UN DSG: Keep goal of 1.5°C alive by closing climate finance, mitigation gaps with urgent, robust action

Following are UN Deputy Secretary-General Amina Mohammed’s closing remarks, as prepared for delivery, to the Commonwealth Heads of Government Meeting’s Climate Change Side Event “Keeping 1.5 Alive — the Glasgow Climate Pact and Building Momentum towards the twenty-seventh Meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change”, in Kigali today:

We are at the mid-point between the twenty-sixth Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) and COP27. The Glasgow Climate Pact, the main outcome of COP26, laid bare huge gaps on mitigation, on finance and on adaptation as well as the actions that needed to be taken over the course of the coming years to close these gaps through just transitions. Let us be frank, almost sixth months after Glasgow, we are off track. Today we have heard that there is political will behind the Glasgow Climate Pact, and renewed commitment to deliver the Paris Agreement.  But, this intent is not translating into action.

Last year, global emissions were at their highest level ever. The nationally determined contributions submitted last year would result in an increase in global emissions of 14% by 2030.

Science tells us that, for us to be on a credible pathway to limit global average temperature rise to 1.5°C, global emissions need to decline by 45% below 2010 levels by 2030.

The battle to keep the 1.5°C goal of the Paris Agreement alive and prevent the worst impacts of the climate crisis will be won or lost this decade. With each passing day of inaction, the pulse of the 1.5°C goal gets weaker and weaker.

At Glasgow, all countries agreed to revise and strengthen their nationally determined contributions.  Group of 20 (G20) nations account for 80% of global emissions. Their leadership is needed more than ever to bend the global emissions curve towards 1.5°C. Thanks to the COP26 President Alok Sharma for the continued leadership.

On finance, the $100 billion commitment made over a decade ago remains unmet, and the trillions needed to ensure a low-carbon, climate-resilient future are yet to be mobilised.

Developing countries continue to face extraordinary barriers to accessing the finance they need, particularly to protect themselves from the worst impacts of climate change which are happening now.

This story plays out against a devastating backdrop. According to the Intergovernmental Panel on Climate Change, at 1.5°C of warming, people living in Central and South America, most of Africa, small island developing States and South Asia, are 15 times more likely to die from a climate impact. The recent climate discussions in Bonn did not reflect the reality of this emergency.

We have six months to Sharm el-Sheikh. The window to demonstrate that the countries are taking serious steps, as agreed in Glasgow, has not yet closed. We still have hope that it can be done.

This means countries bringing forwards new and enhanced nationally determined contributions, underpinned by concrete policies.  Especially from those that have not yet done so, and those major emitters that are not yet on a 1.5°C pathway. We need to go a step further. And this is why the Secretary-General has called for coalitions of support around key emerging economies to accelerate the transition away from coal.

It means donors providing clarity on when and how the $100 billion promise will be met, as well as providing the road map for the doubling of adaptation finance. It is a handshake that is not only fair but that will also help address the trust deficit. It also means multilateral developing banks playing their part in mobilising the trillions of needed private finance. We need to see concrete progress towards reforming rules around eligibility and burdensome access criteria that many developing countries face.

Local solutions need to be supported. Loss and damage needs to be seriously addressed. Youth need to be taken seriously and meaningfully engaged.  We must keep focused on protecting the most vulnerable.

This is why the Secretary-General has called for 100% coverage of early warning systems over the next five years.

One out of every three persons in world is not covered by an early warning system. These persons are predominately in least developed countries and small island developing States. This is unacceptable when we know we have the technology and the tools to achieve this.

Multilateralism is under strain, yet the Commonwealth has the potential to lead the way and provide a model for cooperation. You are a diverse group of countries, spanning many regions of the world, languages, religions and cultures. You include major economies, both developed and developing. You include those already suffering from the impacts of climate in action. And you unite around common values.

So, today, I end with this appeal to you, Commonwealth leaders. Let us not step back from our commitments and revert to the lowest common denominator.  We must close the gaps on mitigation, adaptation, finance and on loss and damage with urgency and ambition.

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Operation Vulindlela: catalyst to NERSA’s approval of 16 more distributed generation projects, streamlining water processes and national rail policy

In the water sector, Operation Vulindlela has been providing technical support to the Department of Water and Sanitation to implement a turnaround plan for the granting of water use licences, with a target to process 80% of all applications within 90 days.

by GCIS Vuk’uzenzele

The South African economy, like any other economy, cannot function, let alone grow, without efficient and competitive network industries. These industries – which include electricity, water, transport and telecommunications – are the arteries through which the oxygen of the economy runs.

Structural problems in these areas have long been cited as some of the main constraints on South Africa’s economic growth. Inefficiency and the high cost of network services are an impediment to doing business in the country.

To address and overcome these challenges, we set up Operation Vulindlela in October 2020 as an initiative of the Presidency and National Treasury to accelerate structural reforms in these network industries. While the responsible government departments and entities drive these reforms, Operation Vulindlela monitors and identifies challenges and blockages. Where needed, it facilitates technical support to departments.

The recent quarterly report outlines the progress made by Operation Vulindlela and the departments responsible for these reforms. Across government, our focus is on reforms that are fundamental and transformative; that reshape the way our economy works.

This includes the auction of high-demand spectrum for mobile telecommunications, which was delayed for more than 10 years and finally completed in March. The release of new spectrum will improve connectivity and bring down broadband costs. 

The establishment of the National Ports Authority as a separate subsidiary of Transnet last year had been delayed for more than 15 years. This was the necessary first step towards enabling private sector participation and increasing the efficiency of our port terminals.

We have also reinstated the Blue Drop, Green Drop and No Drop system for the first time since 2014 to ensure better monitoring of water and wastewater treatment quality. We have published an updated Critical Skills List, also for the first time since 2014.

