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The South African government is considering far-reaching changes to the way public procurement of independent power producer (IPP) generation capacity is being carried out so as to accelerate deployments in a way that navigates the country's prevailing grid constraints, while also creating the certainty needed to support green industrialisation.

The changes were considered necessary to facilitate the procurement of some 10 GW of additional renewables capacity covered by the Ministerial determinations issue to enable procurement, including capacity available for re-allocation from previous bidding rounds where projects were either not selected or did not advance to construction.

Electricity and Energy Minister Dr Kgosientsho Ramokgopa has praised the performance of the IPP Office in its procurement of mostly renewable-energy capacity since 2011, noting that about 8.2 GW of IPP capacity from 107 projects was currently either in operation or under construction. These projects have a combined investment value of about R272-billion.

However, during a briefing he also acknowledged that there was a need to adapt the procurement process in light of recent failures to advance projects selected as preferred bidders to financial close, as well as to navigate grid constraints and streamline the grid-connection processes, which had emerged as a serious bottleneck.

Besides a decision not to select any wind bidders for a 3.2 GW allocation released as part of Bid Window 6 (BW6) of the Renewable Energy Independent Power Producer Procurement Programme in 2022, 14 projects with a combined capacity of 1.4 GW selected as preferred bids under BW5 failed to advance to financial close, while five projects with a combined capacity of 1.6 GW had failed to close under the risk mitigation round.

The IPP Office has moved to pulling the bid bonds of bidders that did not achieve financial close during BW5, but head of legal Lena Mangondo reported during a briefing that this action was being challenged legally.

She also reported that the preferred bidder fees had been paid by the developers of risk-mitigation projects that failed to reach commercial close, but made no mention of whether their bid bonds were also being pulled by the IPP Office.

Ramokgopa said the pulling of the bid bonds was necessary for the credibility of the programme.

"These are legally binding documents … [and] we are going to pull the bid bonds. If we land in court, let's land in court," he said, expressing impatience with the fact that contracts were not being honoured.

"We must stick to the rules of this programme."

While no decisions had been made regarding the future procurement framework, which the Minister indicated would be finalised in the coming three to four weeks, the changes being considered included:

Working with Eskom to find alternative ways to reduced timelines for the issuance of grid connection cost-estimate letters and Budget Quotes (BQs);

Potentially conducting a bidding round specifically for projects that had received grid connection BQs from Eskom, or Eskom Holdings' National Transmission Company South Africa;

Finalising the curtailment framework that had already served before the National Energy Regulator of South Africa so as to immediately unlock grid in areas currently described as having no further connection capacity;

Pursuing regional procurement bid windows in areas shown in Eskom's Generation Connection Capacity Assessment as having immediate capacity available to connect new generation;

Reconfiguring bid windows to allow for separate procurement rounds for new wind and solar PV;

Considering "technology agnostic, system-requirement-focused bid windows that could involve collocated generation technologies and storage;

Reviving the wind and solar park concept so as to direct new generation to areas ...

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As fast-moving consumer goods manufacturer Tiger Brands continues to advance a bakery restoration initiative it launched in March this year, the company has identified the Western Cape as a key growth region to increase the current 20% market share of its Albany bread brand.

Nationally, Tiger Brands sells 1.3-million loaves of bread a week from nine bakeries across the country.

The bakery restoration initiative has been focused on recovering volumes in the inland region, reducing stock-keeping unit complexity, optimising depots, benchmarking bakeries, managing revenue better, delivering consistent quality and reducing overheads and other cost management efforts.

The company has also managed to improve margin leakage management and use science- and intelligence-based approaches to pricing and marketing, to ensure a more targeted strategy on pricing, sales and profits.

Some of Tiger Brands' key focus areas for the 2025 financial year across its bakeries include filling critical roles, ensuring stable relationships between management and labour, building more technical skills capacity and a diverse talent base, continuing wellness programmes and making Tiger Brands a good place of work, instilling its corporate values and enhancing communication forums.

