Trade Winds Update Volume 56
South Africa back in the dark,
South Africa once again plunged into darkness with Stage 6 Loadshedding this past week after seeing some reprieve with lower stages the week before. It is reported that at the end of last week the amount of Megawatts shed from the grid equated to Stage 8 (8000Mw) however the government and Eskom itself has rubbished the claim.
Earlier this week, President Cyril Ramaphosa had called for a special cabinet meeting to go over the newly appointed Electricity Minister, Kgosientsho Ramokgopa’s plan on slowing down the decommissioning of coal plants.
According to two insiders with knowledge of the discussions, the plan suggests that this would be done through public-private partnerships, limiting the financial burden to the fiscus.
The state-owned power utility will have received approximately R500 billion in state support over the past 20 years, following the debilitating nationwide power outages since 2008. National Treasury has revealed that a series of cash injections and a proposed takeover of a portion of Eskom’s loan portfolio will amount to R495.6 billion by March 2026. This includes the R254 billion relief package announced by Finance Minister Enoch Godongwana in February, which is contingent on Eskom meeting pre-established performance targets to reduce its dependence on public funds.
As the week comes to a close, Eskom employees are planning to embark on a strike, demanding a 15% wage hike, along with housing and electricity allowances which will further exacerbate the ailing power utility’s ability to generate electricity.
Transnet sceptic over private sector assistance,
Transnet’s failures require greater participation from the private sector, but there is scepticism about the utility’s willingness to pursue this route. While Transnet seeks private sector “partners,” it avoids the term “privatization” to avoid political tensions.
President Cyril Ramaphosa has directed Transnet to reform its operations, but some critics believe the parastatal is responsible for the problem and will not be effective in the solution. Consultant David Christianson recommends greater private sector participation through various means, such as concessions or even partial privatization. However, Transnet’s recent auction of freight rail slots to private sector operators had strict and short contract conditions, resulting in only one slot awarded for a minor route.
This indicates that Transnet is still not welcoming private sector participation. Christianson also notes Transnet’s precarious financial position, with revenue and debt service payments almost equal and a lack of transparency in asset valuation. Since the Covid-19 lockdown, Transnet’s container freight business has declined sharply, with national rail freight volumes at their lowest since WWII.
The switch from rail to road transport has also accelerated, attributed by Transnet to cable theft and a shortage of locomotives. However, others point to reduced capital investment.
Transnet recently issued a Request for Qualifications for a 20-year concession on the Johannesburg-Durban container line, but the concessionaire must guarantee jobs for over 3,000 Transnet employees. Christianson believes that a genuine concession could be a game-changer, but political will is crucial for success.
President Ramaphosa expects a roadmap for Transnet, but some doubt the exercise’s success, given the lack of progress in the Eskom initiative.
Zimbabwe, the cradle for Lithium Mining,
The World Economic Forum reports that global lithium mining reached 540,000 metric tonnes in 2021 and is projected to increase to 1.5 million and 3 million metric tonnes by 2025 and 2030, respectively. However, these figures pale in comparison to the estimated 10 million metric tonnes of untapped lithium resources at the Bikita lithium project in Zimbabwe, which experts say could meet up to 20% of global demand for the metal if fully exploited.
As a result, investors have taken a keen interest in Zimbabwe’s lithium extraction industry, with Chinese investors leading the way in acquiring mining entities, claims, and joint ventures with local and government entities. In the past three years alone, at least $10 billion has been invested in various lithium projects in Zimbabwe.
A recent significant development in the lithium mining space is the Zimbabwean government’s ban on the export of unprocessed lithium. The Base Minerals Export Control Order requires a written permit from the Minister of Mines and Minerals for any lithium-bearing ores or non-beneficiated lithium to be exported from Zimbabwe. The government hopes this ban will encourage value addition and the establishment of processing firms in Zimbabwe.
In conclusion, Zimbabwe’s lithium extraction industry, and the wider mining industry across Africa, offers promising prospects for foreign investors, and we can expect continued interest in this sector in the coming years.
Zam-Moz Oil Pipeline on the cards,
President Hakainde Hichilema has declared the intention of Zambia to construct a pipeline for transporting oil products from the port of Beira, Mozambique. To support this project, Mozambican Transport Minister Mateus Magala has stated that due to Zambia’s mineral resource boom, Mozambique should increase the cargo volume exported through Beira.
At present, petroleum imports from Mozambique are transported by road. The project will also support Zambia’s only oil pipeline, currently being converted from carrying crude oil to diesel, that runs from Dar es Salaam in Tanzania to Ndola, as the country shuts down its inefficient oil refinery.
Additionally, the government plans to build pipelines from Lobito in Angola and Walvis Bay in Namibia, although neither of these projects has progressed beyond the planning stage. Mozambique is also planning to establish a fuel depot at Vanduzi along the current pipeline to Zimbabwe.
Tankers can collect fuel at Vanduzi, located near the intersection of the east-west road from Beira to Zimbabwe and the northbound road to Tete, Malawi, and Zambia.
China set to increase domestic iron-ore stockpiles,
During a news briefing on Wednesday, China’s state planner announced plans to accelerate the construction of iron ore exploration projects and enhance their capacity to ensure a stable supply of iron ore.
According to the National Development and Reform Commission, the government will closely monitor market dynamics and collaborate with relevant departments to restrict irrational price hikes. The Chinese government has been concerned about its heavy reliance on imported iron ore, which currently accounts for over 70% of its total iron ore needs.
China Iron & Steel Association plans to increase domestic supply to 370 million tonnes by 2025.
Analysts predict that China’s annual iron ore output will reach an eight-year high of 290 million tonnes in 2023. However, domestic output may not increase much further in the near term due to the complexity of constructing new projects in underground mines with challenging geological conditions and high costs.
Data from the Metallurgical Mines’ Association of China shows that the world’s largest iron ore consumer produced 44.50 million tonnes of iron ore concentrate in the first two months of 2023.
Celebrating Worker’s Day,
Workers’ Day, an international holiday observed by many countries since 1891, will be celebrated this coming Monday, 1 May.
The holiday serves both as a celebration of workers’ rights and the significance of this day cannot be overstated. It honours the hardworking men and women who keep our economies afloat, and it pays tribute to those who fought tirelessly for justice and equality. As we celebrate Workers’ Day, we are reminded of the sacrifices made by those who came before us and of the work that remains to be done to ensure that all workers are treated with dignity and respect.
And some fun before we close,
Le Petit Chef, featuring the worlds ‘smallest chef’ returns to South Africa. About 2-1/2’’ tall, the animated French cook moves around your table and prepares a multi-course meal with the help of 3D projection mapping.
A magical experience!
Please note our offices will be closed from 27 April 2023 and re-open 2 May 2023.
Upcoming Public Holidays:
27th April 2023 – Freedom Day (South Africa)
28th April 2023 – Kenneth Kaunda Day (Zambia)
1st May 2023 – Worker’s Day/Labour Day (DRC/South Africa/Zambia/Zimbabwe)
“Greatness is sifted through the grind, therefore don’t despise the hard work for surely it will be worth it in the end.”