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Engineering News editor Terence Creamer discusses the key themes of the first Medium-Term Budget Policy Statement of the Government of National Unity, delivered by Finance Minister Enoch Godongwana, including specific moves to unlock private sector participation to build new transmission infrastructure.

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Scaling up private-sector participation (PSP) in the delivery of infrastructure emerged as a central component of the "pro-growth agenda" outlined by Finance Minister Enoch Godongwana in his first Medium-Term Budget Policy Statement (MTBPS) since the formation of the Government of National Unity.

Public and private fixed investment levels currently stand at about half of the targeted 30% of gross domestic product (GDP) set in the National Development Plan, and the MTBPS describes the quality of public-sector infrastructure spending as suboptimal and the quantity as inadequate.

"As a result, existing infrastructure is deteriorating, backlogs are growing and the cost of providing infrastructure is high.

"This represents both a challenge and an opportunity," the MTBPS reads.

While government would restructure the way public infrastructure projects were prepared and financed, Godongwana emphasised the measures being taken to mobilise private resources to augment constrained public capability amid weak growth.

Notwithstanding the 3% growth target set as an aspiration for 2025 by government and business, the National Treasury is forecasting growth of only 1.7% next year, on the back of a forecast of 1.1% for 2024, which represented a downward revision from 1.3% forecast in the February Budget.

Such low growth continues to place strain on the revenue outlook (which was also lowered by R22.3-billion in the MTBPS) and the fiscal balance, which currently reflects a debt burden of R5.26-trillion or 74.1% of GDP, and has resulted in debt-service costs now consuming 21.6% of revenue.

Government had identified higher levels of infrastructure investment as crucial for lifting growth and employment, but was also pursuing a fiscal strategy aimed at narrowing the consolidated Budget deficit from 5% of GDP in 2024/25 to 3.2% in 2027/28, while stabilising debt at 75.5% of GDP in 2025/26.

CREDIT ENHANCEMENT TOOL

The MTBPS, therefore, lists a series of reforms geared towards catalysing greater PSP in infrastructure, including a proposal to launch a credit enhancement instrument to de-risk projects for developers and lenders, while mitigating government's need to add to contingent liabilities.

The instrument is being developed with the support of the World Bank and is also being canvassed with private reinsurers.

It will initially be used to support independent transmission projects (ITPs), with the lack of electricity grid infrastructure having emerged as a constraint to connecting new renewable-energy plants.

The National Treasury confirmed that a pilot ITP project was being prepared for next year using a build-operate-and-transfer model, but did not provide further specifics regarding the institutional arrangements.

However, ongoing reference was made to the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) as a "template" for the procurement of public infrastructure.

The REIPPPP projects have been procured through a dedicated structure known as the IPP Office.

It was also confirmed the credit-enhancement vehicle would be operational by the end of 2025 and that the tool would be used as part of the new blended financing risk-sharing platform to help de-risk the ITPs.

The lessons learned from the REIPPPP in unlocking private-sector investment were also being drawn on to increase private participation in transactions in other sectors, notably water and freight logistics, where the credit-enhancement vehicle would be introduced over the medium term.

In water, the private sector could participate through performance-based contracts and public-private partnerships (PPPs).

"Performance-based contracts for the nonrevenue water programme [water leaks] are being fast-tracked in the eThekwini, Tshwane, Nelson Mandela Bay, Buffalo City and Mangaung metros."

Meanwhile, Trans...

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The National Energy Regulator of South Africa (Nersa) has approved four new electricity trading licences, the issuance of which had been opposed by Eskom, along with the country's first-ever private import/export licence.

The Energy Regulator, which is Nersa's highest decision-making body made the approvals during their meeting on October 29, agreeing with the approval recommendation agreed to by the Electricity Subcommittee on October 1.

Trading licences were issued to CBI Electric Apollo, Discovery Green, Green Electron Market and GreenCo Power Services, while the import/export licence was issued to GreenCo Power Services.

Nersa fulltime regulator member for electricity Nhlanhla Gumede noted Eskom's objections, which were made by its distribution division during public hearings held on July 18.

