The madness of crowds

Old Mutual Wealth Investment Strategists Izak Odendaal and Dave Mohr 

Once again, South Africa is the country that see-saws from one extreme emotion to another. Two weeks ago, the robustness of our rule of law was being celebrated. Now we are grieving the loss of many lives and widespread destruction and looting. This just as the devastating third wave of Covid-19 infections seems to have peaked. 

What just happened? 

What may have started out as a political protest – to the jailing of former president Jacob Zuma – quickly descended into widespread violence and pillaging on an unimaginable scale in KwaZulu-Natal and townships around Johannesburg. Perhaps because phone cameras are ubiquitous now, many harrowing images were circulated this week.  

The military has now been deployed and a semblance of order is returning. The next major challenge is to restore supply chains so that food, fuel and medicines remain accessible in affected areas.  

While we have never experienced anything on this scale before, South Africa does have a history of violence stretching back centuries, but particularly in the 1980s and early 1990s. Crime is rife in our society and there are frequent outbreaks of public violence. These range from violent strikes and service delivery protests to battles between rival taxi operators and xenophobic attacks against foreign nationals.  

Order needs to be restored and maintained, but the underlying issues and social ills also need to be addressed as a matter of urgency.  

Chart 1: SA unemployment rate 

Source: Refinitiv Datastream 

However, there is footage showing that it was not only desperately poor people who looted. Many of the stolen goods were loaded into upmarket vehicles. This unjustifiable lawlessness is deeply worrying and calls for serious soul-searching as a nation. 

Trust in the security services will have to be rebuilt, as well as trust in one another. There is no other alternative for people who want to stay in South Africa. As is always the case in our country, there was also good news amid the chaos. There were, for example, many encouraging scenes of communities standing together to protect shopping centres and neighbourhoods, and there was also no shortage of volunteers keen to help clean up and rebuild.   

Can the centre hold? 

South Africa has been on the brink many times, but somehow always managed to veer away from a descent into complete anarchy. It’s as if we are always peering over the edge, stepping back only at the last minute.  

This recalls Yeats’ Second Coming which former President Mbeki was fond of quoting: “Things fall apart; the centre cannot hold.” The events of the past few days will convince many that the country has finally spun out of control, its centrifugal forces no longer strong enough.  

But their pessimism is likely to be misplaced. What is crucial is that South Africa has a framework within which to rebuild social trust and repair the economy.  

The big philosophical questions of representative democracy have long been settled. What seemed like intractable conflict in the 1980s gave way to our constitutional order: all adults can vote, everyone is equal before the law, and our basic rights and freedoms are enshrined in the Constitution. The problems we are faced with today are largely practical, not conceptual or ideological. They are big, and we have failed to address many of them, but progress is possible.  

Failed states cannot even begin to address their problems because there is no consensus on the basic rules of the game. In contrast, most of South Africa’s 60 million citizens want peace. Most are fed up with crime and corruption. Most want shared prosperity and hope for all.  

So the centre can hold. It is held together by ordinary people and key institutions such as our free and fair elections, a parliament with opposition parties, our Reserve Bank, businesses and business organisations, civil society, trade unions, and of course the courts.  

What will the economic impact be? 

The combination of Level 4 lockdowns and the violence and looting means July is likely to see steep declines in economic activity across a number of sectors, and the third quarter as a whole could see negative GDP growth. The losses will run into billions, some of it insured, much of it not. Some smaller businesses therefore might have to close for good.  

The biggest impact will be on the retail sector, followed by transport and logistics, and manufacturing. Retail is an important sector at around 7% of GDP, but clearly an economy is much bigger than its shops and malls. South Africa is a R5 trillion economy, some of it informal and fragile, but much of it sophisticated, flexible and robust. 

Depending on how soon calm can be restored and shelves restocked, activity can rebound fairly quickly as we saw a year ago when the economy emerged from hard lockdown. People still need to buy food, clothing and other household items. The rebuilding and restocking efforts will add to economic activity, giving a boost to fourth quarter growth numbers. The exact timing is of course is up in the air at this stage.  

While it is easy to overstate the short-term damage, it is also possible to underestimate the long-term consequences. These are likely to extend well beyond the retail sector, dealing a blow to already fragile business and consumer confidence. The blow can be softened if government deals more decisively with the violence and also adapts its policies to boost the economy. 

As the looting intensified, the World Bank released a report highlighting some of the steps South Africa should take to grow the economy and create jobs. While important economic reforms have been announced – most notably the deregulation of electricity production – there is more that can be done to make it easier to do business. Listening to the expert economic advice of global institutions like the World Bank is an important start, just like the government has relied on expert advice in dealing with the pandemic. 

Crime and unrest have long impacted the economy negatively in a number of ways. Last week’s riots were in many respects an acute flare-up of a chronic condition. Injury and loss of life cost the economy billions (and unquantifiable anguish). Diverting scarce resources to security measures is extremely costly. Small businesses, particularly in townships, are very vulnerable to theft and often don’t survive as result. Stolen goods can be replaced, but it drives up insurance premiums, sometimes to unaffordable levels for informal entrepreneurs.  

