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Motus's Import and Distribution business took a significant bite out of the automotive group's profit in the financial year ended June 30, says CEO Osman Arbee.

"Minus the importers we had a great year."

Announcing Motus's results in Johannesburg on Tuesday, Arbee said the JSE-listed group had been saved by its long-standing diversification and internationalisation strategy, which managed to bump up revenue and profit outside the struggling South African economy.

Motus saw revenue increase by 7%, to R113.7-billion, compared with the previous financial year, with operating profit down 4%, to R5.5-billion.

Operating profit at the Import and Distribution division, which included brands such as Hyundai, Kia and Renault, saw a 45% drop in operating profit for the financial year, to R780-million, compared with the previous year.

Retail and Rental had a 1% increase in profit, to R2.58-billion, Mobility Solutions was up 12%, to R1.27-billion, and Aftermarket Parts up 19%, to R1.24-billion.

Both the Aftermarket Parts and Retail and Rental businesses had much more of an international flavour.

Around 35% of Motus' earnings before interest, taxes, depreciation and amortisation currently came from international operations, up from 22% in 2021, noted Arbee.

CFO Ockert Janse van Rensburg described the Import and Distribution business as the group's Achilles heel this year.

Janse van Rensburg is also the Motus CEO designate, as Arbee is set to retire this year, at age 65.

Arbee noted that the Import and Distribution business was impacted by the fact that the relevant brands were no longer manufacturing entry-level vehicles, with cash-strapped South Africans increasingly leaning towards cheaper mobility solutions.

Motus had also seen lower production allocation from the brands' parent companies, or with these brands being short on supply of the relevant vehicles.

Arbee added that the South African new-vehicle market was highly competitive, especially with the growing number of Chinese entries.

There was hope, however, that the situation could improve.

Arbee believed that increasingly positive consumer sentiment, an interest rate cut or two, as well as "a few more jobs", could all help to "kick up" new-vehicle sales in South Africa to around 600 000 units in the next 24 months, up from the 510 000 units expected in the 2024 calendar year.

Hyundai, Kia and Renault were also launching new entry-level models to fill the current gap in the market.

Janse van Rensburg added that Chinese car makers were not yet posing a threat to Motus's import business in the entry-level segments, noting that they might remain unable to do so going forward.

South Africa's entry-level vehicle stock came mostly from plants in India, where they were big sellers, with China not focused on producing these vehicles, as they generally do not sell in China.

Janse van Rensburg also echoed Arbee's sentiment that South Africa would deliver better results for Motus going forward, as the economy was expected to start generating some traction.

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Transnet CEO Michelle Phillips has acknowledged criticism over the pace at which it plans to recover rail volumes and has reported that an internal "stretch target" of 193-million tons has been set for 2024/25 against an official target of 170-million tons.

Speaking during the State-owned group's results presentation, she said the 170-million-ton goal had been set conservatively in line with what Transnet felt it could deliver leveraging its own resources. It could be lifted, however, "with help" from customers and private partners.

The stretch target still falls well short of the record 226-million tons railed in 2017/18 and is also below contracted volumes. Nevertheless, meeting it would represent a material improvement on the 152-million tons railed in 2023/24, and a marked recovery from the volume collapse to149-million-tons in 2022/23.

Transnet's "lack of ambition" came in for stiff criticism during the first high-level meeting between Cabinet members and business leaders since the formation of the Government of National Unity in August, where Transnet revealed that it had not met its volume-recovery targets during the first half of its financial year

It was also revealed at the meeting that only at rail volumes of between 200-million and 220-million tons yearly was Transnet's contribution supportive of the country's economic recovery and job creation.

"If you ask me if it's doable in this year, I'm going to say to you, not without help. We need a lot of help," Phillips said in response to it meeting a target of close to 200-million tons.

Volumes could be supported, however, by deals with original-equipment manufacturers (OEMs) to return locomotives to service that have been idle for a protracted period, owing to inadequate maintenance plans and the unavailability of spare parts.