Tiger Brands ultimately aims to have Albany become South Africa's most loved bread brand by being the lowest per unit cost producer, delivering superior quality with a relentless focus on efficiencies to drive sustainable and profitable growth for stakeholders - powered by a highly skilled team.

The company's operational improvements across its bakeries have also allowed it to make more positive impacts within the communities that it operates, with various programmes having benefited schools, old age homes and food distribution organisations.

Tiger Brands corporate affairs and sustainability chief Mary-Jane Morifi points out that the group's support to communities has improved access to nutritious food and people's ability to be self-sustaining with food gardens.

Additionally, Tiger Brands has helped communities advance infrastructure builds and reduce food and plastic waste.

Apart from its bakery optimisation drive, Tiger Brands has been advancing a groupwide optimisation effort over the last year. Tiger Brands group CEO Tjaart Kruger tells Engineering News that the group has made big changes to its operational management structure and streamlined its business divisions, which has allowed the group to offer more affordable products more widely.

CASE IN POINT

The Bellville bakery, in Cape Town, where Tiger Brands hosted an in-depth media tour on October 17, was commissioned in 2017 at a cost of R350-million.

The plant has the capacity to produce 12 000 loaves an hour on two baking lines, with its current utilisation rate being 7 500 loaves an hour, or 60% of capacity.

Bakery manager Sandra Pillay explains that the three-hour baking process at the plant starts with trucks unloading flour into silos, as well as yeast into condition tanks, with the mixing process thereafter involving the addition of water at the right temperature and ratio.

After mixing, the dough is divided to reach a baked weight of 700 g and rounded before resting, moulding and rising. The loaves are baked for 22 minutes before being cooled, sliced, bagged, coded and crated.

The plant services more than 3 000 outlets with a distribution footprint across the Northern Cape, Western Cape, Eastern Cape and the Overberg region.

The bakery recorded an increase in production from 64-million loaves in the 2017 financial year to 80-million loaves by the 2023 financial year. In the first half of the 2024 financial year, the bakery produced more than 38-million loaves.

Notably, the bakery has improved on the number of consumer complaints per million units between 201...

Engineering News editor Terence Creamer discusses the International Energy Agency's statement that the world is moving into the Age of Electricity; how the critical minerals demand associated with this coming age is an opportunity for Africa; and what this could mean for South Africa.

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South African consumers should, in the nearer future, receive some form of subsidy to buy electric vehicles (EVs), as has been the case in most major markets in the world.

These subsidies are aimed at assisting car buyers to transition to these cleaner, but still more expensive, vehicles.

Speaking at the South African Automotive Week 2024, held in Cape Town and hosted by naamsa | The Automotive Business Council, President Cyril Ramaphosa on Thursday fulfilled two of the domestic automotive industry's long-standing wishes.

"The Department of Trade, Industry and Competition, National Treasury and the Department of Mineral and Petroleum Resources are in conversation about implementing the EV White Paper [released last year].

"This work includes the beneficiation of critical minerals, the production of new-energy vehicles (NEVs) and their associated value chains," noted Ramaphosa.

"It also includes the production of batteries for battery-electric vehicles (BEVs) and the development of value-chains in the green-hydrogen fuel-cell market."

NEVs refer to hybrids (less green at the tailpipe), plug-in-hybrids (PHEVs - more green) and zero-emission BEVs (most green). The goal of the White Paper is to help South Africa's automotive industry transition to include NEV production of all types.

"We are working to finalise comprehensive NEV policy guidelines that do not exclude technologies such as hybrids and PHEVs," noted Ramaphosa.

"So, consideration must be given to incentives for manufacturers - as well as tax rebates or subsidies for consumers to accelerate the uptake of EVs."

Ramaphosa did not provide a timeline for the finalisation of these guidelines.

"This is not just about a greener future, but also about ensuring that South Africa remains competitive in the global market," he emphasised.

"As many of our major trading partners rapidly shift to EVs, there is an imperative that we remain part of this global supply chain. If we don't, we'll be left behind."