Eskom argued that Nersa was prohibited from allowing two or more licensees in a single distribution supply area and accused the traders of "cherry picking customers".

The objection was lodged despite the fact that Nersa had already issued six trading licences since 2014 to PowerX, EnPower Trading, Neura Trading, Energy Exchange of Southern Africa, Envusa Trading and to Eskom Holdings' National Transmission Company South Africa (NTCSA).

Gumede said a distinction had to be made between a distributor, the number of which needed to be restricted to ensure the efficient and safe operation of the physical distribution network, and traders, which facilitated the buying and selling of electricity over those networks but did not operate them.

He indicated that there was no legislative or regulatory restriction on the number of traders and noted that the Electricity Regulation Act encouraged competition; a principle that had been reinforced and amplified in the Electricity Regulation Amendment Act to which President Cyril Ramaphosa had recently assented.

Nevertheless, he did highlight the urgent need for Nersa to finalise a framework and rules for electricity traders as well as for wheeling given the prospects of many more trading applications in the coming years.

The Energy Regulator also agreed that additional work was required to firm up the framework for import/export licences, when approving GreenCo's ground-breaking application.

Africa GreenCo CEO Ana Hajduka described Nersa's decision to grant the company the two licences as a "powerful endorsement of the potential for private sector collaboration to drive South Africa's energy transformation in collaboration with key players like Eskom and NTCSA".

GreenCo commercial manager for South Africa Precious Mpepele added that the import/export licence would drive a transparent, interconnected energy market in Southern Africa to deliver renewable electricity.

The company had signed long-term power purchase agreements (PPAs) with independent power producers in South Africa and Botswana and the trading and import/export licences respectively would enable GreenCo to sell electricity bought from those suppliers to Sibanye-Stillwater operations in South Africa.

Apollo Africa CEO Jenna Harris also welcomed Nersa's decision, which she said reaffirmed the regulator's commitment to uphold the Energy Regulation Act and promote broader participation in the electricity market.

"We firmly believe, as demonstrated in mature electricity markets, that competition is the most efficient way to reduce the cost of power to the market.

"This is in the best interest of our economy where electricity forms the foundation input costs for all primary and secondary industries in South Africa," Harris added, indicating that Apollo looked forward to working with Eskom to assist in jointly shaping a new and sustainable market structure.

Sturdee Energy executive director Andrew Johnson told Engineering News that the award of a trading licence to Sturdee Energy's Green...

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South Africa will call for the New Collective Quantified Goal (NCQG) on climate finance to be set at $1.3-trillion yearly during the upcoming COP29 climate negotiations, which will be held in Baku, Azerbaijan, from November 11 to 22.

The NCQG is the finance goal that parties to the Paris Agreement are expected to set prior to 2025 from the current yearly floor of $100-billion; a target that developing countries have long argued as being too low and have also criticised developed countries for failing to honour.

During stakeholder consultations ahead of COP29, Forestry, Fisheries and the Environment Minister Dr Dion George argued that the current financing mechanisms had proved insufficient in scale and effectiveness, which he said highlighted the urgency for a new financing model.

"COP29 presents an opportunity to advocate for innovative and improved financial frameworks that can mobilise substantial resources more efficiently.

"Such a model must ensure predictable, accessible, and adequate funding, and address the shortcomings of existing systems and empowering countries like South Africa to implement ambitious climate actions."

The NCQG, the Minister added, should provide a clear and ambitious quantification of the financial support needed by developing countries to implement their Nationally Determined Contributions (NDCs) or decarbonisation pledges, as well as their National Adaptation Plans, and should also reflect their inclusive just transition pathways.

"Access to finance must be significantly scaled up to offer new, additional, and predictable funding that is fit for purpose.

"Specifically, we need grants and highly concessional financing that can be effectively allocated to create enabling environments for rapid investments.

"By de-risking investments and creating new asset classes for clean technologies, we can unlock and leverage greater amounts of public and private finance," George said.

Business Unity South Africa (Busa) environment and energy director Happy Khambule concurred, saying that the NCQG should be larger and more comprehensive.

