Engineering News editor Terence Creamer discusses the frustrations experienced about the slow pace of implementation of the Energy Action Plan amid intense loadshedding; the creation of one-stop shop for regulatory approvals at the Department of Trade, Industry and Competition; the exemption granted to allow the Kusile power station to return to service earlier; and other developments in the energy sector that the country could expect.

The average tariff increase for various categories of Eskom customers arising from the National Energy Regulator of South Africa’s (Nersa’s) recent allowable revenue decision has been tabled in Parliament as is required for these increases to be legally implemented on April 1.

On January 12, Nersa approved revenue of R318-billion for the State-owned utility for 2023/24 and R352-billion for 2024/25. Once translated to increases in Eskom’s standard tariff, these revenue increases amount to a hike of 18.65% for this financial year and 12.74% in 2024/25.

In an annexure included in the tabling to Parliament, which was made on March 13, it is indicated that Nersa has approved a tariff hike of 18.65% for most tariff categories, together with an average increase for municipal customers of 18.49% with effect from July 1, 2023.

However, the hike for Homelight 20A customers, or poor residential customers, has been limited to 10%.

Eskom will now publish a tariff book on its website to provide more detail with regards to what increases will be implemented from April 1, which will also affect the municipal adjustment from July 1.

While Eskom had requested Nersa to also approve an overhaul to the tariff structure, the regulator decided on March 10 to approve only Eskom’s proposed Homeflex tariff for residential customers. Homeflex introduces a residential time-of-use tariff and a new offset rate for those with small-scale embedded generation for compensation for energy exported to the grid.

The implementation of the tariff hike on April 1 is also not going to be affected by legal challenges to the hikes, after the Democratic Alliance (DA) and the Tebelia Institute withdrew their respective applications for and urgent interdict against the implementation of the increases.

In the Tebelia Institute and DA’s application the interdict formed the first part of a two-part review application. The review, or Part B, of that application is now scheduled to be heard during May. Part B challenges the Nersa determination made on January 12 for Eskom’s allowable revenue.

A separate case by the United Democratic Movement (UDM) and others addresses the loadshedding aspects.

The participants have agreed to address the revenue-related matters in the DA-led case and the loadshedding matters in the UDM-led case.

The urgent aspect of the UDM-led case (focus on loadshedding) is proceeding from March 20, 2023 in the Gauteng High Court.

In light of the proposed Economic Freedom Fighter’s protest action, it may take place virtually and is anticipated to continue for a few days from March 22.

Legacy Motor Group (LMG) chairperson and shareholder Mpho Dipela says dealerships in South Africa face “significant challenges” as they participate in the transitioning to electric vehicles (EVs).

At the end of 2021, there were more than 16.5-million electric cars on the road worldwide, with this number expected to reach almost 350-million by 2030.

“For example, the higher costs of EV manufacturing, combined with the need to keep prices competitive for consumers, mean that average dealership sales margins for EVs are often much lower than for ICE vehicles,” says Dipela.

“Manufacturing and particularly battery prices need to improve to overcome this obstacle and drive profitability.”

Dealerships in South Africa also face limitations in their ability to set and negotiate end-prices, owing to pricing controls and online channels increasingly being controlled by original-equipment manufacturers (OEMs, or vehicle manufacturers), explains Dipela.

With more OEMs committing to increasing EV production, there is a growing desire to shift to online sales channels, or even sell exclusively online, which could further limit the role of dealerships – an issue that requires industry engagement to safeguard small businesses and jobs, he notes.

“The high cost of EVs is also a concern for consumers and dealerships,” says Dipela.

“Many South Africans who purchase vehicles outside of the premium segment simply cannot afford to purchase an EV, and dealerships must find ways to make EVs more affordable for these aspirant customers. EVs are still regarded as for the elite.”

This conundrum does, however, provide greater opportunities for dealership finance departments to help consumers bridge the gap between the price of EVs and traditional vehicles.

“Additionally, while the profitability of used EVs remains uncertain, their longer lifespans and slower depreciation suggests that they could ultimately hold greater value for the second-hand market, which could mean an opportunity for dealerships specialising in preowned vehicles,” says Dipela.

