Public Enterprises Minister Pravin Gordhan responded with an “emphatic no” to a question as to whether government considered outgoing Eskom CEO André de Ruyter to be a traitor, as implied in a recent statement by Mineral Resources and Energy Minister Gwede Mantashe, who said “Eskom, by not attending to loadshedding, is actively agitating for the overthrow of the State”.

Gordhan was speaking during a briefing convened by Eskom chairperson Mpho Makwana after De Ruyter’s resignation – submitted at 7:30 on Monday December 12, only days after Mantashe’s comments – was confirmed by Eskom on December 14, following a media leak.

“The emphatic answer is no [and] I'm not going to qualify the answer,” Gordhan said in response to a question on Mantashe’s comments, which Makwana said were not in his “purview” to comment on.

“It is absolutely unfair, and uncalled for, to use that kind of language for somebody who tried their best to get Eskom out of the mess that it was in, and on to a different kind of platform.

“The more knowledgeable people amongst you know that the mess didn't start in 2019 - it didn’t start in 2009, or 2010 or 2011 or 2012, it started a long time ago.

“And there's a long list of people who must be held responsible for decisions that they didn't make the right way.”

Gordhan said the comments by his Cabinet colleague were “unhelpful at a time when we need to engender confidence both in the institution and government”.

He also paid tribute to De Ruyter for the sacrifices he had made in moving from the private to the public sector and for “giving his all to this particular national project”, while acknowledging government failures to ensure that more generation was added in line with De Ruyter’s consistent call for an additional 4 000 MW to 6 000 MW of non-Eskom generation.

POLITICAL SUPPORT CRITICAL

Earlier in the briefing De Ruyter confirmed that his decision to resign had been made because he no longer felt he had the “support of the broader political economy”, which he described as “absolutely critical to enabling the success of Eskom going forward”.

“Given recent media reports, I'm unfortunately currently in a position where I do not regard that position as being tenable and I have accordingly decided to step back to afford the shareholder and the board the opportunity to appoint a candidate to the position of group chief executive who may be better suited, better equipped for the strategic and operational objectives at hand.”

De Ruyter had agreed to remain beyond his two-month notice period and would depart the organisation on March 31, 2023, to facilitate a smooth handover to his successor.

Makwana confirmed that he had accepted De Ruyter’s resignation when it was handed to him during a pre-scheduled meeting with De Ruyter on December 12 and that the board would work “tirelessly to ensure that we secure the next leader of Eskom”.

BOARD TURNAROUND PLAN?

Gordhan went to lengths to stressed that government remained committed to the strategy of improving Eskom’s performance, while reforming the electricity supply industry, including the through unbundling of the utility and the creation of an independent grid company.

However, no firm date was set for the establishment of the independent board of the National Transmission Company South Africa, despite a list of candidates having been compiled and handed to Gordhan.

The Minister also underlined government’s ongoing commitment to the Just Energy Transition (JET) strategy, which was being supported financially by several developed countries and which included plans to repower and repurpose coal stations that were scheduled for retirement.

However, Makwana emphasised that the new Eskom board – which began work on October 1 and which he described as an engaged rather than a passive board – was working on a separate long-term turnaround plan to end loadshedding, which was currently being canvassed ahead of sign-off.

“We're in key consultative engagements with the sharehold...

It's been another extreme week on the electricity front, with Stage 5 loadshedding, the resignation of Eskom CEO Andre de Ruyter and some dramatic Nersa postponements. Terence Creamer discusses this traumatic period.

The National Energy Regulator of South Africa (Nersa) has refused to concur with two electricity procurement determinations submitted by the Department of Mineral Resources and Energy (DMRE) under Section 34 of the Energy Regulation Act – including one for a 3 000 MW Combined Cycle Gas Technology (CCGT) project that Eskom plans to develop in Richards Bay, KwaZulu-Natal.

