Africa’s first integrated green hydrogen plant

Egypt Green, which is owned, built, and operated by Fertiglobe, Scatec ASA, Orascom Construction and The Sovereign Fund of Egypt, marks an important milestone in the development of a green hydrogen ecosystem in Egypt and the broader African region.

Sharm El Sheikh, Egypt, 8 November 2022

  • Today marks the start of the commissioning of the first phase of the green hydrogen plant in Ain Sokhna, Egypt, during an event at COP27 attended by Egyptian President, Abdel Fattah El-Sisi and Norwegian Prime Minister, Jonas Gahr Støre.
  • The facility is the first integrated green hydrogen plant in Africa, and when fully developed will consist of 100 MW of electrolysers, powered by 260 MW of solar and wind.
  • The facility will deliver up to approximately 15,000 tons of green hydrogen as feedstock for the production of up to 90 000 tons of green ammonia per year in Fertiglobe’s existing ammonia plants.
  • The consortium is in the process of finalising engineering and technology choices for the full-scale plant and the partners aim to reach a Final Investment Decision (FID) on the facility in 2023.
  • Currently testing the first and largest PEM electrolyser in Africa for the first phase of the project.

The launch of the hydrogen facility comes as world leaders gather for the United Nations COP 27 Climate Change Conference in Sharm El Sheikh, Egypt, where they seek to accelerate global climate action through emissions reduction. Unless we make sharp reductions in greenhouse gas emissions in the coming decades, global warming will exceed the Paris agreement’s goal of limiting temperature rise to 1.5 degrees Celsius.

In order to secure affordable, accessible and sustainable energy security for future generations an accelerated shift to renewable energy and lower carbon-intensity fuels is required. Green hydrogen, which is produced from water using renewable energy sources, has the potential to play a significant role in decarbonizing hard to abate sectors, such as heavy industries and global shipping.

Ain Sokhna has a strategic position close to the Suez Canal Economic Zone with the possibility of using renewable electricity to develop an industrial hub near global shipping lanes.

Fertiglobe has a strong global network through its shareholders OCI N.V. and ADNOC and is an early mover in hydrogen and low-carbon ammonia. The hydrogen tie-ins for up to 100 MW of electrolysis have already been installed at Fertiglobe’s two existing ammonia plants in Ain Sokhna.

The project is being built by Orascom Construction using Egyptian engineers and state of the art technology.

Terje Pilskog, CEO of co-owner and leading renewable power producer Scatec said: “Today marks a key milestone for Scatec, but more importantly, it represents a breakthrough for green hydrogen production in a strategically situated region. It is an honour to work together with Egyptian authorities and our industrial partners on this project and commence the commissioning of the green hydrogen project in Egypt during the UN world leader’s climate summit. We see a massive green hydrogen demand driven by strong policy support globally, and Africa is perfectly positioned to take advantage of its low-cost renewables and strategic position.”

His Excellency Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, UAE Special Envoy for Climate Change and chairman of co-owner Fertiglobe, said: “The commissioning of ‘Egypt Green’ marks another important step in the journey to unlock the potential of hydrogen and its carrier fuels.  As the world meets in Sharm el Sheikh for COP 27, this project represents a practical response to the need to meet rising energy demand with minimum emissions. The first integrated green hydrogen plant in Africa, delivered in record time, shows what can be achieved when we collaborate around a shared ambition. Fertiglobe will continue to leverage its knowledge and experience in hydrogen and ammonia, to make low and zero carbon fuels more available, as the world seeks a realistic pathway to a decarbonised energy system.”

Nassef Sawiris, Executive Chair of OCI N.V. and Executive Vice Chair of co-owner Fertiglobe said: We are pleased with the launch of the first tangible project of its kind and the first integrated green hydrogen plant in Africa. It is a true milestone that puts Egypt and Africa firmly on the map as one of the best places in the world to develop a green hydrogen hub, thanks to available land, abundant renewable energy sources, the significant pool of skilled labour, and our location on global crossroads. We are pleased to have been able to show leadership in developing a green ammonia production platform in such a short time frame, something that has not been achieved elsewhere. We could not have done this without the support of in particular the Egyptian government or without the collaboration with our industrial partners. We look forward to seeing the positive impact this project can have for the world.”

Ahmed El-Hoshy, CEO of OCI N.V. and co-owner Fertiglobe said: “This project is a significant further step towards our global decarbonisation strategy and an exciting milestone for Fertiglobe, as it marks the first of many stages in the execution on our hydrogen roadmap. Adding the electrolyzer to our state-of-the-art ammonia facilities and infrastructure in Egypt, we are fully leveraging our existing ammonia production and global distribution infrastructure, including OCI’s Port of Rotterdam ammonia import terminal. We aim to meet the increasing demand for large-scale low-carbon hydrogen and ammonia, as the need for more sustainable energy sources becomes more urgent. Together with our partners in the project we are acting on this need and bringing the hydrogen future to life.”

Osama Bishai, CEO of co-owner Orascom Construction said: “The project brings together world class partners that collectively set an ambitious goal to form a new hydrogen hub out of Egypt, thus creating a new sustainable industry. So many variables went into making this phase come to life. This project would not have been possible without the support of the Egyptian government and several ministries, who by working closely with the consortium, was able to provide immense support that was integral to the swift delivery of the first phase of ‘Egypt Green’. I am also proud of our teams on the ground who worked tirelessly to commission the first phase of this project, consequently, making this launch possible. This state-of-the-art project, which implements the latest hydrogen technology, is built by Egyptian engineers on Egyptian soil. We are delighted to embark on a journey that plays an important role in the sustainable industrial development of Egypt.”

Ayman Soliman, CEO of The Sovereign Fund of Egypt said: “This project is a showcase of transitioning from pledges to implementation, delivering on Egypt’s promise to the world to create a regional hub for green energy and transforming the Suez Canal into a green corridor. We are setting a precedent with our foreign and local partners from the private sector by establishing the first integrated green hydrogen plant in Africa and Emerging Markets that caters to the growing demand for clean energy. It is a moment of pride that we will build on for future generations. Our pipeline of projects in the green energy field capitalises on Egypt’s ideal location with its unique renewables profile and proximity to markets with renewables deficits to realize our shared goal of emissions reduction.”

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COP27: Which countries will push to end fossil fuel production? And which won’t?

Fossil fuels have provided a crucial source of energy over the past 200 years. But they also account for 75 per cent of global greenhouse gas emissions, enable massive environmental destruction and support many brutal regimes.

The United Nations climate change conference, known as the Conference of the Parties (COP27), began Sunday in Sharm el-Sheikh, Egypt, offering countries and organisations yet another chance to push for a phasing out of fossil fuel production. Russia’s invasion of Ukraine and the resulting sanctions have made this move both urgent and challenging.

As researchers working on climate change and resource governance, we believe that new initiatives like the Beyond Oil and Gas Alliance (BOGA) and rising support for a Fossil Fuel Non-Proliferation Treaty — which aims at addressing the threat posed by fossil fuel production — can help build momentum towards phasing out fossil fuels.

A managed fossil fuel phaseout offers a chance for producers — including governments, corporations and unions — to negotiate the terms of a ‘just transition’ to renewable energy that includes retraining workers, addressing lost income, securing new forms of energy and diversifying fossil fuel dependence economies.

COP26 opened the doors for a phaseout

The Glasgow Climate Pact, that emerged out of COP26 last year, called upon parties to “accelerate efforts towards the phase-down of unabated coal power and inefficient fossil fuel subsidies, recognizing the need for support towards a just transition. ”The COP26 held in Glasgow last year opened the doors for the phasing out of fossil fuel production globally.

The COP26 also saw the launch of the BOGA through which governments like Costa Rica, Denmark, France, Greenland, Ireland, Québec, Sweden and Wales can pledge to either phase out the production of fossil fuels, commit to a production phaseout with a legislated end date for existing production, or make looser commitments.

So far, no government with significant fossil fuel production has joined BOGA or endorsed the Fossil Fuel Non-Proliferation Treaty initiative, a fast growing civil society initiative calling for an end to new exploration and production, a fair phaseout of existing production and a just transition for fossil fuel workers, communities and producing countries.