While a settlement had not been reached with Chinese locomotive supplier CRRC, a 'Step-in OEM' would help Transnet Freight Rail (TFR) return 77 locomotives this year and another 88 next year. Likewise, 11 long-standing Mitsui locomotives would resume service in 2024/25 and 30 more the following financial year, alongside 34 43/44Ds this year and 54 more in 2025/26. Another 111 Class 23E units would be returned over the coming three financial years.

Phillips also saw potential to strike specific deals with key commodity customers along the lines of the five-year partnership agreement between Sasol and TFR, where Sasol is funding the maintenance and repair of a dedicated fleet of 128 ammonia tankers.

Moving beyond the 226-million-ton level, however, would be possible only through direct private sector participation (PSP) in rail operations, which would be made possible only once the Network Statement and tariffs were approved by the Interim Rail Economic Regulatory Capacity.

Internally, TFR has been vertically separated to create a rail operating company and a rail infrastructure manager to prepare for the entry of private rail operators. However, chronic underinvestment in the network, along with tariff uncertainty, could prove to be key hurdles for third-party train operators.

Chairperson Andile Sangqu stressed that the repair of the rail network was being prioritised with a view to ensuring that third-party operators could participate on a network that was "safe and dependable". He also said that the board was advocating for the development of greater capacity within Transnet to accelerate PSP projects across the rail and port systems.

That said, Transnet's "huge debt burden" was hamstringing the ability of the company to generate the cash it needed to stay afloat, notwithstanding the R47-billion government guarantee extended in late 2023.

"We are exploring several solutions, which include enhancing our revenue through operational efficiency and enhanced asset optimisation through disposa...

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The New Development Bank (NDB) on Friday signed a R5-billion loan agreement with State-owned freight transport and logistics group Transnet.

The agreement was signed during the NDB's ninth yearly meeting, held in Cape Town.

Transnet's freight rail sector renewal programme, which aims to restore freight rail volumes in South Africa, includes infrastructure renewal, locomotive overhaul and wagon fleet renewal workstreams.

The South African government will guarantee the loan.

"We need to fix the network," Transnet CEO Michelle Phillips told Engineering News Online following the signing ceremony. "And we have a long way to go to do that."

Phillips added that the network was in "a terrible state".

"We have a lot to do to lift it to the standard where everyone can use it - us and private operators."

"This loan underscores NDB's commitment to supporting sustainable development and economic growth in South Africa," noted NDB president Dilma Rousseff.

"By modernising the freight rail sector, we aim to facilitate more efficient logistics operations that will benefit the entire region and align with our goal of investing in a sustainable future."

The NDB was created in 2015 by Brazil, Russia, India, China and South Africa (Brics) to mobilise resources for infrastructure and development projects in Brics and other emerging market economies and developing countries.

In 2021, the NDB began expanding its membership and admitted Bangladesh, Egypt, the United Arab Emirates and Uruguay as its newest members.

The NDB has, to date, financed 14 projects in South Africa, including the new Transnet loan agreement.

Engineering News editor Terence Creamer discusses the implications of moving that State-owned enterprises that previously fell under the Department of Public Enterprises to new departments.

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Eskom CEO Dan Marokane says the State-owned company is eager to participate in a "holistic conversation" about the gap that has emerged between the changes under way in the electricity sector and the rules governing the industry, including those related to the way tariffs are set.

In an exclusive interview with Engineering News, Marokane expressed optimism in Eskom's ability to bring an end to the devastating era of loadshedding, and indicated that the recent period of operational stability had helped to restore morale, slash diesel costs and provide the board and executives with time and space to begin focusing on the future strategy for the unbundled entities.

He acknowledged brewing opposition, however, to its sixth multiyear price determination (MYPD6) revenue application that could translate to a tariff hike of 36% on April 1 next year, if approved in full by the National Energy Regulator of South Africa (Nersa).

