SA climate change measures change

South Africa in partnership with the rest of Africa is on the frontline in the global struggle against climate change and is dedicating significant resources to adapt to the reality of an already-changing climate and address consequential loss and damage.

BY MINISTER BARBARA CREECY

The revised Nationally Determined Contribution (NDC), the Climate Bill and South Africa’s negotiating position for COP-26 have been approved. We have also brought forward the year in which emissions are due to decline from 2035 in the initial NDC, to 2025 in the updated NDC.

As a developing country, South Africa is committed to contributing its fair share towards a global low-emissions, climate-resilient economy and society by mid-century. We recognise the consequences of climate change will be catastrophic for the world, and for South Africa, in particular, without global ambitious action to reduce emissions, and address adaptation.

The latest science makes it clear that in order to prevent these catastrophic consequences, an accelerated shift to a low-emissions society is required.

Our updated Nationally Determined Contribution (NDC), was deposited with the UN Framework Convention on Climate Change (UNFCCC) recently. The submission of the updated NDC follows widespread consultation with business, organised labour, government, civil society and the Climate Commission.

South Africa has set an ambitious Nationally Determined Contribution of 420- 350 Mt CO2-eq which is compatible with Paris Agreement goals. However, to achieve such an ambitious target, developed countries must meet their financing commitments made under the UNFCCC and reaffirmed in the Paris Agreement adopted at COP 21.

In the past decade developed countries have not kept to the level of commitments on climate finance, enshrined in the Paris Agreement. In particular there has been minimal assistance to emerging economies in this regard. Accordingly, we need certainty and predictability of the quantum of financing available to us, to embark on our Just Transition.

The Presidential Climate Commission appointed in February, is tasked with bringing together the government, private sector, organised labour and civil society to advise the government on just transition pathways that will ensure our transition to a lower carbon economy that will open up new opportunities for inclusive local industrialisation and growth, job creation and re-skilling.

Fundamental to the commission’s mandate is ensuring that those most vulnerable to the consequences of the transition, particularly workers and communities in the coal value chain, are not left behind.

Cabinet has also adopted the long-awaited Climate Change Bill, an important step in the development of our country’s architecture to manage and combat climate change. The bill, which will soon be tabled in Parliament, spells out that all adaptation and mitigation efforts should be based on the best available science, evidence and information. It further gives effect to South Africa’s international commitments and obligations in relation to climate change, and defines the steps to be taken to protect and preserve the planet for the benefit of present and future generations.

The bill sets in place a mechanism to co-ordinate the government response to the effective management of climate change impacts. Through the national adaptation response, we will strengthen resilience and reduce vulnerability to climate change.

With regard to our country’s negotiating mandate for COP-26, South Africa is fully committed to a collective, multilateral approach to addressing the global challenge of climate change, with the UNFCCC at its centre.

Our position on resource mobilisation is to secure new commitments of support by developed countries for implementation by developing countries, addressing both mitigation and adaptation. We need the COP to provide clarity on and commence the process for determining a new and more ambitious goal for long-term finance, increasing beyond the $100 billion (R1 498bn) per year from 2025.

As already explained, South Africa, and many other developing countries, require the means of implementation for its adaptation and mitigation actions. This funding could come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance.

With regard to adaptation, COP-26 should deliver an outcome that will enable practical progress, including launching a formal programme of work on the operationalisation of the Global Goal on Adaptation. The position that we will be taking to COP on the adaptation global goal is that we should aim to increase the resilience of the global population to climate change by at least 50% and reduce the global populations that are impacted by the adverse effects of climate change by at least 50%, by 2030 and by at least 90% by 2050.

It is particularly important that developed countries show leadership and come forward with massively enhanced support to developing countries, particularly at this time when sustainable development has been set back decades by the Covid-19 pandemic.

* Creecy is Minister of Forestry, Fisheries and the Environment.

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Gauteng, Northern Cape, Sasol sign groundbreaking agreement on green hydrogen

Chemicals and energy giant Sasol has announced a first-of-its-kind memorandum of agreement with the Northern Cape government to conduct a two-year feasibility study for a landmark green hydrogen project in the province’s Boegoebaai.

Another memorandum of agreement has also been signed with the Gauteng provincial government.