These are just some examples where, by focusing effort and attention on a limited number of priority reforms, this administration has been able to drive progress.

Through Operation Vulindlela, we have also been able to take a more focused and holistic approach to reforms, ensuring better coordination where multiple departments and entities are involved.

The best example of this is in the energy sector, where a number of important, interconnected reforms are underway to change the way that we generate and consume electricity.

Milestones include the raising of the licensing threshold for new generation projects to 100MW, allowing these projects to connect to the grid and sell power to customers. We have revived the Renewable Energy Independent Power Producer Procurement Programme through the opening of new bid windows.

Changes to the regulations on new generation capacity have allowed municipalities to procure power independently for the first time. And legislative reforms will ultimately give birth to a new competitive electricity market, supported by the publication of the Electricity Regulation Amendment Bill and the work underway to amend the Electricity Pricing Policy.

The process of unbundling Eskom is on track, with the entity meeting its December 2021 deadline for the establishment of a National Transmission Company. By December this year we hope to complete the unbundling of Eskom’s generation and distribution divisions.

The quarterly report highlights a number of other important achievements, as well as areas where intensive work is underway.

In the water sector, Operation Vulindlela has been providing technical support to the Department of Water and Sanitation to implement a turnaround plan for the granting of water use licences, with a target to process 80% of all applications within 90 days.

Work is also underway to establish a National Water Resources Infrastructure Agency that will ensure better management of our national water resources.

In the transport sector, inefficiencies in port and rail have severely affected our ability to export goods. Work is underway to establish partnerships with private sector operators to invest in port infrastructure and improve the management of container terminals at the ports of Durban and Ngqura.

The White Paper on National Rail Policy, which was approved by Cabinet in March, outlines plans to revitalise rail infrastructure and enables third party access to the freight rail network. Transnet Freight Rail is already in the process of making slots available for private rail operators on the network.

A fully operational e-Visa system has been launched in 14 countries, including some of our largest tourist markets. A comprehensive review of the work visa system is also underway to enable us to attract the skills that our economy needs.

These reforms have been made possible due to better collaboration across government behind a shared reform agenda.

We call on business and investors to take advantage of the changes that are underway and turn their pledges and commitments into tangible, job creating investments.

This article was originally published in the GCIS Vuk’uzenzele.

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Global electric vehicle outlook for 2022

Electric vehicle sales breaking records in 2021, four times 2019 market share

The annual International Energy Agency Global Electric Vehicle Outlook report for 2022 indicates sales of 6.6-million electric cars last year – a new record, rising to nearly 10% of global car sales and double that of 2020. There are now more than 16.5-million electric cars on the road, tripling from 2018.

China is the global EV sales leader, with Europe and the United States making up the top three markets. More electric cars were sold in China last year than globally in 2020, while in Europe electric car sales continued their year-on-year sales increase, by more than 85%. Two and three-wheelers have high EV market share, especially in Asia, where China again dominates, registering 9.5 million new electric two- and three-wheelers out of the 10 million registrations. Vietnam and India are the other largest markets for these vehicles.

“There are five recommendations to government outlined in the recent Global EV Outlook 2022 report from the IEA,” says Hiten Parmar, Director of the uYilo eMobility Programme. “Firstly, to maintain and adapt support for electric vehicles, to kickstart the heavy-duty EV market, to promote the adoption of EVs in emerging and developing economies, expand EV infrastructure and smart-grids and, finally, to ensure secure, resilient and sustainable EV supply chains.”

According to the IEA’s report, there has been nearly 40% expansion in the number of public chargers last year, reaching 1.8 million, meaning there is now about 10 EVs per public charge point. South Africa is the market leader for Africa, having installed over 300 public chargers to date through various service providers, with the latest expansion projects including ultra-fast (150 kW) chargers.

The model range of EVs globally has shown a five-fold expansion since 2015, now numbering 450. This trend is also visible in heavy-duty vehicles which is showing an accompanying increase in sales in the United States and Europe, driven by the increase in available models, and economic and policy support. In emerging economies, a lack of model availability and high prices means EV adoption is still low.

“In South Africa, the electric vehicles currently marketed are exclusively from premium brands,” says Parmar. “Audi, BMW, Jaguar, Mercedes-Benz, Porsche and Volvo all have full electric models available, while the cheapest is from MINI. We still require a wider segment of models to drive further growth in the local market. This can only be realized within the mandate of the Department of Trade, Industry and Competition under the import duty framework, and local production incentives for manufacturing.”

The effect electric vehicles will have on the road transport sector, in reducing emissions and contributing to countries achieving their net-zero goals by 2050, will require EV market share to grow by 60% globally. This will require that all elements of the electric vehicle supply chain be significantly expanded, especially the battery supply chain, however more supply investment is needed to meet demand.

“Few areas of the new global energy economy are as dynamic as electric vehicles. The success of the sector in setting new sales records is extremely encouraging, but there is no room for complacency,” said IEA Executive Director Fatih Birol. 

Currently the zero emissions announcements by automotive manufacturers are more ambitious than government targets, but they require policy support in order to be effectively materialised.

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Green means go for new generation capacity

Nersa has agreed to put into effect Operation Vulindlela’s suggestion to drop power purchase agreements as one of the requirements for registering embedded generation projects below 100MW.

In a bid to be recognised as a global leader in energy regulation, NERSA (National Energy Regulator of South Africa) confirmed that it would also be focusing on automating the 100MW registration process for embedded energy projects as part of a broader strategy to automate its business processes. (Although these facilities do not need a licence, they must be registered.)

This will ensure much-needed investment in new generation capacity and will alleviate load shedding.

