News in South Africa 10th May:

1. Load shedding continues:

Eskom said you should anticipate more power cuts this week as the increase in electricity demand is overwhelming its system, especially during peak hours.

Loadshedding continues
Image taken by: Dazzle Jam

The embattled power utility implemented stage 2 load shedding Monday evening after its generation units tripped.

“At the same time, a unit each at Hendrina and Kendal power station returned to service that is not enough though to stave off the implementation of load shedding during the evening peak. The return of a generation each at Kusile, Matimba, and Lethabo power stations as well at two at Hendrina and three at Tutuka have been delayed which have really increased the evening peak constraints” said spokesperson Sikonathi Mantshantsha.

A third of the way into May, Eskom is setting a record-breaking pace for breakdowns and the use of its expensive diesel backup generators.

And, if Eskom’s worries about the rest of this week turn out to be well-founded, then it will be on track for a load shedding record too.

Thanks to suddenly re-instituted load shedding on Monday afternoon, electricity rationing has now been used for all but three days this month. And those were two Sundays and a public holiday.

For all but one day, load shedding was at Stage 2.

Load shedding now hits, on average, every 2.3 days.

On Monday, Eskom warned about its ability to keep the lights on every day this week during the evening peak hours.

Eskom’s data shows that its planned maintenance outages are lower as South Africa slides into winter, as per usual, but are higher than this time last year.

Unplanned outages, though, are still climbing, now at an unplanned capability loss factor (UCLF) approaching 29.8% so far in May, up from 29.4% in April – and from a recent low of 20.5% in August.

Even with load shedding in place, Eskom is burning through diesel at its open-cycled gas turbine (OCGT) plants, intended to provide short bursts of power at key times.

The backup plants ran for almost the entire evening peak period all of last week, right through to 22:00.

2. Massive petrol price spike:

Analysts and economists are warning South African motorists to brace for a massive increase in fuel prices in June, as the government’s General Fuel Levy intervention is expected to come to an end.

Petrol vehicle owners were given a slight reprieve in May, with prices coming down by 12 cents per litre for the month. However, this was only possible due to costs being offset by the government’s intervention.

In March 2022, finance minister Enoch Godongwana said that using the country’s reserves would allow it to reduce the general fuel levy (GFL) included in the basic fuel price by R1.50/litre for the period between 6 April to 31 May 2022.

While it is not yet clear whether the deadline for this intervention (31 May) means that it will still be in place for June’s petrol price adjustments, experts say that motorists will inevitably have to deal with the R1.50 levy being forged back into the overall price.

“The government provided short-term relief through reducing the GFL, but this relief ends at the end of May going into June. If the GFL returns to its set rate, that will add another R1.50/l to petrol and diesel and will certainly push the prices of these fuels much higher,” said the Automobile Association.

“The question now is how the government plans to deal with the fuel price going forward, and how, ultimately, this will result in sustainable relief for South African consumers.”

The increase has already been pencilled in by economists at Absa, with the bank also forecasting increases in fuel taxes in the coming year as part of the National Treasury’s annual adjustments.

The only way to soothe the sting of the R1.50 levy being added back into the fuel prices is to hope for a recovery in the rand and, and lower oil prices – however, in the first week of May, the rand has taken a beating against a resurgent dollar, while oil prices remain stubbornly high.

3. OR Tambo fuel crisis:

Following flood damage to railways in KwaZulu-Natal, transporting jet fuel from Durban to the OR Tambo International Airport by rail will likely only be 100% restored by the end of October this year, Airports Company SA (ACSA) said on Monday.

The airport is currently suffering a shortage of fuel supplies as a result.

Currently there are about 3.5 days’ supply at OR Tambo. A supply of five or more days is usually regarded as “more comfortable”, ACSA CEO Mpumi Mpofu said during a briefing on Monday afternoon.

Due to a shortage of jet fuel supplies, two airlines have temporarily cancelled flights. One international airline cancelled operations from 24 April to 1 May – a total 14 flights and about 3 150 passengers impacted. Another airline cancelled its flights on 24 April only, impacting about 100 passengers. 

“While overall stock levels are stable [at OR Tambo], certain suppliers impacted by a declared force majeure [due to flood impacts] are still unable to acquire the quantities of jet fuel they require. Airlines do not use the same fuel supplier, and as a result not all are equally impacted,” explained Mpofu.