Having tracked through the Fossil Fuel Cuts Database which countries had previously adopted initiatives to curtail fossil fuel production, including moratoria, divestments, carbon taxes or subsidy phaseouts, we tried to determine which of them might join an international coalition for a managed phasing out of fossil fuel production.

Who may join the phaseout coalition?

Using the Fossil Fuel Cuts Database, we tested economic, political and climate vulnerability factors against initiatives already taken between 2006 and 2019 by 124 governments with fossil fuel reserves. We found that dependence on fossil fuel rents reduces the likelihood of constraint measures, but not the size of fossil fuel reserves or production. Richer countries are also more likely to use constraints.

Based on our findings, we sketched seven main categories of countries for building up a global phaseout coalition.

The first and most likely members of such coalitions are middle and high-income countries with democratic regimes, active domestic climate movements and fossil fuel reserves of little significance to their economy. This has been the case of most of BOGA’s members.

The second category includes small countries that have no fossil fuel industry and are highly vulnerable to climate change impacts, such as the republic of Vanuatu in Oceania, the first state to officially support the Fossil Fuel Non-Proliferation Treaty.

The third category comprises countries with little prospect of fossil fuel production compared to major stakes in a green transition, such as Chile, a leading copper and lithium producer.

A fourth category includes high-income democratic countries with significant fossil fuel production but a diversified economy, such as the Netherlands, which shut down some of its natural gas fields.

A fifth category comprises countries where fossil fuel production is almost exclusively serving domestic energy markets that are slowly decarbonizing. China, India and the U.S. — the three biggest coal burners — have considered phasing down their coal production, but are yet to sign the Powering Past Coal Alliance — a coalition of national and sub-national governments, businesses and organisations working to advance the transition from unabated coal power generation to clean energy.

A sixth category includes countries that are highly dependent on fossil fuel revenues but still interested in accelerating their economic diversification, such as Saudi Arabia, the world’s largest exporter of crude oil, which embarked on an ambitious economic diversification plan. But, like with many other fossil fuel rich countries, this plan largely relies on fossil fuel revenues to finance diversification and a green transition, thus sustaining the paradox of increased production to pay for a planned phaseout.

A seventh category comprises low to middle-income countries with a high level of dependence on foreign aid, foreign direct investment and fossil fuel revenues. These countries face challenges when translating fossil fuel wealth into inclusive forms of development and often become even more indebted. Compensating them for leaving their fossil fuel reserves has proven challenging. However, some countries like Colombia may at some point decide to join a coalition following initial pledges to keep fossil fuels in the ground.

The right incentives can mobilise institutions

An agreement over a managed fossil fuel phaseout will not only help reduce emissions, but also help producers move away from the harmful effects of fossil fuel revenue dependence.

With the right kind of economic and political incentives, including support for economic diversification and energy security guarantees, a phaseout agreement could attract producing countries and mobilise key organisations, including the International Energy Agency, the Organization of the Petroleum Exporting Countries, the UN Framework Convention on Climate Change and the World Trade Organization.

The next two COP meetings taking place in Egypt and in the United Arab Emirates will play a crucial role in increasing pressure to phase out fossil fuels, expanding the number of BOGA members and starting substantive discussions on processes and principles for an international fossil fuel phaseout agreement.

Article courtesy The Conversation

By Philippe Le Billon, Professor, Geography Department and School of Public Policy & Global Affairs, University of British Columbia

Nicolas Gaulin, Msc Student in Environmental Sciences, Wageningen University

Päivi Lujala, Professor, Geography, University of Oulu

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Minister Enoch Godongwana: 9th Southern Africa/Europe CEO dialogue

10 Nov 2022

It is my privilege to welcome all of you to the 9th Southern Africa/Europe CEO Dialogue. In February this year, leaders from Africa and Europe met in Brussels for the 6th European Union – African Union Summit.

A key outcome of that Summit was the adoption of a joint vision for a renewed partnership between Africa and Europe. This, we said, will be a partnership based on solidarity and shared values towards a prosperous, sustainable and shared future. We committed to work together to build more diversified and inclusive economies. We also agreed on strengthening investment, supporting industrialisation and the development of sustainable and resilient value and supply chains.

Ladies and Gentlemen, it is in this context that this 9th Southern Africa/Europe CEO Dialogue is taking place. We are also meeting against a backdrop of two major global crises: the lingering Covid-19 pandemic and the Russia-Ukraine conflict.

This Dialogue, therefore, is not only a platform to advance the vision we articulated in Brussels, but also to respond to the challenges of our time. It is also a platform to strengthen trade and economic relations between Europe and South Africa.

Economic outlook

Due to a significant slowdown in the world’s largest economies including the Euro Area, the IMF projects global growth of 3.2 percent, from a forecast of 4.4 percent in 2022. The 2023 outlook has also been revised downward to 2.7 percent.

Global headline inflation is projected at 8.8 percent in 2022, before slowing to 6.5 percent in 2023 and 4.1 percent in 2024. In the short-term, global monetary policy will continue to tighten as central banks intensify the fight against inflation.

Global trade volumes will slow significantly from 10.1 percent in 2021 to 4.3 percent in 2022, and 2.5 percent in 2023. Disruptions to global trade, supply and value chains have tilted the balance of risks to Africa’s economic growth outlook to the downside.

Africa’s real GDP growth is now projected at 4.1 percent in 2022; significantly lower than the near 7 percent recorded in 2021. Growth is likely to come in at around 4 percent in 2023. In South Africa, real GDP contracted by 0.7% quarter on quarter in the second quarter of 2022, compared to a downwardly revised expansion of 1.7 percent quarter on quarter in the first quarter.

We expect domestic monetary policy to tighten further in the near term. Persistently high inflation, rising interest rates, slowing global growth, increased volatility and uncertainty all point to a challenging outlook in the near to medium term for South Africa’s economy. Domestic GDP growth for 2022 has been revised downward to 1.9 percent from a projected 2.1 percent, and to 1.4 percent in 2023 from 1.6 percent.

Our response to the challenging economic environment

In response to the challenges of the moment, our focus has been on the implementation of structural reforms to improve competitiveness, industrial policy to boost manufacturing and measures to strengthen the capacity of the state. We are doing this within a clear and stable macroeconomic framework, including a stable and flexible exchange rate, low and stable inflation, and sustainable fiscal policy.

On structural reforms, we are creating a competitive energy market, dealing with inefficiencies in our ports and rail network, addressing our visa regime to attract skills and investments and are reforming our water and telecommunications sectors. Work continues to build a capable and developmental state which is a necessary precondition for inclusive growth.

We are also intervening to reverse the decline in fixed investment, including through ensuring policy certainty and addressing the cost and ease of doing business. The capacity of our state-owned enterprises to invest in the economy, to unlock growth and job creation is being enhanced.

Infrastructure budgets across government are being increased while capacity for project planning, preparation and execution is being enhanced. Spending on capital assets is the fastest growing expenditure item on our budget. Action is being taken to modernise procurement and improve contract management.

Our investment in fighting crime and corruption is being strengthened as part of removing impediments to investment and growth. The African continent is devastated the most by the worsening effects of climate change, which poses an existential threat to humanity. We are committed to the goal of a just transition.

Our approach envisions accelerating investment in new generation capacity, while preserving the livelihoods of communities adversely affected by the transition from coal and other fossil fuels.

We reiterate President Ramaphosa’s call at COP 27 that Africa needs to build adaptive capacity, foster resilience and address the loss and damage due to climate change. For this to happen, our continent needs a predictable, appropriate and at-scale funding stream and technological support.

This places a responsibility on developed nations to honour their commitments to those countries with the greatest need and that confront the greatest environmental, social and economic effects of climate change.

Conclusion

Programme Director, in the words of Andrew Steer, the CEO of the Bezos Earth Fund, this is a sobering moment not only for Africa, but also for the world. It is a time of a slowing growth globally, geopolitical tensions, and the lingering impact of Covid-19. It is also a time of the perfect storm of rising food prices, rising energy prices, rising interest rates, as well as increases in the impact of climate change and vulnerability.

All of this is happening when the fiscal space has narrowed considerably in many countries and access to global capital even more constrained.

Faced with this stark reality, the need for ongoing dialogue among key decision makers has never been greater.