He adds that dealerships must update their operating models and financial planning to accommodate the EV transition, as EVs could result in a 40% decrease in aftermarket spending as they have fewer mechanical parts and longer service intervals.

Dealerships will also have to invest in upskilling their staff to ensure that they have the skills and knowledge to sell and service EVs.

“Ultimately, the transition to EVs is not just about selling cars. It is about creating a whole new ecosystem of products and services that support cleaner, greener transportation,” says Dipela.

“This includes everything from charging infrastructure to battery recycling. Dealerships must adapt to this new reality if they want to remain competitive in the market.”

As one example of creating a supporting ecosystem for EVs, dealerships have to invest in infrastructure to support EVs, such as installing charging stations, especially as loadshedding heightens range anxiety.

“Without the adequate presence of charging stations, EVs will not be a practical option for many South Africans,” says LMG public relations, marketing and customer experience GM Edward Makwana.

“The development of a comprehensive charging network will not only benefit EV owners, but drive economic growth and job creation, and reduce South Africa's carbon footprint. However, to ensure that all communities have access to charging stations, support through regulations and fiscal policies is also necessary.”

LMG is a 100% black-owned automotive retail company headquartered in Tshwane.

The company operates a motor trading division that represents five BMW dealerships and three Mini dealerships.

Other divisions of LMG include LMG Approved Repair Centre, LMG Pre-Owned, LMG Prestige and LMG Tyre and Rim.

At present, the company employs just more than 400 people.

The uYilo e-Mobility Programme is a decade old this year.

The programme, aimed at enabling the ecosystem for electric mobility in South Africa, was established in March, 2013, as an initiative of the Technology Innovation Agency (TIA).

TIA is an entity of the Department of Science and Innovation.

“Investing in uYilo was an ambitious forward-thinking undertaking which has paid off for all parties involved,” says TIA acting CEO Patrick Krappie.

"As a national programme, uYilo has made significant contributions, from enterprise and skills development to wider market-enabling initiatives on policies, regulations and standards in reducing market barriers for technology uptake.

“E-mobility represents an important core pillar of the Just Energy Transition,” adds Krappie.

“Through continued investments in uYilo, TIA is committed to supporting the growth of this industry,” he says.

“There have been many developments and great strides that have taken place in the past decade,” notes uYilo director Hiten Parmar.

"Much of the advancement and development of this fast-evolving industry has taken place behind the scenes.

“The groundwork in both the private and public sectors has required consultation and knowledge development on every level, in order to lay the foundation for this diverse industry that will affect and inform our lives for generations to come.”

In this past decade, uYilo has established an accredited battery testing laboratory, provided materials testing and characterisation services, and created a live testing environment for electric vehicles within the smart grid ecosystem, notes Parmar.

“We have also provided opportunities for more than 45 interns over this period, providing them in-service industry training.

“Another highlight is the annual uYilo Kick Start Fund which focuses on growing local products and services in the e-mobility space towards their commercialisation.

“A vital aspect of the transition to e-mobility is establishing local competence, expertise and industry so that we are not solely reliant on imports,” says Parmar.

These locally manufactured products and services must also find acceptance in international markets.

“South Africa cannot be an exporter of raw materials and an importer of finished product. In order to boost local employment and investment, we need to encourage and enable local industry, creating our own e-mobility ecosystem,” says Parmar.

Forestry, Fisheries and the Environment Minister Barbara Creecy has granted Eskom exemption that will enable it to operate temporary stacks at the Kusile power station, in Mpumalanga, for 13 months without using the flue-gas delsuphurisation (FGD) mechanism.

The exemption, which was granted on March 14, has not been extended in terms of the newly published State of Disaster regulations as requested by Eskom, but rather in line with Section 59 of the National Environmental Management: Air Quality Act (NEMAQA), and includes several conditions.

The decision exempted Eskom from what would have otherwise been a lengthy process of amending its Atmospheric Emission Licence and Creecy said it was granted in the interests of alleviating the country’s electricity crisis.

