Electricity Minister Dr Kgosientsho Ramokgopa has acknowledged that South African cities and towns face the real prospect of ongoing power interruptions even if the balance between supply and demand is restored, owing to significant investment backlogs in the distribution sector.

Quoting from research conducted when he was overseeing Infrastructure South Africa, Ramokgopa estimated the backlog to be above R30-billion, given that underinvestment in maintenance and refurbishments had been found to be growing at an average yearly rate of about R2.5-billion from 2011 to 2022.

Municipal finances, he said, had not improved since that research, which meant the problem was likely larger today than when the study was concluded.

"The message I'm trying to convey is that when we get to a situation where we have resolved loadshedding, it doesn't follow that communities are going to have electricity, as a result of the failing of these [distribution] assets," the Minister warned during a weekly update on the implementation of the Energy Action Plan.

Besides Eskom Distribution, which is in the process of being unbundled into a separate entity, there are 238 municipal distributors, some of which are currently struggling to service communities, owing to a combination of financial and skills constraints.

In addition, overdue debt owed to Eskom from municipalities now stands at R63.2-billion, having grown by R4.7-billion since April.

A total of 44 municipalities, including many of the Top 20 debtors which collectively owe R48.9-billion, have been identified as having low electricity distribution competence and only 11 of the 28 municipalities that had active payment plans as of July were honouring these plans.

It was also confirmed that only 13 municipalities had applied for the debt relief package announced by Finance Minister Enoch Godongwana in February and that only seven had, to date, been approved to participate in the scheme.

Eskom Distribution group executive Monde Bala said that a key condition for receiving relief under the scheme was for the defaulting municipality to keep its current account up to date for a period of 12 months. Such a reconciliation could take place only once a municipality had participated for more than a year.

The National Energy Crisis Committee (Necom) had established a workstream to discuss ways to finance the investment and maintenance backlogs, including by possibly securing funds from the $8.5-billion Just Energy Transition Partnership.

Engagements were also under way involving the Department of Cooperative Governance and Traditional Affairs, the National Treasury, the South African Local Government Association and Eskom to discuss how the sector could be made more sustainable in future.

A previous attempt to establish seven wall-to-wall regional electricity distributors was found to be in breach of the Constitution, which gives municipalities the authority to reticulate electricity.

However, the tabling of the Electricity Regulation Amendment (ERA) Bill, which could have far-reaching implications for the structure and functioning of the distribution sector, had been postponed. This, owing to a mishandling of changes made to the draft, which led to Parliament sending the Bill back to the Office of the Chief State Law Advisor for re-certification.

Ramokgopa refused to be drawn on the delay saying only that, from government's perspective, the passage of the ERA under the current Parliament was regarded as urgent and that Deputy President Paul Mashatile, as leader of government business, would interface with Parliament on the matter.

In the meantime, Necom was working on proposals for some immediate changes to regulations with implications for the sector, on which the National Energy Regulator of South Africa (Nersa) would facilitate public consultations before making decisions.

A proposed net billing framework, allowing firms and households to be remunerated for electricity they feed into the grid, was und...

Energy Ministers and officials from the Brics bloc met in Sandton on Friday to discuss potential areas of collaboration for improving access to secure and affordable energy, while transitioning to cleaner energy systems.

The meeting was chaired by South Africa's Mineral Resources and Energy Minister, Gwede Mantashe, who reiterated his stance that the transition should address both the lowering of emissions and ongoing energy poverty.

He also repeated that South Africa, where a long-running imbalance between supply and demand has resulted in daily power cuts, would continue to pursue all technologies, including coal and nuclear, to improve its own security of supply.

However, there were also initiatives under way to accelerate the deployment of renewable energy, which currently contributed less than 10% of the country's electrical energy.

Other participants to the meeting emphasised the importance of integrating social justice into the energy transitions under way in each country, as well as the importance of transmission-related investment to support the connection of renewable generation.

In a statement released following the meeting, the Department of Mineral Resources and Energy (DMRE) reported that the Ministers agreed that an "inclusive, diverse and holistic" approach to the energy mix was required to achieve sustainable energy supply while averting potential future disruptions in the sector.

