News in South Africa 21st November:
1. R200bn in infrastructure projects underway:
SA’s infrastructure backlog appears to be getting some of the attention it needs.
Some 48 strategic infrastructure projects worth R193.4 billion are currently under construction, and projects worth R87.4 billion in the procurement phase, according to Infrastructure SA (ISA), which was established by cabinet in May 2020 to accelerate infrastructure development.
These projects are expected to create more than 421 000 jobs, according to ISA, which operates under the Ministry of Public Works and Infrastructure.
There are 328 projects in the ISA pipeline, most of which relate to energy, human settlements, transport, social infrastructure and water.
While this is a drop in the ocean compared with the R6.58 trillion envisaged in terms of the National Development Plan 2030, there are promising signs of gathering momentum.
One of the projects being piloted by government is putting its massive property portfolio to better use.
“The government is looking at refurbishing and leasing out old buildings, and putting government buildings back into the private space,” said Alvino Wildschutt-Prins, manager for Infrastructure Pipeline Management, speaking at the Asset Owners Forum South Africa’s (AOFSA’s) first anniversary gathering last week.
Government owns 4.7 million hectares or 4.5% of the country’s land area, and has about 90 000 facilities with a net asset value of R134.5 billion, or 33.9 million square metres that could be put to use.
However, nearly two-thirds of that property portfolio is rated as being in fair to very poor condition.
So-called catalytic projects, worth more than R300 billion, have been identified. These include the production of green hydrogen by Sasol for use in sustainable aviation fuel and the greening of industry, and the Hydrogen Valley Project, led by Anglo Platinum, aimed at creating a green hydrogen corridor with several hydrogen-related industrial, construction and transport projects.
Investment spending in South Africa fell from an average of almost 30% of GDP in the early 1980s to about 16% by the early 2000s. “In effect, South Africa has missed a generation of capital investment in roads, rail, ports, electricity, water, sanitation, public transport and housing. To grow faster and in a more inclusive manner, the country needs a higher level of capital spending,” says the National Development Plan 2030.
2. Extreme load shedding ahead:
Eskom said on Sunday that it has run out of cash to buy diesel and does not plan to order any more until 1 April 2023.
The consequence of this will be extreme levels of load shedding not yet experienced in SA.
At a state of the system briefing last week, Eskom Chief Operating Officer Jan Oberholzer said that since 1 April, Eskom has spent R12 billion on diesel against an initial budget of R6.1 billion. This was later revised to R11.1 billion.
“If we continue to burn diesel the way we have for the past seven months, the cost would be astronomical. But we do not have the cash to spend. We would be able to pay if the municipalities were paying us,” said Oberholzer at the time.
The implications of Oberholzer’s statement are beginning to sink in as SA starts the week on Stage 4 load shedding.
Finding money
Public Enterprises Minister Pravin Gordhan met with the Eskom board on Sunday night about the “serious concerns about the risk of higher levels load shedding in the coming months.”
“The department of public enterprises (DPE) is urgently working with National Treasury and Eskom for it to find the money to buy supplies of diesel,” the department said in a statement.
Empty tanks
In the past, Eskom has overspent its diesel budget excessively, arguing that the R500 million a day per stage cost to the economy is greater than the cost of buying diesel. Eskom has therefore spent profligately on diesel to keep the lights on, with the only cap being the amount of diesel that can physically be delivered and burnt each month. This has equated to about R2.4 billion of diesel a month.
But the National Energy Regulator of SA (Nersa) has refused to allow Eskom to fully recover its costs for diesel spend from consumers, arguing that a more efficient and prudent operation would not have to resort to such excesses. This has left Eskom out of pocket and its executives under pressure from the National Treasury for overspending and failing to tighten up the sinking ship.
On Sunday, in an exchange with analyst Chris Yelland published on Twitter, Eskom spokesperson Sikonathi Mantshantsha confirmed that Eskom did not plan to procure more diesel until 1 April next year and that its tanks were empty.
3. Ban on scrap metal exports:
The government is set to introduce tighter measures to curb metal infrastructure theft, which is costing the economy about R187 billion a year.
The department of trade, industry & competition has proposed that exports of ferrous and nonferrous waste and scrap metal be banned for an initial period of six months, despite objections by several stakeholders and the EU, a key trading partner.
4. Taxi strike incoming:
The Western Cape Education Department (WCED) says contingency measures have been put in place to assist matriculants during a planned taxi strike on Monday and Tuesday.
This past week, the South African National Taxi Council (Santaco) advised Western Cape commuters to make alternative transport arrangements.
Operators are planning a shutdown in protest against a number of grievances including the issuing of heavy traffic fines — vehicle impoundments and the discontinuation of the Blue Dot taxi pilot project.
Over the next two days, the stay-away will affect thousands of commuters — including school children.
Education MEC David Maynier says they’ve contacted all exam centres regarding contingency plans — and have sent every individual matric candidate an SMS urging them to make alternative transport plans before Monday.
5. Good news for diesel:
The latest weekly estimates from the Central Energy Fund (CEF) point to petrol pain for motorists in December – but there is good news for diesel following months of steep hikes.
According to the CEF’s weekly data to 18 November 2022, petrol prices are currently showing an under-recovery (thus a potential increase) of around 90 cents per litre for December. While this is still negative for motorists, it’s showing a reversing trend, down 30 cents from a week ago.
Diesel prices, meanwhile, have shown a turnaround in fortunes and are now projected to decrease by as much as 68 cents per litre.
The department stresses that the snapshot is not predictive but rather serves as a fuel price indication. As market conditions change throughout the month, so too do the forecasts.
These are the projected price adjustments at the end of week three of November.
- Petrol 93/95: increase of 90 cents per litre
- Diesel 0.05%: decrease of 68 cents per litre
- Diesel 0.005%: decrease of 60 cents per litre
- Paraffin: increase of 9 cents per litre
The turn in fortunes for diesel prices is largely thanks to a lower basic price driven by a drop in the oil market, boosted by a stronger rand versus the dollar.
The oil market fluctuated quite a bit in November, pulled to and fro by two opposing narratives on demand. The first narrative, supporting higher oil prices, has been one of greater demand for oil against a constrained supply.
As the northern hemisphere heads into the winter months, demand for fuel has increased. However, this comes against a backdrop of Russian oil being sanctioned due to its ongoing war with Ukraine, as well as a reduced supply from Saudi Arabia and OPEC+ nations.
All information sourced from articles posted by: Moneyweb, BusinessTech, Fin24, BusinessLive, and EWN.