Currently only one of Kusile’s four operating units is in service, after the Unit 1 flue duct collapsed on October 23 due to a build-up of slurry. The collapse also compromised the unit 2 and 3 flue ducts, which share a chimney with the Unit 1 flue.

The three units, which are able to produce 2 160 MW of electricity, have been inoperable ever since, adding about two stages of loadshedding every time Eskom implements rotational cuts.

A full repair of the damaged west stack, in which the three damaged flues are housed, is expected only in December 2024.

“Eskom’s request pertains to a temporary solution to restore lost generation capacity at its Kusile power station while a damaged stack undergoes repairs which are due for completion in December 2024.

“In the interim, Eskom plans to construct the temporary stacks by November 2023, which it anticipates will allow the resumption of generation capacity of 2 100 MW which will reduce the country’s exposure to loadshedding by two levels,” Creecy said in a statement, stressing that she was aware of the well-documented socio-economic impacts of loadshedding.

Eskom would need to apply to the National Air Quality Officer for a one-off postponement of the compliance timeframes for minimum emission standards for new plants.

This one-off postponement of the compliance timeframes for minimum emission standards for new plants would be valid until March 31, 2025.

The exemption granted in terms of Section 59(1) of NEMAQA was subject to the following conditions:

Eskom must issue a public notice in two national newspapers explaining reasons for the application;

Eskom must conduct a public participation process subject to a curtailed timeframe of 14 days;

Eskom must account to Creecy and the Portfolio Committee on Forestry, Fisheries and the Environment in the National Assembly on the progress of its repair to the west stack; and

Eskom must undertake measures to mitigate against the exposure of its employees and surrounding communities to harm emissions which, at a minimum, must include independent health screenings and referral to appropriate public health facilities for treatment where necessary.

Creecy acknowledged that bypassing the FGD system would likely result in increased sulphur dioxide emissions during the 13-month period and would exceed the current applicable limit contained in Kusile’s Atmospheric Emission Licence.

“I am equally aware of the health and associated impacts of exposure to sulphur dioxide emissions, particularly on communities in close proximity to coal-fired power stations.

“In the light of the competing factors, I have been called on to make an extraordinarily difficult decision,” the Minister said in a statement.

Even before being ranted the exemption, Eskom appointed Concor as the main contractor for the temporary stacks, with installation subject to approval by the Minister.

Eskom’s current plan is for the first unit, using temporary stacks, to be returned to service eight months after the environmental exemption was secured, with the second and third units following in one-month intervals thereafter.

A new €15-million initiative has been launched to provide research and technical support for “catalytic” just transition projects in South Africa’s Mpumalanga province, currently the centre of South Africa’s coal industry and where 22 GW of coal-fired power capacity is scheduled for retirement before 2035.

Dubbed Just SA, the ‘Just Transition to a Decarbonised Economy for South Africa’ project is being funded by the German government’s International Climate Initiative and will be implemented over a five-year period.

The project’s political partner is South Africa’s Department of Fisheries, Forestry and the Environment and Minister Barbara Creecy attended its official launch in Johannesburg on Tuesday.

Speaking at the event, Creecy indicated that Just SA was aligned with the $8.5-billion Just Energy Transition Partnership (JET-P) that the country had concluded with Germany, France, the European Union, the UK and the US and would assist in identifying “transition pathways in the province of Mpumalanga”.

She argued that climate justice had to involve affected workers and communities from the outset and also had to ensure that those most vulnerable to the transition were direct beneficiaries of the transition projects.

There was also growing pressure on South Africa, she acknowledged, to demonstrate visible progress on its JET-P, which was the first such partnership to be concluded globally, given that similar climate finance partnerships had since been struck with Indonesia and Vietnam.

“Having met with some of the officials involved in the Indonesia partnership, it has made me realise that South Africa has to get its act together and get its act together quickly, because now there's going to be competition for international financing,” Creecy said, indicating that South Africa needed to attract $98-billion in transition-related investment over the coming five years to support its energy transition and to tackle debilitating loadshedding.

German Ambassador to South Africa, Lesotho and Eswatini, Andreas Peschke, said the transition of South Africa’s energy system presented an opportunity for job creation not only in the renewable-energy field but also for alternative livelihoods in tourism, agriculture and the rehabilitation of Mpumalanga’s natural resources.

