Financial Mail Green Economy 2023 March by business_essentials

GREEN ECONOMY

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Note from the Publisher GOING GREEN IS REALLY ABOUT INVESTING IN THE FUTURE. For too long, Africa has been a spectator on the global stage. But thanks to our thriving agricultural sector and vast natural resources, one could argue that we’ve always been green. The challenge is finding and maintaining a link to skills development, so that the environment’s gain is also our economic gain. At long last, we’ve realised that these don’t need to be at odds. If we take care of our land and water, our crops and soil, our livestock and exports, we’re really ensuring our own future. Above all, a green economy means more jobs, a better standard of living and a chance at creating a level playing field for all South Africans. It’s about time. The Cold Press Media team and I are thrilled to play our small part in this initiative. We look forward to a green future.

THOUGHT LEADERSHIP ARTICLES 09 CHIETA BACKS SA’S GREEN

HYDROGEN ECONOMIC DRIVE

14 UNTAPPED AFRICA:

A FRONTIER FOR ESG

IVING THE GREEN LIGHT TO G GREEN DEALS IN AFRICA

17 MOVING THE WORLD FORWARD WITH RESPONSIBLE INVESTING

20 THE LOCAL CONSTRUCTION

SECTOR CAN IGNITE THE FUSE ON SA’S INFRASTRUCTURE RENAISSANCE

24 SUPPORTING A CLIMATEFRIENDLY WORLD

28 DESPITE ITS CHALLENGES, ESG INVESTING IS HERE TO STAY

29 SUSTAINABILITY IS A BIG DEAL FOR SMALL BUSINESS

32 SOLVING THE POWER CRISIS IN SA 38 AFRICA’S LARGE INFORMAL ECONOMY A KEY ELEMENT OF STRATEGIES TO ELIMINATE PLASTIC WASTE

GIVING THE PLANET A 2ND LIFE AND PEOPLE

REVOV’s 2nd LiFe product range

39 FINANCIAL INSTITUTIONS HAVE THE POWER TO FIGHT CLIMATE CHANGE

42 2023 RENEWABLES OUTLOOK:

THE YEAR OF THE PRIVATE PPA

Jennifer Potter

R100 51.2V 100Ah 5.1kWh R9 51.2V 220Ah 11.2kWh

revov.co.za

Copyright © Financial Mail Green Economy is published by Cold Press Media (Pty) Ltd for Arena Holdings (Pty) Ltd. Copyright: Cold Press Media. All rights reserved. Reproduction in whole or part is prohibited without prior permission of the publisher. Opinions expressed do not necessarily reflect those of the Board of Management of Arena Holdings (Pty) Ltd. All correspondence about Financial Mail Green Economy should be directed to Cold Press Media.

CONTENTS

African Clean Energy Developments

12-13, 32-33

Atlantis Special Economic Zone

6-7

Avbob

24-27

Bowmans

CHIETA

8-9

Coca Cola Beverages Africa

36-38

Diesel Electric Services

First National Bank

29-31

Gautrain

22-23

Heineken

34-35

Hohm Energy

NedGroup Investments Old Mutual Investment Group

16-17 FC, 2-3, 20 & BC

REVOV Batteries

Safripol

Sanlam Investments

Scatec

42-45

Small Enterprise Development Agency

18-19

Standard Bank

39-41

Standard Chartered

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

EDUCATION

ASEZ – South Africa’s Greentech hub Atlantis in the Western Cape has been prioritised as a Greentech hub by all three tiers of government. The scheduling of the Atlantis Special Economic Zone (SEZ) state-owned company Limited as a provincial business enterprise was approved by the National Treasury on 15 December 2021. The Atlantis Special Economic Zone Company (ASEZCo) is driving sustainable development and job creation in the area by harnessing opportunities in a growing green economy.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