We need a deeper conversation on accelerating sustainable and inclusive growth on our continents.

We need to find ways of strengthening trade among ourselves in this new environment.

Together we must navigate through the global crises and disruptions shaping our national and regional economies.

We must strive for prosperity and sustainability for our people and continents.

I have no doubt that this will be the platform where all of these issues will be thoroughly deliberated upon.

I wish you a successful Summit.

Thank you!

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BASF and G-Philos power up on stationary storage systems for renewable energy projects

Partners offer NAS® batteries for long-duration, high-energy stationary storage coupled with a suitable power conversion system for power-to-gas, power grid and microgrid applications. Through their cooperation agreement, both companies strengthen their commitment to the renewable energy market in South Korea.

BASF Stationary Energy Storage GmbH (BSES), a wholly owned subsidiary of BASF SE, and G-Philos, Korea’s leader in power-to-gas (P2G) technology, signed a sales and marketing agreement for NAS batteries (sodium-sulfur stationary batteries) for P2G projects, power grid and microgrid applications. The companies will work together to develop and market energy storage systems based on NAS batteries from BASF and power conversion systems (PCS) from G-Philos. G-Philos will also purchase NAS batteries from BSES with a total capacity of 12 MWh.

BASF and G-Philos started to work together in 2020 when an NAS battery system and a PCS developed by G-Philos were deployed in a demonstration P2G project implemented by G-Philos in collaboration with Korea Midland Power (KOMIPO) at Sangmyung Wind Farm, Jeju Island, South Korea. In this project, the NAS battery serves as an energy buffer between wind turbines and electrolysers to ensure stable hydrogen production from surplus wind power despite the fluctuating nature of wind. NAS batteries were selected for this application due to their enhanced safety, which is required due to their proximity to hydrogen production. Now that the concept has been proven by the successful operation of the system for more than a year, the partners are looking forward to expanding their cooperation further.

Based on their agreements, BASF and G-Philos plan to strengthen their commitment to the market for long-duration energy storage and climate-friendly hydrogen in South Korea and the Asia region. G-Philos also intends to offer preconfigured package solutions consisting of a combination of NAS batteries with its power convertors through its own distribution network. G-Philos can supply PCS products suitable for NAS battery systems ranging from 250 kW up to 1 MW.

Gawoo Park, CEO of G-Philos, says: “With the increasing use of renewable energies, NAS batteries will be one of the most important solutions for storing electricity from renewable sources and, in particular, for CO2-free hydrogen production. With this agreement, we look forward to making an important contribution to establishing NAS batteries in this application together with BASF and intend to purchase further NAS batteries from BASF in the future.”

“We are pleased to see that the benefits of NAS batteries have been proven once again, now in this challenging application. With G-Philos as a partner, our NAS battery business in South Korea is expected to grow steadily. The new agreement is the starting point to expand the distribution of NAS batteries to other business areas beyond power-to-gas projects,” comments Frank Prechtl, Managing Director of BSES.

For more information on NAS batteries in South Africa, contact Lloyd Macfarlane, Altum Energy: lloyd@altum.energy

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Treasury on loan agreement with France and Germany

10 Nov 2022

Bilateral loan agreements AFD and KFW

South Africa, France and Germany have signed loan agreements for the two European nations to each extend €300-million in concessional financing to South Africa to support the country’s just energy transition. The loans are provided by the French and German public development banks, Agence Française de Développement (AFD) and Kreditanstalt für Wiederaufbau (KFW), directly to the National Treasury.

Both loans are sovereign loans that take the form of non-earmarked budget financing that is transferred directly into the National Revenue Fund of South Africa. These loans are in support of the policy and institutional reforms undertaken by the government of South Africa in support of its just energy transition.

The loans are highly concessional as their terms are substantially more generous than what the Government of South Africa would be able to raise in capital markets. These loans are already reflected in South Africa’s gross borrowing requirement (in Table 3.7 of the Medium Term Budget Policy Statement) and well within South Africa’s risk benchmark of foreign debt as percentage of total debt (in Table 7.1 of the Budget Review) The financial terms of the two loans are shown in Table 1.

Table 1. Financial terms of the AFD and KFW loans

The estimated cost for the Government of South Africa to raise an equivalent loan today in the market would be around 8.9%. This estimate is based on a fair value estimation of South Africa’s foreign currency bonds relative to the risk free rate, secondary market activity and historical issue spreads.

Due to South Africa’s high stock of debt and the currently high interest rate environment, replacing market lending with much cheaper concessional loans, allows South Africa to reduce its cost of funding and overall debt burden. By lowering debt service costs, the Government of South Africa creates more fiscal space for critical social and other priorities.

A just energy transition can attract investment, create new industries and jobs, and help South Africa to achieve energy security and climate resilience. South Africa requires more support for its just energy transition given the large scale of the required transition in the context of the current socio-economic challenges and will therefore continue discussions with various multilateral lenders in pursuit of this objective.

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SA’s new Just Energy Transition Investment Plan

Joint Statement

The International Partners Group, chaired by the UK and comprised of France, Germany, the UK, the US and the EU, jointly welcome and endorse South Africa’s Just Energy Transition (JET) Investment Plan.

At COP 26 in November 2021, the governments of South Africa, France, Germany, the United Kingdom and the United States of America, along with the European Union, issued a Political Declaration announcing a new ambitious, long-term Just Energy Transition Partnership (JETP). The Partnership aims to accelerate the decarbonisation of South Africa’s economy to help it achieve the ambitious goals set out in South Africa’s updated Nationally Determined Contribution emissions goals.

During the World Leaders Summit at COP27 on 7 November, President Cyril Ramaphosa of the Republic of South Africa launched the new JET Investment Plan prepared by the South African government as envisaged in the Political Declaration. The Plan covers three priority sectors – the energy sector as well as, electric vehicles and green hydrogen – for finance.

A ‘Just’ approach underpins the Plan, aiming to ensure that those most directly affected by a transition from coal – workers and communities including women and girls – are not left behind. It identifies $98-billion in financial requirements over five years to begin South Africa’s 20 year energy transition.  Investment will be required from both public and private sectors.

The IPG is mobilising an initial $8.5-billion to catalyse the first phase of the programme.

The funding package will be disbursed through various mechanisms over the five year period including grants, concessional loans and investments and risk sharing instruments. The IPG’s funding will align to the Investment Plan and be geared towards: coal plant de-commissioning; funding alternative employment in coal mining areas; investments which will facilitate accelerated deployment of renewable energy and investments in new sectors of the green economy.

The Chair of the International Partners Group, the United Kingdom’s Prime Minister Rishi Sunak, said: “I congratulate President Ramaphosa for the great progress that has been made on the South Africa Just Energy Transition Partnership. In one year since COP, South Africa, along with the UK and our friends in the International Partners Group, have shown how serious we are about making the changes we need to halt climate change. South Africa’s JET Investment Plan paves the way for a sustainable and fair transition away from coal and towards cleaner forms of energy, building the foundations for a strong green economy.”

The President of the United States of America, Joseph R. Biden, said:  “The United States is proud to partner with the Government of South Africa and the members of the International Partners Group to support South Africa’s just transition to a cleaner energy future. We welcome the comprehensive JET Investment Plan, and fully support South Africa’s economy-wide energy transformation. Our support for South Africa’s clean energy and infrastructure priorities, which include efforts to provide coalminers and affected communities the assistance that they need in this transition, will help South Africa’s clean energy economy thrive.”

The President of the Republic of France, Emmanuel Macron, said: “France is proud to work with South Africa on the implementation of this Just Energy Transition Partnership, which will help to strengthen the country’s energy security, green its electricity mix and set a benchmark for other countries around the world, while keeping at its core the just element of this transition in order to leave no one behind. I welcome the ambitious Just Energy Transition Investment Plan presented by South Africa and I am happy to confirm that France has just unlocked a concessional policy support of 300 M€ to South Africa, as a first step towards the fulfilment of our $1-billion commitment to support South Africa’s decarbonisation”

The Chancellor of the Federal Republic of Germany, Olaf Scholz, said: “Climate protection and economic prospects must go hand in hand. The adoption of the investment plan is a milestone on the path to a climate-neutral and – at the same time – socially just economy in South Africa. Germany is contributing 1 billion USD, including a substantial part through grants, to a support package from the international donor community worth 8.5-billion USD. This is an ambitious start. More needs to follow, particularly in collaboration with the private sector.”