The announcement was made by Sasol’s Vice President for Energy Business Priscillah Mabelane, at the second annual Sustainable Infrastructure Development Symposium of South Africa (SIDSSA). According to Mabelane, the project in the Northern Cape could potentially produce at least 400-kilo tons of hydrogen every year.

The project underpins the province’s Green Hydrogen strategy: a precursor to the country’s Green Hydrogen strategy.

“A project of this magnitude has the potential to create up to 6000 direct jobs – generating much-needed socio-economic benefits including creating further indirect jobs across the ecosystem. We are very excited to be leading this feasibility study as part of unlocking South Africa’s ambition to a global green hydrogen export player,” she said.

With countries moving towards lowering carbon emissions, hydrogen – which only emits water vapour when used – is considered to be the fuel of the future but large scale use of hydrogen was hampered because of the need to burn fossil fuels when extracting it.

Now countries such as South Africa, which have great potential and access to renewable energy resources, are able to produce clean hydrogen without the need to burn any fuel which can potentially place them as leading players in a green hydrogen economy.

This, Mabelane said, gives South Africa immense potential to benefit from the green economy.

“South Africa’s total green hydrogen potential could reach four to seven million tons by 2050 with over three million tons of export opportunity. This catalyses the roll out of more than 50GW of renewable energy for South Africa, contributing more than R100 billion per annum to our economy and creating more than 370 000 jobs to 2050.”

Mabelane added that as part of Sasol’s approach to “developing a hydrogen economy”, the company has established several partnerships – including signing a memorandum of agreement with the Gauteng government.

“We signed a memorandum with the Gauteng provincial government to leverage special economic zones. These have been earmarked as enablers to unlock South Africa’s green hydrogen market potential for domestic use such as mobility, revitalisation of the steel industry and sustainable aviation fuel, particularly at OR Tambo [International Airport],” she said.

Head of Infrastructure and Investment in the Presidency, Dr Kgosientsho Ramokgopa, said the memoranda of agreement are an indication of South Africa’s commitment to lowering the country’s carbon emissions.

“Green hydrogen is the 21st-century oil and it’s going to contribute in the agenda of the country as led by [Environment, Forestry and Fisheries] Minister Barbara Creecy of making sure that we meet our obligations with regard to our nationally determined contribution, the net-zero [carbon emissions] path that we have articulated and it should constitute part of the totality of submission when we go to [the United Nations Climate Change conference],” he said. – SAnews.gov.za

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Investors pushing the drive to net zero

Thirty-two percent of investors are happy for their money to be used to reduce carbon emissions, regardless of return.

Ninety One has published the second edition of the Planetary Pulse survey, Investing for a Carbon Free World: What Investors Want. The survey of more than 6 000 individual investors across ten markets (UK, Germany, Italy, Denmark, Sweden, South Africa, Singapore, Hong Kong, US, and Canada) found that investors are ready to support the drive to net zero, with half stating that asset managers should use their influence as shareholders in carbon-heavy companies to help facilitate the reduction in carbon emissions. This suggests that investors are ready to use their wealth and influence to invest in sustainable solutions which assist in the drive to reach net zero.

Based on their answers, respondents fell into four broad investor personalities when they thought about investing overall and sustainable investing specifically. Despite a clear knowledge gap, the concept of investing to achieve net-zero has positive appeal for four out of five investors. However, many investors remain skeptical about their ability to contribute to efforts to tackle climate change, with 61% stating that they feel the worst polluter should be tackling the issues.

South African responses

In the South African context, almost two thirds of the 1 109 investors interviewed had at least some
knowledge about net zero. 80% indicated that the principle of net zero appeals to them, and 74% believe it
is the most effective way of slowing or stopping climate change. However, they feel it’s more complicated
than it appears: 51% believe there’s no point working towards net zero unless every country does; 62% feel
that simply reducing carbon isn’t enough – we also need to extract carbon from the atmosphere; and 54%
believe that the consequences of simply getting rid of heavy carbon industries haven’t been properly
thought through.


South African respondents were split in their views about their personal impact on the issue, with 58% believing that the onus should be on the worst polluters to tackle climate change and 36% of the opinion that net zero is a pipe dream that will never be achieved. In addition, there seems to be little consensus about the status quo of net zero across respondents, with 58% saying they see little action being taken anywhere with regards to net zero, and 61% now seeing a real focus on net zero and climate change across business and government.