"Current climate finance flows have been insufficient and non-additional, shifting the disproportionate cost of climate action to developing economies despite their limited fiscal capacity.

"Recent proposals for cross-border tax adjustments - targeting goods imported from developing countries to fund developed country climate obligations - are particularly concerning," Khambule added.

Busa also supported the principle that developed economies should provide financial, technological, and capacity-building assistance, but stressed that this support should not place undue financial burdens or impose unjust conditions on developing countries.

"Crucially, climate finance should not exacerbate current developing country debt crises.'

Presidential Climate Commission executive director Dr Crispian Olver, who has been appointed deputy chair of the commission from January 1, said COP29 and progress on the NCQG was crucial for setting the tone for the next round of NDCs, which countries were expected to lodge in 2025.

The current NDC's are not aligned with the goal of limiting global warming to 1.5°C above pre-industrial levels.

The 'Emissions Gap Report 2024' published by the United Nations Environment Programme recently warns that unless the level of NDC ambition is increased and there is faster implementation, the world is on course for a temperature increase of between 2.6°C and 3.1°C over the course of this century.

South Africa plans to submit its new NDC in June, with consultations expected to start in April.

Olver highlighted that securing NDC ambition would be challenging in the current geopolitical environment.

Nevertheless, he argued that South Africa should do what it could to ensure that the Baku gathering represented...

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The automotive industry is "definitely seeing progress" in its discussions with Transnet on developing the southern rail corridor between Gauteng and Gqeberha and Coega, in the Eastern Cape, says Ford Motor Company Africa president Neale Hill.

Discussions on this project started in 2019 already.

Vehicle manufacturers in Gauteng - BMW, Ford and Nissan - currently move their vehicle exports mainly through Durban.

These manufacturers also have to transport imported components to their plants via Durban, as well as bring in imported vehicles for the local market.

Ford's logistics via the Durban port are currently divided between rail and road.

The local arm of the US vehicle manufacturer produces the Ranger bakkie for the local and export markets at its Silverton plant in Pretoria.

"We are making progress in our discussions with Transnet," says Hill. "We'd like there to be more progress, but we are seeing movement, especially now that Transnet has a new management team.

"You are now dealing with people with years of experience; people who have grown up in the organisation."

Hill notes that there is a vulnerability in a system where so many vehicle manufacturers are dependent on a single export route.

"All of us would consider Gqeberha. Look at the recent floods in Durban and snow in KwaZulu-Natal and how that affected exports.

"We, as Ford, must also support a very specific shipping schedule, and these vessels don't wait if there is a snarl-up on the highway."

This said, Hill notes that Transnet has moved to improve the rail service between Gauteng and Durban.

"We are seeing greater capacity coming in on the Durban line for automotive. The line is being upgraded and we are seeing more trains coming through - but, again, we would definitely like to see more happen.

"With our production schedule we would ideally like to see more vehicles on rail as opposed to vehicles going on the roads."

Hill says Ford has no preference as to whether the southern corridor is operated by Transnet, a private-public partnership, or a third-party operator.

"We are not prescriptive as to what the ultimate solution should look like, but we would like something that is effective, efficient and reliable.

"And, as I said, our engagement with Transnet has been phenomenal. We do see some green shoots."

Ford produces between 650 to 680 Rangers a day, of which around 65% is exported, says Hill.

"You are looking at exporting 400 vehicles a day, so we want four trains a day - and that's just us, not Volkswagen, BMW or Nissan.

"We also import components for the Silverton plant.

"As an industry, we believe there is enough opportunity to fill the railway line both ways."

The Volkswagen, Isuzu and Mercedes-Benz plants are located in the Eastern Cape and also need to transport their vehicles - made locally and imported - to customers in the north of the country.

Hill says he hopes to see material movement on the development of the southern corridor in the next 18 to 24 months.

Naamsa | The Automotive Business Council and Transnet earlier this month signed a memorandum of understanding (MoU) to convene a naamsa-Transnet 'auto war room'.

This war room will drive the collection, consolidation and sharing of data to support the implementation of strategic initiatives, while it will also monitor key railway performance indicators, slot availability/capacity, and rolling stock availability and utilisation.