European Commission President, Ursula von der Leyen, said: “For the EU, the climate transition needs to be just. This partnership, with new investments, is how we help ensure that nobody is left behind. Therefore I welcome the endorsement of this Investment Plan. It will now kick-start the Just Energy Transition Partnership with South Africa, a first of its kind global initiative for accelerating a just energy transition in countries that commit to phase out coal. It is a flagship of EU-supported multilateral cooperation to limit global warming to 1.5°C.”  

A joint 12-month update to leaders by South Africa and the IPG summarises key technical progress that has contributed to the development of the JETP Investment Plan. It, and the preceding six-month update to leaders, also outline measures undertaken by the government of South Africa to strengthen the enabling environment for South Africa’s long-term energy transition.

The IPG’s initial $8.5-billion funding package includes[1]:

  • $2.6-billion through the Climate Investment Funds Accelerating Coal Transition Investment Plan[2] (CIF ACT)
  • $1-billion from France[3]
  • $1-billion from Germany[4]
  • $1.8-billion from the UK[5]
  • $1-billion from the US[6]
  • $1-billion from the EU[7]

Some of this funding is already programmed while other parts of it have still to be finalised and programmed in line with the final Investment Plan. Work to programme the full $8.5-billion will continue in coming months.

In addition to the $8.5-billion, the World Bank Board has recently approved the Eskom Just Energy Transition project which is providing $0.5-billion of financing in support of South Africa’s Just Energy Transition.

INTERNATIONAL PARTNERS GROUP FINANCIAL SUPPORT

The IPG has supported South Africa’s Just Energy Transition in a variety of ways both directly and indirectly.  A fuller description of support is provided below.

Early progress in deploying the $8.5-billion support of Investment Plan

The Climate Investment Fund Accelerating Coal Transition (CIF ACT) Investment plan will provide $2.6-billion in total including $500-million of highly concessional Accelerating Coal Transition funding provided by the CIF. IPG members (Germany, the UK and the US) provide approximately 65% of funding for the overall CIF ACT programme. The CIF ACT Investment Plan will support the decommissioning and repurposing of three coal power stations, community development and energy efficiency projects in Mpumalanga. The World Bank’s Eskom Just Energy Transition project will provide finance for decommissioning and repurposing a further coal power station.

France and Germany are providing $600-million ($300-million each) for a concessional policy loan to South Africa to support the JETP.  The loan will be formally signed during COP27.

A number of IPG grant funded activities contributed to the development of the Investment Plan and will contribute to ongoing analytical and policy work as South Africa moves towards implementation.  These include:

  • The UK has funded work with municipalities and affected communities in the two most coal-dependant municipalities in Mpumalanga (eMalahleni & Steve Tshwete Local Municipality) to co-develop a coherent and inclusive just transition plan for each municipality.
  • Germany has funded the integration of renewable energy (particularly solar energy) into the existing energy grid. Measures to increase energy efficiency are being developed in cooperation with local authorities.
  • The US Trade and Development Agency funded a Clean Energy and Climate Infrastructure Event Series to promote cooperation on clean energy topics between the public and private sectors in the United States and South Africa.  The series inaugurated with a two-day workshop on green hydrogen, held last week [October 31 – November 1] in Cape Town.  USTDA also intends to support preparation of projects to strengthen South Africa’s grid and accelerate deployment of renewable energy.
  • The EU has awarded grants to increase the participation of South Africa’s civil society in reducing emissions and adapting to climate change, while enhancing gender equality and the participation of the youth by strengthening skills.
  • France has funded work for the development of a climate finance mapping and tracking tool, the execution of a study related to the localization potential for solar PV and storage value chains in South Africa as well as support to Eskom for the refinement of its JET strategy and implementation plan.

Elements of the $8.5-billion still to be programmed

A further $2.2-billion of sovereign loans will be programmed by France’s AfD, Germany’s KfW and the EU’s European Investment Bank in support of the Investment Plan.  The details of these loans will be announced as they are finalised.

$1.5-billion of Development Finance Institution support for private sector investment is available from the US and the UK. This will take the form of patient investments which will either seek to crowd in private sector investment to new and riskier areas or provide investment where the private sector is currently unwilling or unable to invest.  Details of these investments will be announced as they are finalised.

The UK is providing $1.3-billion of guarantees to enable enhanced AfDB lending in support of activities set out in the Investment Plan.  Details of the related loans will be announced once they have been agreed between the AfDB and the South Africa Government.

Additional IPG resources beyond the $8.5-billion

Further details of the $8.5-billion package are set out in the Investment Plan. In addition, the following additional resources are being made available by IPG members:

  • The US is making $45-million in highly concessional funding available through Power Africa
  • The European Investment Bank is making a €200-million loan to a South African bank for on-lending to eligible onshore wind and solar photovoltaic projects in South Africa.  Germany is providing €30-million to help South Africa develop Sustainable Aviation Fuel and €5-million to work on a Green LFG value chain.
  • In the second half of 2022, Germany offered 395 Million Euro to support the JET IP implementation, including 125-million grants.

[1] Some IPG contributions will be made in the provider’s domestic currency, which may be impacted by fluctuations in conversion against the dollar which means that the numbers may not total exactly $8.5-billion.  As of the date of finalising the Investment Plan they totalled $8.455 billion.  The country numbers in the press release have been rounded to the nearest $0.1-billion.

[2] The CIFs ACT Investment Plan is calculated on the basis that $500-million in ACT funding will leverage an additional $2.1-billion in finance including World Bank and African Development Bank loans as set out in the CIF ACT Investment Plan.

[3] $1.0025-billion

[4] $0.968-billion

[5] $1.824-billion

[6] $1.0215-billion, not including the additional $45-million of highly concessional funding (mentioned below)

[7] €1.03-billion via the European Investment Bank (EIB) and the Global Europe Programme. The European Investment Bank is planning to provide concessional loans up to 1-billion euros to decarbonise the South African Economy and promote the development of green hydrogen and the EU will further provide 35-million euros in support of Just Transition.

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Minister Enoch Godongwana: Medium-Term Budget Policy Statement

The strategic goal of this government is to reduce poverty, inequality and unemployment, in pursuit of a better life for all. It was former President Nelson Mandela who reminded us that; “Democracy will have little content, and indeed, will be short lived if we cannot address our socioeconomic problems within an expanding and growing economy.”

South Africa’s economy has underperformed for many years.

Several long-standing structural impediments continue to hamper growth. These include:

  • unreliable electricity supply,
  • costly and inefficient ports and rail network,
  • crime and corruption,
  • weak state capacity, and
  • high  levels  of  market  concentration  and  barriers  to  entry  that  suppress  the emergence and growth of small businesses.
     

These challenges undermine our efforts to create jobs, contributing to high levels of poverty and inequality.

Our structural challenges have been exacerbated by new ones, including the global economic slowdown, high energy and food prices; and the destruction caused by natural disasters such as the recent floods.

The 2022 Medium Term Budget Policy Statement aims to address the needs of South Africans and secure our future stability and prosperity.

It provides for spending adjustments to continue rebuilding lives and infrastructure following devastating flood damage earlier this year.

It restores fiscal strength and rebuilds fiscal space, despite the unfavourable economic backdrop.

It enhances the quality of public services such as Education and Health.

It also prioritises the safety and security of our people and invests in future growth by increasing funding for critical infrastructure.

Economic outlook

Madam Speaker, let me now turn to the economic outlook.

Many of the risks we outlined in the February 2022 Budget Speech have materialised.

Globally, these include: rising inflation, tightening financial conditions and the ongoing effect of COVID-19, including the more stringent lockdowns in China and their impact on global demand and supply chains. These were made worse by the outbreak of the Russia-Ukraine conflict.

As a result, the IMF’s global growth forecast for 2022 has been revised down, from 4.4 per cent to 3.2 per cent, and the 2023 estimate from 3.8 per cent to 2.7 per cent.