While 65% of South African respondents believe that less than half of their portfolios are invested in companies or funds that are helping the world to achieve net zero, 65% said they would increase that proportion over the next 12 months. Interestingly, 67% of respondents felt that investment managers can drive the move to net zero by using their influence as shareholders to help companies reduce their use or production of carbon, while only 21% felt that divesting in companies that are high carbon emitters would help to achieve this goal.

Globally, it is evident that divesting from high emitters will create significant risks and inescapable consequences for emerging markets, starving them of capital. While nearly half (49%) of all investors were able to see the negative impact divestment will have on the developing world, there is more conversation needed to raise awareness regarding the allocation of capital to ensure an inclusive, global transition to net zero.
Encouragingly, these findings confirm the growing global movement to create long-term, impactful changes to tackle climate change and shift to investing for net zero, with nine out of 10 global investors and 77% of South African investors stating that they believe that reducing carbon emissions should be encouraged and are happy for their money to play a part in achieving that aim. Moreover, 32% of investors (30% in SA) believe this so strongly that they are happy for their money to be used to reduce carbon emissions, regardless of return.

Hendrik du Toit, Founder and CEO, Ninety One: “We believe in sustainability with substance. However, there is an incontrovertible and sobering fact about the drive to net zero – any effort that does not work for the world’s 7.9 billion people, will fail everywhere. To really save the planet, we must help emerging markets go green. That means robust carbon markets, debt-for-climate deals, and financing options to speed up the transition. As a company with its roots firmly in South Africa, we understand this need perhaps better than most. Emerging economies, after all, are not responsible for the bulk of emissions to date.”

Deirdre Cooper, Co-Portfolio Manager, Global Environment Fund, Ninety One: “The climate crisis presents both tremendous opportunities and risks to investors. This survey makes clear that investors across the globe are looking to allocate capital to funds that invest in companies and countries that are working towards a sustainable future. The investment management industry has an integral role to play in tackling the climate crisis in the real economy, and this cannot be met by providing investment capabilities to investors which tilt towards asset-light sectors, moving capital out of emerging regions, or selling assets to less responsible owners and outsourcing. It is our responsibility to provide end investors with solutions which can counter the climate crisis.”

https://ninetyone.com/-/media/documents/sustainability/91-planetary-pulse-wave-2-reasearch-findings-1021-en.pdf

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International climate deal could solve SA’s energy and economy crisis

Some of the world’s richest nations recently met with South African cabinet ministers to discuss a climate deal that could see billions of dollars put toward ending the country’s dependence on coal.

The delegation is trying to hammer out an agreement that can be announced at the COP26 climate talks, which start in Glasgow, Scotland on 31 Oct, two people familiar with the talks said. The discussions with South Africa — the world’s 12th-biggest emitter of greenhouse gases — include representatives from the US, UK, Germany, France and the European Union.

While South Africa is under pressure to cut its dependence on coal, which accounts for more than 80% of its power generation, it needs finance to facilitate the transition to cleaner energy. Developed nations may also need to find a way to address the challenges faced by South Africa’s state-owned power utility, which is burdened by R400-billion of debt.

The envoys met with South African ministers including Pravin Gordhan, the public enterprises minister whose portfolio includes oversight of power utility Eskom Holdings, Barbara Creecy, the environment minister, and Ebrahim Patel, the country’s trade and industry minister, the people said, asking not to be identified as a public announcement has yet to be made. Talks will be held with South Africa’s politically powerful labour unions, business leaders and the Presidential Climate Change Coordinating Commission, three people familiar with the arrangements said.

The South African ministers pressed for details on what finance was available, but the envoys favour an incremental approach and more commitments from South Africa, the people said. While Gordhan urged support for Eskom, other options such as transitioning South Africa and its car industry toward electric vehicles were also discussed, they said.

Albi Modise, a spokesperson for the environment ministry, confirmed that a group of ministers met with the envoys but declined to comment further, saying a statement will be issued later. 