“The transition towards more modern sources of energy may also help, in my opinion, to ease the current energy crisis.

“In fact, it may be not only the most sustainable, but maybe also the fastest way to bring new energy to the grid,” Peschke said in a speech, during which he addressed the audience in both English and isiZulu.

Just SA project director Navina Sanchez, of German development agency GIZ, said the projects would be implemented in a consortium with six South African partners, including the Mpumalanga Green Cluster Agency, GreenCape, Trade and Industrial Policy Strategies, the National Business Initiative, the Youth Employment Service and WWF.

“The project will provide targeted regional and local support to Mpumalanga . . . and focuses also on catalysing and unlocking more infrastructure and economic development in the province and will work with local communities,” Sanchez explained.

Mpumalanga Green Cluster CEO Nkosinathi Nkonyane indicated that he saw immediate opportunity to catalyse increase agricultural activity in the province, which was already one of the country’s “bread baskets”, as well as to attract wind and solar investment on the back of Mpumalanga’s existing grid infrastructure.

While access to grid infrastructure had emerged as a significant constraint to integrating new renewables generation in the Cape provinces, it is estimate that Mpumalanga has about 5.5 GW of available grid capacity.

It is likely that the next public renewables procurement bid window will direct bidders to areas with residual grid capacity, including Mpumalanga, KwaZulu-Natal, Limpopo, Gauteng, North West and the Free State.

Stellantis last week signed a memorandum of understanding (MoU) with the South African government’s Industrial Development Corporation (IDC) and the Department of Trade, Industry and Competition (DTIC) to develop a manufacturing facility in the country.

Stellantis South Africa (SA) tells Engineering News Online that the MoU was signed by the three parties with the aim “to work together towards finalising a Stellantis local vehicle assembly plant solution for the local and export markets”.

“The current three-way MoU is to develop a solution at which stage a review by all parties on their involvement and/or investments will be decided and shared.”

For the IDC, the outcome of the business case will “largely inform” its decision on the nature of its potential investment in the operation in terms of “the quantum and equity consideration”.

The IDC is currently also a shareholder in the BAIC assembly plant in the Eastern Cape.

Stellantis sells the Jeep, Alfa Romeo, Fiat, Citroën, Opel and Peugeot brands in South Africa.

The company says it is currently reviewing various options in terms of the brands and models that would be most suited for production in South Africa, with the export market a key element of the localisation and business plan.

“More details will be communicated at a further stage.”

This is also true for the specific special economic zone currently under consideration for the location of the fully-built-up vehicle plant, as well as the anticipated yearly production volume.

Initially, only the production of internal combustion engine variants will be considered, says Stellantis.

“But with the relevant government support frameworks in place, there is no reason why future plans wouldn’t include new-energy vehicles, in which Stellantis is one of the global leaders.”

The target for first vehicle production is 2026, but Stellantis cautions that this is dependent on many variables.

“South Africa, with its advanced infrastructure, diverse economy, sophisticated capital markets, and developed manufacturing capacity, is the ideal location for any company aspiring to reach the continental market more effectively, both from a cost and logistical point of view,” Stellantis tells Engineering News Online.

“Regional production capacity will enable Stellantis' sales and market share ambitions for the Middle East and Africa.

“The manufacturing site in South Africa will be a new building block in our industrialisation strategy that includes the plan to sell one-million vehicles in the region by 2030, and will bring us closer to our customers’ needs in the region.”

But what about the energy shortages currently plaguing South Africa?

Stellantis says the business details being finalised between the MoU partners include discussions on energy, and “the challenges and changes ahead”.

“Options such as alternative green energy solutions, in line with planned standard operating procedures, form part of the discussions to mitigate the current problems being faced in the country.”

Trade, Industry and Competition Minister Ebrahim Patel reports that an energy one-stop shop to speed up the regulatory processes required for private investment in electricity generation has been established and is being managed by InvestSA.

In a presentation to the Portfolio Committee on Trade and Industry, Patel reported that the one-stop shop had been established in line with the Energy Action Plan (EAP) to tackle loadshedding, which has since been declared a state of disaster.