What we can’t measure is the investment that does not take place because of crime and violence, when global businesses and investors overlook the country, or when locals decide to emigrate and take their skills and capital with them. Or simply when a business that wants to expand finds it impractical to do so (as was recently the case with Rio Tinto’s Richards Bay mineral sands operation).  

How did markets respond? 

The rand is the country’s financial pressure valve, and it lost about 2% against the US dollar in the past week. Neither local nor foreign investors like to see scenes of anarchy, but if short-lived they are unlikely to count as a dramatic event in the context of the currency’s history. Foreign investors are more likely to dump South African equities, bonds and the currency when they are concerned about global economic growth than in response to events on the ground here. In fact, some of the weakness in the rand was due to a stronger dollar in response to firmer US inflation.   

Chart 2: Rand dollar exchange rate 

Source: Refinitiv Datastream 

South Africa has long been better at attracting portfolio flows than foreign direct investment (FDI). In other words, foreigners are more likely to buy bonds and equities that they can quickly trade in and out of thanks to our sophisticated financial markets than buying businesses that they have to operate. There are substantial FDI flows, but portfolio flows are bigger. Portfolio investors also tend to have short memories and most often trade on global financial considerations    

Foreign investors in emerging markets accept that there is less social stability and weaker government control than in developed markets. It ends up being built into the valuations and the higher return expectations. Violent protests are not unique to South Africa. Just in the last year, Chile, Colombia, Brazil and Mexico have experienced widespread riots. In fact, according to the latest Global Peace Index, the number of riots, strikes and anti-government protests worldwide jumped 244% percent in the last decade. The frustrations and depravations of Covid-19 lockdowns have been fuel to the fire in many cases.  

Even the US was engulfed by protests against police brutality and discrimination last year. And of course it doesn’t take much for football supporters in Europe (the UK especially) to become unruly.  

The JSE as a whole was largely unchanged, but that is because it is mostly a global index and rand hedges rose. Retail and bank shares were quite a bit weaker, as could be expected. 

Bonds were weaker, but South Africa’s dollar credit default spread (its market-based credit rating) has moved in line with its emerging market peer group. The rising bond yields therefore do not reflect a fundamental change in the assessment of the government’s creditworthiness, but rather the weaker rand.  

Chart 3: South African dollar credit default swaps vs peers 

Source: Refinitiv Datastream 

It is ultimately global financial developments that matter most to our markets. And as things stand, the global environment remains very supportive. Commodity prices are still elevated, and capital still abundant.  

How should investors respond? 

If you have a diversified portfolio, there is no reason to take any immediate action. As citizens we are saddened and angered by the events of the past few days, but as investors we can spread our eggs over many baskets. Global markets are unaffected by what happens in South Africa. 

A knee-jerk reaction would be to sell out of South African investments completely and take all the money offshore. However, remember that the local assets are already pricing in a lot of bad news hence the surprisingly small market reaction to these events. It is sensible for local investors to have substantial global exposure to manage risks and to access different return opportunities, but be careful of throwing out the baby with the bathwater. It is generally better to be a buyer when others are selling in a panic. If you are aiming to increase offshore exposure, do not attempt to be too clever in timing the rand. Focus on what you want to buy on the other side.  

We can’t ignore what is happening around us. We are all shaken. Ultimately, however, what happens in Beijing and Washington and the trading floors in New York and London matters more for your portfolio than chaos on the streets of Durban or Soweto. 


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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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Premier Job Mokgoro on illegal mining

An integrated approach in combating illegal mining must be strengthened – Premier Mokgoro

North West Premier, Prof. Tebogo Job Mokgoro believes the integrated approach in combating illegal mining activities must be strengthened to achieve greater results.

Premier Mokgoro made the remarks during his visit to Matlosana Local Municipality following the discovery of 20 dead bodies suspected to be that of illegal miners near Lawrence Park’s mine ventilation shaft which is no longer operational in Orkney near Klerksdorp.

Premier Mokgoro said the situation is very much unacceptable and this calls for immediate action.

“The situation calls for drastic deliberate action that should happen almost immediately. I made it very clear that we have to strengthen our integrated approach towards dealing with illegal mining. Our efforts must be more sustainable and long-lasting in terms of effectiveness.

We really believe that not sufficient role players have been taking part in operations. Going forward we will pull all resources together to combat, counter and eradicate this menace completely” remarked Premier Mokgoro.

In his visit, Premier Mokgoro was accompanied by MEC for Community Safety and Transport Management, Sello Lehari as well as the Acting Provincial Commissioner-General Dintletse Molefe.

Before the inspection, Premier received a report on efforts by the South African Police which included different operations geared towards dealing with the illegal mining.

