initial expectation was for the US to impose reciprocal tariffs to close the gap between the less than 8% duties imposed by South Africa on American products and US tariffs, the Trump administration had instead based the 30% outcome on its calculation of America's trade deficit with South Africa.

In applying the formula, however, the administration neglected to take account of any trade in services, where the US enjoys a sizeable surplus over South Africa.

In addition, it included gold processed in South Africa that did not originate in the country and made no accommodation for exempted products, which are mostly minerals, nor those exports covered under Section 232 of the US Trade Expansion Act.

Besides the 30% tariffs imposed on a broad range of South African products, including key agricultural exports such as citrus, the US has also implemented Section 232 tariffs of 25% on all automotives, automotive components, steel and aluminium imports, including from South Africa.

INFLATED FIGURES

"The numbers are extraordinarily high and apart from the empirical theoretical problems with them, there are huge problems with the calculation thereof," Lawrence, who is also director of Policy Research in International Services and Manufacturing, said.

He highlighted the gold-export calculation as especially problematic: "We import raw gold, we process it, and we export it to the US.

"But they have counted that gold at the free-on-board price, meaning that they are counting those imports of gold as originating in South Africa when, in fact, they don't.

"We are only partially processing those goods, so they are inflating the import value substantially … and they are inflating the deficit hugely.

"Now, if you cut that out, the reciprocal tariff would drop quite substantially," he argued, adding that the deficit was being further amplified by the inclusion of the exempted and Section 232 exports.

"Importantly, they have also excluded services in which the US runs a trade surplus with South Africa.

"In fact, if you account for exempted goods, account for the Section 232 goods, and you account for services, South Africa runs a trade deficit.

"In other words, we should have a zero, reciprocal tariff."

Lawrence also warned that, besides the direct impact arising on trade between South Africa and the US, South African exporters should also prepare for increased competition in other markets, including Africa, as Chinese exporters sought new customers for their heavily-tariffed products.

At home, industries could face a flood of cheap imports, and the International Trade Administration Commission should, thus, prepare for a significant rise in antidumping and safeguard applications.

TARIFFS AFFECT 1.3% OF GDP

XA Global Trade Advisors CEO Donald MacKay said the tariffs imposed on South African exports by the US would affect 1.3% of the country's GDP, once exemptions covering about R61.5-billion, or some 40% of yearly exports to America, were considered.

The 60% balance was affected either by the 30% so-called reciprocal tariffs announced on April 2, or the 25% imposed under Section 232 of the US Trade Expansion Act.

The 30% tariffs would affect R45.1-billion of yearly exports, while the 25% tariffs would affect some R33.3-billion-worth of automotive and automotive component exports and R12.8-billion-worth of steel and aluminium exports.

MacKay said 8% of South Africa's exports, or about R157-billion of the R1.8-trillion it exported yearly, went to the US, accounting for a mere 0.44% of total American imports.

EY tax partner Duane Newman also cautioned on the negative growth effects, reporting that EY estimat...