Deliberations reportedly focused on programmes to promote energy cooperation with a view to "enhancing energy security, advancing universal access to energy, minerals for energy transitions and research and technological cooperation".

The Brics countries also agreed that "balanced and economically sound" energy policies, based on national circumstances, should be employed to support energy security.

On minerals for energy transitions, the Ministers undertook to exchange best practices and standards in the development and beneficiation of minerals in the country of origin.

The DMRE reports that the delegates also committed to exploring various technologies and new materials that were central to global energy transitions and carbon reduction.

South Africa's automotive manufacturing sector is widely regarded as a success story; however, it must now bolster local demand and adapt its policies and initiatives amid a weak domestic growth outlook and the global, albeit uneven, shift towards new energy vehicles (NEVs).

Speaking during a recent Creamer Media webinar, Toyota Wessels Institute for Manufacturing Studies manufacturing ambassador Professor Justin Barnes indicated that South Africa faces real headwinds in relation to the transition to NEVs.

South Africa and Africa's automotive markets are still dominated by internal combustion engine (ICE) vehicles, while the shift towards NEVs - which constitute a wide array of technologies - is occurring rapidly in the European Union and other developed markets.

NEV development is, therefore, moving along in other markets in which South Africa competes, but not its domestic market, as NEVs are still not price competitive with ICE vehicles without considerable subsidies, Barnes explained.

The country, thus, faced the conundrum of needing to meet export demand for NEVs while being unable to supply the domestic market, owing to affordability constraints.

The Automotive Production and Development Programme (APDP) in its current form is a particularly good incentive scheme for the production of NEVs and, therefore, the real challenge lies in the marketplace, Barnes argued.

The country's automotive industry is export orientated, with the APDP incentivising firms through a rebate mechanism that is tied to a reduction in import duties. If the domestic market does not perform well, there is less of an incentive to export, he pointed out.

"Without the rebate model, we are not a globally competitive export producer. The key issue, therefore, is how do we stimulate demand for NEVs in South Africa, or how do we displace exports of present vehicles into the developed world markets that will still be consuming ICE vehicles?" Barnes questioned.

National Association of Automotive Component and Allied Manufacturers executive director Renai Moothilal reiterated Barnes' sentiments about bolstering local demand and mentioned scope for provincial support structures to explore market-stimulation initiatives.

"We need to start thinking creatively - how do you support the roll-out of charging stations and the like. I think there's sufficient impetus in supply-side support. What is missing in the South African context is [a clear plan for] reshaping the market. It is important from the way the incentive package works, and not just from a 'can we sell vehicles' perspective," he outlined.

To meet the market demand for ICEs and NEVs, Barnes suggested that South Africa's automotive industry's opportunity lies in Africa and in creating regional value chains.

Only ten-million adults in South Africa can afford a new vehicle, and projections show that this is not set to increase, owing to the challenging economic climate.

However, there are opportunities on the continent, with several countries having developed a middle class and, therefore, South Africa should position itself as a hub for the region, he highlighted.

Barnes called for strategising an African automotive pact that will provide the biggest opportunity for growth in traditional vehicle production, but that will also support potential production in relation to NEVs.

"We will actually be facing major demand growth in . . . the traditional ICE . . . and NEV space, and a combination could be a huge advantage for us going forward," he highlighted.

Coega Development Corporation senior business development manager Thandile Jack also reiterated Africa's presenting a market opportunity for the country and added that the Middle East presents a new market in terms of NEVs.

Barnes explained that the country's automotive manufacturing sector has a very strong foundation that has been established over generations, which ensures that it will be producing vehicles well into the future.

"The question is whethe...

Engineering News editor Terence Creamer discusses the importance of the Electricity Regulation Amendment (ERA) Bill; why the Bill has not yet been tabled in Parliament despite Cabinet having approved its tabling in March; and the implications of this delay.