The reports painted a sophisticated operation by the heavily armed illegal miners in different Matlosana municipality towns. Over 50 people have been arrested in different operations and gold material as well as firearms were seized. They are still appearing in court.

MEC for Community Safety and Transport Management Sello Lehari said residents’ needs to work with the police to arrest those who are behind these operations which are problematic to the communities in the area.

“Police are on high alert and investigation are ongoing. Others have been deployed in the identified hot spots. We are expecting more arrests soon. Residents must work with us and give us the necessary information. Thus far the information that came through is not enough. We need to educate our people to work with the police and inform us because the perpetrators are part of our communities. Indeed an integrated will go a long way in dealing with the illegal miners” said MEC Lehari.  

Sustainable joint operations are expected to ensue in due course.


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G7: why major economies are delaying a break with the fossil fuel industry

The climate crisis is certain to be a hot topic at the G7 summit in Cornwall. While the leaders of the world’s richest countries agree in theory on the need to reach net-zero emissions by 2050 at the latest, they remain faithful to a fossil fuel industry reluctant to substantively change its business model.

By George Ferns, lecturer in Management, Employment and Organisation, and Marcus Gomes, lecturer in Organisation Studies and Sustainability, Cardiff University

A recent report by the International Energy Agency, a typically conservative advisory body, argued for an immediate ban on new fossil fuel projects. But investments by oil, gas and coal companies into finding new sources continue, as does industry lobbying to undermine regulation. The environment ministers of the G7 countries committed to end funding for new overseas coal projects by the end of 2021. But 51% of their Covid-19 economic recovery funds – a total of US$189 billion (£133 billion) – paid between January 2020 and March 2021 were earmarked as financial aid for the fossil fuel industry. Worse, US$8 of every US$10 dedicated to non-renewable energy was paid with no conditions on these companies to reduce their emissions.

Why does it seem so hard for G7 leaders to match their words with action when it comes to the fossil fuel industry?

Betting on the long-term business case

Despite setbacks in volatile markets and oversupply risks, there is still a lot of money to be made from extracting, producing and selling hydrocarbons. Demand for coal has plateaued, but oil and gas demand is predicted to rise at least for the next 15 to 20 years, particularly in emerging economies such as China and India.

This puts G7 leaders in an awkward position. On the one hand, governments need to reboot economic growth after the pandemic slowdown – a profitable energy sector nourished by rising demand abroad is welcome, even though hydrocarbon extraction can be especially polluting in developing countries.

Governmental support for the industry in the form of subsidies or tax breaks artificially inflates the profitability of fossil fuels, in turn making renewables a less attractive investment. Put simply, it is less risky and more profitable to – at least for now – invest in oil and gas.

Carbon lock-in

The fossil fuel industry continues to shed public support, but it can rely on the fact that it’s embedded within a complex system of consumers, suppliers and contractors, politicians and the media. The cause-and-effect relations that define such an intricate system often produce unintended outcomes.

This interdependency is referred to as carbon lock-in. Economies have evolved in such a way that they perpetuate an energy landscape dominated by fossil fuels and plagued by an inability to radically change.

Not only does carbon lock-in result in inertia, it causes a tragedy of the commons-type problem. Big oil companies such as BP, Exxon Mobil and Shell are unlikely to make meaningful changes until the rest of the system acts in unison. National oil companies and smaller privately owned fossil fuel companies comprise the bulk of known fossil fuel reserves. But they often evade the spotlight and so can operate with more freedom. For a big oil company to make high-risk changes to its business model while others enjoy a free ride would be seen as a bad business decision.

Lock-in, as the name suggests, is very difficult to break. That said, G7 members are powerful nodes within this complex network. Strong leadership – such as divestment from fossil fuels and strong support for renewables – would cause reverberations throughout the whole system. But strong commitments coupled with counter-intuitive policies only send a signal that meaningful changes aren’t coming.

Identity crisis

People working in the fossil fuel industry often stay in the sector for their entire career – starting off as students of engineering or geoscience in departments funded by the industry, working all over the world and then heading into management positions.

The industry’s identity is predicated on certain values that have existed since the early days of hydrocarbon exploration, including, as one study found, a deep trust in the potential of science and technology to further humanity’s control over nature and to drive progress and economic development.

The ideological commitments of leaders in the fossil fuel industry will take a firm challenge from governments to overcome. It’s clear from financial decisions in the lead up to the summit that G7 leaders aren’t quite up to that test yet. But the meeting in Cornwall is their opportunity to signal that that cosy relationship is finally coming to an end.

Courtesy: The Conversation

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Zeph Nhleko: DBSA plays a vital role in green financing and fighting climate change

Bank’s just transition framework will detail support for infrastructure development and investment

It is often said that if one is not part of the solution, one is most likely to be part of the problem. In the global drive for a just transition and sustainability, everyone must certainly pick a side. Not only is the UN’s goal to limit the increase in the global average temperature to about 1.5°C bold, it is probably the most difficult activity global citizens are trying to do together. And it requires much money.