The president's announcement, which was met with enthusiastic applause, comes as some vehicle manufacturers have expressed concern that hybrids and PHEVs have been excluded from the EV White Paper, with companies such as Toyota, Mercedes-Benz and BMW already producing PHEVs and hybrids at their local plants.

No BEVs are currently produced in South Africa.

South Africa's vehicle makers have also been advocating for NEV sales incentives for quite some time.

Domestic sales of NEVs - especially the more expensive PHEVs and BEVs - have been slow in South Africa, frustrating efforts by manufacturers to produce these vehicles for the local and export markets.

For the year-to-date end-August, NEV sales totalled 8 333 units. Within this number, BEV sales were at 871 units, PHEV sales at 346 units, and hybrid sales at 7 116 units.

Export Crunch

Europe and the UK are South Africa's biggest new-vehicle export markets, with 75% of the 400 000 vehicles exported last year finding their way to these regions.

However, Europe is set to ban internal combustion engine (ICE) vehicles by 2035, forcing South African vehicle manufacturers to either adapt, or potentially lose this market.

Two out of every three vehicles produced in South Africa are destined for the export market.

Many vehicle manufacturers are also set to abandon ICE production altogether as the global green economy gathers speed.

China has also emerged as the world's biggest BEV producer, with South Africa courting the likes of powerhouse BYD, an NEV-only producer, to set up a local plant. For that to happen, however, some degree of local uptake would be required.

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South African manufacturer Malben Engineering, of Nigel, is pioneering the use of green steel in the production of automotive components for leading local original-equipment manufacturers (OEMs).

The company, which was established in 1974 and has developed into a Tier 1 supplier of stampings and welding components including for Ford South Africa, is trialling low-carbon steel produced by Salzgitter, of Germany, as part of the Salzgitter Low Carbon Steelmaking programme.

Still led by one of its original founders Amerigo Smargiasso, Malben Engineering has taken delivery of what is believed to be the first-ever green steel coil on the African continent, imported with the support of value-adding steel processor and merchant Allied Steelrode.

Operational director Luca Smargiasso believes the integration of green steel could be a "game changer" for the level 4 broad based black economic empowerment company in light of the increased use of low-carbon steel by global OEMs and given growing pressures to decarbonise the local steel supply chain.

"Companies such as ours are at the forefront not only of understanding this change, but ensuring that we are a market leader in the usage of green steel, which in the future will be as sought after as white gold," Smargiasso asserts.

Allied Steelrode chief marketing officer Lee-Ann Geyser also highlights that Europe, which is South Africa's main automotive trading partner, is moving to introduce taxes on imports with high carbon footprints.

These border adjustments could ultimately mitigate the higher cost of using green steel; costs that the three partners have agreed to absorb for the trial.

"This is no longer just a moral or environmental choice, but a strategic business decision," Geyser adds.

Local Salzgitter agent Shane Barnard, of United Steel, is confident that the price gap between grey and green steel will close over time, as new regulations are introduced and the uptake of green steel rises.

National Association of Automotive Component and Allied Manufacturers Renai Moothilal says the trial is also aligned with the South African Automotive Masterplan 2035 vision for higher levels of localisation, where decarbonisation is becoming a priority in each OEM's sourcing decisions.

About 0.48 t of carbon dioxide (CO2) is emitted when producing a tonne of green steel, compared with the up to 2.4 t of CO2 emitted for every tonne of grey steel.

"First movers and early adopters such as Malben Engineering should be well placed when these decisions are made - as their emission reduction strategies have been tried and tested, removing risk from sourcing," Moothilal says.

Malben Engineering, Allied Steelrode and Salzgitter will now evaluate the mechanical and chemical performance of the green steel to compare its quality-related aspects with conventional steel in areas such as formability to welding, and the potential for corrosion during transportation.

Luca Smargiasso is confident that discrepancies are unlikely, given that the steelmaking process rather than the end-product is adapted during the production of low-carbon steel.

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Two projects selected as preferred bidders under South Africa's inaugural Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP) bidding round have advanced to commercial close and will now enter construction.