Eskom reports that it has made material advances in developing what it calls a 'virtual wheeling product' that will allow one or more generators to transact with multiple offtakers, including those supplied by municipal distributors.

However, the utility insists that a national wheeling framework is still urgently required so as to standardise the calculation of wheeling charges across all of South Africa's distributors, with such charges currently varying significantly from distributor to distributor.

Eskom senior adviser for electricity pricing Onicah Rantwane also reports that, while the virtual wheeling proof of concept is well advanced, further development work is being undertaken to refine the solution ahead of implementation, for which there is no firm date.

She also notes that the product is heavily reliant on the deployment of meters that are able to provide time-of-use readings, as well as the associated information communication technology systems needed to collect and process that data.

In addition, it would be helpful if cost-of-supply studies could be completed across the distribution sector so as to ensure use-of-system charges are calculated using a more standard formula to make them both fair and affordable.

Speaking during a webinar hosted by EE Business Intelligence, Rantwane reported that the virtual wheeling model had been designed to integrate with existing Eskom and municipal billing systems, as well as for revenue neutrality.

It also differs markedly from the prevailing wheeling system, which is mostly confined to bilateral agreements between an individual generator and offtaker, by catering for multiple generators and offtakers, with accounts settled by way of a consolidated "refund" rather than through individual credits.

Under the model, information will be aggregated by the buyer - which could be a corporate, a trader, or an aggregator - and a single refund for the wheeled portion of the electricity consumed by the various individual customers will be paid to the buyer.

The model is anticipated to be attractive to companies such as retailers with multiple stores in various locations that have power purchase agreements with several renewables generators that are wheeling electricity through the grid.

The buyer, which could be the company itself or a trader, will aggregate the generator and customer data through a buyer platform, which will interface with an Eskom aggregation platform to reconcile the data so that the refund can be calculate and settled. The settlement is based on Eskom's avoided purchase cost.

The buyer will then allocate the wheeled energy credit to the individual customers, which means refunds will be paid on an aggregated basis rather than against individual bills.

"The basis for the refund is that the individual customer will be paying the full bill, including the energy purchase from Eskom and the wheeled energy.

"Eskom has, therefore, overcharged the individual accounts and therefore a refund is due," Rantwane explained.

The concept does not depend on amendments to the electricity supply agreements, including with municipalities, as not credits are provided to the municipality and municipal revenue is also unaffected.

However, the creditworthiness of municipalities, many of which owe Eskom outstanding debts, could limit deployment in certain areas.

"Eskom will have to receive payment before we can refund the buyer or the trader. [If] we haven't received the payment from municipalities for that month, we will not effect the wheeling refund," Rantwane confirmed.

It is currently taking an average of 25 months for government to complete import duty investigations and to provide the necessary Ministerial approvals for the South African Revenue Service to implement duty increases or reductions, a new report shows.

Compiled by XA Global Trade Advisors, the analysis also highlights a marked slowdown in turnaround times over the past ten years, with the longest outstanding case in 2013 having been 17 months, which is eight months shorter than the current average turnaround time.

Import duty investigations are officially meant to be concluded within six months.

CEO Donald MacKay believes the delays are also the chief cause for a steep decline in the number of applications to the International Trade Administration Commission of South Africa (Itac) for duty increases or reductions.

The report shows that only four new applications were made by private firms in the six-months to June 30, a ten-year low.

"At times of economic distress, we should see the use of trade policy instruments rising, yet we find the very opposite happening," Mackay argues.

Macsteel CEO Mike Benfield confirms the report's assertion that business is opting out from using the trade remedy, indicating that the circumstances that prevailed at the time of the application typically no longer applied by the time a decision is eventually made.

For instance, Macsteel's application for a 10% duty on black bar was overtaken by other market circumstances, such as intensifying loadshedding, which had become even more threatening to the future of its bright-bar facility than import competition.

The effectiveness of the proposed protection, Benfield adds, is often undermined further by the proposed reciprocal-agreement stipulations attached to the proposed duty.