This means that the global environment will be less supportive of our growth than we anticipated at the time of the budget.

The outlook contains many risks, notably further slowing global growth and higher inflation if the Russia-Ukraine war escalates.

There is also a possibility of energy rationing in Europe that will impact on global energy prices and output.

A further decline in Chinese economic growth could slow global demand and add pressure to global supply chains, while the tightening of monetary policy could slow global output even further.

These are significant risks in the global environment.

In this context, small open economies like ours need to be especially careful and have solid fiscal buffers in place to weather the coming storm.

Domestically, the robust pace of economic recovery in early 2022 was derailed by floods in various parts of the country, particularly KwaZulu-Natal and the Eastern Cape; industrial action in key sectors, and widespread power cuts.

We now expect real GDP growth of 1.9 per cent in 2022, compared with an estimate of
2.1 per cent in February.

Over the next 3 years, the economy is expected to grow at an average of 1.6 per cent.

This level of growth is too low to support our developmental goals. Accordingly, we must take action to put our economy on a higher growth trajectory.

Growing an inclusive economy

Our approach to growth is based on a clear and stable macroeconomic framework, complemented by the implementation of structural reforms to improve competitiveness, industrial policy to boost manufacturing and measures to strengthen the capacity of the state.

Key elements of our macroeconomic framework are a stable and flexible exchange rate, low and stable inflation, and sustainable fiscal policy.

Since the Budget in February, we have accelerated the implementation of structural reforms to address binding constraints on economic growth and support investment and job creation.

Madam Speaker, the intensity of load shedding is having a disastrous effect on our economy. We have therefore focused our efforts on reforms in the electricity sector.

Several policy and regulatory changes aimed at creating a competitive energy market, are also underway.

These include the removal of the licensing threshold for embedded generation projects, where the pipeline has grown to 100 projects, representing over 9000 MW of capacity.

The Electricity Regulation Amendment Bill has been finalised. It provides for the establishment of an independent transmission and system operator, which will fundamentally transform the electricity sector.

Reducing South Africa’s reliance on a single monopoly utility and unlocking massive new private investment in generation capacity will contribute significantly to long-term energy security.

Madam Speaker, there is a crisis in our logistics sector.

Inefficiencies in port and rail are costing the economy billions and further undermining our efforts to raise growth.

We welcome the end of the Transnet strike and are working with Transnet leadership and all stakeholders to urgently address the challenges in the sector.

Several steps are being taken to introduce greater competition and efficiency into ports and rail.

The National Assembly has passed the Economic Regulation of Transport Bill.

It will  stablish an independent transport regulator to encourage greater competition and enable regulated access to the network.

In addition, requests for proposals have been issued for third-party access to the freight rail network and private-sector partnerships for the Durban Pier 2 and Ngqura container terminals.

In telecommunications, the auction of high-value broadband spectrum has been completed. The next step is to complete digital migration to release these frequencies.

The Minister of Communication and Digital Technologies will shortly indicate a new date for analogue switch-off.

In the water sector, we have cleared the backlog of water-use licenses.

The process to establish a water regulator through the National Water Resources Infrastructure Agency Bill is also on track.

The agency will enable effective management of bulk water infrastructure and facilitate private sector investment.

The review of the work visa system has been completed with recommendations to attract skills and investment.

Honourable Members, these reforms are not the totality of our reform agenda.

More must and can be done to unleash the dynamism of our economy. Key to this is the need for a capable, developmental state.

Strengthening state capability

Madam Speaker, a strong and capable state is a necessary precondition for growth.

The state is responsible for creating and maintaining an enabling environment for growth and investment, it provides basic services, and promotes the rule of law.

To do this effectively, the state needs to be responsive to societal needs, prioritise, sequence and coordinate interventions through institutions that are accountable and capable.

Infrastructure investment for enabling growth

Leveraging fixed investments is a critical part of achieving sustainable and inclusive growth. It supports economic recovery, raises the economic potential and creates jobs.

We have seen gross fixed capital formation contract on average by 4.4% annually between 2016 and 2020; from a peak of R796 billion in 2015.

The contraction has been broad-based. Private sector investment, which accounts for nearly two-thirds of total fixed investment, as well as the public sector, have both declined.

We seek to reverse these trends by tackling impediments to investment.

In the private sector, policy uncertainty, constraints to the ease of doing business along with the high cost of doing business are often cited as key constraints to investment.

Our clear and stable macroeconomic framework, progress on structural reform, and supporting enablers to growth will go a long way to removing impediments to investment.

They will also boost confidence and create an enabling environment for the private sector to invest.

With respect to public sector investments, State-Owned Enterprises have an important role to play in the provision of critical economic goods and services in the economy.

Addressing supply side constraints particularly in the energy and transport sectors is critical to support higher and sustainable economic growth.

On general government, we are increasing on-budget infrastructure allocations to remedy the erosion of baselines.

Over the medium term, government consolidated spending on building new and rehabilitating existing infrastructure will increase from R66.7 billion in 2022/23 to R112.5 billion in 2025/26. This includes roads, bridges, storm-water systems and public buildings.

This makes spending on capital assets the fastest growing item by economic classification.

By delivering on public sector investments, we will crowd- in private investment, improve public service provision and address backlogs; thus, igniting a virtuous cycle of higher investment, growth and employment potential.

We are also committed to improving state capacity, project planning and preparation, procurement practices, and contract management.

This will address chronic underspending of allocated infrastructure budgets, improve value for money and efficacy of our investments.

Climate change mitigation and adaption

Madam Speaker, climate change is reshaping the world around us, including our economic context.

It poses physical risks to our people, infrastructure, the environment and production including of critical goods such as food.

The global response to climate must be coordinated.

For our part, we are finalising negotiations on the pledges by the International Partner Group for the Just Energy Transition.

In addition, the investment plan supporting our energy transition was recently endorsed by Cabinet.

We will take all necessary steps to ensure that our transition that is just.

The fiscal outlook

Madam Speaker, when government finances are saddled with debt it becomes very difficult to meet our development objectives.

For nearly 15 years, the South African government has been tabling higher deficits.

As a result, government debt is projected to be more than R4.7 trillion in the current financial year, compared to R627 billion in 2008/09.

This debt is incurring debt-service costs that will average R355.2 billion per year over the medium-term expenditure framework.

As already outlined, the global economy is slowing, inflation is increasing, and financial markets are becoming more volatile.

The result is that the debt-service costs are estimated to be R5.9 billion higher in 2022/23 than what we thought at the time of the February budget.

Moreover, the possibility of a major price correction in financial markets is a significant risk. This will affect fiscal revenues going forward.

It is for this reason that the medium-term strategy needs to maintain a prudent approach to fiscal policy.

We need to decrease our debt burden and debt-service costs by reducing our annual deficits. This will stabilise the public finances and reduce the fiscal risks.

Honourable Members, we are making progress in this regard. A consolidated fiscal deficit of 4.9 per cent of GDP is projected in 2022/23.

This will decline to 3.2 per cent of GDP by 2025/26. A primary fiscal surplus of 0.7% of GDP will be achieved in 2023/24. This is one year earlier than projected at the 2021 MTBPS.

We also now expect gross government debt to stabilize at 71.4 per cent of GDP in 2022/23 — two years earlier, and at a lower level, than projected in the 2022 Budget Review.

Among other things, this means that we are proposing that no budget reductions are implemented in the 2023 Budget. In fact, consolidated government spending will exceed R2.2 trillion this year and will rise to R2.5 trillion in 2025/26.

Turning to revenue, since the 2022 Budget, revenue collection has exceeded projections, and the gross tax revenue estimate for 2022/23 has been revised up, by R83.5 billion, to R1.68 trillion.

The higher estimate is largely due to improvements in corporate income tax collections, with strong receipts from the finance and manufacturing sectors.

The better-than-expected revenue collection estimates, including over the medium term, have allowed government to narrow the deficit and mitigate lingering and new risks.

Equally, it allows us to gradually restore the baseline budgets of departments key to the delivery of services, without making unaffordable permanent commitments.

A portion of higher-than-anticipated revenue will be utilised as follows:

  • Reducing the deficit in the current financial year and over the MTEF;
  • Making additions for infrastructure projects and critical public services such as education, health, and policing;
  • Addressing fiscal risks that were previously identified in February. These include higher- than-projected debt service costs, the public service wage bill, and the materialisation of financial risks from some state-owned companies.