The International Development Finance Club (IDFC), a leading group of 26 national and regional development finance institutions worldwide — of which the Development Bank of Southern Africa (DBSA) is a member — reported in its annual Green Finance Mapping Report for 2020 that development finance institutions (DFIs) or public development banks have provided $867bn in green finance in the five years from 2015 to 2019. About 25% of all new IDFC commitments in 2019 were green financial commitments.

The DBSA is now detailing its integrated just transition investment framework to support infrastructure development and investment within decarbonisation, climate change and adaptation as well as societal considerations parameters. Green financing and investment are critical components of DFIs’ participation in the fight against global warming. Green financing in this context refers to sourcing funding from structures designed to fund green ventures and capital investments into environmental protection, energy conservation and clean energy towards low-carbon, resource-efficient economies as well as mitigation of and adaptation to climate change.

The UN recently called on public development banks to reduce fossil fuel infrastructure funding. This is a very important call, but the process must be undertaken gradually, otherwise sudden investment stops, particularly aimed at servicing existing projects, might have unintended consequences, especially on societies dependent on these investments. Therefore, the principles of net zero emissions, which argue for a balance between greenhouse gas produced and that removed from the atmosphere, make much sense.

Accredited agency

There is increasing enthusiasm in the sustainable debt market for activity and behaviour-based instruments this year, as $378bn had already been raised in the first quarter of 2021, which is 50% of the $757bn raised in the whole of 2020.

The DBSA’s role in green funding and investment activities dates back to 2010, as evidenced by its pivotal role in setting up the Independent Power Producer Office. The bank is an accredited agency of global green funds such as the Global Environment Facility and the Green Climate Fund. Over the past few years, the DBSA has succeeded in raising almost $1bn to finance green ventures. More than $157m was raised in the partnership with the Green Climate Fund, about $54m from the partnership with the Global Environment Facility, more than R1bn from the Green Fund and more than $600m from DFIs and the capital markets. It is not even close to being enough.

Of the total energy exposure, including non-generation investments such as networks and metering, the renewable energy exposure of the DBSA in Africa is about 42%. The DBSA therefore plays an important role in the climate and green finance environment. The fifth bid window of the renewable energy independent power producer procurement programme launched in April will result in the bank’s portfolio increasing even further. Current green financing initiatives include:

  • Renewable energy investment.
  • The climate finance facility that plays a catalytic role with a blended finance approach to increase climate-related investments in Southern Africa.
  • The embedded generation investment programme that is used as a first loss/guarantee facility and as credit support to non-sovereign guarantee-backed power producers and renewable projects.
  • The municipal solid waste management programme that is implementing organic waste treatment solutions in municipalities in SA.
  • The public-private sector energy efficiency programme that has focused on the creation of detailed feasibilities to evaluate the optimal financial and institutional model for the public and private sectors for energy efficiency in SA.
  • Equity funding for the small projects independent power producer programme.
  • Increased access to urban services and improved quality of life in municipalities.
  • Unlocking biodiversity benefits through development finance in critical catchments.

Given the limitations in public funding, domestic policy positions remain critical in ensuring that investors have clarity regarding stated objectives. The energy, climate change and emissions positions pronounced by the Presidential Economic Advisory Council, envisaged from the presidential climate change co-ordinating commission and outlined in the revised nationally determined contribution document, are good examples of the required clarity.

The lack of economic policy coherence remains a huge concern for the country. Though we traditionally refer to macroeconomic policy as fiscal and monetary, there is a clear case to ensure that an integrated and synchronised approach should be adopted if sector polices (social, financial, trade and investment, industrial, transport, infrastructure, environment, and so on) are also part of the planning. It requires reconfiguring the current governance model in terms of streamlining functions and separating policymaking from policy implementation.

• Nhleko is DBSA chief economist.

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Environmental stewardship and the mining sector – powering a greener future

By Advocate Tsheko Ratsheko, Group Manager of Environment, Mining Licences, and Sustainability at ‎Exxaro Resources

We and our planet are in an environmental crisis. Climate change, population growth, pollution, poverty, and an increasing demand for natural resources which are damaging to our natural ecosystems, are some of the most significant challenges we must overcome. The impact of human industry on our atmosphere, land, water, and biodiversity is not only visible today but is also increasing over time.

But with these pressing challenges also come unique opportunities for change. Reducing the environmental impact of the mining industry has become more than an ethical or regulatory imperative; it can also be a viable business model that capitalises on resource efficiency to achieve long-term sustainability and business resilience.

Exxaro is one of  South Africa’s largest coal mining companies but also one of the first significant investors in renewable energy solutions. Protecting our ecosystems and transitioning towards cleaner, renewable energy has long been a core strategic objective for Exxaro.

