The cancellation of R17.47-billion in tenders by the South African National Roads Agency Limited (Sanral), will lead to major delays in the execution of these projects, warns Concor CEO Lucas Tseki.

The tenders that the Sanral board cancelled are the Mtentu Bridge Wild Coast project, on the N2, valued at R3.4-billion; the rehabilitation of the R56 Matatiele, in the Eastern Cape, at R1-billion; the N3 Ashburton interchange, in KwaZulu-Natal, at R1.8-billion; and improvements to the EB Cloete interchange (N2 and N3 connection point in KwaZulu-Natal), at R4.3-billion.

The Open Road Tolling tender in Gauteng, valued at R6.88-billion, lapsed and was not renewed.

Sanral says the tenders were cancelled owing to “a material irregularity in the tender process” where a resolution made by its board in January 2020 was not implemented by management in the evaluation of the affected tenders.

Concor participated in the tender process for the Mtentu bridge in a joint venture (JV) with the China Communications Construction Company as part of the N2 Wild Coast Project.

The majority black-owned company is already active on the N2 project, where it is constructing the multibillion-rand Msikaba bridge in JV with MECSA Construction.

The Mtentu bridge project already faces heavy delays as the Aveng-Strabag JV in 2019 terminated construction, citing, among other things, safety fears relating to the surrounding communities.

This meant that the tender had to be re-issued.

A new, third tender process on the Mtentu bridge will probably only see construction on the project kick off in 2024 or 2025, says Tseki.

The delay probably also means that the 580-m-long stay-cable Msikaba bridge will have to go into care and maintenance, as it would have been completed by that time.

As a stranded asset, with construction of the N2 towards the Mtentu bridge also in jeopardy, the Msikaba bridge is likely to be used by no-one except local farmers until Mtentu is completed, says Tseki.

He adds that the unskilled workers on the Msikaba bridge were set to move to the Mtentu project, but that the delay has now made this impossible.

The communities around Mtentu have also already invested money to enable their participation in the construction project, with up to 30% of the contract’s value to flow to local communities.

“This is a national crisis causing significant social and economic harm,” says Tseki.

The N2 project, linking KwaZulu-Natal and Eastern Cape, was also set to boost the flagging Eastern Cape economy.

What is also of relevance, is that the Concor–China Communications Construction Company JV has invested large amounts of money and time to present its tender, says Tseki.

“We spend huge resources to put forward a responsible, competent bid. The same is almost true for all the projects, and it just illustrates how heartbreaking it is that all of these tenders, and not just Mtentu, have been cancelled, especially during these tough economic times,” he notes.

“It is almost inconceivable how this could have happened,” adds Tseki. “Sanral is a highly respected roads agency worldwide and it has a credible, competent management team.

“It is one of the leading State-owned enterprises, but it seems to be deteriorating. To cancel tenders like this simultaneously is highly unusual in our sector, especially since government and the private sector agreed that infrastructure was a key component of economic recovery following Covid-19.”

Other Options

Since January 2020, it seems as if a number of projects under a billion-rand have been awarded by Sanral, and Concor and the industry would like to understand under what procurement regime that happened, says Tseki.

“These projects are going ahead; they are under construction. Our grave concern is that it seems as if this resolution, as noted by the board, was not applicable to these projects. This is where the confusion comes in and where we are very concerned about the level of transparency between the sector and Sanral.

“Thi...

Mineral Resources and Energy Minister Gwede Mantashe has described as “constructive” a proposal by the opposition Democratic Alliance for a meeting to discuss short-term solutions to the country’s ongoing load-shedding crisis.

In his Budget Vote address, Mantashe outlined the initiatives his department was taking to ensure that new capacity was added and to close what Eskom estimates to be a 4 000 MW to 6 000 MW immediate shortfall.

These included the conclusion, by September, of the procurement of 2 600 MW of wind and solar capacity following Bid Window Five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme, finalising the procurement of up to 2 000 MW under the much-delay and controversial Risk Mitigation Independent Power Producer Procurement Programme and launching B6 for a further 2 600 MW of renewable electricity.

Mantashe also reconfirmed that request for proposal documentation was being prepared for a 513 MW storage programme, a 3 000 MW gas-to-power scheme, a 1 500 MW new coal procurement, as well as for another 2 600 MW under BW7 of the renewables programme.