The projects, named Mogobe BESS and Oasis Mookodi, have a combined capacity of 180 MW/720 MWh, and will be connected to transmission substations located near to Kathu in the Northern Cape and Vryburg in the North West province respectively.

The battery storage projects are expected to enter into commercial operation in September 2026 and have a combined investment value of R5.3-billion.

Mogobe BESS is being developed by a consortium led by Scatec, while Oasis Mookodi will be constructed by a consortium led by EDF Africa. Both consortia also include local, black-empowerment and community-trust ownership.

A signing ceremony for what are South Africa's first standalone grid-scale, private-sector battery projects procured under the government's BESIPPPP was held in Cape Town on October 16 and attended by Electricity and Energy Minister Dr Kgosientsho Ramokgopa.

The construction phase, which is scheduled for the coming 24 months, is expected to create 217 jobs.

The projects have committed to spending 11% and 20% of total costs, respectively, on local content during construction, and 20% and 26% of total costs on local-content, respectively, during operations.

Once in operation, the projects will store energy during periods of low demand and release the electricity during peak demand periods, or when needed to stabilise the grid.

The installations will also offer ancillary services to the system operator and allow for more renewable energy to be integrated onto the grid.

The Independent Power Producer Office also announced that two of the remaining three projects selected as preferred bidders during Bid Window 1 were expected to reach commercial close by the end of November, while the fifth bidder is preparing for commercial close in early 2025.

Meanwhile, the announcement of preferred bidders from BESIPPPP Bid Window 2, where 615 MW/2 460 MWh is being procured, will be made within weeks, while bid submissions under Bid Window 3, where a combined capacity of 616 MW/2 464 MWh is being procured, is scheduled for the end of October.

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It is important for government to not only pursue new investors, but to also look after current investors already doing business in South Africa, says Naamsa | The Automotive Business Council president Billy Tom.

Tom is also the CEO of Isuzu Motors South Africa. The local arm of the Japanese manufacturer is based in Gqeberha, in the Eastern Cape, where it assembles trucks and the D-Max bakkie for the local and export markets.

Speaking at the South African Automotive Week 2024 held in Cape Town this week, Tom questioned South Africa's "obsession" with garnering new investments - "we always want to go and stand and cut ribbons" - while not looking to those companies which had already invested in South Africa, while "they were bleeding".

Tom also noted that investment was like water, and that it would follow the path of least resistance.

"And we've made it really difficult to invest [in South Africa]."

While Tom was, generally speaking, optimistic about the Government of National Unity, he believed there remained a "big trust deficit" between the private sector and government, despite the recent combined effort to tackle loadshedding.

He lamented the fact that some Cabinet ministers remained dead-set against private participation in the areas where there existed government monopolies, and that the label of 'white monopoly capital' was so often handed out around boardroom tables.

Naamsa had by Wednesday not yet met with the new Minister of Trade, Industry and Competition Parks Tau.

The automotive industry contributes more than 5% to GDP and is the country's largest manufacturing sector.

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With the global energy system moving into the "Age of Electricity", the International Energy Agency (IEA) has again highlighted the central role of Africa in producing the critical minerals required to support the electrification of energy services, such as transportation, previously dominated by fossil fuels.

Releasing the 'World Energy Outlook 2024' report, IEA executive director Fatih Birol argued that it was becoming increasingly evident that the future of the global energy system was electric.

"We've witnessed the Age of Coal and the Age of Oil - and we're now moving at speed into the Age of Electricity, which will define the global energy system going forward and increasingly be based on clean sources of electricity," Birol asserted.

Global electricity demand growth, the report added, was already growing at twice the pace of overall energy demand and was poised to accelerate further, adding the equivalent of Japanese demand to global electricity use each year under current policy settings.

Low-emissions sources of electricity were also set to generate more than half of the world's electricity before 2030, with demand for coal, oil and gas projected to peak by the end of the decade.

While there was uncertainty over how fast the share of electric vehicles would grow from their current share of about 20% of new car sales worldwide, a rise to 50% by 2030 would displace around six-million barrels a day of oil demand.