The importance of environmental stewardship

Responsible environmental stewardship is about protecting and preserving natural resources for the greater good of all our stakeholders. Water scarcity, air pollution, biodiversity threats, hazardous waste, and climate change all pose significant environmental and financial risks that we need to manage while delivering on other business objectives. Without a clear environmental strategy in mind, it is not possible for the business to be able to respond effectively to the emergent systemic shocks and be sustainable. Given our dependence on natural resources and systems for human sustainability, an inconsiderate approach to environmental stewardship will undermine much-needed development and human progress.

Since 2006, we have developed group-wide environmental management standards which are reviewed annually and guided by reference to global instruments. In the next 10 years, we plan to increase our efforts and focus on environmental stewardship by reducing our greenhouse gases through investing in self-generated renewable electricity and alternative fuels, ensuring water availability through efficiency and recycling efforts, managing the potential effects of severe weather events (such as heatwaves) through best practice adaptive methods and waste management through increased recycling considerations.

Transitioning to a low-carbon future

Fossil fuels are becoming a less acceptable energy source and global energy generation is moving towards renewable energy, hence Exxaro has made the strategic decision not to seek further growth in thermal coal. As the largest supplier of coal to Eskom, however, our coal portfolio remains a valuable natural resource that must be extracted optimally and responsibly to continue providing energy security, which will support economic growth and social development in South Africa. An early maximisation of the value of our coal assets will enable our transition to low-carbon alternatives while minimising the social impact on employees and communities that depend on the coal economy and enabling a Just Transition to a low-carbon economy.

In 2009, we made our first significant investment in renewable energy with the Tsitsikamma Community Wind Farm, providing 95 megawatts of clean, zero-carbon energy into the national power grid. In 2012, we partnered with the Tata Power Company to form Cennergi and began our second renewable energy project: the Amakhala Emoyeni Wind Farm. In 2019, we further bolstered our renewable energy portfolio by acquiring the remaining 50% share of Cennergi.

With these investments, we have firmly established ourselves as a leader in green energy while continuing to deliver high-quality coal to our existing clients. Building our renewable energy portfolio not only gives us long-term resilience to climate-related risks but also opens up alternative economic activities. 

Full carbon disclosure

Because we currently still rely on fossil fuel as our primary energy resource in South Africa, managing our emissions remains a priority. South Africa has arguably set the most aggressive emissions target of any developing country, aiming to reduce emissions by 34% by 2020 and 42% by 2025. Global leaders are meeting in Glasgow in November 2021 at the UN Climate Change Conference (COP26), and each member party (including South Africa) must present revised commitments on their carbon emission targets. If anything good has come from the pandemic, lockdown periods have shown that these targets can be met, albeit through severe restrictions on economic activity.

Exxaro measures manage and report energy and carbon data in terms of the Greenhouse Gas (GHG) Protocol, which provides a standard measurement platform to compare emissions internationally and locally. During 2020, we reported a 9% decrease in carbon intensity and a 7% reduction in electricity intensity due to energy efficiency projects at our business units.

The Carbon Disclosure Project (CDP), a UK-based organisation that oversees a global environmental disclosure system, provides valuable insights into corporate strategies for environmental stewardship. The system also helps to channel investment to companies adhering to sustainable carbon and emissions management. It also provides our environmental reporting with a central data repository that is audited and assured externally every year. That level of transparency in environmental reporting is crucial, as it holds organisations liable for their emissions.

Water, waste, and air

Environmental stewardship must also extend beyond carbon considerations. Water is a strategic natural resource for South Africa and our business, which is why we have committed to responsible and sustainable water use through efficient reuse and recycling,

Our waste management policy is also critical to maintaining our licence to operate. We have moved from a cradle-to-grave philosophy to a more circular, cradle-to-cradle approach. We see waste as a business opportunity and have developed cost and benefits analyses of our hazardous waste stream. Using digital systems to track and monitor sources of our hazardous waste, we are also able to eliminate or reuse waste at the source.

Mining activities such as drilling, blasting, crushing, transportation, materials handling, and storing generate dust. We therefore regularly improve our mitigation measures to reduce the impact of these on the surrounding atmosphere, such as avoiding blasts during high wind conditions, applying chemical dust suppressants, or using vegetation on topsoil stockpiles.

During 2020, we focused on going beyond compliance and implemented our reviewed air quality management system at various business units. The dust fallout rate at most of our operations complied with the regulated residential and non-residential limits, largely due to these dust suppression measures.

Preserving biodiversity is critical

Biodiversity loss has been identified as being at significant risk in the context of climate change. Considering this, we have been implementing several projects to ensure that our mines coexist in harmony with the natural environment. These include an Alien Invader Eradication Programme, a Wetland Rehabilitation Project, and Biodiversity Relocation Programmes.

These initiatives and programmes aim to protect indigenous flora and fauna species and support local ecosystems beyond the areas Exxaro operates in. We have committed to exceeding our biodiversity goals so that both current and future generations can enjoy a clean and flourishing natural environment.