The MYPD6 application covers the 2025/26, 2026/27 and 2027/28 financial years and is due to be subjected to a public participation process in the coming months.

The submission has been prepared in line with the MYPD methodology that Nersa sought to overhaul last year, when the Electricity Price Determination Methodology Rules were approved in December.

That decision was rescinded by the Energy Regulator in July, however, when it emerged that the rules could not be implemented, partly owing to timing pressures and partly because they were not accompanied by a methodology to calculate the tariffs.

Marokane acknowledges that the rules, along with many other prevailing regulations governing Eskom and the sector, are "outdated" but says there is currently no clear action plan from Nersa on how these will be modernised to reflect the emerging realities of the industry.

Those changing realities are being addressed primarily through the National Energy Crisis Committee (Necom), but Marokane contends that regulatory changes are not keeping pace with the swift decision-making emerging from that structure, resulting in implementation risks.

"We need to bring the same level of vigour and pace that's on display at Necom into the regulatory environment, which means Nersa needs to move with pace," he tells Engineering News.

There might be a need, he adds, to bolster Nersa's internal capacity in the short term to enable it to address areas of concern, which range from the tariff structure to wheeling and feeding into the grid, to having new rules that cater for traders in areas where Eskom has sole distribution rights.

DEBT-RELIEF ALONE NOT SUFFICIENT

As part of the conditions of the R254-billion debt-relief package, the National Treasury underlined that debt-relief alone would not return the utility to financial sustainability and that tariff increases would also be required.

Eskom estimates that its tariffs are 25% to 30% below cost-reflective levels in real terms, depending on the licensee, be it transmission, generation or distribution, and its submission to Nersa seeks to address the deficit to provide revenue certainty once the debt-relief period ends in 2025/26.

The State-owned enterprise is already facing a backlash to the revenue application, despite it not having been officially released into the public domain. Nersa has indicated that it will publish the application on its website as soon as it has been assessed to be compliant with the prevailing rules, following which public hearings will be scheduled.

Marokane says he understands the concern being expressed by business, civil society, political parties and also the Government of National Unity, which has set reducing the cost of living as a key priority, alongside stimulating growth and job creation.

He also acknowledges ongoing criticism of Eskom's costs, saying: "I'll be the first to tell you that we need...

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South Africa's Industrial Development Corporation (IDC) is optimistic of converting the rise in business confidence that has accompanied the recent easing in loadshedding and visible efforts to address freight logistics bottlenecks into higher levels of investment this year, following a decline in disbursement during its 2024 financial year.

The development finance institution disbursed R15.9-billion in the financial year to

March 31, 2024, representing an 11% decline when compared with the R17.8-billion disbursed in the previous year.

Approvals fell 16% to R17.3-billion from a record level of R20.7-billion in the previous financial year.

Interim CEO David Jarvis, who stepped into the role in October after TP Nchocho's departure, told Engineering News in an interview that he was confident that approvals would rise towards the target of R22-billion, owing to the more supportive climate for investment and the realisation of some of the projects that had been originated by the IDC itself.

Industrial projects valued at R3.7-billion had graduated from development stage to bankability during the period under review.

Notwithstanding weaker commodity markets, which impacted the IDC's financial performance, Jarvis indicated that the group saw significant potential in critical minerals projects in South Africa and Africa, where it was pursuing projects aimed at developing minerals-related value chains.

"Two of our investments were to support battery-grade manganese projects during the course of the year, as well as a battery-grade graphite investment.

"So these are important investments which we're making to support that play towards a [critical minerals] industry which is going to grow five times over the next 20 years," he said.

He also revealed that the IDC was in communication with Chinese companies with a view to pursuing co-investments in regional minerals value chains. This disclosure comes ahead of an upcoming State visit by President Cyril Ramaphosa to China, which will take place from September 2 to 5, where the issue of minerals value addition is expected to be on the agenda.