“We continue to work with other government departments, under Operation Vulindlela, to streamline approval processes for generation for own use,” he added.

However, DA Member of Parliament Kevin Mileham requested that Mantashe open up a discussion to find short-term solutions to load-shedding, while making the addition of new generating capacity the “number one priority for the next five years”.

International examples, including the deployment in Vietnam of 9 000 MW of rooftop solar in 2021, could be assessed, along with the prospect of increasing the allocation available for procurement under the next renewables bidding round from 2 600 MW to “whatever the market is prepared and able to provide”.

Mileham also argued in favour of the urgent removal of any residual red tape preventing energy-intensive companies and miners from taking up the reform allowing sub-100 MW projects proceeding without a licence.

“Once we've addressed the short-term supply challenge, we can start looking at long-term solutions, and that's where nuclear and other technologies can be considered,” Mileham said.

Mantashe said he welcomed the offer by the DA for a meeting and proposed a “session with many people under one roof” to discuss solutions.

“I think it’s a constructive proposal in the sense that sharing ideas is the most obvious way of finding solutions rather than just nit-picking and looking for weaknesses.”

Johannesburg could turn around the lossmaking performance of City Power, end load-shedding and improve the green credentials of its manufacturing industry by purchasing 80% of its wholesale electricity from large-scale, citizen-owned solar and wind plants at a cost below that purchased from Eskom currently.

This is the view of Clyde Mallinson, an energy specialist who has conducted extensive modelling on a future domestic electricity supply industry based exclusively on solar, wind and storage.

His analysis shows that such a system could be progressively built between now and 2035 at a yearly cost of $6-billion and deliver not only stable electricity to meet current demand, but also an abundance of low-cost surplus electricity to support the electrification of mobility and to unlock new electricity-intensive industries.

In an address to the South African National Energy Association, coincidentally held ahead of the upcoming Joburg Energy Indaba, Mallinson said City Power was currently recording yearly losses of about R300-million, owing to a combination of technical and nontechnical losses, including “outright theft” of electricity.

The Joburg Energy Indaba will take place on 23 and 24 May 2022, under theme of ‘Re-Imagining Energy’ and will be addressed by Executive Mayor Mpho Phalatse.

“So, by the time the dust has settled, and City Power has bought its wholesale electricity from Eskom, sold on its retail electricity and tried to keep its grid going, they are actually losing money on the distribution of electricity.”

To improve the unit’s prospects, Mallinson is proposing that City Power transition to purchase 80% of its wholesale electricity from solar and wind generation plants located anywhere in the country and at rates that would be about 40c/kWh to 50c/kWh below the net wholesale Eskom tariff.

Mallinson proposes that the citizens of Johannesburg be encouraged to subscribe to green bonds to finance the construction of these renewable-energy plants, which could be run by professional operators for a fee and held as City Power assets on behalf of residents.

“In that way the residents actually own the cash flows or dividends of those wind and solar plants and, at the same time, City Power could turn a loss of about a third of a billion rand a year into a profit of between R3-billion and R4-billion a year on the electricity distribution business.”

Once profitable again, Mallinson proposes that City Power repair, grow and strengthen the distribution grid and use some of the savings to make electricity less expensive for those struggling to afford current tariffs, which continue to rise.

“Then the city can pass on the green credits associated with that electricity to businesses, particularly those involved in export industries that will need those green credits to remain competitive.”

Mallinson has also been canvassing the model with various district municipalities as a way of allaying the fears of those stakeholders who remain sceptical of wholesale private ownership of generation assets.

He believes that poor citizens should be lent money, at highly concessional rates, to make the investments and that the dividends should be sufficient to ensure that the bond can be repaid within ten years.

Thereafter, the continued dividend stream should be shaped to be equivalent to about three or four times the current R350-a-month Covid relief grant.

“So, we actually have a solution where the municipalities are going to save on the wholesale price of electricity and have space to allocate those savings to the poor and pass on the green benefits to business.

“It will also end load-shedding, which is in everyone's interest and the dividends from these plants will flow into the pockets of the people of Johannesburg.”