Should any of the fiscal risks materialise, this could negatively affect the fiscal position and government’s effort to stabilise the public finances.

In-year spending adjustments

Madam Speaker, we are allocating a net addition of R13 billion in spending adjustments for the 2022/23 financial year in the Adjustments Appropriation Bill.

The largest adjustment — R6.3 billion, or 49 per cent of the total —– is allocated towards disaster relief, especially the April flooding in several parts of the country.

Other adjustments in the Adjustments Appropriation include:

  • R389 million for 24 rural bridges through the Welisizwe Rural Bridges programme;
  • R500 million is also set aside to kick off the Home Affairs digitisation project, that will employ 10 000 young people over 3 years.
  • R118 million to deal with interim relocation costs and to prepare for the rebuilding of Parliament.
     

Honourable Members, during the current financial year, wage negotiations have been taking place at the Public Service Coordinating Bargaining Council. On 30 August 2022 government made a final offer which emanated from a facilitation process. This offer includes the following:

  • Continuation of a non-pensionable cash allowance for the current financial year. This translates into an average of R1 000 per employee per month until March 2023.
  • A pensionable salary increase of 3% for public servants.
     

Madam Speaker, the offer on the table is in the best interest of the fiscus and public service workers. Implementing it does not undermine the collective bargaining process. We believe that the facilitation process has helped all parties get to this point. Therefore, the spending estimates we are tabling today include this amount.

This offer will be implemented through the payroll system, and back dated to April 2022.

Expenditure framework

Honourable Members, our budget over the next three years is focused on restoring service delivery and laying the foundation for higher growth.

Medium-term changes to spending plans are driven mainly by government’s decision to extend the special COVID-19 Social Relief of Distress grant by one year, until 31 March 2024.

The fiscal framework also includes funding for the carry-through costs of the 2022/23 public service wage increases, as well as for safety and security, infrastructure investment and service delivery.

The SRD grant was introduced in May 2020 as a temporary measure to respond to the needs of the most vulnerable who were affected by lockdown measures. It has been extended several times since then.

Discussions on the future of the grant are on-going and involve very difficult trade-offs and financing decisions.

Despite the provision made in this budget, I want to reiterate that any permanent extension or replacement will require permanent increases in revenue, reductions in spending elsewhere, or a combination of the two.

Madam Speaker, this is what is meant by trade-offs: balancing the need to address one priority over another.

Overall, consolidated  government  spending  is  projected  to  increase  from R2.21  trillion  in 2022/23 to R2.48 trillion in 2025/26 at an average growth rate of 4 per cent.

The social wage, totalling R3.56 trillion over the next three years, or 59.2 per cent of the consolidated non-interest spending, will take up the biggest share of the budget in support of poor households and the most vulnerable in our society.

The largest allocations are directed to the education, health and social development sectors.

Moreover, over the next three years, spending increases will be prioritised to improve investment in infrastructure and boost the budgets for safety, security and fighting corruption.

Overall, government’s consolidated capital spending will increase, from R95.1 billion in 2022/23 to R145.4 billion in 2025/26. This excludes spending on state-owned enterprises.

We are working closely with the Presiding officers of Parliament to restore and rebuild our Parliament. Over the medium term expenditure framework, we have made allowance for approximately R 2 billion for rebuilding our Parliament.

Division of Revenue and Changes in Funding at Local Government

Madam Speaker, over the next year, we will work with provinces and municipalities to make meaningful progress in achieving our development goals.

Municipalities shape the living conditions of our people. They ensure that people have access to clean drinking water, energy, housing and sanitation.

Yet several municipalities are dysfunctional, experiencing, either financial or leadership crisis, reflected in a general inability to deliver services.

Following a diagnostic review of the local government capacity building system, the National Treasury is coordinating with key stakeholders including the Department of Cooperative

Governance, SALGA and provinces in the design of capacity-building systems towards a more integrated and outcome-focused approach.

Over the next three years,  we propose allocating 48.4 per cent of available non-interest spending to national departments, 41.4 per cent to provinces and 10.1 per cent to local government.

This will allow provinces to support basic education and health services, roads, housing, social development, and agriculture.

We are also allocating additional funds to local government to support the delivery of free basic services to poor households, considering the rising cost of the free basic services, as well as rising bulk electricity and water costs.

The 2023 Budget Review will provide more detail on these efforts.

Addressing Risks from State-Owned Enterprises

Madam Speaker, some of our state-owned companies represent critical components of economic activity, especially in transport, engineering and energy. These com

companies should be self-sufficient and must contribute to economic growth.

Unfortunately, we face a situation where financial weakness caused in previous years by bad leadership and corruption still needs to be resolved.

Moreover, when unavoidable events such as the recent floods destroy infrastructure and assets, it puts the whole economy at risk.

In the meantime, the road network must function, ports must operate and critical technical projects cannot be halted.

So, as balance sheets are being restored and those who looted and mismanaged then are being held accountable, including through the criminal justice system, we have little choice but to act to keep these key services running.

We are proposing to use higher-than-anticipated revenues in the current year to reduce risks from specific SOEs.

These resources cannot be used to fund baseline increases as they are once-off. Using them in this way will also not expand the fiscal deficit compared to our existing medium-term plans.

The financial support to SOEs recognises their potential to contribute to our long-run growth prospects.

We are thus tabling a Special Appropriation Bill to provide additional funding to Denel, Transnet and SANRAL. These allocations will allow these entities to adjust their business models and restore their long-term financial viability.

Fiscal support to state-owned companies remains a challenging balancing act given the many competing priorities and limited resources. Funding to SOEs will now come with strict pre- and post-conditions. Pre-conditions mean that SOEs will need to comply with these conditions before they receive government support, not after.

Non-compliance to conditions, means no funding.

Transnet is allocated R2.9 billion to ensure the return of out-of-service locomotives. This will be complemented by R2.9 billion from in year spending adjustments to deal with flood damage that affected its operations in Ethekwini.

Denel is allocated R3.4 billion to support recent progress made to stabilise the entity.

This allocation will be augmented by R1.8 billion in sale of non-core assets and will unlock a committed order book of R12 billion awaiting execution.

SANRAL

Honourable members, the uncertainty surrounding the Gauteng Freeway Improvement Project continues to have a major negative implication for road construction in the country.

We need to move on from the debates of previous years and find solutions to this challenge.

To resolve the funding impasse the Gauteng provincial government has agreed to contribute 30 per cent to settling SANRAL’s debt and interest obligations, while national government covers 70 per cent.

Gauteng will also cover the costs of maintaining the 201 kilometres and associated interchanges of the roads and any additional investment in road will be funded through either the existing electronic toll infrastructure or new toll plazas, or any other revenue source within their area of responsibility.

Government proposes to make an initial allocation of R23.7 billion from the national fiscus, which will be disbursed on strict conditions.

ESKOM

Turning to Eskom. For at least a decade, we have spent billions of rands supporting Eskom, with limited improvements in the reliability of the electricity supply or the financial health of the company.

To ensure Eskom’s long-term financial viability, government will take over a significant portion of the utility’s R400 billion debt.

While the selection of the relevant debt instruments and the method of effecting the relief is still to be determined, the quantum is expected to be between one-third and two-thirds of Eskom’s current debt.

The debt takeover,  once finalised, together  with other reforms will ensure that Eskom  is financially sustainable

The programme will allow Eskom to focus on plant performance and capital investment and ensure that it no longer relies on government bailouts.

Importantly, the programme will include strict conditions required of Eskom and other stakeholders before and during the debt transfer.

These conditions will address Eskom’s structural challenges by managing its costs, addressing municipal and household arrears due to the utility, and providing greater clarity and transparency in tariff pricing.

In addition, the conditions will be informed by a Treasury led independent review of Eskom’s operations, in particular the performance of its generation fleet.

Further details of the programme will be finalised following consultations with all relevant stakeholders and lenders and will be announced in the 2023 Budget.

Modernising procurement

Madam Speaker, we are working to strengthen our procurement and financial accountability system.