“The one-stop shop will assist power-generating companies navigate the different processes that apply in law and increase turnaround times by assisting investors to submit applications through a single-window process to obtain all necessary government approvals,” Patel reported.

Some of the department’s staff had already been redeployed to the one-stop shop and further recruitments would be made from outside of the department after the start of the new financial year on April 1.

“Unblocking teams” were also currently being assembled to assist potential investors speed up their projects.

Cutting red tape and accelerating regulatory processes has been highlighted as urgent by the National Energy Crisis Committee that has been set up to implement the EAP, which focuses on supporting a recovery in the performance of the Eskom coal fleet and adding new non-Eskom generation.

Patel reported that moves to hasten regulatory approvals was one of eight actions being undertaken by the Department of Trade, Industry and Competition (DTIC) to support the EAP, with the other seven including:

Increasing private investment in generation, primarily through the extension of development finance from the Industrial Development Corporation, which had already supported 24 renewables projects with a combined capacity of 953 MW and had a potential project pipeline (comprising both publicly and privately procured projects) involving more than 8 000 MW;

Introducing “regulatory flexibility” on transformation by providing independent power producers with a “customised” black economic empowerment scorecard that takes account of the “unique characteristics of electricity projects”;

Providing “regulatory flexibility” on competition laws, with the Competition Commission having released draft regulations for public comment that would extend block exemptions to both suppliers and consumers of electricity to allow for collaboration without infringing on South Africa’s competition legislation;

Establishing a R1.3-billion Energy Resilience Scheme, which will provide blended finance to support companies affected by loadshedding, as well as grant financing for township and rural enterprises aiming to invest in solar back-up solutions;

Developing, through the South African Bureau of Standards, various energy efficiency standards for technologies that can help reduce consumption;

Ramping up monitoring of potential price gouging and price fixing on key energy components, including solar panels, inverters and batteries; and

Supporting the industrialisation of energy components by attracting and incentivising manufacturing investments.

“The eight actions outlined constitute a major new focus for the DTIC-group.

“It requires a ‘retooling’ of the department and its entities, with shifts of staff and resources from originally-budgeted areas to the expanding work in managing the energy challenges,” Patel told lawmakers.

Catalytic converters, engine parts, engines, clutches/shaft couplings, silencers/exhausts and ignitions/starting equipment are the component groupings most at risk from the global move to electric vehicles (EVs), as they are not required in these types of vehicles, says National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal.

Other components also at risk are transmission shafts/cranks and gearboxes, he adds.

These components are also not required within EVs, but their manufacturers’ existing capabilities offer them the opportunity to pivot and join the EV supply chain.

In 2021, automotive component exports from South Africa increased by 27% to a record R69.2-billion, up from R54.5-billion in 2020.

Catalytic converters, at R35-billion, comprised 50.4% of total automotive component exports, followed by engine parts, tyres and engines as the biggest categories.

In total, the yearly South African component exports at risk amounts to R66-billion, says Moothilal.

In terms of job opportunities, around 17 500 jobs are at risk within the South African components sector, he notes. This excludes employment related to engines, as this is done in-house by two vehicle manufacturers.

The risk to component makers in terms of the EV evolution is divided into three categories.

High risk is where a company’s core business is to become obsolete; medium risk is where the core business will become obsolete, but there are opportunities to pivot within the operation; and low risk, where the company has a diversified product portfolio, with only one portfolio to become obsolete.

“However, it is important to note that the impacts of the phasing out of internal combustion engines (ICEs) are unlikely to be linear and immediate,” emphasises Moothilal.

The global phasing out of ICE vehicles in the short and medium term will not completely eliminate hybrid and plug-in hybrids, both of which require many similar components as ICEs, he notes.

“People often ask if SA is ready for NEVs – what does it mean for component manufacturers? Are we going to fall off a cliff?

“Actually not. Component manufacturers in South Africa have typically responded to technology changes every time there is a new model or a facelift is to be produced,” says Moothilal.