Earlier this year, the DMRE submitted three determinations for the regulator’s concurrence, which is required before public procurement can take place, including:

a determination for the procurement of 1 000 MW of new generation capacity from technologies such as landfill, biogas and co-generators;

the procurement of 14 791 MW of new generation capacity from renewables and storage by independent power producers; and

a determination for the procurement of 3 000 MW of new CCGT.

During a meeting on December 14, the Energy Regulator voted against concurring with the 1 000 MW determination or the 3 000 MW of CCGT, while approving the determination for 14 791 MW of new generation capacity from renewables and storage in line with the Integrated Resource Plan of 2019 (IRP 2019).

Concurrence was not provided for the 1 000 MW on the basis that a Section 34 determination was the incorrect instrument, as the energy could be procured by Eskom under a Short-Term Power Procurement Programme (STPPP) and the costs recouped through the tariff.

The Energy Regulator made the decision despite the previous STPPP having been mothballed partly because Nersa had refused to treat it as a pass-through cost when making Eskom revenue determinations.

The 3 000 MW CCGT determination was also rejected on the basis that a request to deviate from the IRP 2019 should be pursued as a Section 34 determination.

In its reasons for decision, which were not immediately shared, Nersa would reportedly make a recommendation for the approval to be sought using another section of the Act.

The Energy Regulator has postponed deciding on Eskom’s tariffs for 2023/24 and 2024/25 after the Electricity Subcommittee (ELS) of the National Energy Regulator of South Africa (Nersa) requested more time to finalise its recommendation – this only ten days out from a looming December 24 deadline for the regulator to finalise its decision as stipulated in an order made earlier in the year by the High Court.

Eskom’s fifth Multi-Year Price Determination (MYPD5) revenue application, if fully approved, would translate into a 32% hike in its standard tariff on April 1, 2023, followed by a 9.74% increase in 2024/25.

The increase requested by Eskom is premised on allowable revenue of R335-billion, before any possible regulatory clearing account (RCA) adjustments and before catering for R15-billion arising from a settlement reached after the Supreme Court of Appeal ordered that the remaining portion of a R69-billion government equity injection, which was found to have been deducted incorrectly from Eskom’s MYPD4 revenue, be recouped.

In terms of the settlement, the outstanding R59-billion would be recovered during the financial years from 2024 to 2027.

The Energy Regulator was scheduled to make an MYPD5 determination on Wednesday, but following a protracted workshop held to consider the application a total of 14 issues of concern were raised by regulatory members.

As a result, the ELS requested the Energy Regulator, Nersa’s highest decision-making body, to provide it with more time to finalise its recommendation.

While the Christmas Eve court-ordered deadline was highlighted, no firm timeframe was provided for when a final decision would be made.

Instead, officials were instructed to finalise a “project plan” by the close of business on December 14 for resolving the outstanding matters.

The Energy Regulator also postponed approving Eskom’s R10-billion RCA application for the 2020/21 financial year, which formed part of the MYPD4 revenue cycle.

During a meeting on November 29, the Energy Regulator referred the RCA decision back to the ELS for reconsideration, arguing that several questions about the application remained unanswered.

These issues had not been resolved satisfactorily by December 14 and the ELS, thus, also requested more time.

Approval was provided, however, on an implementation plan for RCAs arising from the 2019/20 and 2020/21 financial years, which were approved by the Energy Regulator on December 6, 2021, and November 8, 2022, respectively.

Collectively the RCAs amount to R3.46-billion and the Energy Regulator approved that these would be liquidated over a three-year period, beginning in 2024/25.

Mpho Makwana, recently appointed chairperson of the Eskom board, is widely expected to step into André de Ruyter’s role as Eskom group chief executive.

In 2009, Makwana - then a non-executive director - acted in that role for seven months after the departure of Jacob Maroga from the top job. He was reappointed to the board and installed as chairperson in October this year. He has promised to bring down the price of electricity, while committing Eskom to dramatically improve the performance of the company’s creaking power stations.

De Ruyter resigned from Eskom this week, deciding to end his tenure as the utility’s group chief executive days before he would have marked three years at the helm.