We are also adopting best-practices in the procurement of goods and services, including the highest standards of transparency in the tendering processes.

Such modernisation aims to simplify and speed up the process for public  infrastructure projects, whilst reducing the scope for looting and corruption.

We are envisaging two changes to procurement governance:

  • We expect to introduce the Public Procurement Bill – which will enhance transparency, integrity and promote the use of technology for efficiency and effectiveness in public procurement – to Parliament in March 2023.
  • The new Preferential Procurement Regulations of 2022, replacing the now invalid Regulations of 2017, will be promulgated in November 2022 to be effective from 16 January 2023. The regulations empower organs of state with the authority to determine their own preferential procurement policies within the ambit of the Preferential Procurement Policy Framework Act.
     

Fighting crime and corruption

Earlier this week, President Ramaphosa announced Government’s response to the recommendations of the Commission of Inquiry into State Capture.

He committed the government to “a new chapter in our struggle against corruption, to advance the renewal of our society.”

He noted the need for the state to be “ethical and free of corruption as it serves the needs and interests of the people.”

As noted by the Commission, to enable service delivery we should protect honest accounting officers and authorities who make decisions in good faith from criminal prosecution and civil litigation.

In this regard, we will strengthen the auditing and preventative control systems, to enable managers to manage, while putting mechanisms to hold them accountable.

The Commission of Inquiry into State Capture made recommendations aimed at strengthening the institutional, governance and accountability mechanisms.

As has been done with Bain, we will continue to take punitive administrative action against companies and individuals who have actively facilitated corrupt and irregular procurement activities.

Madam Speaker, crime is a safety, economic as well as a social issue. A safe environment is important for full participation in economic and social life. This makes fighting crime a key pillar of enhancing economic growth.

Many South Africans live in fear in their homes, in their places of work and in places of recreation.

In response, we are allocating additional resources to our security forces to take the fight to those that threaten our peace as a nation.

We will support the police to recruit an additional15 000 constables over the next 3 years.

Avoiding grey-listing by the financial action task force

Honourable Members, we are doing everything necessary to prevent grey-listing by the Financial Action Task Force; the international standard-setting body that oversees global compliance with anti-money laundering rules.

Already we have tabled  two bills in Parliament, aimed at addressing  weaknesses  in our legislative framework.

The Bills are expected to be enacted by the end of this year.

This will be a significant step towards meeting the 40 recommendations made by the Financial Action Task Force.

We are also required to implement laws on anti-money laundering and corruption more effectively.

Investing in building the capacity of our regulatory and enforcement institutions is already bearing positive results. These include:

  • The Investigating Directorate of the National Prosecuting Authority has enrolled 26 cases, declared 89 investigations and 165 accused persons have appeared in court for alleged state capture-related offences.
  • The Asset Forfeiture Unit has frozen or granted preservation orders to the value of R12.9 billion, and returned a total of R2.9 billion to affected entities;
  • The SIU has instituted four High Court cases in relation to contracts worth R62.1 billion; and
  • SARS investigations arising from the Commission’s findings and evidence have resulted in collections of R4.8 billion in unpaid taxes. SARS is currently engaged in 18 projects involving 222 cases. 11 of those cases are recommendations explicitly for SARS to execute and 8 have been finalised and the others are under investigation.

This 2022 MTBPS proposes additional resources to the budgets of the National Prosecuting Authority, the Special Investigating Unit, the Financial Intelligence Centre  and  the  South African Revenue Service, to further improve the capability of the state to investigate and prosecute sophisticated financial crimes.

In addition, Government will also publish a revised national risk assessment strategy on anti- money laundering and terror financing.

Conclusion

Madam Speaker, let me conclude by reiterating what I said in the beginning: our democratic ideals will be given life and sustained by a growing and inclusive economy.

We cannot ignore the relationship between democracy and the economy, and the relationship between politics and inequality.

We are fortunate to have a legal and policy framework, backed by a political vision, that allows us to transform the economic conditions of our people and deliver on the promise of democracy.

This MTBPS reminds us of the urgent need to pursue the reform of our economy in a consistent manner, with the freedom of our people in mind.

We should not take lightly the link that Former President Nelson Mandela and many other leaders after him, drew between a thriving economy, and a fair and just society. This the golden thread that runs through our Constitution and this Medium-Term Budget Policy Statement. We should keep sight of this goal and the balancing act it entails as we do our work.

Madam Speaker, I am grateful to the President and Deputy President for their support and leadership. Thank you to the Deputy Minister of Finance, and the National Treasury team, led by the Acting Director-General.

My sincere  thanks to the  Commissioner of the South African  Revenue Service, and the Governor of the South African Reserve Bank.

Let me also thank my colleagues in the Ministers’ Committee on the Budget and in the Budget Council who have shared the load of the tough decisions that have to be made. Similarly, the Parliamentary Committees of Finance and Appropriations, I express my sincere appreciation.

Lastly, thank you to each and every South African. We serve at your privilege. I thank you.”

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ACWA Power and IDC set to explore green hydrogen projects in SA

ACWA Power, a leading Saudi developer, investor, and operator of power generation, water desalination and green hydrogen plants worldwide, and the Industrial Development Corporation of South Africa (IDC), a government-owned Development Finance Institution, have signed an extensive memorandum of understanding (MoU) exploring a partnership in the development of green hydrogen and its derivatives in the Republic of South Africa.

This partnership coincides with the state visit of the South African president Cyril Ramaphosa to the Kingdom of Saudi Arabia. The agreement was digitally signed by Paddy Padmanathan, Vice Chairman and Chief Executive Officer of ACWA Power; Clive Turton, Chief Investment Officer of ACWA Power; Rian Coetzee, Head of Industry Planning and Project Development at IDC; and Russell Wallace, Manager of Legal Services at IDC, with agreement copies exchanged at a gathering attended by executive dignitaries.

This is the first agreement of its kind between ACWA Power and the IDC, but the parties have previously collaborated for equity in a renewable energy plant in South Africa. The potential value of this MoU is estimated at US$10-billion. ACWA Power will function as the developer for green hydrogen and its derivatives in South Africa, with the IDC acting as co-developer and equity partner in the proposed projects.

Paddy Padmanathan, Chief Executive Officer and Vice Chairman of ACWA Power
Paddy Padmanathan, Chief Executive Officer and Vice Chairman of ACWA

With tangible renewable energy development commitments in South Africa already contributing to the country’s clean energy goals, the signing of the MOU with the IDC for the development of green hydrogen is a significant step towards further investing in diversifying the country’s energy mix and accelerating its green economy. “

 Paddy Padmanathan, Chief Executive Officer and Vice Chairman of ACWA

As a company that is driving energy transition, ACWA Power is proud to work closely with the IDC with whom we share a robust working history, and today we are delighted to take our collaboration further. I am confident that our expertise in developing mega-scale green hydrogen projects in other geographies will enable us to successfully create a new avenue of sustainable energy generation, one that will pave the path to further progress,” he added.

South Africa has a net-zero target for 2050 and plans to become a significant producer and exporter of green hydrogen and its derivatives. Accordingly, the government has mandated the IDC to lead the development and commercialisation of the green hydrogen economy. The IDC, in partnership with the Green Hydrogen Panel, is in the process of finalising the South African Green Hydrogen Commercialisation Strategy (GHCS). 

The IDC recognises the substantial value and benefits that the green hydrogen economy will bring to South Africa. The green hydrogen economy presents new economic, skills, employment and community opportunities for the country. We are pleased to explore potential partnership opportunities with ACWA Power, given its pedigree and expertise in this industry.”

Joanne Bate, Chief Operating Officer

The IDC is currently supporting the development of several catalytic projects in the green hydrogen value chain including green hydrogen and ammonia production, mobility projects and decarbonisation of hard-to-abate sectors using green hydrogen.  IDC is also exploring bespoke funding solutions with co-funders for green hydrogen projects and supporting the required regulatory and policy changes to foster a conducive environment for the development of this new green hydrogen industry for South Africa.

Given ACWA Power’s experience in the South African renewable energy industry and in green hydrogen projects abroad, the company can play a meaningful role in supporting the objectives of the GHCS. Both parties will carry out a feasibility study, potentially cooperate, jointly develop and co-invest in projects in the green hydrogen value chain in South Africa. This MOU with ACWA Power will support the implementation of the GHCS and will contribute towards the country’s green hydrogen production targets.