Some senior members of South Africa’s government are pushing hard for climate mitigation measures. President Cyril Ramaphosa chairs the climate commission he created last year and its more ambitious emissions reduction target was adopted by cabinet this month. Creecy has said developed countries need to boost energy transition and climate-adaptation funding to developing nations.

“South Africa is well-positioned to obtain concessional finance both for the country-wide climate transition and the electricity transition in particular,” Gordhan said in a response to queries before the meeting.

Still, the pivot from coal faces opposition within South Africa. Gwede Mantashe, the country’s energy minister, has advocated for the construction of new coal-fired power stations. Mantashe, the former head of the National Union of Mineworkers, is the politically influential chairman of the ruling African National Congress.

The move to reduce South Africa’s reliance on coal comes as Chinese demand pushes prices toward record highs. The dirtiest fossil fuel, which was struggling against cleaner energy sources, is now seeing its biggest comeback ever, complicating international climate talks set to begin in just a few weeks. 

Courtesy of Bloomberg.

BY: BLOOMBERG

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Eskom has launched renewable energy tariff

Eskom has launched the Renewable Energy Tariff pilot programme to assist many businesses that have corporate renewable energy commitments. This enables customers to source a blended electricity supply with up to 100% of their electricity from one of the utility’s renewable sources.  

The Renewable Energy Tariff pilot programme gives customers a mechanism to achieve their renewable energy commitments to purchase this energy from Eskom, without the initial capital investment of having to own a renewable energy generator or to enter into long term Power Purchase Agreements (PPAs). The offer allows customers to have a 24-hour blended renewable supply to their facility and allows them the flexibility to relocate premises without needing to move renewable energy assets. 

Eskom generates green power from some of its renewable electricity plants such as the Sere Wind Farm and run-of-river hydro facilities. The Renewable Energy Tariff pilot programme is initially limited to renewable electricity generated from the Sere Wind Farm and only available to Eskom’s customers. 

During the period of the pilot programme, Eskom offers a maximum of 300GWh per annum to customers supplied directly by Eskom, on a first-come-first-served basis.

COST-EFFECTIVE AND FLEXIBLE

Monde Bala, Group Executive Eskom Distribution Division explains, “The Renewable Energy Tariff is designed to provide a cost-effective and flexible option for Eskom customers to consume renewable power. It further provides flexible, convenient and short-term power purchases for when you move your facilities. It will be available to Eskom supplied customers whose electricity accounts are up to date.” Bala says the tariff will be available to Eskom business customers who have green targets and who would like to use renewable power in their facility or production processes.

All participating customers will have an option to select any percentage of their current electricity usage to be green. The Renewable Energy Tariff can also supplement wheeled electricity from a third party or own renewable electricity generated on-site to help customers achieve their clean energy target. The tariff is designed as a declining block tariff.

MORE GREEN LESS GREEN

The more green energy a customer purchases (as a percentage of total consumption), the lower the rate, more detail on the tariff pilot is available from the Eskom website (https://www.eskom.co.za/eas/renewable-energy/).  Eskom customers, therefore, have an option to select an affordable contract, which is charged monthly, based on the percentage of renewable energy they consume, and this percentage will be charged monthly as specified in the contract. 

At the end of 12 consecutive months, Eskom will evaluate the amount of renewable energy in kWh consumed against the contracted percentage, and if the actual capacity is less than the contracted capacity, Eskom will adjust the Renewable Energy Tariff based on the actual percentage. The renewable energy charge payable by the customer will be adjusted accordingly.

The customer’s next electricity account will be adjusted to reflect the difference. Eskom’s Renewable Energy Tariff pilot programme will last for a two-year period ending 31 March 2023, after which the company will make a decision whether to take the tariff for formal approval.  

For more information visit the website at https://www.eskom.co.za/eas/renewable-energy/

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SAPVIA comments on Suntech Solar legal case against Minister of Trade, Industry and Competition

The South African Photovoltaic Industry Association has been named as a Respondent in an application filed by Suntech Solar Power South Africa (PTY) Limited (“Suntech Solar”) on 3 September 2021.

Niveshen Govender

Suntech Solar has taken the decision to challenge the Risk Mitigation IPP Procurement Programme’s decision-making process and the associated empirical data utilised that led to retrospective exemptions from designated local content (“DLC”) requirements.