The MoU also supports the development of priority infrastructure projects by the State railway owner, including the southern corridor.

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A new matchmaking platform to directly link providers of grant funding pledged to South Africa's Just Energy Transition Investment Plan (JET-IP) with domestic beneficiaries is aiming to ensure the disbursement of at least R600-million in grant funding to 20 projects in 2025 and facilitate disbursements of R1.5-billion to 50 projects in 2026.

Grant recipients could include local small firms, trade unions and municipalities, as well as community-based and nongovernmental organisations.

Known as the JET Funding Platform, the online tool was officially unveiled at a function in eMalahleni, Mpumalanga; the province identified as "ground zero" for South Africa's efforts to cushion workers and communities whose lives and livelihoods could be negatively affected by the shift from coal to renewable energy.

The website through which potential grant beneficiaries can apply for funding will be launched on November 1.

Speaking at the JET Funding Platform unveiling on October 25, Minister Patricia de Lille, who spoke in her capacity as acting Electricity and Energy Minister, said the platform was not a fund itself, but rather a way to improve visibility of the pipeline of potential JET projects that could be supported by grant funders.

A total of $821-million in grant funding linked to South Africa's JET-IP has been pledged by the International Partners Group of France, Germany, the UK, the US and the EU, which have now been joined by Denmark and Netherlands, as well as by Canada, Switzerland and Spain, which are supporting the JET-IP bilaterally.

Grants make up a small portion of the larger $11.6-billion pledged in support of South Africa's JET-IP, which will target investments in the electricity, new energy vehicle and green hydrogen sectors. The bulk of the funding is being made available in the form of concessional loans, including policy-linked loans to the National Treasury.

While South Africa is continuing to call for yet more grant funding there has also been criticism that the initial grants have been directed mainly towards entities and consultants from the countries providing the funding.

The funders, meanwhile, have indicated that the pipeline of potential grant-ready domestic projects is limited.

The development of the matchmaking platform, which has been overseen by the JET project management office in the Presidency, is accompanied with a plan to further grow the pipeline by providing project preparation support to potential beneficiaries.

JET Funding Platform manager Jerrod Moodley said at the launch that various initiatives would be undertaken to support potential beneficiaries with their project preparation so as to expand the number of grant-ready applications that could be made through the online system.

Once an application was submitted, Moodley said that it would be assessed against the eligibility criteria set for the JET-IP, as well as whether it was ready to be proposed to a potential funder.

Funders would then complete their own assessments before deciding whether or not to approve a grant.

The category of projects that could receive support has been broadened well beyond climate-mitigation projects to include projects that could enable the transition, those that were supportive of economic transformation, community empowerment and ownership, as well as those that could promote economic diversification, improve governance and compliance, and projects deemed to have a high and sustainable impact.

"JET Funding Platform stands as a beacon of hope - a mechanism designed to connect the most deserving projects and communities with the critical grant funding needed to achieve objectives set out in the JET-IP," De Lille said.

Engineering News editor Terence Creamer discusses government's review of the current framework through which electricity capacity is procured from independent power producers (IPPs); the reasons for the review; and what changes are being considered.

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Despite welcome relief from loadshedding in South Africa, a total of 3.3 GW of renewable-energy projects were registered with the National Energy Regulator of South Africa (Nersa) this year, with more than 2 GW registered in the third quarter alone.

Analysis conducted by Gaylor Montmasson-Clair, senior economist at Trade and Industrial Policy Strategies, indicated that the surge in registrations during the quarter, from 606 MW in the first quarter and 732 MW in the second, could be attributed to a few large projects.

These included a 475 MW solar PV project in the Free State, which Montmasson-Clair described as the biggest single registration since such projects were exempted from licensing in 2021, as well as a 380 MW wind farm in the Western Cape, a 310 MW wind farm in Mpumalanga and a 240 MW wind project in KwaZulu-Natal.

He said the strong performance during the quarter, which was the second best since the licensing exemption was introduced, may indicate that economics rather than loadshedding was now driving the market.