However, softer commodity market conditions negatively impacted the group's financial performance during the year as well as the IDC's listed equity portfolio, the value of which fell to R45.5-billion from R51-billion, largely on the back of a fall in Sasol shares.

In addition, the IDC's mining and metals exposure made up 42%, or R12.4-billion, of total nonperforming loans, while dividend flows from companies in the sectors also decreased.

Supporting green growth and low-carbon transitions was also high on the IDC's investment agenda, with the group having already played a role in supporting various renewable electricity projects and having been appointed as the project management office of the green hydrogen and new energy vehicles components of South Africa's Just Energy Transition Investment Plan.

However, Jarvis also highlighted the IDC's alignment with the Government of National Unity's priority to support inclusive growth through jobs-rich industrial development, including in agriculture, manufacturing, tourism and services.

In the key area of manufacturing, the IDC has already announced a partnership with

Stellantis to establish a plant that will manufacture 50 000 Peugeot Landtrek bakkies and it is also still aiming to up production at the BAIC plant at Coega, in the Eastern Cape, which has underperformed relative to initial expectations.

"The continued commitment to inclusive and sustainable industrialisation is evident in our corporate plan for the 2024/25 to 2026/27 period wherein we've committed to deploy over R60-billion of on-balance-sheet funding over that period," he said.

The IDC also confirmed that it would be returning to the bond markets following a hiatus, which arose because...

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Sustainable Power Solutions (SPS) has started to test and commission a R135-million solar PV and battery solution project for abalone farmer Aqunion, a subsidiary of the Sea Harvest Group.

Construction of the solar system began in November last year.

Founded in 2008, SPS has, to date, commissioned more than 250 solar and storage projects across sub-Saharan Africa, St Helena Island and the Seychelles.

SPS owns and operates the Aqunion system, located at Romansbaai, in the Western Cape, and sells the power to the abalone farmer.

Aqunion says the rising costs of electricity, and frequent loadshedding, frustrated its efforts to run an efficient operation at Romansbaai, which has an output of around 200 t of abalone a year.

"Our operations need a constant and reliable power supply to maintain the best conditions for our high-value abalone," explains CEO Rowan Yearsley.

"SPS offered us a comprehensive solar and battery energy storage solution that align with our goals of reducing operational costs and improving our sustainability.

"We wanted a partner who could manage the energy production aspect while we focus on our core business of farming abalone," he adds.

The SPS system, with a 20-year life-cycle, augments Aqunion's existing hydro-plant and seawater storage facility.

SPS senior energy storage specialist Johan Wolmarans says the Aqunion system includes a battery-based energy storage system designed to deliver up to four hours of backup power, and a solar array capable of supplying about 22% of Aqunion's required yearly energy needs.

The total array size is 2.4 MWp, he notes. The battery inverter size is 3 MVA, and battery storage is 8.2 MWh.

"This solution not only helps Aqunion during peak operational times, but significantly reduces their reliance on diesel generators, reducing the associated emissions," says SPS business development manager Charles Neethling.

The installation of the solar panels, placed over existing abalone tanks, required some custom engineering and special materials to withstand the corrosive environment so close to the ocean.

"It's a hot, humid, windy environment with a high salt-spray content," says Wolmarans.

"We had to seamlessly integrate with existing infrastructure and ensure the durability of the system, despite the harsh conditions. We made use of special bolts, for example, made from improved stainless steel compared with what we normally use."

With the implementation of SPS's renewable-energy solution, Aqunion anticipates a significant shift in its energy consumption profile.

"We expect to see our energy costs decrease over time and our reliance on renewable energy increase from 10% to 30%," says Yearsley.

Wolmarans says the current prolonged lull in loadshedding is having an impact on SPS's business, as well as that of its customers.

"We can see that customers are being cautious in proceeding with new projects.

"Solar power remains popular and a good investment, but the business case for using energy storage - we had to pivot a little bit, even though we still see a lot of opportunities.