The “either-or” narrative pitting accelerated infrastructure delivery against localisation has been challenged by Dr Bernie Fanaroff, who played a central role in the development of the Steel Master Plan, which identifies localisation as one of several instruments to be used to revive the embattled sector.

Speaking at a conference on the master plan hosted by the Steel and Engineering Industries Federation of Southern Africa, Fanaroff questioned the view emerging in some parts of government, business and academia that “localisation will add unnecessary costs, delays and quality issues” to the delivery of urgently needed infrastructure.

“It’s crucial that we have to tackle this issue head on.

“I think it’s factually wrong and I think the argument depends on over-generalisations,” Fanaroff said.

The former Square Kilometre Array Project Office director reflected on the localisation success of the Meerkat radio telescope, in the Karoo, which he said was highly regarded internationally and had been “designed and built by South African engineers, scientists and technicians”.

“If we can do that, we can do it with anything.”

Fanaroff called for far greater levels of transparency during the design phase of large infrastructure projects so as to allow the metals and other industries to gain insight into what was being proposed and to provide input on what could realistically be supplied locally.

“We need to look at what can be produced competitively rather than just repeating a mantra that local production is too expensive, doesn’t come on time, has quality problems and so on,” he said, cautioning that such an attitude would lead to a self-fulfilling prophecy.

He cautioned, though, that industry could not perceive localisation as a gift or as an invitation to charge exorbitant prices.

“It must be a way of stabilising the industry and incentivising industry to move to being more internationally competitive.”

Earlier Trade, Industry and Competition Minister Ebrahim Patel confirmed that government viewed localisation as one of the key levers for promoting industrialisation, which was one of the department’s three main priorities, the other being transformation and the building of a capable State.

Patel agreed that the infrastructure roll-out should be accelerated, but said that it was also crucial for increasing demand for manufactured inputs, including steel products.

He noted that the local content criteria had been integrated as a qualifying criterion for the latest independent power producer (IPP) bidding rounds, and highlighted progress being made to increase local content in the automotive and rail sectors.

The Minister did not reflect, however, on the difficulties IPPs were having in securing local solar panels, with several renewables projects possibly not closing or having to do so at a far higher tariff unless they were able to secure a local-content exemption.

Patel also argued that the recent adverse Constitutional Court judgment in relation to the Preferential Procurement Policy Framework Act did not prevent organs of State from pursuing localisation, but rather that the National Treasury did not have the power to issue such regulation.

A Procurement Bill would be published for comment and Patel urged the steel industry to comment on how the State should use its “procurement muscle” to rebuild the industry.

National Union of Metalworkers general-secretary Irvin Jim was more forceful, arguing that the participants to the Steel Master Plan should oppose any reversal to preferential procurement, which he described as an attack on local content and to the manufacturing industry.

“There should be an urgent review and upgrading of public sector procurement policy and operational capacity to support localisation across all sectors of the economy,” Jim argued.

He added that localisation requirements in mining, construction, transport capital equipment and renewable energy should be “significantly upgraded”.

The board of the South African National Roads Agency Limited (Sanral) has cancelled tenders to the value of R17.47-billion, citing “material irregularities”.

The tenders which the Sanral board did not approve are the Mtentu Bridge Wild Coast project, on the N2, valued at R3.4-billion; the rehabilitation of the R56 Matatiele, in the Eastern Cape, at R1-billion; the N3 Ashburton interchange, in KwaZulu-Natal, at R1.8-billion; and improvements to the EB Cloete interchange (N2 and N3 connection point in KwaZulu-Natal), at R4.3-billion.

The Open Road Tolling tender in Gauteng, valued at R6.88-billion, lapsed and was not renewed.

Sanral says the tenders were cancelled owing to “a material irregularity in the tender process” where a resolution made by its board in January 2020 was not implemented in the evaluation of the affected tenders.

The agency does not explain what this resolution entailed.

“It is common knowledge that for a proper governance environment to exist, board decisions must be implemented by management – unless, of course, the argument is about the legality of the board decision in question,” notes Sanral.

“Any alternative to that will result in the breakdown of governance and indeed in chaos, something which Sanral has hitherto avoided.”

Sanral says the board’s decision was informed by the conclusion of a “proactive assurance” conducted by its internal audit and legal teams, both of which “were bolstered by an external legal opinion”.