The report, which is the third produced by XA, calls for a rethink of such reciprocal agreements, arguing that they are being unevenly applied, add significant cost without a commensurate benefit, slow down the process, and are causing businesses to opt out of the process.

It also asserts that the delays are costly, calculating them at R2.6-billion in duties having been paid where there is no local producer and R4-billion in duties not collected in duties where protection has been requested.

These costs have been determined by calculating the difference between the current duty and the requested duty and multiplying this rate difference by the value imported from month seven of an investigation up until June 30, 2023.

The report indicates that Itac is not the only reason for the slowing turnaround times, with the evidence pointing to rising dwell times with the two responsible Ministers, Trade, Industry and Competition Minister Ebrahim Patel and Finance Minister Enoch Godongwana.

MacKay confirms that the report's findings have been shared with Itac and the government departments and that an initiative is under way in a bid to have lawmakers discuss its contents at the level of a portfolio committee meeting.

The information has also been shared with Business Unity South Africa and there are indications that the formation plans to prioritise discussions with government on the delays in an effort to secure a solution.

XA has also outlined a possible import investigation masterplan, which it believes could help remedy the problem.

"We are left with a trade policy system which has almost completely ceased working. This has to be addressed," MacKay avers.

Naamsa | The Automotive Business Council reports that new-vehicle sales increased by 8.6% year-on-year in the second quarter of the year, while new energy vehicle (NEV) sales grew by 100.7% year-on-year.

The industry, however, sold 8.1% fewer new vehicles quarter-on-quarter, which likely reflects the strain on consumers' budgets following a further interest rate increase and ongoing affordability considerations.

The strong performance of the new-vehicle market during the second quarter of this year, compared with the same quarter of last year, reflects the lower base effect owing to the impact of the severe flooding in Kwazulu-Natal on vehicle production and supply chain disruptions at the time, the entity states.

The passenger car segment, in particular, remained under pressure in view of higher interest rates and inflationary pressures, while the improved performance in the heavy commercial vehicle segments is mirroring the increasing reliance on road transport due to ongoing structural rail network challenges.

Positively, NEV sales by 18 industry brands grew from 738 units sold in the second quarter of last year to 1 481 units sold in the second quarter of this year.

Following a significant year-on-year increase of 421% from 896 units in 2021 to 4 674 units in 2022, comprising 0.88% of total new-vehicle sales, NEV sales for the first half of this year increased by a further 47.1% to 3 146 units, compared with the 2 139 units sold in the first half of 2022.

Battery electric vehicle sales in the first half of this year, at 502 units, were already at the level of the 502 units sold for the full 2022.

Naamsa says a timely NEV policy framework to support investment decisions for NEV manufacturing and to safeguard export volumes into the European market, is imperative for the domestic automotive industry's inevitable transition to NEVs.

Moreover, the industry body reports that the second quarter saw the automotive industry gaining 105 jobs, with aggregate industry employment having increased from 33 392 at the end of March to 33 497 at the end of June.

The average monthly vehicle manufacturing industry employment number for 2022 was 33 321, compared with 30 697 in 2021.

Naamsa says there was a recovery in vehicle production to pre-pandemic levels in 2022, with various new generation models launched by manufacturers.

The industry body elaborates that average industry capacity utilisation continues to recover to pre-pandemic production levels, but the ongoing global semi-conductor shortage, as well as loadshedding in South Africa, have impacted on the operations of original-equipment manufacturers differently.

These two factors typically increase costs in the domestic supply chain, while raw materials remain subject to exchange rate movements and the global price index.

The global semi-conductor shortage resulted in about 4.2-million fewer vehicles produced in 2022, following a loss of about seven-million units globally in 2021.

Although global vehicle production increased by 6% to 85-million vehicles in 2022, up from the 80.2-million units produced in 2021, it was still 7.7% below the pre-pandemic level of 92.1-million vehicles produced in 2019.

South African vehicle production increased by 11.4% to 555 889 units in 2022, compared with the 499 087 units produced in 2021, which exceeded the global vehicle production growth figure of 6%.