The first two projects making use of licence exemptions for generation facilities of up to 100MW have successfully been registered with Nersa. The two projects are developed and operated by Sola Group and will generate power for Tronox Mineral Sands’ operations located in the North West. The registration of the projects took 73 days from submission.

Power will be wheeled across Eskom’ s transmission grid to Sola’s operations on the West Coast and in KwaZulu-Natal. The projects have 28GWh of excess energy per year, which Sola is looking to market to other interested clients connected to Eskom’s grid.

The licence exemptions are expected to unlock investment in the energy sector to help address the generation capacity gap of between 4 000MW to 6 000MW. Implementing the Operation Vulindlela recommendation will help unlock the investment conduits of 50 projects with the combined energy potential of 4 500MW.

Operation Vulindlela is a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic recovery. Operation Vulindlela aims to modernise and transform network industries, including electricity, water, transport and digital communications.

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A perfect storm is forcing green independence from the coal-dominant grid

By Lance Dickerson, MD, Revov

For all our best intentions and well-meaning words, it is often easier to continue with the status quo. However, a perfect storm in South Africa has catapulted us into a new energy future. While its painful now, we will be grateful in a decade or two from now.

South Africa has relied on an ever-weakening coal-based national power supply with Koeberg being the sole nuclear reactor. As far back as 1998 – some would argue earlier – the writing has been on the wall. In the years leading up to the 2010 World Cup, the new-builds such as Medupi were already too little, too late. This is even before the cost overruns, delays and expensive design flaws. This as other countries were investing billions into renewable energy builds.

We’ve had some great announcements locally. There is the 100MW private embedded exemption and if one drives along various routes such as the N2 in the Eastern Cape you will see growing wind farms, but where is the mass rollout of renewable power generation? Most South Africans can answer this question.

Over the same period, the world has become conscious of the environment and there’s been a push towards reducing carbon emissions. The Congress of the Parties (COP) 27 will proceed later this year in Africa, after the last edition of COP was criticised for underrepresenting the so-called Global South. All eyes will be on countries such as ours.

While one may well be cynical about the level of carbon emission concern globally, the truth is that many countries have already made bold commitments. Norway, France, UK, US: they’ve all made bold plans to reduce and outlaw internal combustion engines by various dates – all of which fall, by the grace of God, comfortably within our lifetime. We will see it.

China is light years ahead of a country like South Africa. Shenzhen, the home of electric vehicle (EV) maker BYD, has 16 000 electric buses and 22 000 electric taxis. Carmakers around the world are investing billions of dollars into research and development, from 100% EV makers to traditional brands plotting their plans to shift their businesses to the certain electric future.

None of this is new. We’ve known this in South Africa for years. We’ve known the world is moving to renewable energy and e-mobility. Ask the average South African for their thoughts on the mass rollout of electric charging stations and their answer will likely be: “Great, but where will the electricity come from?”

Everyone knows Eskom barely has its head above water. We feel it with incessant bouts of load shedding. This is part one of the perfect storm. Out of necessity the government will have no choice but to speed up the transition to renewable power generation, complete with private players that can deliver. Businesses and households have little choice but to find ways to protect themselves from this unreliability.

The second part of the perfect storm is the cost of fuel. The end of May will likely see a record fuel price increase, made worse by the temporary fuel levy grace period coming to an end. Running a generator during prolonged periods of load shedding is very quickly becoming something only those with very deep pockets can contemplate. One shudders to think that Eskom runs diesel generators to keep our lights on. The costs are eye-watering.

The third part of the perfect storm is the repo rate increase cycle, putting pressure on already squeezed retailers and consumers. Costs eventually have to be passed on. Imagine running a small or medium business that’s dependent on electricity to generate revenue while the power is removed in bouts of stage 2, 3, 4 (and possibly more) load shedding. Imagine the squeeze when read against increasing rent, increasing input costs and ever-more weary customers. How long is this sustainable?

The fourth part of the perfect storm is the willingness of private financial institutions and lenders to proudly advertise credit and funding lines for renewable installations. Businesses and private households will likely take up this offer precisely because it gives them the opportunity to develop freedom from dependence on a broken grid.

Within five years we will see huge investments in installations of all sizes: homes, small businesses and larger manufacturing and mining operations that require high-voltage solutions. Lithium iron phosphate batteries mean that the ability to store energy has come on in leaps and bounds.

That’s the perfect storm – where South Africans are forced to make the transition. However, the good news is that by using 2nd LiFe batteries, where the cells are repurposed from EV batteries, consumers and businesses can make the transition with the peace of mind that they are contributing to an important step in the circular economy: they are using batteries that don’t add further strain to the environment such as their first life counterparts.

That’s where we want to be: in a world where conscious decisions are made to look after the planet. If it takes us being forced, through a perfect storm of Eskom failures and economic headwinds, to get there so be it. Better late than never.

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Shipping losses fall, but Ukraine war, cost issues and sustainability concerns muddy the waters

  • Safety & Shipping Review 2022: 54 large ships lost worldwide last year. Total losses down 57% over past decade. South China, Indochina, Indonesia, and the Philippines top loss location. The Arabian Gulf saw a significant increase in loss activity to rank second. British Isles sees most shipping incidents.
  • Southeast Asian waters are replacing the Gulf of Guinea as the most dangerous for commercial shipping.
  • Ukraine invasion has multiple impacts: loss of life/vessels, exacerbation of crew crisis, trade disruption, sanctions burden, and cost and availability of bunker fuel.

Fires, container ship and car carrier incidents leading to oversized losses and ‘general average’ process becoming more frequent. Sustainability concerns driving up costs of salvage and wreck removal. Decarbonisation of shipping industry creating new risks.