SAPVIA fully supports the objectives of the Department of Trade Industry and Competition (‘the dtic”), and our efforts are therefore focused on ensuring an enabling environment for local manufacturing and ultimately industrialisation which needs to be done responsibly and sustainably, making economic sense.

SAPVIA COO Niveshen Govender states, “We have engaged Suntech on this matter to better understand their position and further reached out to the dtic to facilitate a conversation before legal action was taken. As we understand, the dtic should be in a position to respond to the challenge with the record of decision and empirical data-based research.”

Suntech Solar are a member of SAPVIA in good standing.

As the representative body of the solar PV sector in South Africa, and as a result of our extensive efforts in driving sustainable and responsible localisation, including specific engagements with government and industry at large on this matter, SAPVIA has been cited as an interested party.

“No legal action is being taken against the Association,” Govender concludes.

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Shedding the light on Eskom and its mountain of debt

Eskom released its FY20/21 financial results on 31 August 2021. These were characterised by the persistent strain on the liquidity and profitability position, high gross finance costs and some challenges to operational efficiency.

By Sithembiso Garane, Head of Listed Credit @ Futuregrowth

The group incurred a loss after tax of R18.9 billion, a slight uptick from the previous year’s loss of R20.7 billion. The audit opinion was qualified owing to irregular expenditure and going concern risk.

The government injected R56 billion to assist in reducing the debt burden.

Eskom current debt maturities were reduced to R44.9 billion from R128 billion in FY20. The group’s cash generation capacity has continued to deteriorate since its five-year peak in FY17 at R47.4 billion and is currently sitting at R30 billion.

The prevailing theme remains Eskom’s unsustainable debt, despite the recent equity injection and reduction in capital expenditure. Operating expense increases offset the revenue surge. Primary energy cost pressure and the inability to contain employee costs continue to pose a significant challenge in the utility expenditure reduction programme.

The energy availability factor decreased from 66.64% to 64.19%, largely attributed to increased maintenance. During the year, two Kusile power stations were added to the grid, contributing 1 500MW, and Medupi’s final unit was handed over to Eskom in July 2021.

Investigations into the recent Kusile explosion are ongoing, with the damage estimated at R2 billion. Eskom expects to incur an additional R38.4 billion in environmental project costs on Medupi, as part of its loan conditions with the World Bank.

Financial highlights FY20/21

  1. Revenue was up 2.38% year-on-year, solely owing to the 8.76% tariff increase. Sales volumes significantly declined by 6.7% (from 205 635 GWh to 191 852 GWh) off the back of the Covid-19-induced slump in demand across all customer categories. Management noted that sales volumes are expected to rebound in FY21/22, albeit not to pre-Covid levels. Revenue is expected to be aided by 15.06% tariff increase in the medium term.
  2. Interest bearing debt (IBD) reduced from R483 billion to R401 billion, assisted by the R56 billion equity injection from the government. The reduction in the capital expenditure programme over the reported period also contributed to the net redemption of debt. Finance costs remained very high, despite the slight decrease from R48 billion to R45 billion. As a result, the effective cost of debt spiked from 9.58% to 9.66%. This remains a concern for the issuer, as it seeks to extricate itself from this debt overhang.
  3. Primary energy costs continued to rise in spite of the lower demand: 3.4% year on year, due to a combination of coal and import cost escalation, higher utilisation of open cycle gas turbine (OCGT) and renewable energy independent power producers (IPPs). The IPPs contributed 24.0% in total primary energy costs and accounted for 6.0% of energy generation. The growth in contribution was stunted by the force majeure on wind energy procurement during the hard lockdown. Coal contribution, which currently accounts for 85% of energy generation (and 65% of the cost base), is expected to decrease as Eskom rolls out its decarbonisation strategy.
  4. Eskom’s average employee cost decreased from R775 000 to R735 000 as a result of the slight reduction of headcount from 44 000 to 42 000 and a management salary freeze. This is expected to be dampened by the 7% wage increase settlement over the next three years. Employee costs remain the Achilles heel for the counterparty as it grapples with its cost base. A 42 000 headcount is still a far cry from the 35 000 optimal level as noted by management. The total employee cost accounts for 16.35% of Eskom’s revenue.
  5. Municipal debt arrears increased by 26% year-on-year from R28.0 billion to R35.3 billion (including interest accrued over time). This figure was R6 billion in FY16 and is escalating very fast. Efforts to address collections from the top 20 defaulting municipalities continue to be questionable. Eskom has entered into a payment agreement with 12 of the 20 defaulting municipalities in an effort to increase recovery; however, 10 of the 12 are yet to comply with the agreement.
  6. The utility remains completely reliant on its R350 billion government guarantee programme to raise debt in the market. Currently, the guarantee headroom is R47 billion, inclusive of the R32 billion committed drawdown. The expected debt service costs for FY22 are R71 billion (FY21 103 billion), R31 billion of which are finance costs. Eskom generated R30 billion from operations, hardly covering its net finance costs (R33 billion in FY21). The total funding requirement for FY22 is R39 billion which can be fully absorbed by the guarantee headroom.
  7. Eskom recorded a net loss for the year of R18.9 billion and R37.2 billion in irregular
    expenditure, which is the main driver for its audit qualification. The reduction in debt does give some reprieve on debt service costs; however, the entity’s failure to generate sufficient cash from operations remains a significant risk.