"There remains, however, still a lot of opportunities in the off-grid space, with a number of communities that are unserviced [by Eskom], Also, with rising energy costs, it makes sense to use battery storage technologies."

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The National Energy Regulator of South Africa (Nersa) has confirmed that it received, on August 16, Eskom's sixth multiyear price determination (MYPD6) revenue application for the 2025/26, 2026/27 and 2027/28 financial years.

In a statement the regulator said that the application would be processed in line with all required procedures, including an assessment of its regulatory compliance, after which it would be published for stakeholder comment and public consultation.

No timeframe was provided, but Nersa said the plan and timelines for the processing of the application would be communicated after the Energy Regulator's pronouncement on the application's compliance.

Therefore, Nersa did not confirm whether the application included a request for allowable revenue of R446-billion for 2025/26, which would translate to a 36% hike for direct customers.

"Nersa is committed to ensuring that all regulatory processes, including public participation, are conducted with the utmost transparency, fairness and inclusivity," the regulator said.

Eskom CFO Calib Cassim confirmed on August 26 that Eskom had indeed made its MYPD6 submission but also refused to be drawn on its contents until Nersa published the document for public comment.

Cassim also confirmed that the broader submission catered for "unbundled tariffs" for generation, distribution and the National Transmission Company South Africa.

"There is the revenue application, [but] as part of the process, we also make a Retail Tariff Plan submission to Nersa where the unbundling of tariffs is addressed.

"This is what Nersa will also have to consult on," Cassim said.

Asked what Eskom estimated the current gap to be between prevailing tariffs and cost-reflective tariffs, Cassim said: "We say it's about 25% to 30% in real terms, but it does vary slightly depending on the different licensee, be it transmission, generation or distribution."

The submission comes against the backdrop of growing anxiety over the affordability of electricity in South Africa, with tariffs having increased in nominal terms by over 600% since 2006.

It also follows the assembly of a Government of National Unity, which has listed tackling the high cost of living as a key priority, alongside efforts to grow the economy, increase job creation and reduce poverty.

A Cabinet committee set up to consider interventions to moderate fuel price increases is expected to turn its attention to electricity tariffs once it has made its recommendations, which could include changes to the Basic Fuel Price formula.

Electricity and Energy Minister Dr Kgosientsho Ramokgopa has indicated he plans to initiate a review of the Electricity Pricing Policy and had indicated that he would like to see the current tariff-setting methodology updated.

The Eskom submission has been made using the MYPD methodology after the Energy Regulator rescinded its approval of the so-called Electricity Price Determination Methodology Rules in December.

Ahead of the July announcement to rescind that decision, Eskom had questioned whether the rules could be implemented, owing to the absence of an accompanying methodology to calculate tariffs, as well as the fact that insufficient time had been left to adjust its application, which had been prepared using the MYPD methodology.

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President Cyril Ramaphosa has left the door open to excluding a section in the Electricity Regulation Amendment (ERA) Act that could negatively affect the revenues municipalities raise from electricity sales when the legislation is officially implemented.

Ramaphosa signed the ERA on August 20, with a clause stating that the Act would come into operation "on a date determined by the President".

Prior to the President providing assent to the legislation, the South African Local Government Association (Salga) voiced its strong objection to those parts of the ERA that the organisation said would undermine the exclusive right of municipalities, as outlined in the Constitution, to reticulate electricity.

Salga had also indicated that it was preparing to take legal action should the Act be signed and in his address to the Just Energy Transition Municipal Conference on August 26, Salga president Bheki Stofile reiterated that position, stating that the Act posed a new challenge to local government.

"A clause inserted into the Bill after the public participation process, and signed into law, threatens to remove a significant portion of municipalities' remaining electricity distribution functions.

"Salga has repeatedly implored both Parliament and the President to reconsider this clause.

"We hope the effective date of the Bill will exclude this clause, as failure to do so may undermine the very purpose of our discussions today - the municipal energy transition," Stofile stated.