The agency says no prudent board would have allowed the awarding of the tenders to go ahead in the face of such opinion.

“It is also worth mentioning that there is no basis for any speculation about lack of communication between the board and management. Management was fully aware of the board’s decision.”

Sanral says it is unfortunate that the tender cancellations will lead to a delay in the implementation of what it calls “critical infrastructure projects”.

“However, it cannot be said that governance procedures must be thrown out of the window because we are all now rushing implementation.”

Forestry, Fisheries and the Environment Minister Barbara Creecy reports that she has written to provincial environment MECs to enquire whether they require any assistance in processing environmental impact assessments (EIAs) for embedded-generation projects that could help relieve pressure on the country’s load-shedding-prone grid.

Speaking ahead of her department’s Budget Vote, Creecy said her letter outlined the urgency of the projects, which are being pursued by miners and other energy-intensive businesses in line with a recent market reform allowing sub-100 MW projects to proceed without a licence.

The processing of EIA applications has been identified as one of several factors standing in the way of some 58 such projects that have combined generation potential of more that 4 500 MW and an investment value of about R54-billion.

A joint task team, involving government departments and agencies, the Minerals Council South Africa and the Energy Intensive Users Group is meeting weekly under the aegis of Operation Vulindlela to resolve obstacles at an individual project level, as well as to address remaining constraints at a systemic level.

The Presidency’s project management office head Rudi Dicks reported recently that the task team is working to shorten the timeframes for EIAs and water-use licences through the designation of embedded generation projects as Strategic Infrastructure Projects.

Dicks also reported that dedicated capacity had been created withing Eskom to process grid-connection applications more quickly and that wheeling frameworks and tariffs were being finalised at the municipal level.

Progress is also reportedly being made to simplify the National Energy Regulator of South Africa’s registration process, including by addressing onerous requirements, such as the stipulation that a power purchase agreement be included at registration.

“With regard to the EIA for the 100 MW projects, I have written to all the MECs and I have said to them that we can assist them to fast-track the EIAs or, if they are agreeable, we can actually take over the EIAs for these projects.

“I'm waiting to hear what their preference is, but I have emphasised to them that these are extremely urgent projects,” Creecy said.

She added that a one-size-fits-all approach was not necessary, as some of the provincial administrations were “quite speedy and efficient” and the department would, thus, target only those administrations that required additional support.

AIR QUALITY PANEL

Creecy also used her Budget Vote to confirm her decision to appoint a panel of six experts to provide advice with regards to appeals against various decisions by the department’s National Air Quality Officer in relation to requests for the suspension and postponement of compliance with the Minimum Emission Standards (MES).

Initially, she requested the Presidential Climate Commission to oversee the process, but the commission had indicated that it had insufficient capacity to fulfil the role.

A notice had been Gazetted calling for nominations to the panel by May 26.

Once assembled, Creecy expected the panel to hear evidence from various stakeholders, including Eskom, which has warned that some 16 000 MW of coal capacity would need to be shut immediately unless a postponement was granted.

“In my view, it's necessary to air all of the evidence that would pertain to human health and environmental issues, but also . the economic implications of the emitter having to take facilities offline.

“I think it's important that we hear all of that evidence and we try to work out what would be the best solution because this is obviously an area where there has been a lot of divergent opinions between different interest groups in our society.”

She acknowledged, though, that South Africa continued to face severe air pollution in the three highly industrialised priority areas of the Vaal Triangle, Highveld and the Waterberg-Bojanala areas.

“The regulations for implementing and enforcin...

Transport Minister Fikile Mbalula has yet again promised that a decision on the future of e-tolls in Gauteng is imminent.

Delivering his department’s budget vote on Wednesday, he noted that the matter was on Cabinet’s radar, and that a pronouncement would be made once the final decision had been taken.

“I can report that a decision is imminent. We have been working closely with the Minister of Finance to finalise outstanding matters that will enable the final determination by Cabinet on the funding of the Gauteng Freeway Improvement Project, better known as e-tolls.

“We are alive to the adverse impact the delay in making the final decision on e-tolls has on the South African National Roads Agency’s balance sheet, and its ability to raise capital for its catalytic projects.”