Powering a greener future

There is a common misconception that the mining sector cannot coexist with environmental stewardship but Exxaro has proven otherwise. Guided by environmental sustainability practices and our vision “Resources Powering a Clean World’ to direct our business strategies, we have strengthened our organisational resilience while protecting the future of our environment. These are stewardship practices will transfer to future mining opportunities for sustainable growth.

Over the years, we have developed a comprehensive response for climate change that will continue to reap benefits for our company, our communities, and the environment for years to come.

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Multi-million rand investment for the advancement of manufacturing in SA and Africa

The advancement of manufacturing in South Africa and on the continent has received a significant boost from four of South Africa’s leading manufacturers.

Listed groups Illovo Africa, Metair, TFG and vehicle manufacturer, Toyota SA Motors (TSAM), together pledged an investment of R18 million in the Toyota Wessels Institute for Manufacturing Studies (TWIMS). TWIMS, which as an academic partnership with the Gordon Institute of Business Science (GIBS), is South Africa’s only manufacturing-focused business school and research institution.

The multi-year investment will fund the creation of four dedicated research chairs. Each chair will focus on a particular burning issue relating to the advancement of manufacturing on the continent.

“We hold that the only way for an economy to grow sustainably is through industrialisation. Unfortunately, South Africa has lagged the rest of the developing world in harnessing manufacturing for this purpose and it is even more pronounced for the rest of the continent. We thank the corporate sponsors for their generous investment, which will go a long way towards addressing this issue,” says TWIMS Chairman, Dr Johan van Zyl.

TWIMS has identified four key areas for further research. They are African Trade and Industrialisation, Green Manufacturing, Future Manufacturing and Lean Management. These areas will now be funded by Illovo Africa, Metair, TFG and TSAM respectively.

“Our research shows that South Africa’s manufacturing sector has developed sub-optimally over the last two decades. In the 20 years to 2018, South Africa’s average value addition per capita through manufacturing was only 0.5%, compared to 8% in Vietnam and 5.7% in India,” says Justin Barnes, Executive Director of TWIMS and an Associate Professor at GIBS.

“These numbers do not reflect the immense capacity for economic growth that lies dormant in South Africa and Africa. We urgently need to develop a passion for and commitment to manufacturing in order to unlock our economic growth and benefit from the rapid change in technology that we currently see around the world.”

The investment into the four research areas was announced during a small business function in the new auditorium at the TWIMS campus. The function was attended by the leaders of the four sponsoring companies, members of the TWIMS advisory board, selected guests, and the media.

African Trade and Industrialisation. Says Gavin Dalgleish, Group MD of Illovo Sugar Africa: “Africa’s manufacturing sector is ideally positioned for significant growth across different industries in the continent – creating considerable opportunity for investment and sustainable jobs. As the continent’s biggest sugar producer, we are very excited to be partnering with TWIMS for the advancement of African Manufacturing Leadership and Trade and Industrialisation, which isan initiative that aligns perfectly with our Illovo purpose – Thriving African Community. “

  • Mr Mbongeni Ndlovu has been appointed as the Illovo-sponsored Head of African Trade and Industrialisation.

Green Manufacturing. Says Riaz Haffejee, CEO of Metair: “Given our exposure to the automotive industry and own efforts in adopting more environmentally friendly mobility options, we felt that sponsoring the Green Manufacturing programme is an excellent fit for Metair. In addition to the drive for more sustainable automotive products in operation and at end of life, vehicle manufacturers are placing increasing importance on green manufacturing processes. This is a trend that is likely to intensify across industries in coming years and poses a very interesting opportunity. More so, sustainability is a global imperative that should be top priority for every business and society to ensure that future generations can benefit from Earth’s bounty.”

  • Ms Liesel Kassier has been appointed as the Metair-sponsored Head of Green Manufacturing research.

Future Manufacturing. Says Anthony Thunstrom, CEO of TFG: “Technology is advancing at an ever-increasing pace. The subsequent disruption of manufacturing and management practices is both a threat and an opportunity for African manufacturers. We hope that with our investment in the creation of a Research Chair in Future Manufacturing, we will be able to help position the country and continent to benefit from this change.”

  • Dr Kruschen Govender has been appointed as the TFG-sponsored Head of Future Manufacturing research.

Lean Management. Says Andrew Kirby, President and CEO of TSAM: “Manufacturers have to constantly innovate and adapt to remain viable and profitable. This is especially true given the many disruptions to our logistical infrastructure, electricity supply, labour force and raw material inputs. To best address this, we need skilled managers who are well versed in the specific challenges of a manufacturing organisation. Toyota is the father of lean manufacturing and the practice of lean management. We are proud to support TWIMS and the Lean Management Research Chair.”

  • Ms Khavitha Singh has been appointed as the Toyota-sponsored Head of Lean Management.


TWIMS was established in November 2018 as a way to address the shortage of business managers with manufacturing expertise and to support research, policy creation and industrialisation of South Africa and the continent.