The highest number of registrations recorded in a single quarter was the 2 467 MW registered by Nersa in the first quarter of 2023 when South Africa was experiencing almost daily loadshedding.

Montmasson-Clair noted the prominence of wind projects, as well as the rise in registrations in the Mpumalanga province; developments that were supportive of both system stability and diversity and a just transition in the main coal region of South Africa.

Electricity and Energy Deputy Minister Samantha Graham-Maré also highlighted the rise in registrations during the third quarter, describing the surge as a milestone and a "sign of confidence in South Africa's renewable-energy market".

"Our goal is to accelerate even more gigawatts of renewable energy by continuing to remove unnecessary institutional red tape and making South Africa an even more attractive proposition for investors," Graham-Maré said in a statement.

Her commentary follows confirmation by Electricity and Energy Minister Dr Kgosientsho Ramokgopa that the procurement framework was being reviewed for projects procured through public bid windows.

Such projects had faced relatively more difficulties in recent years in advancing to financial close than was the case in the private-to-private market, for which Nersa registrations offered a proxy.

Particular attention was being given to ensuring that future procurement processes were conducted in a way that available grid was utilised, through curtailment and possible regional bidding rounds, as well as to the streamlining of grid-connection processes.

Consideration was also being given to holding smaller, more frequent bid windows so as to improve competitive outcomes and create a smoother pipeline of projects around which local industrial capacity could be developed.

The outlook for private procurement, meanwhile, was difficult to forecast, with Montmasson-Clair noting that the quarterly data were heavily influenced by a few large-scale projects.

"But, overall, 2024 looks like another solid year for the private market," he said.

The pipeline of private projects being tracked by Operation Vulindlela, which is a joint initiative of the Presidency and the National Treasury, stands as 22.5 GW, while the latest edition of the South African Renewable Energy Grid Survey pointed to projects with a combined capacity of 133 GW at various stages of development across the country.

The result represented a dramatic increase from the 66 GW highlighted in the 2023 edition.

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Nissan South Africa (SA) will see production drop to under 20 000 units this year, down from almost 25 000 units last year, but it is not the end of local assembly at the Rosslyn plant, says MD Maciej Klenkiewicz.

The drop in production follows the Russian invasion of Ukraine, which railroaded Nissan's efforts to find a successor for the successful NP200 half-ton bakkie, which sold around 10 000 units a year in the South African market.

"It wasn't our choice to end production of the NP200. Unfortunately, it is one of those occasions where global politics influenced what happened in South Africa," says Klenkiewicz.

"We had a plan for a successor to the NP200. It was supposed to be built on a platform created in Russia, together with Renault.

"When we exited Russia, we left behind the entire project. It was a big loss - it was more than 40% of our volume, so it was significant."

The loss of the half-tonner saw Nissan SA wrap up a process last year to shrink its workforce by 28%.

In terms of product, the Datsun range was also discontinued in 2022, which hurt Nissan SA in the budget-car market, and this in a domestic economy that has been failing to gain traction.

Nissan SA's product portfolio now consists only of the Navara pickup (produced in Rosslyn in single-cab and double-cab versions), as well as the Magnite and X-Trail sports-utility vehicles (SUVs).

Klenkiewicz and his team, however, have plans to expand vehicle assembly at Rosslyn and to grow the Nissan product portfolio in South Africa.

Tweaking the Navara range to better suit customer needs has seen production and sales of this one-ton bakkie increase by 28% from April to end-September, says Klenkiewicz.

In South Africa, sales are up 25%, and this in a declining bakkie market.

This year will also be the first time in a long time that Nissan SA's Navara export volumes will be higher than its domestic Navara sales.

Nissan SA is hard at work to secure more export destinations in Africa and the Middle East, with Rosslyn the only Navara source plant for Africa.

Klenkiewicz says sales have already expanded into Egypt and Libya, with Algeria next on the list.

Ghana, with its own semi-knockdown plant, is currently the car maker's biggest export market.

"We are trying to maximise our opportunities; we are trying to keep production as high as possible in Rosslyn."