The South African market still leads in the continent's vehicle production, accounting for 54.4% of Africa's total vehicle production, followed by Morocco, which accounts for 45.5% of the total.

Aggregate capital expenditure (capex) by major light vehicle manufacturers in 2022 amounted to R7.1-billion, mostly owing to new-generation model investments, compared with the R8.8-billion spent in 2021.

Naamsa adds that much of the capex invested by the industry are linked to the Automotive Production Development Programme that South Africa has in place to promote higher levels of production and the dev...

Transnet Port Terminals (TPT) CEO Jabu Mdaki is optimistic that the joint venture (JV) with International Container Terminal Services Incorporated (ICTSI) will be implemented from the start of the State-owned company's new financial year in April and become a "catalyst for change" across the Transnet-owned division.

The Philippines terminal operator was named in April as the preferred bidder to partner with TPT at the Durban Container Terminal (DCT) Pier 2, and processes are currently under way to advance the transaction towards financial close.

Mdaki tells Engineering News that the partnership is being pursued in a bid to bolster the operating performance of South Africa's biggest container terminal, which handles 72% of the Port of Durban's throughput and 46% of the country's overall port traffic.

ICTSI, which has 34 terminal operations in 20 countries, including four in Africa, will buy a 50% (minus one share) interest in the terminal for an as-yet-undisclosed fee and will, together with TPT, participate in the 'Newco' being established to operate DCT Pier 2 for the coming 25 years.

The new company will operate independently with its own board and executive committee for the period, after which the terminal will revert to TPT.

The partnership could be extended to 30 years in the event that berth deepening of the North Quay at Pier 2, on which a proposed expansion of the terminal's capacity is dependent, is delayed.

Transnet National Ports Authority is responsible for deepening the berth from 12.8 m currently to 16.5 m so as to enable the terminal to accommodate three 350 m vessels at Berth 205, which would carry average consignments of up to 12 000 twenty-foot equivalent units (TEUs) in a single call.

"Our expectation is that, come April 1, 2024, the JV will be operating," Mdaki reports, adding that significant progress is being made to secure all the approvals needed to complete the transaction, including from the Department of Public Enterprises and the National Treasury.

ICTSI is conducting a due diligence exercise in parallel.

Several TPT managers, including Mdaki, will be travelling to the Philippines during August to gain insight into ICTSI's operations and its operating philosophy.

Transnet and government, which is promoting private sector participation in South Africa's ports and railways as part of reforms being pursued under Operation Vulindlela, believe ICTSI's experience, technology and capital will assist TPT in raising DCT Pier 2's capacity to 2.8-million TEUs over the coming five years.

Currently the terminal is handling about 1.9-million TEUs; a tempo that the partners aim to raise through targeted investments designed at delivering a ship working hour improvement from 50 to between 80 and 120, while also increasing gross crane moves per hour from the current 18 to 28.

No capital investment figure has been disclosed, but Mdaki confirms that investments will be made by the new entity, which could even raise capital independently of its owners, to increase the terminal's capacity.

Mdaki reports that a key objective will be to increase crane density at the terminal with only a minor reconfiguration.

"The critical equipment at the terminal are the ship-to-shore cranes. Pier 2 currently has 14 cranes, but the JV could add about six more."

Investments are also likely to be made into straddle carriers and rubber-tyred gantry (RTG) cranes, with a decision yet to be made as to whether it might be more efficient to convert most of the operation primarily to RTG cranes.

Mdaki insists there will be no retrenchments and that all 1 988 of DCT Pier 2's employees will retain the same terms and conditions as their TPT peers.

He reports that intensive consultations have been ongoing with staff and unions since August 2021, with a joint task team having been formed with the South African Transport and Allied Workers Union and the United National Transport Union at the level of their general-secretaries and full-time shop st...

Independent international engineering and consulting firm ILF Consulting Engineers (ILF) has entered into a partnership agreement with Hyphen Hydrogen Energy, which is preparing to build a $10-billion green hydrogen project in southern Namibia.

The project is being developed in the Tsau // Khaeb National Park, near Lüderitz, and could produce 350 000 t/y of green hydrogen once at full scale.