Shipping boom safety impact: growing use of non-container vessels to carry containers, working life of vessels being extended, port congestion putting crews and facilities under pressure.

Johannesburg/London/Munich/New York/Paris/Sao Paulo/Singapore
The international shipping industry is responsible for the carriage of around 90% of world trade, so vessel safety is critical. The sector continued its long-term positive safety trend over the past year but Russia’s invasion of Ukraine, the growing number of costly issues involving larger vessels, crew and port congestion challenges resulting from the shipping boom, and managing challenging decarbonisation targets, means there is no room for complacency, according to marine insurer Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2022.

“The shipping sector has demonstrated tremendous resilience through stormy seas in recent years, as evidenced by the boom we see in several parts of the industry today,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS. “Total losses are at record lows – around 50 to 75 a year over the last four years compared with 200+ annually in the 1990s. However, the tragic situation in Ukraine has caused widespread disruption in the Black Sea and elsewhere, exacerbating ongoing supply chain, port congestion, and crew crisis issues caused by the Covid-19 pandemic. At the same time, some of the industry’s responses to the shipping boom, such as changing the use of, or extending the working life of, vessels also raise warning flags. Meanwhile, the increasing number of problems posed by large vessels, such as fires, groundings and complex salvage operations, continue to challenge ship owners and their crews.”

The annual AGCS study analyzes reported shipping losses and casualties (incidents) over 100 gross tons. During 2021, 54 total losses of vessels were reported globally, compared with 65 a year earlier. This represents a 57% decline over 10 years (127 in 2012), while during the early 1990s the global fleet was losing 200+ vessels a year. The 2021 loss total is made more impressive by the fact that there are an estimated 130,000 ships in the global fleet today, compared with some 80,000 30 years ago. Such progress reflects the increased focus on safety measures over time through training and safety programs, improved ship design, technology and regulation.

According to the report, there have been almost 900 total losses over the past decade (892). The South China, Indochina, Indonesia, and the Philippines maritime region is the main global loss hotspot, accounting for one-in-five losses in 2021 (12) and one-in-four-losses over the past decade (225), driven by factors including high levels of trade, congested ports, older fleets, and extreme weather. The Arabian Gulf (46) and West African Coast (38) are fifth and sixth respectively over the same period. Globally, cargo ships (27) account for half of vessels lost in the past year and 40% over the past decade. Foundered (sunk/submerged) was the main cause of total losses over the past year, accounting for 60% (32).

While total losses declined over the past year, the number of reported shipping casualties or incidents rose. The British Isles saw the highest number (668 out of 3 000). Machinery damage accounted for over one-in-three incidents globally (1 311), followed by collision (222) and fires (178), with the number of fires increasing by almost 10%. Globally, most incidents, over the past decade, have been caused by machinery damage or failure (9 968), followed by collision (3 134), contact (2 029), piracy (1 995) and fire/explosion (1 747).

Southeast Asian waters are replacing the Gulf of Guinea

Maritime piracy and armed robbery attacks reached the lowest recorded level since 1994 last year (132), according to the International Maritime Bureau (IBM). The drop can be attributed to successful intervention by authorities, but continued coordination and vigilance is necessary to ensure the long-term protection of seafarers given recent rising numbers of incidents in the Singapore Straits and Southeast Asia and recent reports of incidents in Ivory Coast, Angola, and Ghana waters.

The Gulf of Guinea remained the world’s piracy hotspot in 2021 but saw activity fall from 81 reported incidents in 2020 to 34 in 2021, according to the IMB. The good news has continued in Q1 2022. The IMB’s latest global piracy and armed robbery report recorded 37 incidents globally in the first three months of 2022 – compared to 38 incidents over the same period last year – with nearly half of them (41%) occurring in Southeast Asian waters, particularly in the Singapore Straits. In comparison, there was a welcome decrease in reported incidents in the Gulf of Guinea region with seven incidents reported since the start of the year.  There have been no reported crew kidnappings within the Gulf of Guinea waters in Q1 2022 compared to 40 crew kidnappings in the same period in 2021.

Ukraine impact: safety and insurance

The shipping industry has been affected on multiple fronts by Russia’s invasion of Ukraine, with the loss of life and vessels in the Black Sea, disruption to trade, and the growing burden of sanctions. It also faces challenges to day-to-day operations, with knock-on effects for crew, the cost and availability of bunker fuel, and the potential for growing cyber risk.

The invasion has further ramifications for a global maritime industry already facing shortages. Russian seafarers account for just over 10% of the world’s 1.89 million workforce, while around 4% come from Ukraine. These seafarers may struggle to return home or rejoin ships at the end of contracts. Meanwhile, a prolonged conflict is likely to have deeper consequences, potentially reshaping global trade in energy and other commodities. An expanded ban on Russian oil could contribute to pushing up the cost of bunker fuel and impacting availability, potentially pushing ship owners to use alternative fuels. If such fuels are of substandard quality, this may result in machinery breakdown claims in future. At the same time, security agencies continue to warn of a heightened prospect of cyber risks for the shipping sector such as GPS jamming, Automatic Identification System (AIS) spoofing and electronic interference. Prior to the Ukraine invasion there had already been a number of these incidents, reported in the Middle East and China.

At the same time, the shipping industry continues to fall victim to cyber-attacks. India’s busiest container port, Jawaharlal Nehru Port Trust, was hit by a ransomware attack in February 2022, following incidents at US and South African ports in recent years.

“The insurance industry is likely to see a number of claims under specialist war policies from vessels damaged or lost to sea mines, rocket attacks and bombings in conflict zones,” explains Justus Heinrich, Global Product Leader, Marine Hull, at AGCS. “Insurers may also receive claims under marine war policies from vessels and cargo blocked or trapped in Ukrainian ports and coastal waters.”