Klenkiewicz also aims to introduce new products for assembly in the Rosslyn plant.

"We are working on solutions in terms of light commercial vehicles and pickups. Of course, our priority is to find a successor for the NP200, but we have been forced to start from the beginning, so there will be a delay of up to two to three years."

Any new product that will be assembled will be in addition to Navara production, says Klenkiewicz.

The goal is for the Nissan SA plant to again reach 50 000 units a year - a figure where it can gain the full benefits of government's Automotive Production and Development Programme.

For this to happen, the company may have to look at two new products for local assembly, and not just one, but this process is likely to take more than five years.

In terms of the local product line-up, the Japanese marque will bring in a new five-seater and seven-seater SUV to South Africa in 2026 - both bigger than the Magnite - potentially doubling sales in South Africa, says Klenkiewicz.

"We are also working - it has not been confirmed yet - to bring in a product below the Magnite, in the A-segment. This may come in before 2026."

This first 'new' Nissan product that will make its debut, however, is the Magnite cargo version, due out before the end of the year.

This converted SUV, already available in India, targets the delivery and/or last-mile logistics sector.

Chinese Competitors

Nissan is feeling the heat of the influx of Chinese brands into South Afri...

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There is potential to catalyse rapid industrialisation in Africa by pursuing policies that actively leverage both existing demand and continental moves towards trade integration to increase the production of manufactured goods, a well-known industrial policy and automotive specialist has argued.

Speaking at the Manufacturing Indaba in Johannesburg, Toyota Wessels Institute for Manufacturing Studies' Professor Justin Barnes made the case for developing regional value chains that tapped into existing demand rather than seeking only to sell into growing African markets.

Using the example of the African automotive market, which Barnes has studied extensively, he argued that there was potential for significant manufacturing growth using regional value chains to overcome the current constraints of insufficient economies of scale, limited production capabilities and the ongoing importation of used vehicles.

While his research pointed to a weak outlook for new vehicle sales in South Africa, owing to dim prospects for the growth of the middle class, he pointed to a far more promising prognosis for several countries in both East and West Africa.

Using a yearly income threshold of $10 000 for an adult in Africa to be in a position to buy a car, he argued that African vehicle sales could rise to about 3.4-million by 2035 from an estimate of about 2.5-million units in 2025.

The forecast was based on current economic and income growth forecasts, as well as an assumption that countries terminated policies allowing for the importation of pre-owned vehicles from other regions.

The forecast also catered for Barnes' assessment that South African vehicle sales, which were currently the highest on the continent, were likely to lift only modestly over the period, from about 563 000 to about 614 000.

By contrast, there were potential high-growth nodes in West Africa, where Nigerian sales could rise from about 241 000 vehicles to 350 000 and Ghana could increase from 81 000 to 148 000, as well as East Africa, where Kenyan sales could rise to 156 000 by 2035 from 93 000.

Barnes also exhibited results from his recent modelling of automotive sales in the Economic Community of West African States region, where the combined sales of Côte d'Ivoire, Ghana, Nigeria and Senegal were set to surpass those of South Africa from 2028 onwards.

"This indicates that there are huge opportunities for the development of the automotive industry across Africa," he said.

Besides addressing the problem of second-hand imports, he also said that far greater emphasis should be given by policymakers to the micro, meso and macro interventions needed to support regional value chains and the implementation of the African Continental Free Trade Area Agreement.

However, it also required soul searching about what types of society African government's wanted to build.

These visions would have to be supported by an organisational framework that allowed governments to connect with the private sector and for African companies to connect with one another, as well as policies that bolstered not only skills but also the capability of individuals and companies.

For South African manufacturers to align themselves with the opportunity, a different mentality would also be required from the one that currently prevailed, Barnes argued.

"We cannot repeat a colonising model, which is my experience of South Africans, who just want to trade in Africa.

"We have to think about how South Africa actually operates as an African economy and work towards regional value chains."

Creating what he called "deep collaboration" would necessarily involve providing access to the South African market for other African companies.

"It's not about being nice to one another, because that is what is actually needed to escape the confines of a very small market an...