"If the market share of electric cars were to rise more slowly, remaining below 40% by the end of the decade, this would add 1.2-million barrels a day to projected oil demand in 2030, but there would still be a visible flattening in the global trajectory."

For clean electricity supply to continue growing at pace, the report stressed the need for investment in electricity grids and energy storage.

"Today, for every dollar spent on renewable power, 60 cents are spent on grids and storage, highlighting how essential supporting infrastructure is not keeping pace with clean energy transitions.

"Secure decarbonisation of the electricity sector requires investment in grids and storage to increase even more quickly than clean generation, and the investment ratio to rebalance to 1:1."

The report confirmed there to be ample clean energy manufacturing capacity to support an even faster transition of the electricity sector to cleaner sources of supply such as solar PV and wind.

However, the IEA argued for a diversification of supply chains, including for critical minerals.

While not described as a binding constraint to the growth of renewables, battery storage and electric vehicles, the IEA highlighted potential supply deficits for minerals such as copper, lithium, nickel, cobalt and graphite for the period to 2035.

Here, the agency also saw "upside potential" for Africa, which was already a key player in the global critical minerals mining sector, accounting for 70% of global cobalt production and 16% of global copper production.

"In 2022, mining and extractive industries represent over 30% of total exports in 23 African countries, and critical minerals produce around $20-billion of revenue each year across the continent.

"The Democratic Republic of Congo, South Africa, Zimbabwe and Mozambique are leading producers, but a number of other countries also contribute."

Spending on critical mineral exploration in Africa was also rebounding after years of decline, while new projects were set to expand Africa's share of copper, lithium and natural graphite production by 2030.

"Supporting the existing mining project pipeline requires at least $1.3-billion in cumulative capital investment by 2040, with a possibility to reach around $1.8-billion if projects that are at slightly less advanced stages of development, or are seeking financing and/or permits are also considered.

"...

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New-vehicle exports from South Africa were down 9.2% for the first half of the year compared with the same six months last year, says naamsa | The Automotive Business Council president Billy Tom.

This follows a new record, set last year, at 399 594 new vehicles exported. Three-quarters of South Africa's new-vehicle exports were destined for Europe and the UK.

Tom spoke at the South African Automotive Week 2024, held in Cape Town this week.

Some of the decline in exports could be linked to model changes, such as the new X3 only rolling off the assembly line at BMW's Pretoria plant this month, with overseas customers opting to rather wait for the new-look vehicle.

However, the softening in South Africa's export markets could also be linked to some key economies facing slow or no economic growth.

European markets also faced an influx of Chinese imported vehicles, similar to South Africa, with some consumers opting for a cheaper alternative to a traditional Korean, Japanese or Western vehicle.

naamsa Manufacturing Original-Equipment Manufacturers VP Peter van Binsbergen - also BMW Group South Africa boss - said these events had impacted not only South Africa's exports to these markets, but also local vehicle production, with production also down 9.2% for the first six months of the year.

"It is good to have a large customer base in Europe. However, the downside is that developments in this region have a direct and measurable impact on our industry.

"This means we need to work together - government, labour and industry - to ensure we attract the maximum production allocation to our factories here in South Africa.

"We need to do everything we can to be the first choice when it comes to production allocation and that is largely in our hands here in South Africa."

Parent companies, such as Germany's BMW and the US's Ford, would typically allocate a certain model's production to a plant in its global production network based on that plant's global competitiveness and efficiency.

naamsa immediate past president Neale Hill noted that SA Inc's performance still required improvement in some areas, with electricity stability a major issue in the Eastern Cape, which housed a number of automotive plants, such as Volkswagen and Isuzu.

"It remains a competitive environment. We need agile and nimble policy support, and we need to think about the efficiency of our infrastructure - our ports and rail network."

Van Binsbergen added that South Africa's bilateral trade agreements were also key in safeguarding and/or growing domestic auto production and exports - such as the US's African Growth and Opportunity Act - while there existed "massive potential" within the African Continental Free Trade Agreement.