Mbalula also noted that the Department of Transport (DoT) will, over the medium term, fund the acquisition of a central roads data repository that will provide “a comprehensive and uniform overview of the state of South Africa’s provincial roads”.

“We are committed to provide the necessary support to ensure that there is adequate capacity to deliver roads that enable citizens to access centres of economic activity and social infrastructure.”

The DoT will, during this financial year, also establish a project management unit that will serve as an engineering and project management knowledge repository to assist provinces and municipalities in rolling out projects funded through conditional grants.

This unit would tap into the collective engineering and project management capacity of all the DoT’s entities, said Mbalula, while it would also be reinforced by collaboration with other State organs.

The maintenance of provincial roads is largely funded through the Provincial Roads Maintenance Grant, with an allocation of R37.4-billion over the medium term.

“The maintenance of provincial and municipal roads remains one of our biggest challenges,” noted Mbalula.

“Schedule 5 of the Constitution provides that provincial roads are an area of exclusive provincial legislative competence, while municipal roads are exclusive municipal functions.

“Despite these provisions, the national sphere of government has a responsibility to ensure that these roads are managed within a framework of national norms and standards to maximise their role in enabling economic activity and access to social amenities.”

Ban on Scrap Metal

Mbalula noted that South Africa’s public transport infrastructure was in “a major state of disrepair” because of theft and vandalism that had crippled the DoT’s rail recovery interventions.

“It is for that reason we call this kind of criminality economic sabotage, which must attract the harshest penalty permissible by law.

“We have equally called for the ban of scrap metal exports which provide a perverse incentive for this criminality. We remain ready to work with the Minister of Trade, Industry and Competition to ensure that such a ban becomes a reality.”

The opening of new call-centre sites in Cape Town shows that the city’s business process outsourcing (BPO) industry is shining brighter than ever, says City of Cape Town Economic Growth MMC James Vos.

Teleperformance’s Observatory site currently hosts 1 500 staff, servicing four clients from the UK. By the end of the year, this will expand to 2 500 employees managing client companies in the UK and US, notes Vos.

Later this month, Teleperformance will also open a second Observatory workplace, while Scottish firm, Ascensos, will officially launch its new office.

“Together with domestic-facing clients, more than 70 000 people now work in the sector in Cape Town. Last year, the international BPO market in Cape Town contributed around R14-billion to the metro’s economy,” says Vos.

South Africa has fast become one of the most favoured locations internationally for BPO companies, he adds.

For the second consecutive year, 700 executives from the demand markets of Australia, Canada, France, Germany, Italy, Spain, the UK and the US gave South Africa the accolade of being “the most favoured offshore CX [customer experience] delivery location in 2022” in the annual Ryan Strategic Advisory Front Office BPO Omnibus Survey.

Cape Town and the Western Cape continue to be the most sought after locations for offshore CX delivery in the country, improving their market share to 65% of all delivery in South Africa in the past year, says Vos.

“To date, almost 1 500 unemployed and previously disadvantaged individuals have been trained for call centres and each one of them has been offered permanent employment upon successful completion of their training.”

Eskom CEO André de Ruyter has revealed that the utility is compiling a “consolidated proposal” on how to end the ongoing electricity crisis, including how to introduce much-needed new generation capacity in the shortest possible time.

The State-owned utility estimates the current shortfall to be between 4 000 MW and 6 000 MW and has argued that, unless addressed, Eskom will continue to have limited headroom to address serious maintenance backlogs across its breakdown-prone coal fleet.

De Ruyter, who has acknowledged that South Africans are tired of ongoing load-shedding, reported this week that Eskom was engaging with various local and international experts on the proposal, which will be delivered to both its shareholder department and the policy department once completed.

De Ruyter has previously outlined various short-term measures that could be pursued to address intensifying load-shedding, including:

implementing a three-year standard offer to buy the 500 MW- to 600 MW-worth of surplus electricity believed to be available from private generators;

amending contracts with existing renewable energy independent power producers (IPPs) to unlock a further 200 MW that is currently contractually disallowed from injection into the grid;

facilitating IPP plant improvements to add additional capacity at existing facilities; and

debottlenecking the evacuation infrastructure servicing those IPPs to potentially unlock a further 200 MW to 300 MW.