The school was made possible thanks to a generous endowment of R56 million from the Toyota South Africa Educational Trust (TSAET). TSAET later made a second endowment of R70 million for the creation of a dedicated scholarship for students to participate in the GIBS manufacturing-focused Master of Business Administration (MBA). TWIMS has subsequently established a further scholarship for students from across the continent to attend the various manufacturing short courses on offer.

Since welcoming its first cohort of manufacturing-focused MBA students in 2019, TWIMS has grown its campus with a new 80-seat Harvard-style auditorium, several academic break-out rooms, and even a gym and swimming pool to complement the on-site accommodation. Moreover, TWIMS is in the process of investing in a technology exploration centre that it calls a “Management Sandbox”.

Earlier this year, the first cohort of GIBS MBA students completed their studies. At the same time, TWIMS welcomed the third group of MBA students, as well as its first Doctoral student. This brings the number of post-graduate manufacturing-focused GIBS students on campus to 80. A third of these students benefit from the TSEAT Scholarship and over two thirds of all students come from designated groups.

With its focus on developing executives with world-class expertise in manufacturing, TWIMS has also developed a range of Executive Short Courses (ESCs) focusing on Future Manufacturing, Green Manufacturing, Lean Operations Management, Lean Supply Chain Management, Women as Manufacturing Leaders, African Industrialisation and Sustainable Finance. A number of more general courses, taught by academic specialists from GIBS, are also delivered on campus, including Strategy, Innovation and Design Thinking and The Art of Negotiation.

For more information on TWIMS, its academic programme and its focus on supporting African industrialisation, please visit

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Solving SA’s energy crisis: the role of industry collaboration and innovation

Companies across South Africa have stepped up their corporate innovation capabilities forward, in line with government’s call to find urgent solutions to the country’s energy crisis.

Some of the clear-cut solutions available to South Africa lie in the conversion of waste and refuse into energy; property portfolios committing to green, energy-efficient buildings; land-use sustainability and reduced plastic in the packaging in the production of food, as some key examples.

Creating a circular economy

For its part, the government is committed to redirecting waste from landfills and in support of this, new laws have been legislated and regulations are being rolled out, all aimed at cleaning up South Africa and reducing the negative environmental as well as the health impacts caused by waste.

Overviewing innovations in the waste-to-energy space, Kate Stubbs, Marketing Director at Interwaste explains the many unutilised opportunities for alternative energy creation – the easiest lying in our ability to reuse and repurpose mounting waste to help with the much-needed energy supply. “Many businesses are already moving towards a zero waste to landfill target and examining ways in which they can effectively repurpose through the development of some of the most advanced technology to ensure waste-to-energy can be realised.”

Refuse Derived Fuel (RDF) was pioneered by Interwaste locally. “We have been successful in taking a solid fuel source, which is recovered through the shredding and bailing of certain pre-sorted dry industrial non-recyclable waste – and creating a fuel source that is similar to A-grade coal. This represents a strong alternative to fossil fuel use. This alternative fuel can be used within sole/co-feeding plants and even replace conventional fuels such as coal in production plants for power, steam and heat generation or any other suitable combustion installations,” says Stubbs.

She explains that the Circular Economy model offers opportunities to deliver sustainable and inclusive economic growth, combining job opportunities with positive environmental practices. “By stripping out all unnecessary waste materials, reducing the consumption of energy and raw materials and allowing these materials, energy, and resources to be ‘fed’ back into the cycle, I believe there is an opportunity here for companies to optimise their own waste streams for use in other industries.”

Property space has a critical role to play

Property owners can do much to reduce energy consumption. With a focus on minimising its environmental footprint, Liberty Two Degrees (L2D), a precinct focused, retail-centred REIT, has done exactly that and has obtained certification by the Green Building Council of South Africa (GBCSA) on its entire retail portfolio.

“The retail property sector plays a considerable role in reducing carbon footprint, combating plastic waste, and more importantly saving energy in the process through its support of the circular economy model,” says Jonathan Sinden, Chief Operations Officer of L2D. “Our focus is placed on ensuring that buildings’ ongoing operations and management are resource-efficient and environmentally responsible, with long-term sustainability goals embedded in day-to-day operational policies and plans.”

L2D has a commitment to achieving its sustainability targets of net zero waste this year (2021), net zero water by 2025 and net zero energy by 2030, and has made substantial inroads notwithstanding the pandemic, as demonstrated by its Green Star Existing Building Performance (EBP) ratings on all buildings.

Beyond property, the logistics and supply chain industry is a critical area for greener innovation.

Fully aligned with addressing the energy crisis is the journey by KFC South Africa to eliminate non-recoverable or non-reusable plastic-based packaging by 2025.

Siya Ngcukana, Chief Supply Chain Officer at KFC Africa says that the brand is fully conscious of its impact on the environment and remains committed to ensuring that all-natural resources are managed responsibly throughout the end-to-end supply chain. Our recent switch from plastic straws and stirrers to paper straws and wooden stirrers, resulted in a reduction of approximately 70 tons of non-degradable plastic annually – about 65-million straws and 4-million stirrers.