As for the influx of Chinese imports into the local market, he noted that the South African government had to incentivise these bands to set up production facilities in South Africa, as it had done with existing manufacturers.

DRIVETRAIN CONUNDRUM

Some of Europe's struggles revolved around the question of the future drivetrain make-up of this market, especially the proposed 2035 ban on internal combustion engines, said Van Binsbergen.

He said there had been a notable drop in demand for battery electric vehicles (BEVs) in Europe this year after governments reduced their incentives for these vehicles, while demand for hybrids remained surprisingly robust.

According to EU sales reports, Europe's BEV market share reduced from 19% to 13% year-to-date in 2024, with the plug-in hybrid (PHEV) market share remaining constant, at 6%.

Only traditional hybrids showed strong growth to date this year, reaching a 30% share of the European market.

"This means it is important for the South African automotive industry that hybrids are not excluded from the drive to localise new-energy vehicles (NEVs)," warne...

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A policy decision to allow electricity-intensive companies operating in South Africa to enter into negotiated pricing agreements (NPAs) with Eskom is set to contribute 5.7% to any tariff increase approved for implementation on standard-tariff customers on April 1 next year.

Eskom has included an application for 10 additional NPAs in its larger submission to the National Energy Regulator of South Africa (Nersa) for allowable revenue of R445.6-billion for its 2026 financial year. If approved in full, this would translate to a 36.15% tariff hike next year and raise the standard tariff to 266.78c/kWh from 195.74c/kWh.

Eskom has not disclosed a revenue value associated with accommodating the subsidy for the 10 additional NPAs included in its submission. However, a 5.7% increase on Eskom's allowable revenue of R352-billion for the 2025 financial year implies that an additional R20-billion is being sought.

In the submission, Eskom indicates that electricity sales to NPA customers will be about 23 TWh a year, while it estimates sales to standard-tariff customers of 152.8 TWh.

If accepted by Nersa, the 152.8 TWh in sales would represent a significant decline from the 170 TWh estimated for the current financial year, when only two NPAs with South32 and Sublime Technologies were accommodated in the tariff.

However, it is possible that the sales assumption will be adjusted during the upcoming public hearings in light of more stable operating conditions across the coal fleet, which has resulted in a suspension of loadshedding for more than 200 days, and the higher growth expectations associated with the formation of the Government of National Unity.

Should that be the case, the requested tariff hike could be moderated.

Eskom also does not include the names of the 10 additional NPA beneficiaries, confirming only that it has implemented such agreements with customers in the aluminium, ferrochrome, and silicon carbide sectors in line with NPAs approved by Nersa in accordance with the frameworks approved by the Department of Mineral Resource and Energy.

The NPA framework was implemented by government in 2021 in a bid to prevent electricity-intensive businesses beneficiating mined commodities from curtailing or shutting production, owing to the steep rise in electricity tariffs.

Applicants for the incentive have to prove that electricity is a significant driver of their operating costs, and that they are consuming a minimum of 80 GWh yearly at a load factor of greater than 70%.

In its submission, Eskom says the NPAs are structured to ensure the global competitiveness of the sector from an electricity price perspective and to protect vulnerable sectors.

"South Africa is better off with these customers in the sales base as the NPA structure ensures the relevant variable costs of electricity supply are covered by the tariff and a positive contribution is made to the fixed cost.

"The typically flatter time-of-use and no seasonal differentiated NPA tariff could result in even usage throughout the year with a likely increase in sales which would partly offset the differential between the NPA tariff and standard tariff," it adds.

Eskom says that, in the absence of a NPA, the sustainability of several industries would come into question which could result in potential cut-backs in production or closures.

"This would result in additional upward electricity price pressure on the remainder of the customer base than would otherwise be the case due to loss of contributions to fixed costs."

Besides the NPA subsidy, Eskom has applied for a 29.58% increase in the affordability subsidy charge on key industrial customers, which helps cross-subsidise poor households, but adds about R7-billion to the revenue application.

In a briefing, CFO Calib Cassim stressed that the subsidies, together with several oth...