Trade Winds Update Volume 58

Abeyla Exports > News > Trade Winds > Trade Winds Update Volume 58
Sep 22, 2023 Posted by: Abeyla Exports Trade Winds

Diesel Billions: A Lifesaver for Jobs, Affirms Ramokgopa,

The South African government has set a goal to eliminate ongoing power outages before next year’s elections. In the meantime, the state-owned power utility must continue using diesel to boost electricity production, safeguarding both lives and jobs, according to the nation’s Minister of Electricity, Kgosientsho Ramokgopa.

Eskom has already spent approximately R30 billion on diesel this year. However, Ramokgopa emphasized that the economic cost would have been considerably higher if the nation had been deprived of the electricity generated. He revealed that “Stage six load shedding,” during which 6,000 megawatts of capacity are taken offline, could cost the country up to 1 billion rand daily.

Ramokgopa also highlighted the grim consequences of the 2022 stage-six load shedding, which resulted in the direct loss of over 620,000 jobs, with projections indicating that the numbers might have risen to more than 830,000.

There has been calls for Eskom to reapply for a diesel wholesale license after its initial submission was rejected by the Department of Mineral Resources and Energy. Such a license would have allowed Eskom to purchase diesel at the basic fuel price, reducing it from R23 per liter to around R16, thereby alleviating price constraints.

It’s worth noting that Eskom has been excluded from the National Treasury’s revised set of cost containment measures, While these rules don’t apply to Eskom and Transnet, both entities have been urged to adhere to the guidelines, which encompass reduced expenditures on hiring, capital spending, travel, and conferences. These measures are designed to help address the government’s estimated revenue shortfall of over R21 billion.

Earlier in the year, the National Treasury granted Eskom partial exemption from disclosing irregular expenditures and losses due to criminal activities in its annual financial statements. However, this decision was subsequently reversed.

Finance Minister Enoch Godongwana is expected to announce additional cost containment measures in his medium-term budget on November 1, 2023.

The country is currently battling with Stage 3 blackouts.

BBR Woes A Thing of The Past,
In the past, where trucks used to wait for kilometres on both sides of the South Africa-Zimbabwe border, they now get clearance within two to three hours. The Beitbridge border, which connects South Africa and Zimbabwe, was previously infamous for its long queues of truckers and travellers stretching for kilometres, often leading to dire situations.

Thankfully, such occurrences are now a thing of the past. Previously, trucks took an average of one to two days to clear the border, but now it can be accomplished in three to four hours, thanks to modernization and upgrades on the Zimbabwean side. Similar upgrades are on the horizon for the South African side, promising further reductions in transit times.

Beitbridge plays a pivotal role in southern African trade, facilitating the movement of over 500 trucks and more than 14,000 travellers daily. It serves as a critical conduit for exporters from Zimbabwe, Zambia, Malawi, and Lubumbashi in the Democratic Republic of Congo, who need to navigate multiple border crossings to reach the seaports of Durban or Maputo. This journey previously took one to two weeks, causing considerable frustration for commercial operators and logistics firms.

However, the days of such frustration may be over. The revitalized Beitbridge border, which opened a year ago, has eliminated the bottlenecks that earned it a reputation as the worst border crossing in Africa. “Now it is the best in Africa, by far,”

Most of the improvements in border crossing times are attributed to straightforward design changes. Trucks, buses, and light vehicles, including pedestrians, are now divided into three traffic streams instead of the previous two: one for freight and one for other traffic. Each stream has its dedicated immigration terminal and supporting infrastructure. This has alleviated the long queues on both sides of the border, as they no longer converge in overcrowded customs and immigration areas, as was the case in the past.

While a one-stop border post is the ultimate goal, it will only be achieved once South Africa completes its planned upgrade of its side of the Beitbridge border. Such a one-stop border will allow traffic to cross with a single stop, eliminating the need to navigate two sets of customs and immigration checkpoints on both sides of the border. Similar progress was witnessed in 2009 when Zimbabwe and Zambia established a one-stop border at Chirundu on the Zambezi River, reducing truck wait times from 72 hours to three hours, leading to substantial savings in transport costs and reduced transit times.

Another Fuel Hike,

Based on unconfirmed reports and data from the Central Energy Fund, it appears that South African consumers are in for yet another round of fuel price increases in October. The data indicates potential hikes of around R1.20 per litre. Diesel prices, on the other hand, are expected to rise by approximately R2 per litre. These increases follow a punishing series of fuel price hikes in September.

If these predictions hold true, South Africans can expect to pay roughly R25 per litre for unleaded petrol at coastal areas and about R25.74 per litre inland whilst diesel would cost R25.28 per litre inland and R24.59 in the coastal areas. These escalations are primarily attributed to the surge in international oil prices.

With the anticipated diesel price increase of R2 per litre, consumers are bracing for a succession of price shocks as the year progresses towards the festive season. Transporters, driven by operational necessity, have little choice but to pass on the mounting operational expenses to the average citizen.

Numerous civil society organizations have issued warnings about households approaching the brink of financial strain. From various quarters, President Cyril Ramaphosa’s government has been urged to reevaluate the levies imposed on fuel prices, a localized pricing aspect that many believe could be mitigated.

The two most substantial levies contributing to South Africa’s fuel prices are the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy. As of May 2023, the GFL stands at R3.96 per litre, constituting roughly 17% of every litre of petrol sold in the country. The RAF levy, priced at R2.18 per litre, accounts for approximately 11% of each litre of fuel sold. When combined, these levies amount to R6.14 of every litre of petrol sold in South Africa.