ACWA Power has had a footprint in South Africa since 2016, and currently has two solar energy plants—Bokpoort and Redstone—in the country. Both projects utilise concentrated solar power technology.

With key projects in Saudi Arabia and Oman, the company is ramping up green hydrogen projects at scale in different locations globally.

The NEOM Green Hydrogen Company, a joint venture with ACWA Power, NEOM and Air Products, is developing the world’s largest green hydrogen project in Saudi Arabia. When commissioned in 2026, it will produce up to 650 tonnes per day of green hydrogen. By that date, the project will mitigate the impact of 3 million tonnes of carbon dioxide per year.

In addition, ACWA Power, as part of a joint venture, also recently signed a Joint Development Agreement towards a multi-billion-dollar investment in a world-scale green hydrogen-based ammonia production facility powered by renewable energy in Oman; as well as two Memoranda of Understanding in South Korea with different industrial partners.  

Read more on hydrogen in Green Economy Journal

Turn to Could hydrogen be the future of SA’s economic success? on page 14

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SAPVIA welcomes Eskom Board: a new horizon for the widespread deployment of solar PV

The South African Photovoltaic Industry Association welcomes the appointment of the new Board of Directors of Eskom.

The new Board faces the mammoth task of dealing with the current energy challenges and securing the future of an inclusive and sustainable energy supply, for the country. Eskom’s new leadership showcases the diverse expertise of experienced engineers, especially in renewable energy. As the representative body for the South African solar community, we stand ready for the widespread deployment of renewable energy. We encourage the new board to prioritise transmission and connection capacity constraints, to enable the increased rapid uptake of renewable energy onto the grid.

Welcoming the news, SAPVIA CEO Dr Rethabile Melamu says: “Solar PV technology can alleviate the pressure of the current energy security challenges as it can contribute to generation capacity and be connected to the grid timeously and across all scales. The new Board should therefore incentivise the adoption of household solar systems to ease demand from the utility. We also encourage the Board to work alongside industry stakeholders for the speedy roll-out of utility scale projects.”

We avail ourselves as the representative body for the solar PV industry, to assist in the transition of a new energy paradigm.

MEET DR RETHABILE MELAMU

In Green Economy Journal Issue 53, we speak to SAPVIA’s CEO and get to know this great catalyst of power.

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Minister Pravin Gordhan on appointment of the new Eskom SOC Ltd board of directors

The Minister of Public Enterprises, Pravin Gordhan would like to announce that Cabinet has approved the appointment of the following members to the Eskom SOC LTD Board of Directors:
1.    Mpho Makwana as Chairperson 
2.    Dr Busisiwe Vilakazi
3.    Lwazi Goqwana
4.    Clive Le Roux
5.    Leslie Mkhabela
6.    Mteto Nyati
7.   Fathima Gany
8.    Ayanda Mafuleka
9.    Dr Tsakani Mthombeni 
10.    Dr Claudelle von Eck
11.    Tryphosa Ramano
12.    Bheki Ntshalintshali

Dr Rod Crompton will be retained on the Eskom Board of Directors to ensure continuity.

The executive directors will be the CEO, Andre de Ruyter and the CFO, Calib Cassim.

The new Board brings broad experience, expertise and skills that will provide stability and strategic direction to the entity. Their task will be to reposition Eskom to play a key role in the energy sector. 

The Minister would like the incoming board to deal with immediate current loadshedding issues, procurement, elimination of corruption and ensuring that there is reliability of energy supply in the medium to long term. 

The new board members

Mpho Makwana – holds a Bachelor of Administration, B.Admin, EDP, Post. Grad Diploma, Retailing Management. He is currently Independent Non-Executive Chairman of JSE-listed ArcelorMittal South Africa Limited as well as Lead Independent Director – Nedbank Group Ltd (NDBKF.PK), Nedbank Ltd. Makwana serves as Chairman of the Advisory Board of the Investing in Africa Mining Indaba, Illovo SA (Pty) Ltd, Gibela Rail (RF) (Pty) Ltd. He is Chairperson of SAFCOL SOC Limited and family-owned business Epitome Investments (Pty) Ltd. Non-Executive Director BioTherm Energy (PTY) Ltd; one of South Africa’s foremost renewable energy companies. He served as Non-Executive Director of Eskom between 2002 and 2011. Makwana is recommended for appointment as Chairperson of the Board.

Dr Busisiwe Vilakazi – holds a DPhil in Engineering Science from the University of Oxford. She is the Head of Research and Innovation at SITA and a former Senior Researcher at the CSIR. She has experience and skills in ICT Research and Innovation, Data Science & Analytics, Strategy, Digital Transformation.

Lwazi Goqwana – is an engineer by profession with 25 years of working experience in Manufacturing, Construction, Financial Services, Logistics, Energy and Government Services. Goqwana has worked for multiple organisation’s including Unilever, Tiger Brands, Barclays Africa, Transnet, and the Department of Public Enterprises. 

Clive Le Roux – is a Chief Nuclear Officer at Eskom, an experienced Power Station Manager at Matimba Power Station, and Koeberg Nuclear Power Station. He spent last 10 years in Eskom as a Consultant (Greybeard). Le Roux has strong technical, operational, and human resource skills. 

Fathima Gany – is a finance professional, registered as a full member of the South African Institute of Chartered Accountants (SAICA). Her career, which spans over 20 years, is predominantly in the role of Finance Leadership for Global, Multinational and State-Owned entities across Africa and Middle East. Her broad scope of authority as a senior finance executive includes Strategic, Corporate and Operational finance, Accounting, Treasury, Taxation, Contracts and Procurement, including public finance.

Ayanda Pearl Zinhle Mafuleka – is a Chartered Accountant. She is currently the CEO of FASSET implementing the strategic direction of the SETA. She is the former CFO of the National Credit Regulator. 

Mteto Nyati – holds a BSc in Mechanical Engineering from the University of Kwa-Zulu Natal. He is a former Chief Executive Officer of MTN SA, Mteto has held senior leadership and executive roles in multinational IT companies such as IBM and Microsoft. He is currently the Chief Executive at Altron. In 2004, he was named one of the Yale University’s World Fellows on Global Leadership. 

Dr Tsakani Mthombeni – obtained a BSc, the MSc and PhD, both in electrical engineering. He served as an external examiner at the University of Pretoria, Cape Town and Stellenbosch University. He was the Chair of the Energy Intensive Users Group (EIUG) of South Africa. Dr Mthombeni is Executive: Sustainable Development at Implats, where he is responsible for developing and implementing the Group’s Sustainable Development strategy. Prior to this role he was Vice President: Group Head of Carbon and Energy at Gold Fields, leading Gold Fields’s energy management and climate change strategy. 

Leslie Mkhabela – has an LLB and is the Director and Chairperson of Mkhabela Huntley Attorneys. He is a member of the Black Lawyers Association with expertise in restructuring of state-owned assets, legal practice, commercial and administrative law, and dispute resolution.  

Dr Claudelle von Eck – is an organisational development and change manager and the former CEO of the Institute of Internal Auditors of South Africa (IIA SA). Oversight bodies she serves on includes DIRCO’s Audit Committee, MISTRA Board, Remuneration & Social Ethics Committees.  She is a fellow member of the IoDSA and member of the COMENSA.  

Tryphosa Ramano – is a Chartered Accountant and holds a bachelor’s degree in Commerce (BCom) and postgraduate diploma in Accounting and Finance. She is a corporate governance expert, strategist and has experience in financial services, manufacturing, aviation, and entrepreneur. She worked as a Chief Financial Officer in various companies and served as NED in various listed and unlisted companies.  

Bheki Ntshalintshali – former trade unionist, is the former general secretary of COSATU having been elected in 2015. In 1994, Ntshalintshali was elected as deputy general secretary of the CWIU, but stood down the following year, to study in England. He returned to South Africa in 1996 and took part in the talks which merged the CWIU into the new Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union. Later in the year, he became the organising secretary of the Congress of South African Trade Unions (COSATU), rising to become deputy general secretary. 

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