The exact date of his departure is yet to be determined – he may stay until end of February 2023, or he may be asked to depart immediately, depending on the eagerness of the board under the stewardship of Makwana to see him off.

By the time he departs his office on the fourth floor of Megawatt Park, Eskom’s head office in Woodmead, De Ruyter will have held the job longer than 11 of his predecessors who all occupied the position between 2007 and 2020.

News24 understands that De Ruyter informed Makwana this week of his intention to resign. Makwana will now have to inform Public Enterprises Minister Pravin Gordhan.

De Ruyter, who took up the job in January 2020, arrived at work earlier than his start date in December 2019 when Stage 6 loadshedding gripped the country for the first time.

He has battled against unfounded allegations of racism and corruption, having weathered several intensive investigations that eventually cleared him of wrongdoing.

But criticism for continued load shedding has been most intense. In 2022, rotational power cuts were the worst on record.

The reasons for this are manifold.

Successive ANC ministers failed to ensure procurement of additional generation capacity timeously as far back as 1998, when the government was first informed that by 2007, the country would run out of capacity.

Rampant corruption and design problems plague the construction of Medupi and Kusile, two massive power stations billed as the country’s saving grace. Both power stations are years behind and nearly double over budget, at completion cost of more than R300 billion, with Kusile yet to be completed.

A failure by the Department of Mineral Resources and Energy to ensure additional capacity in the interim, as well as massive delays in the signing of Independent Power Producer agreements, has added fuel to the fire.

De Ruyter has also been praised for taking up what some have called the toughest job in South Africa. He has previously indicated that he believed it was his second national service, a job he took on out of a sense of national duty and a desire to bring about change.

Together with his management team, he ushered in an era of honesty and transparency, imparting with grim determination the true state of the country’s power stations that few before have had the ability to achieve as political pressure was brought to bear.

The team and the previous board under Professor Malegapuru Makgoba, withstood political interference to maintain levels of maintenance that could easily have been abandoned to stave off load shedding, effectively kicking the energy crisis can down the road.

De Ruyter’s tenure will be remembered for not only the disastrous levels of load shedding, but also for intensive sabotage campaigns while he and his team forged ahead investigating industrial-scale corruption, including in major construction contracts, down to tea and milk purchases.

It is unclear at this stage who will be appointed in De Ruyter’s place, however, it is widely accepted that Makwana will be asked to act as CEO. He previously held the position of acting CEO after the departure of Jacob Maroga, in 2009.

Construction sector activity moved strongly into positive territory in the third quarter of the year, with the latest Afrimat Construction Index (ACI) outperforming the overall economy.

The latest gross domestic product (GDP) data released by Statistics South Africa pointed to a real growth rate of 1.6% (quarter-on-quarter) for the economy as a whole, with the construction sector recording real growth in value-added of virtually double this rate, at 3.1%.

Afrimat is a midtier openpit mining company and provider of industrial minerals, bulk commodities, construction materials, future materials and metals.

The ACI is a composite index of the level of activity within the building and construction sectors compiled by economist Dr Roelof Botha, on behalf of Afrimat.

Botha points out that the ACI has now virtually fully recovered from the effects of the Covid-19 pandemic.

“At an index value of 123.4, the ACI is now 23.4% higher than the base period, which was the first quarter of 2011.”

He adds that the ACI remains lower than its record-high index value of above 140 in the third quarter of 2016 – “a clear indication of the erosion of investor confidence that characterised the latter years of the State-capture era”.

The ACI is made up of nine indicators.

When studying the performance of the individual indicators, it confirms a reversal of fortunes from the second quarter of the ‘Value of wholesale sales of construction materials’, which was the star performer during the third quarter.

“This key indicator has increased by 13.3% to an all-time record high of R42.5-billion, quarter-on-quarter, in real terms,” says Botha.