“Together with supply partners in our distribution, we are exploring converting used cooking oil from our restaurants into bio-diesel to enable partial fuel replacement. This would reduce our demand for normal diesel and the associated carbon footprint.”

“The industry is focused on the next generation of supply chains resulting from opportunities presented by new energy-efficient technologies and heightened customer requirements.”

“A key supply chain innovation in which the QSR industry can further reduce energy consumption and carbon emissions is by being Proudly South African – where majority of suppliers they make use of are local businesses. This can have a beneficial impact on energy consumption and transport-derived carbon emissions. To this end, a large portion of our consumer facing packaging portfolio makes use of a local recycled board, which is key in our sustainability efforts,” adds Ngcukana.

As technology and innovation increases, many more opportunities will undoubtedly be unlocked to combat the energy challenges faced in South Africa.

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Deputy Minister Buti Manamela on launch of Nature Africa

Message of support by South Africa’s Deputy Minister of Higher Education, Science and Innovation, Buti Manamela on the launch event for Nature Africa

It is a great pleasure and privilege for me to deliver a message of support to you on the occasion of this historic event. For more than 150 years, Nature has been one of the most authoritative voices of global science. The launch of a dedicated platform supported by Nature to communicate news and results from African science to an international audience is, thus, most welcome and in fact long overdue.

The South African Government, through our Department of Science and Innovation, would like to congratulate Nature on this initiative. In Africa, as elsewhere in the world, science has been at the forefront of the response to the Covid-19 pandemic, from both a public health and economic recovery perspective. To progress African science requires better communication and enhanced global partnerships, and Nature Africa can play an important role to foster such efforts.

Ladies and gentlemen, over the decades Nature has gained global recognition for the steadfast pursuit of its mission to serve scientists by publishing after rigorous review results of scientific advancement and then disseminating these results to enable science to serve society. This should also be the mission of Nature Africa. I would like to share with you three suggestions of ways through which Nature Africa could contribute to enhancing the role African science plays globally.

Firstly, Nature Africa should assist to raise increased international awareness of the crucial, often essential roles, African scientists are playing to respond to global challenges such as Covid-19, global change and food security. These contributions are often not appreciated or celebrated as they should be. Our world will for example not be able to confront pressing global concerns with regard to poverty, inequality and unemployment without the contributions of African social scientists.

We will not achieve the objectives of the Sustainable Development Goals set by global leaders without the contributions of African scientists.  

Nature Africa should help to raise this awareness that support for African science is an investment in a better world for all. There is no lack of material for good news stories to be communicated but what we do need is more communication platforms with global reach, and Nature Africa will help to fill this gap.

As a second action, I would like to recommend that Nature Africa should critically interrogate the existing practices of, and serve as a platform for debate, to find the best modalities for Africa’s participation in global science partnerships. From a South African perspective, it is crucial that values such as co-ownership and shared responsibility underpin international cooperation.  African scientists should be regarded as full and equal partners in global collaboration, and sadly this is at times, not the case.

International funding as important as it is also has the dangerous potential to divert focus away from Africa’s own research priorities. The best response to avoid these pitfalls is for African Governments and bodies such as the African Union to assume our own responsibilities to fund and support African research.  We count on Nature Africa to keep a vigilant eye on the design and implementation of international cooperation instruments, and the honoring of commitments by all concerned, to ensure the full potential of African science to advance equitable and sustainable global development is unleashed.

My third and last call to Nature Africa is to inspire, especially the next generation.  I am delighted to see the participation of many of Africa’s best emerging young researchers in today’s event.

African scientists continue to make us proud on the global stage and their stories must be told to encourage the next generation who will follow in their steps, and awake and sustain general public interest in science.

South Africa is proud to host with Australia the world’s largest radio telescope, the Square Kilometer Array radio telescope, the SKA. Our MeerKAT telescope, a precursor to the SKA, designed and built by African engineers, is already delivering groundbreaking scientific discoveries.  African scientists are, thus, leading the charge to fight pandemic disease and fight hunger, but are also playing their part as leaders in frontier science.

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This is the vision for the Africa we want – a better Africa in a better, more just world enabled by science. We look forward to good cooperation with Nature Africa as we continue to pursue this mission, reinforcing global solidarity and partnership. We also look forward to welcome all of you to South Africa for the World Science Forum in 2022, which will be convened under the theme of Science for Social Justice, as well as our annual Science Forum South Africa in 2021. The objective of our Science Forum is to ignite conversations about science, exactly as Nature Africa will be doing. I thank you.


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Mining Indaba launches the Extractives General Counsel Forum in partnership with Africa Oil Week and Africa Legal

Investing in African Mining Indaba (Mining Indaba), organised by Hyve Group Plc is pleased to announce the launch of the Extractives General Counsel Forum Virtual. Held in partnership with Africa Legal and Africa Oil Week, it will take place throughout 29-30 June 2021.

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