“We already have companies in South Africa exporting into global EV platforms, such as the F150 Lightning platform in the US. That should tell you that EV technology has already found its way into the South African component space.”

The exporter to the US is a locally owned foundry and forge business exporting wheel hubs.

Another manufacturer moving into the EV space is a producer of processed raw materials which has a large export contract with a vehicle manufacturer for the supply of components into their EV range.

A third example is a fuel-cell and electrolyser component manufacturing facility that is currently being established to produce membrane electrode assemblies containing platinum-group metals.

Moothilal says it is also important to remember that a large cohort of Naacam members are multinational companies whose sister plants across the world are already producing components for new-energy vehicles (NEVs – hybrids and EVs included).

This means that they have NEV-specific research and development that can be readily shared with their local subsidiaries as and when required.

When Naacam members were asked in a recent survey what they believe to be the most important enabling factors to transition to component production for NEVs, they ranked technology incentives and capital incentives from government, as well as demand certainty from vehicle manufacturers as the two most important criteria.

Moothilal spoke at an EV conference held in Cape Town last week.

South Africans can now make free real-time payments of up to R3 000 between bank accounts using the PayShap free payment system introduced by regulator the South African Reserve Bank (SARB) and the financial services industry.

The new PayShap real-time payment service enables users to pay or send money to a user's identifier or to the user's mobile number, with the money being reflected in the person's or business' account within ten seconds, said participating financial services firms at the launch event on March 13.

The aim of the real-time digital payments service is to replace the use of cash in daily life, such as to buy snacks from an informal vendor or to pay for transportation, explained financial infrastructure and payment clearing company BankservAfrica head of real-time payments Mpho Sadiki.

Cash remains preferred and dominant in certain settings, including in microenterprises, informal trade and rural areas, said SARB deputy governor and Prudential Authority CEO Fundi Tshazibana.

“Small business owners often talk about the certainty owing to using cash for transactions and the expense of using other payment platforms. However, there are also risks and costs of using and holding cash,” she said.

With PayShap, people will be able to make cash-like payments that the recipient can verify is in his or her account before the customer leaves, she explained.

HOW IT WORKS

PayShap is an additional payment option for people with bank accounts. PayShap will be automatically accessible through bank channels, such as mobile banking and Internet banking.

PayShap is currently only available for people with accounts at financial services firms Absa, FNB, Standard Bank and Nedbank, although Capitec, Investec, Discovery Bank, Sasfin, Standard Chartered and TymeBank will be added to the ecosystem in the coming months, noted BankservAfrica CEO Jan Pilbauer.

The first phase includes the PayShap instant clearing feature. This provides the option to pay-by-account using account details, or to pay-by-proxy, which uses a unique identifier, called a ShapID, such as a cellphone number.

The second phase will introduce an additional request-to-pay function, which will make it possible for a person to initiate a request for payment and receive money securely and immediately in their bank account, explained Sadiki.

“While the focus at launch is on person-to-person payments, every South African, including small business owners and merchants to commercial businesses, stand to benefit from this service as a viable alternative to cash, whether reimbursing friends or family, or paying for items on community marketplaces, hair salons, home maintenance services, car washes, restaurants and transportation,” says Sadiki.

Further, banks' instant payment services will remain, as these are generally used for values higher than R3 000, explained Standard Bank South Africa head of payments Rufaida Banoonhai.

“The goal of the SARB's Vision 2025 national payment system framework and strategy is to develop a safer, faster, more inclusive and cost-effective payments system. Today marks a milestone on this journey and is part of the industry's response to the SARB's Visions 2025,” said Tshazibana.

All the participating stakeholders, including members of industry organisation the Payments Association of South Africa, co-created the service levels that each must adhere to when providing the PayShap service because the user experience is critical to get right to improve adoption and use, emphasised Sadiki.

“Participating financial firms and stakeholders agreed to a three-step process to build the innovative payment system, which is open, tap and pay. Intuitive use, ease of use and real-time verification of transfers are important if we are to truly have a positive impact on a person who relies on cash,” he said.

BANK BENEFITS

Banks generally do not have much visibility into the use of cash in microenterprises and informal trade, as people or business owners general...