“Together with a double-digit real growth rate quarter-on-quarter in the ‘Volume of building materials produced’, these two indicators ensured a hefty quarter-on-quarter growth rate for the ACI of 7.2%,” says Botha.

Despite the positive news, Botha is concerned about the slow pace of recovery of gross fixed capital formation in the economy.

“Although new investment in productive capacity by the public and private sectors combined staged an impressive expansion of 5.5% from the second quarter and by 8.5% year-on-year in real terms, the third quarter figure of R239-billion is still more than 9% down on the third quarter of 2019.

“What is more disturbing is that capital formation in the third quarter only represented 7.1% of GDP, a far cry from the global average of 26% and not remotely adequate for a country with a population of more than 60-million people that is expanding relentlessly.”

Botha says that emerging markets such as Senegal, Chile, Croatia, India, Hungary and Mexico all enjoy capital formation:GDP ratios in excess of 20%.

“Against the background of an expected tax revenue overrun of around R80-billion during the current fiscal year, it has become incumbent upon government to expedite expenditure on infrastructure – both for maintenance and for the expansion and improvement of network industries, especially energy, road and rail.”

Botha points out that the fixed investment category for residential buildings was the only one to have expanded in real terms on both a quarter-on-quarter and year-on-year basis during July to September, with non-residential buildings and construction works still in the doldrums.

“Unless government provides significantly more fiscal resources for infrastructure development in the 2023 budget and addresses the delays in tender processes, the construction sector will remain relatively subdued, ” warns Botha.

Criminals are increasingly using sophisticated technology to target high-end vehicles featuring keyless or smart-entry systems and emergency start capabilities, says Toyota South Africa Motors (TSAM).

The rise in these crimes has partly been attributed to new modus operandi on the part of criminals and syndicates and affects automotive brands across the board, says TSAM.

The local vehicle manufacturer adds that it has been working hard to gather intelligence on the various new methods used by criminals, especially sophisticated cyberattacks that exploit a vehicle’s computer-controlled systems.

These new methods include CAN attacks, fob relaying and a combination of forced entry and key cloning.

A CAN attack happens when a vehicle’s control area network is infiltrated using electronic equipment to gain entry and to then access the computer system to start the engine.

Fob relaying is achieved using high-tech receivers and transmitters to remotely read a vehicle’s security key while in the possession of the owner, thereby allowing the attacker to unlock and start the vehicle.

The third, a combination of forced entry and key cloning, is executed using advanced techniques and equipment to disable the vehicle’s alarm system, and to then clone its security key.

TSAM says it has developed several measures to mitigate the possible theft of Toyota and Lexus-branded vehicles in the country through the use of these methods.

These measures have been shared with the Toyota dealer network through practical online sessions and bulletins. They have also been reviewed and evaluated by VSS Administration – an independent South African organisation that specialises in vehicle security and automotive systems.

“We, as Toyota, are committed to developing safe and reliable vehicles and we will continue with our research and development to further enhance our vehicle security systems,” says TSAM sales and marketing senior VP Leon Theron.

“I would also like to add that vehicle owners will not negate the warranty on their vehicles should they elect to fit an aftermarket security device – provided that these are installed correctly by a reputable fitment centre.”

Theron adds that customers who own a number of selected Toyota models can take them to their nearest dealership for security enhancements from the first week of December.

He says new vehicles, as well as those arriving at dealers for servicing, will automatically receive these enhancements at no cost the customer.

The vehicles affected are Hilux Legend models from 2019; all Fortuner models from 2016; Land Cruiser Prado (VX and VXL models from 2017); all Land Cruiser 200 with smart entry, Land Cruiser 300 models; and all Lexus RX and LX models from 2015.

The new CEO of Volkswagen Group South Africa (VWSA) is a familiar face. Martina Biene returns to South Africa following her two-year stint as the head of the Volkswagen passenger brand before her exit in 2020.

This time around her job also focuses on growing the German brand in Africa, including putting together a sustainable continental assembly strategy.