Eskom expects to fully unbundle the transmission division by December 2021, followed by the generation and distribution divisions in December 2022. This is subject to all regulatory and legislative compliance.

It is our view that management may be somewhat overly optimistic with these timelines, given potential political impediments.

Futuregrowth

The functional separation of the three entities is said to be complete, and plans are afoot to create legal entities that will be operated independently. Some efficiencies may be unlocked through this exercise, but this will not address the core problem of debt spiraling out of control.

The majority (60%) of Eskom’s employee costs come from distribution and shared services – a low-margin division and a cost centre. Other high operating expenses from the generation division are due to the provision for the decommissioning costs of coal generation and are not expected to remain at current levels in the medium term. The third-party generated energy (IPPs and imports) forms part of the transmission division cost base.

Management now has to grapple with the IBD split amounting to R416 billion (as at FY20) across the entities, which requires bondholder consultation and approval. Our expectation is that this will not be a swift process. Further details are yet to be revealed, including how the R350 billion guarantee will be segregated, and business cases for each division so that investors can assess each division’s investability.

More importantly, all these interventions do not address Eskom’s core problem: the debt trap. The utility’s management has alluded that more government assistance to the tune of R200 billion will still be needed. It is our view that, regardless of the divisionalisation and liberalisation of the energy sector, a debt solution is still required. Failing this, the debt problem will be inherited by all or some of the soon-to-be established entities.

Some encouragement but concerns remain

Futuregrowth is encouraged by Eskom’s accelerated execution of its long-communicated divisionalisation strategy and government’s equity injection. However, these interventions are barely scratching the surface when it comes to extinguishing Eskom’s solvency risk. The remaining operational inefficiencies and unsustainable debt burden patently require further extra-ordinary support. We are cautiously optimistic that a decisive debt solution will be found, and we are of the view that comprehensive divisional business cases will determine the success (and/or duration) of the debt separation process.

Government’s recent intervention does indicate that Eskom remains important to the state and that the likelihood of government support is still high. However, these intermittent interventions do not solve the going concern risk status of Eskom, and its high dependency on the shareholder. Eskom needs more than just unbundling to address its solvency and liquidity risk.

Published on www.futuregrowth.co.za/insights.

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Investec Global Sustainable Equity Fund demonstrates it’s possible to simultaneously do good – and do well


Investec’s Global Sustainable Equity (GSE) Fund prioritises investment into companies doing good, with the aim of helping investors do well. By investing in companies that operate in line with and actively enable the United Nations’ 17 Sustainable Development Goals (SDGs), investors will be ensuring that there’s a future for the planet and its people.

The SDGs were adopted in 2015 as a universal call to action to end poverty, protect the planet, and ensure that, by 2030, all people enjoy peace and prosperity. The 17 SDGs are underpinned by 169 individual targets, which have been encoded into governmental action plans. They represent observable and tangible opportunities for companies to offer solutions and services to help achieve them.