Eskom has also indicated its strong support for the cutting of the residual red tape standing in the way of more than 4 000 MW of distributed generation capacity that could be introduced as a result of a recent market reform allowing sub-100 MW projects to proceed without a licence.

The utility will also lease grid-accessible land in and around its Majuba and Tutuka power stations to facilitate an accelerated uptake of the 100 MW opportunity.

De Ruyter did not elaborate on the possible contents of the new proposal, but pointed to examples in other countries, such as Vietnam and India, where large amounts of new capacity was introduced in a short period of time following policy and regulatory changes.

“So it is possible to add significant capacity quite quickly,” he said.

“We are in the process of soliciting views and opinions with a view to putting forward a consolidated proposal to the policy department as well as our shareholder that can be used to resolve the electricity crisis.

“I believe that there are levers to be pulled and that these can be pulled quite effectively.

“But this is not something that is going to happen easily and certainly is not only within the purview of Eskom to make happen.

“We are in the hands of a policy environment that needs to be conducive and needs to enable the addition of that capacity.”

The head of South Africa’s Independent Power Producer (IPP) Office believes that improved stakeholder management and alignment are key to overcoming delays to the introduction of urgently required new electricity capacity and to creating the predictable “procurement rhythm” required to attract electricity and manufacturing investment.

In a wide-ranging interview Bernard Magoro tells Engineering News that all stakeholders, including multiple government departments, the regulator, Eskom and the bidders, need to “come to the party” to overcome the current impediments to projects achieving financial close.

Since the resumption of procurement – which stalled from 2014 to 2020, after Eskom refused to conclude new power purchase agreements (PPAs) and following delays to the finalisation of an updated Integrated Resource Plan and the Gazetting of the determinations required to initiate procurement – none of the projects selected as preferred bids during two separate procurement processes have achieved financial close.

This, despite ongoing warnings of an immediate supply shortfall of as much as 6 000 MW and a sharp deterioration in the performance of the Eskom coal fleet, which has resulted in an intensification of load-shedding over the period.

Procurement officially resumed with the release, in August 2020, of the ‘emergency’ Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) for 2 000 MW, financial close for which has been shifted four times from the initial deadline of the end of July 2021.

It remains uncertain as to how many of the 11 projects, including the three controversial power-ship projects, will meet the new deadline of the end of May, with Magoro indicating only that there should be further clarity soon.

He reports that most of the outstanding issues relating to the gas-pricing formula and local content have been addressed, with the Department of Trade, Industry and Competition (DTIC) having issued a letter lowering the local-content threshold for solar panels from 100% to 35%.

However, an Eskom board request for the insertion of an indemnity clause in relation to any possible adverse legal findings against Karpowership has not yet been resolved. In addition, no project can proceed in the absence of an environmental authorisation, as such authorisations are a bidding requirement.

“I'm hoping that we will have some of the 11 projects reaching financial close by the end of this month.

“We are just finalising a few issues that Eskom raised in the PPA and we have shared some of those changes with the bidders and they're busy evaluating these,” Magoro tells Engineering News, while refusing to speculate on prospects for the power-ship projects.

He also refuses to be drawn on whether the RMIPPPP projects should proceed at all in light of ongoing criticism over their high cost of production, noting that the IPP Office is implementing the programme in line with the requirements as outlined by the Eskom system operator.

The IPP Office has also obtained a legal opinion stating that the non-Karpowership projects are not affected by the decision of the court to grant losing bidder DNG Energy leave to appeal a judgment setting aside its corruption allegations.

“There is also no interdict saying that the bidders cannot sign because of the court case.”

RENEWABLES DELAY

Regarding the delay to the concluding of financial close for the 25 wind and solar photovoltaic (PV) projects selected as part of Bid Window Five (BW5) of the Renewable Independent Power Producer Procurement Programme (REIPPPPP), Magoro says every effort is being made to meet the new staggered deadline of 14 projects by the end of July and 11 by the end of September.

The delay from the initial deadline of the end of April has been necessitated, he reports, by the fact that none of the projects had secured final budget quotes from Eskom for grid connection by the deadline.

Magoro explains that, without such a quote, it is not possible for an IPP ...