The evolving range of sanctions against Russian interests presents a sizeable challenge. Violating sanctions can result in severe enforcement action, yet compliance can be a considerable burden. It can be difficult to establish the ultimate owner of a vessel, cargo or counterparty. Sanctions also apply to various parts of the transport supply chain, including banking and insurance, as well as maritime support services, which makes compliance even more complex.

A burning issue: fires on board

During the past year, fires on board the roll-on roll-off (ro-ro) car carrier Felicity Ace and the container ship X-Press Pearl both resulted in total losses. Cargo fires are indeed a priority concern. There have been over 70 reported fires on container ships alone in the past five years, the report notes. Fires often start in containers, which can be the result of non-/mis-declaration of hazardous cargo, such as chemicals and batteries – around 5% of containers shipped may consist of undeclared dangerous goods. Fires on large vessels can spread quickly and be difficult to control, often resulting in the crew abandoning ship, which can significantly increase the final cost of an incident.

Fires have also become a major loss driver for car carriers. Among other causes, they can start in cargo holds, caused by malfunctions or electrical short circuits in vehicles, while the open decks can allow them to spread quickly. The growing numbers of electric vehicles (EVs) transported by sea brings further challenges, given existing counter-measure systems may not respond effectively in the event of an EV blaze. Losses can be expensive, given the value of the car cargo and the cost of wreck removal and pollution mitigation.

When large vessels get into trouble, emergency response and finding a port of refuge can be challenging. Specialist salvage equipment, tugs, cranes, barges and port infrastructure are required, which adds time and cost to a response. The X-Press Pearl, which sank after it was refused refuge by two ports following a fire – the ports were unable or unwilling to discharge a leaking cargo of nitric acid – is one of several incidents where container ships have had difficulty finding a safe haven. Meanwhile, the salvage operation for the car carrier Golden Ray, which capsized in the US in 2019, took almost two years and cost in excess of $800mn.

“Too often, what should be a manageable incident on a large vessel can end in a total loss. Salvage is a growing concern. Environmental concerns are contributing to rising salvage and wreck removal costs as ship owners and insurers are expected to go the extra mile to protect the environment and local economies,” says Khanna. “Previously, a wreck might have been left in-situ if it posed no danger to navigation. Now, authorities want wrecks removed and the marine environment restored, irrespective of cost.”

Higher salvage costs, along with the burden of larger losses more generally, are a cost increasingly borne by cargo owners and their insurers. “’General average’, the legal process by which cargo owners proportionately share losses and the cost of saving a maritime venture, has become a frequency event, as well as a severity event, with the increase in the number of large ships involved in fires, groundings and container losses at sea compared with five years ago,” explains Régis Broudin, Global Head of Marine Claims at AGCS. It was declared in both the Ever Forward and Ever Given incidents.  The large container ship Ever Forward ran aground in the US in March 2022, and was stuck for over a month before it was freed, almost a year to the day after its sister vessel, Ever Given blocked the Suez Canal.

Post-pandemic world brings new risk challenges

While the Covid-19 pandemic resulted in few direct claims for the marine insurance sector, the subsequent impact on crew welfare and the boom in shipping and port congestion raises potential safety concerns. Demand for crew is high, yet many skilled and experienced seafarers are leaving the industry. A serious shortfall of officers is predicted within five years.

For those who remain, morale is low as commercial pressures, compliance duties and workloads are running high. Such a work situation is prone to mistakes – 75% of shipping incidents involve human error, AGCS analysis shows.

The economic rebound from Covid-19 lockdowns has created a boom time for shipping, with record increases in charter and freight rates. While this is a positive for shipping companies, higher freight rates and a shortage of container ship capacity are tempting some operators to use bulk carriers, or consider converting tankers, to transport containers. The use of non-container vessels to carry containers raises questions around stability, firefighting capabilities, and securing cargo. Bulk carriers are not designed to carry containers, which could impact their maneuvering characteristics in bad weather, and crew may not be able to respond appropriately in an incident.

With demand for shipping high, some owners are also extending the working life of vessels. Even before the pandemic, the average age of vessels was rising. Although there are many well-managed and maintained fleets composed of older vessels, analysis has shown older container and cargo vessels (15 to 25 years old) are more likely to result in claims, as they suffer from corrosion, while systems and machinery are more prone to breakdown. The average age of a vessel involved in a total loss over the past 10 years is 28.

Shipping bottlenecks and port congestion

Covid-19 measures in China, a surge in consumer demand, and the Ukraine invasion have all been factors in ongoing unprecedented port congestion which puts crews, port handlers and facilities under additional pressure. “Loading and unloading vessels is a particularly risky operation, where small mistakes can have big consequences. Busy container ports have little space, while the experienced labor required to handle the containers properly is in short supply. Add in fast turnaround times and this may result in a heightened risk environment,” explains Heinrich.

Climate change: transition problems

With momentum gathering behind international efforts to tackle climate change, the shipping industry is coming under increasing pressure to accelerate its sustainability efforts, the report notes, given its greenhouse gas emissions grew by around 10% between 2012 and 2018.

Decarbonization will require big investments in green technology and alternative fuels. A growing number of vessels are already switching to liquefied natural gas (LNG), while other alternative fuels are under development, including ammonia, hydrogen and methanol, as well as electric-powered ships. The transition to alternative fuels will likely bring heightened risk of machinery breakdown claims, among other risks, as new technology beds down and as crews adapt to new procedures.

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Perfect fuel storm in the road freight and logistics industry

No-one would have thought that we would see such increases in the fuel price as we have experienced over the past six months. As we reel from these increases, the possibility of one of the greatest price increases (in South Africa) that we have ever seen, is looming.