“Through the Investec GSE Fund, investors are able to invest in companies that we believe can provide attractive investment returns over the long-term, through the lens of the SDG framework,” says Investec Wealth and Investment fund manager Barry Shamley. “Investment is, by nature, a long-term commitment that aims to guarantee future wealth. By investing in the Investec GSE Fund, investors combine growing wealth with helping create a positive, sustainable global environment.”

Investec-Global-Sustainable-Equity-Fund_brochure

The Investec GSE Fund’s impact is calculated using the Institutional Shareholder Services (ISS) SDG Impact methodology, with the scores of individual companies assessed by ISS considering positive and negative contributions of revenue, operations and controversies towards the SDGs. The Fund’s overall score is +3.8, against the benchmark – MSCI World – of 0.5, delivering a 100% net positive impact against the SDGs.

“The link between sustainability and performance is closer than many think,” says Shamley. “Business practices and outputs that are aligned with the SDGs provide a net positive outcome for the planet and its people while aiming to deliver positive returns. Investec has a two-decade-long history of robust, sustainable internal practices. This long journey towards better practice and behaviour has been extensively documented in its Sustainability Report.

“This history of sustainable business practices was leading us down the path of committing to the broader SDG goals, but the pandemic accelerated the need for immediate action, putting an even brighter spotlight on issues like inequality, food security and access to healthcare than ever before,” says Shamley. “We wanted to be sure that when we launched a related Fund, it was the best it could possibly be – and we’re confident that the opportunity to invest in a Fund that has a net positive impact on the planet while aiming to generate significant returns is an easy bet for investors.”

Concentrated in 30-50 holdings and aiming for quality growth, the Investec GSE Fund’s investment universe is listed global securities including equities, exchange-traded funds (ETFs) and other regulated collective investment schemes.
Benchmarked against the MSCI World Index on a US dollar base currency, the fund invites a minimum investment of US$10 000 for Class A and US$3 000 000 for Class B.

Alongside the establishment of the Investec GSE Fund, Investec has launched the Class of 2030 initiative, pairing a diverse and representative mix of people from South Africa and the UK – the learners – with experts on the SDGs – the tutors – hoping to educate people about the aims of the SDGs. By creating a space where the learners can fully grasp the essential nature of the SDGs by learning from thought leaders in the right spaces, they’ll be educated from the point of not knowing what an SDG is, to becoming ambassadors and experts who can amplify the message and inspire the other 7.8 billion people who make up Earth’s population, to do the same.

To see how the Class of 2030 is taking charge of the planet’s future, follow @TheClassof2030 on Instagram.

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ESKOM REPORT: No further available capacity for RE to be connected to the Northern Cape grid

The Generation Connection Capacity Assessment, a report published by electricity provider Eskom, points to the potential of new energy projects soon needing to consider locations outside of the Northern Cape.

“Eskom recently published an updated Generation Connection Capacity Assessment (GCCA) which illustrates the capacity that is available for the connection of new generation capacity to the national grid. This report indicates that there is no further available capacity for renewable energy to be connected to the Northern Cape grid, which means any new PV or wind projects will need to look at other provinces such as the Western Cape, North West, Free State or even Limpopo,” says Jan Fourie, General Manager in Sub-Saharan Africa of Norwegian renewables giant and recent Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) tender award winner, Scatec.

This could create the opportunity for the advantages of the ‘just energy transition’ process to spread across more parts of the country, to the benefit of more communities in other provinces.

Most of the current renewable energy projects in South Africa are located in the Northern Cape, where it makes use of the abundant wind and solar resources that are available. It is estimated that 70% of new PV and 60% of wind projects developments are located in this province.

Fourie says the update published by Eskom describes a congested provincial grid, which cannot take any on additional projects without a substantial upgrade of the grid itself.

“Considering the urgency of our country’s need to transition to renewable energy, I don’t foresee this being a practical option in the short term. The alternative is for developers to look at other provinces where solar and wind resources are also available.

“This creates an opportunity for a more socially just transition to cleaner energy, which can also result in a fairer distribution of skills and jobs across more provinces. The development of new projects in other parts of the country brings with it the opportunity of new job creation and it can also redeploy those currently employed in the coal sector.”

The major factor that determined the location of a renewable energy project, says Fourie, has for a long time been the access to wind and solar resources which explains the popularity of the Northern Cape.