This would see a strong return for Volkswagen to the goals set pre-Covid under former VWSA boss, Thomas Schäfer, now global Volkswagen brand COO.

“As the saying goes, if the boss asks, your only options are to say ‘yes’, or ‘yes, with pleasure.

“I can, however, honestly say that it was a pleasure for me to return to South Africa,” says Biene.

Any African expansion programme should serve to boost VWSA’s production numbers at its Kariega plant, in the Eastern Cap – this in an era where the future of South Africa’s vehicle exports to Europe stands in the shadow of increasingly strict emission regulations.

VWSA currently produces the Polo for the local market and more than 80 export markets, and the Polo Vivo for the local and some sub-Saharan markets. Production should reach around 135 000 units in 2022, with 75% of this number exported.

New European emission regulations include the proposed introduction of Euro VII emission standards (2025 for cars, 2027 for trucks), which could add a significant cost to any vehicle produced here and shipped north.

Added to this is a planned ban on the sale of new internal combustion engine (ICE) vehicles in Europe by 2035 (2030 in the UK), in favour of electric and hydrogen vehicles.

Europe is South Africa’s biggest new-vehicle export market.

Two vehicle manufacturers assemble hybrids in South Africa, with none making battery electric vehicles (BEVs).

Whether Euro VII will go ahead as planned remains to be seen, as there has been significant pushback from a number of vehicle manufacturers that prefer to direct their investment in a forward-looking manner to BEVs, rather than continuous re-engineering their ICE technology.

Biene says VWSA is currently awaiting certainty on Euro VII implementation, as this may affect the timing of its introduction of a third model to its Kariega plant.

She expects the production decision to be made in the first half of 2023.

“If the Kariega plant is filled to capacity with existing products because we can still export to Europe, then we would probably push production of a third model out to later – but only to maximum 2030.

“This scenario will buy us more time to grow the African market.”

“We don’t want to rely on exporting to Europe,” she adds. “We would want to do business at home first, which means Africa. Our long-term future is in Africa.”

This philosophy is likely to remain beyond Euro VII and well into the BEV era.

“Shipping vehicles to Europe does not really help our carbon footprint, especially as Volkswagen aims to become a zero-carbon manufacturer,” explains Biene.

“Getting components like batteries from Asia or Europe to here, and then shipping vehicles back, is even worse.

“Also, Europe is not currently looking to Kariega to be the next plant to be converted to an EV plant, as there are still plants in Europe which produce combustion engine vehicles and they have to be switched first.”

As it stands, the third model to be introduced at Kariega – whenever that may be – will be developed alongside Brazil on the current Polo platform.

It is expected that Africa, South America and possibly India may, for a while, remain in what is called the combustion belt, as Europe, America and China continue their progression to BEVs. (India could also possibly become a source of more affordable EVs for Africa and the rest of the combustion belt, says Biene.)

“In the Volkswagen group, we look at this belt with ICEs in mind for another model cycle of two, while we look to Europe as using mainly EVs after 2030,” notes Biene.

One of the derivatives of a third model at Kariega may include a half-ton bakkie – both sin...

The German government has approved a €15-million (about R277-million) grant in favour of chemicals group Linde in support of a renewable hydrogen project in Mpumalanga known as HySHiFT, which is being pursued jointly with Sasol, Enertrag and Hydregen Energy.

The grant was confirmed during the recent visit to South Africa of German Economic Affairs and Climate Action Minister Robert Habeck, who is also Germany’s Vice Chancellor. The funding has been approved through Habeck’s own Ministry, known by its German acronym of BMWK.

The HySHiFT partners aim to build a 200 MW electrolyser and 450 MW of renewable electricity to split water into hydrogen and oxygen and to use the green hydrogen in Sasol’s existing Fischer Tropsch facilities to produce a sustainable aviation fuel (SAF), known as E-Kerosene.

Sasol already produces a certified jet fuel at Secunda, in Mpumalanga, but using grey hydrogen.

The BMWK funding will support the first phase of the project, during which a 40 MW electrolyser is envisaged.