Some airlines have resorted to refueling in Durban and even Windhoek. Mpofu emphasised that there isn’t a fuel crisis at any of ACSA’s other airports in the country.

On Monday, the Department of Minerals and Energy and the Central Energy Fund (CEF) said they were working at providing about 1.5 million litres of jet fuel to OR Tambo in case of a “mismatch” between supply and demand at the OR Tambo airport. The supply from the CEF will come from Mozambique and will be transported to SA either by road or rail.

“Our plan B is to ensure that, if an airline cannot get fuel from its normal supplier, the CEF stock kicks in,” said Mpofu.

A consignment of jet fuel by ship has arrived at the Durban port and is being pumped into the National Petroleum Refiners South Africa (NATREF) refinery. It is currently the only refinery in the country that produces jet fuel. About 70% of jet fuel used in SA is imported.

Meanwhile, ACSA was informed by Transnet Freight Rail that it expects its full rail capacity between Durban and the airport to be fully restored by 30 October this year. Transnet expects at least 50% of its normal rail capacity from the coast will be restored by about 9 June. Jet fuel is also transported from Durban to OR Tambo via a pipeline.

4. Unclaimed benefits – mining sector:

Trade union funds account for more than 80% of the current R47bn in unclaimed retirement benefits in SA, with the majority in just two funds – one of which is a mining industry fund. Why is this, and will draft legislation help?

A substantial amount of unclaimed benefits lie idle in trade union funds, one of the two most-common types of retirement funds in the South African mining industry.

Unclaimed benefits have long been a problem for the Financial Sector Conduct Authority (FSCA), and although draft legislation is currently under consideration which will result in stricter governance of retirement funds, government has yet to address this particular issue.

A huge problem the FSCA has been facing for some time is unclaimed retirement benefits.

Unclaimed benefits include:

  • Withdrawal benefits (usually as a result of termination of employment);
  • Death benefits (where a member has passed away and the beneficiary has not claimed the benefit);
  • Surplus benefits (where the fund has had a surplus distribution to members); and
  • Retirement benefits (as a result of members retiring and not claiming their benefit).

According to the FSCA’s 2020/21 annual report, South Africa currently has unclaimed retirement benefits amounting to approximately R47 billion.

According to the FSCA, although many funds have unclaimed benefits, more than 80% of the R47 billion resides in trade union funds, with the majority in just two funds, one of which is a mining industry fund.

5. Russian oligarch swaying ANC:

United Manganese of Kalahari (UMK) is set to become an unbridled cash cow for the ANC, especially its funding front Chancellor House.

UMK’s riches and its Russian connections potentially create a strong motive for the party’s equivocation on the Russian invasion of Ukraine.

Financial records from Cyprus show that UMK paid out a staggering R2.4 billion in dividends in 2020 following a year of favourable manganese prices in 2019. Later financial reports are not yet available but prevailing prices likely resulted in similar distributable profits in subsequent years.

Chancellor House’s indirect 22% share in the 2020 dividends would’ve amounted to R528 million.

The windfall eradicated Chancellor House’s debt and helped it to increase its stake in the extremely profitable mining company by buying out another shareholder.

This means dividends, likely totalling hundreds of millions of rands in 2021 and beyond, will be unencumbered and can flow freely to the ANC’s largest declared funder.

These figures can be inferred from the publicly available accounts of the Russian half of the UMK joint venture, a Cyprus-registered entity called New African Manganese Investments (NAMI), through which Russian billionaire Vekselberg holds shares in UMK.

What has escaped notice is the evidently enormous importance of UMK in the scheme of things. The scale of dividends revealed in the financial statements of NAMI indicate that the ANC is unlikely to have any comparable dependable source of cash.

South Africa’s recent moves towards a more transparent political funding regime has already shown how Chancellor House and UMK fund the ANC.

In April last year the Political Party Funding Act came into effect. This Act created the (voluntary) quarterly disclosure of funders by political parties.

In the first three quarterly reports produced by the Election Commission it was revealed that Chancellor House donated R15 million to the ANC. This is the new legal maximum a single person or entity can donate to a party.

UMK has however seemingly contributed more than this without falling foul of the donation limit by, for instance, splitting funds up through lots of small entities.

All information sourced from articles posted by: EWN, Business Insider, BusinessTech, Fin24, and Moneyweb.

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