By Gavin Kelly – Chief Executive Officer: The Road Freight Association

Oil has risen to the $114 (around) per barrel mark, the Rand is trading in the R16 range (or so) and the effect is a sky-rocketing price for fuel in South Africa. It has an impact on every single item that is transported to and across South Africa.

Oh yes, those ships also use fuel, and those tariffs are rising. There are still fewer ships plying the seas (thanks to Covid) and there are constraints in the global logistics chains that not only articulate into delays, but into demand, which has an upward price-pressure effect.

Once goods are landed, they then find their way to either consumers or manufacturers via the dependable road transport network, and that is where the next leg of the logistics journey is impacted by fuel (oil) increases. We have all felt, and will continue to feel for some time, the effects of more expensive fuel.

Now to the “Perfect Storm”: With the oil price and Rand value vis-à-vis the Dollar being what they are, there are reports that the fuel price for June will see an increase of between R1.70 to R2.00 – depending on the commodity (product). However, the “relief” offered by the government to reduce the level of taxation on the price of fuel (by around R1.50 per litre) is due to fall away at the end of May – just in time to join the new price increase.

This means a price increase of around R3.20 (a rough estimate, given all that is currently in play) by the first week of June. We cannot afford that. Or any other increases. We? Well, South Africa – but the first signs of despair and retreat will be within the road freight logistics sector.

Already, some transporters closed their doors due to the effects of the Covid pandemic. Financial pressures have remained on the increase, and the unrest that continues to ferment, radically shown by the violent period in July 2021 when the whole logistics chain was attacked (trucks, depots, distribution centres, warehouses and retails stores), continues to wear down companies and cause more closures. Operating costs within the road freight and logistics sector have continued to increase exponentially, with many of these increases coming at a time when the road freight industry can least afford, or withstand, these shocks.

There are many transport companies that cannot keep facing the continual increase in operating costs and the recent fuel (diesel) price increases have become the final “nail in the coffin” for many of our transporters.

Uncontrolled fuel increases are the factor that can cause a collapse in the road freight logistics sector.

Whether we like it or not, transporters cannot absorb the cost of fuel increases. This puts them out of business very quickly, so the fuel increase must be passed on to the client (who pays for goods to be transported), which is then passed on to the consumer. Disposable funds are decreasing, consumers are being very careful about what they buy, with so-called essentials such as food, medication, power, water and accommodation now the focus for most consumers.

There have been calls for the taxes on fuel to be reduced or removed and “collected elsewhere”. Those options will not resolve the underlying issues:

  • The basic price of oil  – determined outside of South Africa through supply and demand, and
  • The Rand / Dollar exchange rate – determined by international financial view of South Africa

Solutions to the (expensive) fuel crisis could possibly be:

  • An agreement between African states producing oil (or refined products) for a far lower rate for African countries in the spirit of the Africa Continental Free Trade Agreement (AfCFTA) and to ensure African economies do not collapse
  • Concentration by SASOL to produce far more fuel (was its goal in the 1970s and 1980s not to make South Africa independent of foreign oil supply?)
  • Development and growth of the synthetic fuels industry in South Africa – from all possible sources
  • Development of electric transportation devices and supply

Not only would we solve our transport energy consumption and demand challenges, we would definitely create employment (more importantly in a long-term and sustainable context) and would be heading in the right direction in terms of moving ourselves away from the reliance on fossil fuels.

Until then, our sole dependable form of goods distribution – from producers to manufacturers to market – will be under dire pressure and could collapse when many of our transporters close down operations, solely due to the unbearable cost of fuel. This will affect all transporters – big and small.

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Africa’s scientific agility in the face of a pandemic

The Covid-19 pandemic triggered a rapid curve not only for the governments tasked with containing it, but also for the scientists tasked with understanding it and its cascading effects.

Two years on, as countries still battle to douse the remnants of the pandemic fires as successive waves continue to rise, the pandemic offers learning opportunities for scientists and policy makers across the world. From the outset, it was clear that innovation and creativity would be key in the region’s quick and nimble response to the pandemic. And African scientists very quickly stepped up to the plate.

For every 1 000 innovations globally that came out in response to Covid-19, 13% of these were from Africa. This goes to show the strength of the African innovation ecosystem, though it’s still in its infancy stages. A creativity and innovation that Africa was able to tap into fast. Importantly, several of these innovations were low-cost and easily adaptable to low-and-middle income country contexts,” said Dr Uzma Alam, a global health researcher and partner with the Africa Institute for Health Policy.

She was speaking during a recent Sustainability Research and Innovation Congress (SRI) Inkundla, one of four curated conversations in the lead-up to the SRI2022 Congress to be held in June.

The Congress will be hosted by Future Africa and held both onsite in Pretoria and online from June 20-24. It brings together a dynamic and diverse group of professionals committed to driving global sustainability forward through transdisciplinary research and innovation.

The SRI Inkundlas address each of this year’s Congress themes: African science and innovation, New Horizons, Different Ways of Knowing, and Nexus Issues.

In the first session, Alam posited that innovation was especially important when thinking through the sustainability, research and innovation lens looking at Covid-19 as a case study, because it was able to bring in features that underpin resilient systems – such as our flexibility and adaptability as a continent.

Flexibility and adaptability were also key in the social sciences context too, particularly in anticipating and addressing the gaps in human rights, and the many vulnerable populations left out in the response to Covid-19.

Dr Leonore Manderson, a Medical Anthropologist and Distinguished Professor of Public Health and Medical Anthropology at University of the Witwatersrand, led a team of five researchers from the Consortium for Advanced Research Training in Africa (CARTA), to effectively mine out the social science impact the pandemic would have in the context of Covid-19.