Port of PE Rocks Ahead with Early Revetment Completion!,

The Transnet National Ports Authority (TNPA) has successfully concluded the revetment project at the Port of Port Elizabeth’s tanker berth and berth 14, completing it three months ahead of the original schedule.

According to TNPA, the revetment, constructed using rock armour to disperse incoming wave energy and prevent embankment erosion, was undertaken to restore and rehabilitate the existing revetments that had deteriorated at the port’s tanker berth and berth 14.

The erosion of the revetment was primarily caused by wave action, which led to the displacement of the rock armour.

TNPA emphasized that as a result of this project, the protected berths and embankment will ensure safe berthing operations for liquid bulk vessels. The collaboration with bulk oil carriers and liquid nitrogen gas vessels, which use berth 14 and the tanker berth, enabled these berths to remain operational throughout the project’s execution, a significant achievement in terms of operational flexibility.

Pamela Yoyo, TNPA’s port manager for Nelson Mandela Bay Ports, highlighted the team’s customer-focused approach, which played a pivotal role in maintaining ongoing operations during the construction phase. She praised the project team for their dedication to completing the project within an expedited timeline while fulfilling their mandate of enhancing and safeguarding port infrastructure.

Durban’s Business Aim Their Sights at Transnet’s CEO!,

Transnet’s Chief Executive Officer (CEO), Portia Derby, is facing mounting criticism, with the Durban Chamber of Commerce and Industry (DCCI) publicly urging the Minister of Public Enterprises, Pravin Gordhan, to relieve her of her duties due to concerns surrounding the state of South Africa’s ports.

In a letter addressed to Minister Gordhan a week ago, the DCCI voiced its accusations against Derby, claiming that her management has resulted in a disruption of business operations due to inadequate service delivery, as reported by 702.

The letter, signed by the organization’s CEO, Palesa Phili, expressed the frustration of the city’s business community, stating that they have reached a breaking point and can no longer tolerate Derby’s actions. The DCCI asserted that Derby’s actions seemed to be deliberately obstructing businesses by failing to provide the necessary services within the existing port infrastructure.

Furthermore, the chamber expressed doubts about whether Derby, as well as the heads of Transnet Freight Rail, Sizakele Mzimela, and Transnet National Ports Authority CEO, Pepi Silinga, genuinely have the best interests of the business community at heart.

The DCCI declared that Transnet’s executive team has repeatedly demonstrated incompetence, leading to daily financial losses and the collapse of businesses. The letter emphasized that allowing this situation to persist any longer is unacceptable.

Zambia-DRC Railway Collaboration to Inspire Global Corridors

Efforts are underway to study the feasibility of constructing a railway linking Zambia’s Copper Belt region with DR Congo’s Katanga region, while also connecting to Angola’s Lobito port railway. This project is part of the Trans-African Corridor plan.

These studies are supported by the European Union and the United States through the Partnership for Global Infrastructure & Investment, an alternative to China’s Belt & Road Initiative, launched in 2022. The EU and US will combine financial resources and technical expertise for collaborative approaches that may serve as models for other strategic corridors globally.

The next step involves the EU and USA assisting with pre-feasibility studies, building on initial US-led support for modernizing the Benguela railway route from Lobito to the DR Congo border.

The new railway aims to enhance exports, streamline goods transport, and promote local mobility, reducing transportation times and environmental impact for metal, agricultural, and other exports.

European Commission President Ursula von der Leyen emphasized the holistic approach, saying, “Our goal is not just connecting a landlocked region to the sea; it’s also about investing in local value chains, clean energy, and workforce skills. PGII represents a new way of thinking about large infrastructure investment, focused on shared prosperity and real benefits for all partners.”

Zambian Govt Plans to Capitalize On Copper Boom,

In response to the global surge in copper demand, the Zambian government has unveiled ambitious plans to achieve an annual copper production of three million tonnes by 2031. The finance minister expressed the goal of raising copper output from 760,000 tonnes in 2022 to 3 million tonnes by 2030, emphasizing the need to accelerate production during his 2022 budget speech.

The government envisions substantial gains due to the increasing demand for copper in green energy technologies. Under the current copper boom, the Ministry of Mines anticipates that existing mines will increase production by over one million tonnes in the next seven years. However, there is a significant disparity between the government’s projections and the estimates provided by mining companies for future production.

First Quantum Minerals announced a $1.25 billion investment in Kansanshi Mine, citing renewed confidence in Zambia. While this expansion could potentially boost output to 250,000 tonnes, it falls short of the government’s estimate of 300,000 tonnes from the same mine.

The prospect of Zambia obtaining 800,000 tonnes of copper from new mines is uncertain. The Ministry of Mines forecasts the opening of 17 new mines in 2026, all of which are expected to quadruple their production within four years.

However, Zambia has a history of setting ambitious mining targets that proved unattainable. This trend has continued even after the 2021 election, with fluctuations in production targets. Zambia’s mining sector has remained stagnant for the past decade, failing to capitalize on high copper prices. The latest forecast for 2023 predicts a decline in copper production to 682,000 tonnes, lower than levels in the early 1970s.

The government attributes this stagnation to the inconsistent taxation policies of the previous government, which created tensions with the mining industry. These tensions included a prolonged legal battle to liquidate one of the country’s major copper producers initiated by the previous administration.

Celebrating Heritage Day!

On the 24th of September, South Africa observes and celebrates Heritage Day also known as “Braai Day”, a day dedicated to acknowledging and honouring the rich cultural tapestry of our nation.

This special day serves as a reminder to cherish and embrace the diverse cultural heritage represented within the South African population. Across the country, numerous events and activities are organized to commemorate this significant occasion.

Please note our offices will be closed 25 September for the Public Holiday.

“Keep your face always toward the sunshine, and shadows will fall behind you.”