“Developers will now need to consider grid capacity perhaps more than access to resources. South Africa is in a fortunate position to have an abundance of solar and wind resources, and there is now the potential of a very welcome cash injection for other provincial economies which will ultimately be in everyone’s best interest,” says Fourie.

The Generation Connection Capacity Assessment of the 2022 update Transmission Network (GCCA-2023 update) provides stakeholders with an indication of the available capacity for the connection of new generation at the main transmission system (MTS) substations on the Eskom transmission network that may be in service by 2022 based on both approved and proposed new transmission infrastructure projects.

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Supply chain interrupted

With trade already heavily challenged by the Covid-19 pandemic, the violent and destructive protest action of last week has thrown supply chain risk into stark contrast yet again, with businesses scrambling to secure the weak links, safeguard lives and property and reduce the risks to business continuity as far as possible.

“As a result of the pandemic, there has been a major consumer shift to online shopping with people clicking a button on their computer and getting goods delivered to their home. With so much of the supply chain happening behind the scenes and out of sight, consumers generally do not understand the complex and interlinked processes involved in getting that parcel or service delivered to their doorstep,” explains Tony Webster, of insurance brokerage and risk advisors, Aon South Africa. “It’s only when something goes wrong as it did last week, that there is a realisation of just how critical, yet fragile supply chains are, and how the domino effects of an incident reverberate throughout the entire value chain,” Webster adds.

Why it matters

With major highways and byways in and out of KZN blocked, it means that tens and thousands of fleet vehicles are unable to deliver goods across the country from South Africa’s busiest port, not to mention delays caused in Gauteng, the country’s economic hub. Goods will be late in reaching destinations, if at all, as transport operators run the risk of having trucks and cargo damaged, burnt or looted by rioting crowds.  

It is not uncommon for multiple events that disrupt supply chains to occur simultaneously.

“It’s quite possible that certain providers of products are going to be caught up in more than one event concurrently, as these events rarely wait for each other to finish and do not operate in a linear way,” says Webster.

In addition to the disruption of business operations, the impact of breakdowns in logistics systems raises another peril: reputational risk.

“Because consumers rarely separate the logistics from the provider of the product, the business involved could be hit twice: an immediate impact on revenue and profit, along with a loss of attraction in the future triggered by reputational damage. We’ve all been lulled into believing that everything is a click away and that’s fine if it works, but it only works when that specific supply chain is absolutely fluid and nothing goes wrong,” Webster explains.

It falls on the businesses whose products, essential components or raw materials are in the supply chain to evaluate and address these risks and put measures in place to mitigate them.

“Whatever businesses are producing or manufacturing, they will have a portfolio of products, and some of those products will be more valuable than others, either because they generate more income or because they service a market that’s growing for them or they are crucial for a key customer,” says Webster. “If they understand what’s driving the value of that business, they can then start to find the potential supply chain pressure points and risks around the end-to-end fulfilment of that product.”

Businesses should identify their most crucial supply chain ecosystem and the suppliers that are critical to that ecosystem. How a company addresses the risk becomes clearer once the points where a blockage or incident could negatively affect its ability to deliver products or services have been identified. Then they can ascertain their course of action, whether it is to hold more inventory, bring suppliers closer to home, diversify distribution points geographically, explore new logistics options or other alternatives.

“We’re seeing companies start to think more strategically around the business continuity element,” says Webster. “It’s all about how an organisation fulfils its most important client needs if a portion of stock is lost, which may mean relying on redundant supply, using a different route or other alternatives.”

Reshaping organisational response strategy

In addressing risks identified during the ongoing pandemic, many organisations made changes to their operating models, workforce strategies, products, portfolios, supply chains and more. The pandemic has created massive uncertainty, but also an unprecedented opportunity to learn and reshape parts of an organisation, building resilience for future shocks.

Concerns over geopolitical tension have been simmering in the background for a while and with domestic political unrest front and centre on South African soil at present, organisations are bound to find out just how resilient these changes are in the face of major disruption to their supply chains.

“It is at times like these where the insights and advice from experts in the field prove to be invaluable. Defining the fine line between what organisational risks can be handled internally and what aspects of that risk need to be covered externally, will provide a roadmap amid massive uncertainty,” concludes Webster.

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