“Our focus was on people who consistently slipped through the cracks or were on the margins of society where there were not societal mechanisms to support them – people whose lives have yet to be documented in relation to Covid-19 such as people living in refugee camps such as in East Africa for example, no one counts those numbers of who has been affected by Covid, let alone died from it,” she added.

“The challenge for us was to think through how one might engage populations whose lives were so precarious and who had no access (to societal mechanisms of supports such as grants),” Manderson continued.

And while many countries across Africa recognised the social cost of the pandemic and tried to mitigate against it by finding mechanisms to halt its impact – such as by increasing pensions and various social grants – there were populations of vulnerable people left out of that.

“Social science has an enormously important role in anticipating these kinds of pitfalls and creating conversations around addressing them,” she said.

Data would be a fundamental pillar underpinning healthcare system, and the resultant responses to Covid-19 and future disease epidemic.

“Without data you’re not really able to have an idea of where you’re going, how you’ve been performing or benchmarking and tracking progress,” added Dr Tom Achoki, a faculty member at the school of health systems and public health at the University of Pretoria.

Achoki emphasised how critical data was in surveillance and response, especially in epidemics and in determining what is working or not in identified hotspots.

Moreover, data was a key determining factor in the managing and distribution of resources, both human and financial in dealing with health crises such as epidemics and pandemics.

“Resources are not limitless, so we must make sure that we are able to allocate our resources in both an effective and judicial way so we can get the maximum bang for the cash we put out there.

“So, unless we are able to understand those differences at a subnational level and also are able to look at the outcomes of the healthcare systems (like the effectiveness of interventions), being able to see whether those are being delivered in a cost-effective way is fundamental to sustainability,” Achoki said.

He added that there needed to be a regional culture of data use, as an accountability mechanism.

“Because data can be there, but if it’s not being utilised for implementation at policy level then it becomes reports sitting on the walls. There has to be that culture of data use to ensure we are keeping different custodians of different health systems accountable,” he stated.

Alam re-emphasised the innovation coming out from African scientists, and that through the evidence that 13% of innovation during the pandemic came out of Africa, albeit relatively small, it was a significant marker that innovation wasn’t just one directional and flowing from developed countries.

“Africa has its own place in the innovation ecosystem. However, we do need to develop our innovation ecosystems including thinking through how we fund innovation beyond the normal grant mechanisms. Africa needs to set its own agenda in terms of research and innovation, and the policies to support innovation are African driven” she said.

Alam continued: “For far too long and for whatever reasons, it (the agenda) has been a process driven from the outside, as such the stakeholders are not the owners of that agenda so there is no sustainability. Also, innovation doesn’t occur in a vacuum, nor does science occur in a vacuum so partnerships are key, but they need to be equitable.”

The first session was moderated by Dr Richard Wamai, Associate Professor at Northeastern University where he co-leads the Integrated Initiative for Global Health.

He said that frameworks such as the African Union’s Science, Technology and Innovation Strategy for Africa 2024 – among others – recognised research and innovation as enablers for achieving Africa’s sustained growth and competitiveness and economic transformation.

“Africa is a continent on the rise. Some have said that this is the century for Africa. The push for science, innovation and technology is motivated by the need to find new solutions for complex problems including disease, population, climate change and natural resource management.”

For more on the informative Inkundla discussions around sustainability, research and innovation, visit https://sri2022.org/sri-inkundlas/ or register for the Congress here: https://sri2022.org/registration/.

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Minister of Forestry, Fisheries and the Environment, delivers Budget Vote for 2022/23 to National Assembly 

18 May 2022

Climate change induced disasters are the most significant threat to people, economies and the natural world today, says Forestry, Fisheries and the Environment Minister, Barbara Creecy. 

Delivering the Department of Forestry, Fisheries and the Environment’s 2022/23 budget speech to the National Assembly, the Minister said the recent floods in KwaZulu-Natal illustrated the human tragedy behind the 6th International Panel on Climate Change report. 

Women and children girls living in rural areas are directly impacted by climate change and the increase in changing weather patterns and natural disasters.  As the providers of food, fuel and water for their families, they have an important role to play in climate change policy development and management in South Africa. 

“It is imperative that we face the urgency of the climate crisis, climate resilience will need to be built across the system and special attention must be paid to particularly vulnerable individuals, households and communities,” said the Minister.

The current work by the Presidential Climate Commission to support the co-creation of a Just Transition Framework for South Africa emphasises that all people affected must be part of developing the solutions and that there must be an equitable distribution of risks and opportunities so that vulnerable workers and communities do not carry the burden of change.  The process can only succeed if it helps us with our broader developmental objectives, namely, economic inclusion, employment and building a more equal society.

In line with our revised ambitious Nationally Determined Contribution (NDC) to reducing green-house gas emissions, we have developed the Sectoral Emission Targets (SETs) framework that outlines emission reduction goals for key sectors of the economy. The process of allocating SETs will start in the 2022/23 financial.

The adoption of the Climate Change Bill by Parliament during 2022 will put in place the domestic architecture for Climate Change mitigation and adaptation. 

Through the National Climate Change Adaptation Strategy all 44 district municipalities have been supported to develop climate change adaptation strategies. Current work includes support to ensure integration of climate priorities into the Integrated Development Plans. 

A Presidential Climate Finance Task Team, headed by Mr Daniel Mminele, is leading a technical team to understand the full details of an offer by developed countries to mobilise $8.5 billion (R131 billion) over the next three to five years to support the implementation of our revised NDC and to begin our Just Transition. 