The HySHiFT project is among a list of nine green-hydrogen projects to have been registered with Infrastructure South Africa and is included in an updated list of Strategic Integrated Projects (SIPs) in a Government Gazette notice published by the Department of Public Works and Infrastructure on December 6 in line with the Infrastructure Development Act.

Programmes formally categorised as SIPs should theoretically be supported by a streamlined system for securing various authorisations, including environmental approvals, which are also allowed to be applied for concurrently rather than consecutively in a bid to accelerate development.

The BMWK grant approval for HySHiFT also coincided with a separate but related development: the initiation of the inaugural H2Global tender for the importation into Germany and the European Union of green hydrogen derivatives.

BMWK has approved €900-million for H2Global, which will oversee the deployment of a funding instrument that extends long-term purchase agreements to projects outside of Germany offering the most competitively priced green-hydrogen derivatives, such as ammonia, methanol and SAF. The products are then sold, under short-term contracts, to European consumers, with public funding used to compensate for any difference in pricing.

The idea of the instrument is to support the global market ramp-up for green hydrogen, whereby the long-term purchase agreements provide hydrogen exporters with the security they need to invest, while customers are able to access green-hydrogen derivatives sooner and at competitive prices.

The ten-year purchase and sale contracts are processed through Hintco, a subsidiary of the H2Global Foundation.

The first deliveries to Germany and Europe under H2Global are planned for the end of 2024 and the German government is planning to make a further €3.5-billion available for new bidding rounds with terms up to 2036.

HySHiFT consortium partners have, on several occasions, signalled their intention to bid into the H2Global scheme.

In November this year South African vehicle owners were paying, on average, R2 515 more a month to keep their cars on the road than in 2018, says WesBank in its newest mobility calculator.

WesBank uses an average entry-level vehicle (at a price tag of R250 000), that travels roughly 2 500 km/month to calculate these indicative costs.

The newest mobility calculator shows that the monthly cost of the vehicle ownership basket, comprising instalments, fuel, insurance and maintenance costs, has increased to R10 165 in November, up from R7 716 in 2021, owing mostly to increases in fuel costs and ongoing interest rate hikes.

This number reflects a percentage increase of 32% year-on-year.

In 2022, vehicle instalments and fuel spend combined remain the largest portions of the basket, accounting for 81% of the monthly spend. Fuel spend accounts for 39% of the total on its own, with the vehicle instalment cost at 42%.

The figure to November 2022 indicates that the average monthly fuel spend, at R3 950, is almost on par with the vehicle instalment rate at R4 313.

The monthly insurance cost of R1 409 makes up 14% of the total with running costs a month accounting for the final 5%, at R493.

WesBank says the latest numbers vary quite substantially from the 2018 mobility costs basket, when fuel spend accounted for only 36% of the total, at R2 765, while the average vehicle instalment was 44%, at R3 383.

“As a result of vehicle price inflation over the past year and other industry constraints, consumers have spent more on average for new and used vehicles in 2022, and this trend is likely to continue into 2023,” says WesBank marketing and communication head Lebogang Gaoaketse.

In October this year, the average value of a new vehicle financed through WesBank was R388 338 compared with R368 696 in October 2021.

This reflects a 5% year-on-year average price increase for new vehicles.

“Prospective vehicle owners should take a holistic view when planning a car purchase to ensure they don’t overextend themselves, and right-size their spend to fit their budget,” notes Gaoaketse.

“This includes making allowances for increases in costs down the line, such as a higher interest rate or a further increase in the fuel price, as we are currently experiencing.

“The smartest move is to make provision for these rising costs over the duration of the finance contract.

“It is important to remember that the monthly vehicle ownership basket figure is based on data that constantly shifts in relation to market activity and is thus intended as a guideline only,” adds Gaoaketse.

“The economic impact of Covid-19 created an anomaly in relation to the 2019 data and should also be taken into consideration when comparing the 2022 figure with 2020 and 2021.”