ILF has developed its green-hydrogen credentials on projects in Canada, Finland and Austria, and will provide Hyphen with project management services, technical expertise, as well as procurement and contract advice.

It will also provide implementation expertise on the project's socioeconomic development goals, including the creation of 15 000 construction jobs, 3 000 permanent jobs and 30% local procurement.

Hyphen CEO Marco Raffinetti says ILF's hydrogen experience will support it in meeting project timelines and Namibia's development objectives.

Hyphen is a joint venture between Nicholas Holdings Limited and ENERTRAG, but the Namibian government confirmed in June that it would take up a 24% equity stake in the project.

Hyphen is targeting yearly production of one-million tonnes of green ammonia by 2027, with plans to increase yearly production to two-million tonnes by 2029, mostly for export.

Director of Hydrogen at ILF, Dr Michel Kneller, described the Namibian development as a "lighthouse project" that was poised to contribute to the energy transition under way globally.

Energy Council of South Africa CEO James Mackay believes an expedited promulgation of the Electricity Regulation Amendment (ERA) Bill together with the unbundling of Eskom will send a clear signal to stakeholders and investors that the "political will" exists to place the country's poorly performing electricity sector on a sustainable pathway.

He tells Engineering News that South Africa's current market structure, which is dominated by a single vertically integrated utility, is out of line with the markets in operation in other developed and developing economies and is, thus, an impediment to much-needed generation, transmission and distribution investment.

"We are probably one of the most backward economies globally around reform," Mackay asserts, noting that other middle-income economies, as well as all the Brics bloc countries, have already unbundled their markets to support their energy transitions.

He describes the enactment of the ERA legislation as both an important market signal as well as a signal of the country's commitment to reform.

"We've got great technical plans and good technical ideas of what needs to be done, but they are sitting there pending a real political signal.

"I think that the ERA encapsulates that, but if there isn't political will to push the ERA through, then a lot of the plans will simply gather dust," Mackay, who is deeply involved with the National Energy Crisis Committee (Necom), tells Engineering News.

For that reason, business used its latest regular meeting with President Cyril Ramaphosa and several other government Ministers at the Union Buildings on August 1 to make an appeal for the ERA to be approved by lawmakers during the current Parliamentary term.

It was agreed at the meeting that the Bill should be expedited within the sixth Parliament as one of the "critical next steps" required to restore confidence.

In a joint statement, it was argued that the ERA Bill was crucial to ending loadshedding, expediting energy development, expanding transmission infrastructure, establishing a competitive electricity market, and attracting investment in the energy sector.

Mackay acknowledges that having the legislation approved ahead of the 2024 elections will prove challenging, particularly given that no formal programme for its passage through Parliament has been agreed following the Bill's tabling on July 20.

However, he is convinced that there is still time to make material progress, pointing to the speed at which the Eskom debt relief package was processed by lawmakers earlier this year.

"Until the ERA is actually through Parliament, everyone is going to be unsure if there's the political will to reform our energy system," he adds.

Likewise, Mackay views Eskom's unbundling as crucial for expanding the grid, as well as to provide local and international investors with the assurance that the playing field between Eskom and independent power producers is truly level.

He welcomed the National Energy Regulator of South Africa's recent decision to grant the National Transmission Company South Africa (NTCSA) a transmission facilities licence and expressed optimism that the associated trading and import/export licences with be similarly transferred from Eskom to the NTCSA in the not-too-distant future.

The unbundling of Eskom took a further step forward this month, when Public Enterprises Minister Pravin Gordhan sent a letter to the board providing his consent for the transfer of Eskom's distribution assets from Eskom Holdings to a newly established distribution company.

However, independent boards have yet to be appointed at any of the entities, including the NTCSA, whose unbundling has been prioritised.

Once the unbundling is in place, Mackay believes it will be possible for new codes to be released for public comment, which will outline how new market arrangements, such as wheeling and trading, will be implemented.

These far-reaching market reforms, Mackay explains, are designed to ensure that the ...