Recent media coverage has cast doubt on the Weather Service’s ability to predict severe weather events and protect our citizens from the impact of climate change. These reports are untrue. Weather warnings were issued ahead of the floods from 11-12 April and were updated with the intensity of the weather event, to a Level 5 Warning on the morning 11 April and to a Level 8 warning or severe impact by 8 pm that night.

To ensure, that despite revenue shortfalls, our forecasting ability is state of the art we have allocated The South African Weather Service  an amount of R100 million over three years to upgrade its infrastructure, starting with R15 million in 2021-2022. 

South Africa, continues to face severe air pollution in the three highly industrialised priority areas of Vaal Triangle, Highveld and the Waterberg-Bojanala areas. The regulations for implementing and enforcing priority area air quality management plans will be published before the end of 2022. 

Given the complex nature of the issues raised in the appeals against the 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 and the issuing of a Provisional Atmospheric Emission Licences, nominations have been invited for people to serve on a panel of experts to consider evidence presented and advise the Minister on the appeals.  The government gazette inviting such nominations has already been issued.

To improve waste management in municipalities, the Department is not only assisting in the development of their Integrated Waste Management Plans, and training local government on sustainable waste management practices, we also donating vehicles required to transport waste to landfill. This includes Skip Loader Trucks, Front End Loaders, compactor trucks . 

Minister Creecy said the White Paper on Conservation and Sustainable Use of Biological Resources, emanating from the policy work linked to the High Level Panel Report on the management, breeding, hunting, trade and handling of elephant, lion, leopard and rhinoceros, will be considered by Cabinet in June this year. Thereafter  it will be published for public comment. 

On the recommendation to close the captive lion breeding industry, the Minister intends to establish a Panel of Experts to formulate and oversee implementation of a voluntary exit strategy those who wish to participate. 

“I believe that by engaging and working with stakeholders, we can develop a voluntary strategy that can mitigate risks, including the effect on the local economy, job creation and the welfare and well-being of the lions themselves,” said the Minister. 

This Panel will have clearly defined terms of reference, and tight timelines, so that effect can be given to the HLP recommendation, and the decision emanating from the 2018 Parliamentary Colloquium on Lions. 

Minister Creecy said addressing the poaching of our country’s wildlife and plant species has been prioritised by government with provinces and sectors hard hit by these crimes receiving extensive support from the Department. 

As poaching pressure has shifted across the country and KwaZulu-Natal has become a key target area for criminal syndicates, key departmental resources have been deployed to actively support Ezemvelo KZN Wildlife and the SAPS. This includes assistance to intelligence gathering and joint investigations, support to law enforcement officials and Joint Operations Managers, including the nerve centre in Hluhluwe Imfolozi Park which is part of the Integrated Wildlife Zones.

Extensive work is also being done by the priority committee under Initiative 5 of Operation Phakisa, to deal with the poaching of abalone and West Coast Rock Lobster along the coast, and stem the illicit trade in both species.   

Among the steps to be taken is the implementation of the recommendations of the Consultative Advisory Forum on West Coast Rock Lobster to ensure the continued sustainability of the species. 

Referring to seismic surveys along the country’s coastline, Minister Creecy said the Department intends to develop a research programme on seismic surveys and their impacts in our local waters. This will begin this year and will analyse the footprint of seismic surveys that have already taken place in South Africa’s Ocean Exclusive Economic Zone.  

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Old Mutual Report: Africa’s future is tied to climate change

South Africa and the continent’s future depend largely on the private sector reducing the impact of climate change and addressing systemic social issues, says the Old Mutual Group in its first Climate Change Report, part of its 2021 Integrated Reporting suite comprising six publications.

Although sub-Saharan Africa produces only a small share of global emissions, the region will face some of the most severe impacts of climate change, says Old Mutual Group CEO, Iain Williamson. “We believe the economic, social, and environmental systems in which we operate are inseparable and the physical effects of changing weather patterns will exacerbate extreme poverty, inequality, and unemployment.

“As a supplier of financial services to millions of customers across the African continent, we have an important role to play in driving greater inclusion and more equal societies. We must actively help build a low-carbon, resource-efficient environment that creates greater access to the economy for all stakeholders.”

Market observers and Old Mutual stakeholders have expectations about the company’s overall role in society. “With the inclusion of the Climate Change Report, we have increased the level of our corporate transparency and our commitment to integrated and open communication,” says Williamson.

The Group’s first Climate Change Report is based on the principles of the Taskforce on Climate-Related Financial Disclosures (TFCD), and when read with the Sustainability Report, provides a roadmap of Old Mutual’s future actions.

“The key challenge is catalysing financing and investment. These are essential enablers for a socially inclusive transition to a low-carbon economy and a climate-resilient future on an economy-wide scale. The role of the private sector was emphasised at COP26, which stated that about 70% of the total funding requirement for a global climate change response would come from private enterprise,” says Williamson.

“We recognise that our core business of gathering capital and investing it requires a balance of environmental, economic and social considerations specific to the African continent. Our goal is to invest in developments that reduce Africa’s carbon footprint, and this aligns with Old Mutual’s purpose of ‘Championing Mutually Positive Futures’ for all stakeholders.

“Our first Climate Change Report also reinforces that we already have significant climate change achievements under our belt. These include being the first South African insurer to join The Net Zero Asset Owner Alliance and launching South Africa’s first ESG equity fund – which is 40% less carbon-intensive compared to the Capped SWIX and being named the Best ESG Responsible Investor in Africa (2021) by Capital Finance International,” concludes Williamson.

The comprehensive suite of reports now consists of the primary integrated report and five companion reports that examine: Remuneration, Governance, Tax Transparency, Climate Change and Sustainability. Also included in the suite is the Old Mutual Insure 2021 Integrated Report.

You can read Old Mutual’s first Climate Report here.

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