In his subsequent address, Ramaphosa said he understood that Salga "would like some exceptions to be inserted" once the legislation was implemented and indicated a willingness to entertain further discussions on those exclusions ahead of the Act's implementation.

However, the President continued to underline the importance of the legislative changes that would be enabled by the ERA, saying that these "paved the way for a new, competitive electricity market".

"The reforms contained in the law must help to speed up decarbonisation. But more than that, they must result in a better deal for households and businesses," Ramaphosa said.

In a subsequent panel discussion, Electricity and Energy Minister Dr Kgosientsho Ramokgopa expressed confidence that a solution could be found "without going to court".

For his part, Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa expressed relief at Ramaphosa's willingness to engage further on the matter before the Act came into force.

Hlabisa, who is also the leader of the Inkatha Freedom Party, which is a participant in the Government of National Unity, indicated that he would be taking his lead from the President in helping to facilitate the interventions required to reach an acceptable resolution.

Meanwhile, Deputy Finance Minister David Masondo reported that the future revenue model for municipalities was also receiving priority attention under Operation Vulindlela, including how the revenue gap arising from changes to the electricity sector could be closed.

The conference itself had been convened to improve coordination and alignment at the municipal level with the Just Energy Transition Investment Plan (JET-IP), which estimated that investments of about R319-billion were required between 2023 and 2027 to maintain and expand municipal and Eskom electricity distribution networks.

It was agreed that a JET Municipal Forum and secretariat would be established following the conference to support the implementation of the JET-IP at the local government level.

The forum would prioritise the establishment of three workstreams to support capacity building, finance structuring and energy access initiatives across municipalities, starting with the top 20 licensed municipal distributors.

It was anticipated that the forum would also help empower municipalitie...

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The International Finance Corporation (IFC) has confirmed that its stands ready to support South Africa's efforts to facilitate private sector participation in the expansion of the country's electricity grid.

IFC Africa VP Sérgio Pimenta told Engineering News during his recent visit to South Africa that the World Bank Group agency had already been providing advice to government on possible models for deploying independent transmission projects to help address grid-related backlogs.

Eskom's National Transmission Company South Africa has indicated that 14 218 km of new powerlines, 170 transformers (105 865 MVA), alongside 40 capacitors (2 700 MVar) and 52 reactors (14 713 MVar) are required by 2032 to connect new renewables capacity, much of which will arise in areas where there is currently limited grid in place.

Government is, thus, looking to supplement NTCSA's own build programme with private grid projects and moves are under way to set up a procurement agency at the Development Bank of Southern Africa.

The next step, Pimenta told Engineering News, was to begin implementing such projects and he reported that the IFC was ready to provide direct funding to such projects as well as to mobilise private funding for grid-related investment.

"The needs are very significant and no institution by itself will be able to cover them," he said, estimating that South Africa needed to invest some $10-billion to expand and modernise its grid.

The IFC's current committed investment portfolio in South Africa stands at $3.7-billion across 49 clients - its largest in Africa. But Pimenta confirmed that the development financier was keen to both grow and diversify the portfolio, including by funding independent transmission projects.

For every dollar of IFC invested, he was also confident it could help mobilise a further $5-billion from long-term investors, such as pension funds, sovereign funds and other institutional investors.

"That's one of the roles we can play in addition to providing our own financing."

Pimenta met with Electricity and Energy Minister Dr Kgosientsho Ramokgopa during his visit, which took place from August 21 to 23, and he told Engineering News that their discussions centred on the pragmatic steps required to facilitate private investment into the grid.

He noted that the IFC had already supported similar projects in other parts of the world, including in Côte d'Ivoire, and argued that the main benefits lay in the efficiency that private companies brought to delivering such projects and in securing the necessary funding.

"As is the case in many other countries, we are not advocating 100% private-sector, or 100% public-sector solutions.

"We are advocating for a pragmatic solution where everyone contributes," he said, adding that there were also World Bank financial products to help derisk the projects in a context where there was limited fiscal space to provide guarantees.