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ZA Update: TNPA pledges infrastructure investments, whilst Europe sees influx of South African coal

The Western Cape continues to see investment and opportunity whilst South Africa’s coal exports surge amidst the Ukraine - Russia conflict

Following our most recent South Africa update, please see the latest news affecting ZA supply chains below.

 

TNPA pledges a minimum of R16bn towards Western Cape infrastructure improvements

The Transnet Port Authority (TNPA) has pledged to invest a minimum of R16bn towards improving the port infrastructure in the Western Cape between now and 2029.

The 7-year investment will cover the ports in areas including Cape Town, Mossel Bay and Saldanha, with the overall R16bn being split for various projects in each area.

The TNPA’s investment is a product of its new operating system, prioritising projects which will create future growth whilst also focusing on the current operational needs to improve port efficiency.

It is expected that R452m will be spent on projects in the current financial year, with the provisional proposed breakdown being:

  • Mossel Bay - R2.2bn
    • Proposed projects include deepening of the port and breakwater extension
  • Port of Cape Town - R5.5bn
  • Saldanha - R8.4bn
    • Phase 2 ore expansion, berth construction, breakwater refurbishments

The investments will also stretch to include the procurement of marine vessels and helicopters for operational and safety purposes.

 

Construction of world’s largest solar farm under way

The construction of the world’s biggest solar farm, located in Kenhardt on the Northern Cape, has begun.

The facility will be built and run by Scatec ASA, who are reportedly building what will be the world’s largest clean energy plant of its kind, with the capacity to generate 540 megawatts of electricity when running at its peak.

Costing R16.4bn, the battery storage facility is part of the South African government’s Risk Mitigation Independent Power Producers’ Procurement Programme and will help to secure power for South Africa’s power grid.

 

Trucking protests caused a projected R300m cost to the industry

Following a period of trucking protests, said to have cost the South African economy over R300m, an 11 point plan is being drawn up between the South African Transport Union, All Truck Drivers Alliance and the Transport Association of South Africa to solve the current challenges surrounding foreign truck drivers.

The 11 point plan focuses on bringing foreign drivers’ rights in line with those of the South African labour laws currently in place, whilst Visa requirements will also be reviewed. The plan is likely to shake up the South African economy, no longer making foreign drivers the ‘cost-effective option’, which will in turn push up the prices of goods for the end consumer. Many believe that as opposed to making foreign driver rules stricter, it would be beneficial to relax laws for local drivers as this would likely bring prices down for ZA consumers.

 

Africa to Europe trade boom contributes to Euro port congestion

With African trade to Europe climbing by 72% from April - June 2021 to April - June 2022, South Africa contributed 3m out of the overall 4.6m tons of goods shipped. 

In particular, it is South Africa’s coal exports which are seeing a surge in the wake of the Russia-Ukraine conflict as much of Europe’s supply has been halted.
Despite the rise in price for the coal, Northern Europe is seeing coal exports from South Africa at the highest they have been since 2014, with Rotterdam importing the majority of the fuel and countries such as France, Germany and Italy restarting imports from the region due to challenges in sourcing from their long term providers.

 

Cost of tyres could rise as import duty proposal gains momentum

The cost of tyres in South Africa could rise by 41% if a new import duty is agreed to.

Continental, Bridgestone, Goodyear and Sumitomo, South Africa’s 4 largest tyre importers and members of the SA Tyre Manufacturers’ Conference have filed an application to impose further duties of up to 69% on Chinese imports of passenger, taxi, bus and truck tyres, which has met opposition from the Tyre Importers’ Association of South Africa.

It is thought that if the duty is approved, a higher proportion of South Africa’s tyres will be imported from the likes of Europe and Japan, as opposed to China in order to avoid the higher price. Tyres are already the 3rd biggest cost driver in the country, meaning that it is likely there will be a knock-on effect across the South African economy.

Although various tyre ranges are likely to rise by around 40%, it has been predicted that truck tyres will rise by 17%, which would signal a 6% increase to operators. 

A spokesperson from the Road Freight Association said “an increase in the cost of tyres could become the final nail in the coffin for many operators, leading to a collapse in the country’s critical road freight logistics sector”. As the ZA rail infrastructure is not an alternative to road freight, much of the country’s medicine, food and fuel will also likely see price rises as a result.

 

New EU rules could adversely affect South African citrus growers

The Citrus Growers’ Association of Southern Africa (CGA) has launched an appeal to President Cyril Ramaphosa in an attempt to curtail new import regulations which would negatively impact the fruit growers.

The CGA raised concerns when new pre-import chilling regulations were imposed at the last minute, not giving the South African exporters sufficient time to adapt to them, leaving containers detained on arrival as they were already en-route when the new rules came into force.

The biggest dispute has come as an estimated R605m (almost £29.7 million) worth of fruit is currently en-route to Europe where, if the new regulations stand, it could face being destroyed on arrival.

It is hoped that President Ramaphosa’s intervention could at minimum delay the new regulations, or at best lead to them being abandoned altogether by European Union nations.

 

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