EDUCATION

he ASEZCo, with its Greentech theme, is a unique SEZ that speaks to the needs of investors in Greentech. It is a key element in the Western Cape Government’s economic recovery plan. The scheduling of the company as a provincial business enterprise bodes very well for its role as a game-changer in the Western Cape economy’s renewable energy and green technology sectors. The company seeks to attract Greentech investors that embody the elements and ethos of green-technology manufacturing and resource-efficient cleaner production. It is being positioned as the ideal destination for sustainable manufacturing for manufacturers wanting to supply their technologies to Independent Power Producers bidding on the national government’s renewable energy programme, the REIPPPP (Renewable Independent Power Producer Programme). Partnerships with InvestSA, Wesgro, Greencape and the City of Cape Town’s Enterprise and Investment unit create an environment of rapid facilitation and access to opportunities. Opportunities to establish profitable trade relationships through Wesgro’s Trade facilitation unit and GreenCape’s membership to the International Cleantech Network (ICN) abound. Both these mechanisms provide immediate access to international markets, helping investors to grow their order books significantly and mitigate against supplying to a single market. Nonfinancial incentives include single-point investment facilitation through the Atlantis Investment Facilitation Office, development application fast-tracking for land use

applications, building plan submissions, and occupancy certificates. Financial incentives include development application fee exemptions for land-use applications and building plan submissions, a special electricity incentive for medium and large power users, and development contribution deferral/debt write-off (capped at R1m per investment). Atlantis is the ideal location from where to compete in Africa’s green technology markets. It is located within a transport corridor with easy access to two ports. It has a large manufacturing skills base, which continues to grow with local and provincial government support, and operational costs, especially for manufacturing businesses, are low. In addition, the City of Cape Town continues to roll out modern infrastructure throughout the area. The ASEZCo offers industrial-zoned land, strong support from the government, and mutually beneficial business relationships where investors work closely with and help uplift the local community. This lays a solid foundation for sustainable productivity and success. Green skills development and growing technical capabilities within the Atlantis community are part of ASEZCo’s strategic objectives. This aligns with the legislative requirement of the Special Economic Zones Act to grow the regional economy and drive socioeconomic impact. We at the Atlantis Special Economic Zone encourage you to get in touch for any queries or interest in establishing your investment. Contact Jarrod Lyons at jarrod@atlantissez.co.za.

Photo by Denys Nevozhai on Unsplash

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

ABOUT US The Chemical Industries Education and Training Authority is a statutory body which is responsible for facilitating the education, training and skills development needs of the chemical and manufacturing industries. The Authority identifies skills gaps and looks at ways to fill these gaps through various training initiatives in partnership with higher education institutes, public entities, skills development providers, and private organisations. These initiatives are vital for the success and sustainability of nine key industries, including: fast-moving consumer goods, speciality chemicals, explosives, petroleum, pharmaceuticals, fertilisers, surface coatings, base chemicals, and glass. CHIETA collects Skills Development Levies from the chemical industry, and distributes these funds back to member companies in the form of: • Mandatory Grants, paid to members to fund their skills development programmes. • Discretionary Grants, allocated towards initiatives which respond to the need for priority and pivotal skills. • Strategic Projects, aligned to the goals of the CHIETA and the educational needs of the wider value chain.

To help provide well-structured educational opportunities, CHIETA works in close collaboration with the Quality Council for Trades and Occupations (QCTO) to design and develop occupational qualifications and trades, assessment tools quality assurance, accreditation, monitoring as well as certification of competent learners. This helps ensure that individuals are properly equipped and prepared for successful careers in the chemical and manufacturing industry. CHIETA is a trusted partner in skills development and training, guided by its well-researched Sector Skills Plan. Through this plan, the Authority is empowered to provide information to the chemicals and manufacturing industry on the sector training needs.

THOUGHT LEADERSHIP ARTICLE

CHIETA backs SA’s green hydrogen economic drive By Yershen Pillay, CHIETA CEO

outh Africa has demonstrated its desire to develop a green economy as calls for nations to manage their natural resources sustainably reach a crescendo. Mindful of this need, the Chemical Industries Education and Training Authority (CHIETA) recently commissioned a comprehensive study of hydrogen power and the hydrogen economy in South Africa, aimed at assisting the government and companies within the chemical industries. The study will direct and inform the Authority’s participation when it comes to meaningful skills and economic development for the sector. It is in line with South Africa’s Economic Reconstruction and Recovery plan that President Cyril Ramaphosa introduced in National Assembly in October 2020. The plan includes a significant green component, which seeks to promote the creation of new ‘green’ jobs, industries and companies. It also acknowledges the need to invest in research and development to support green industrialisation, which will see the manufacture of green hydrogen liquid fuel cells and platinum fuel. The CHIETA green hydrogen power study will focus on the collection and analysis of documents, baseline data, and a literature review on the state of the hydrogen economy in South Africa. It will culminate in a green hydrogen research report that responds to the project’s objectives. Meanwhile CHIETA will work with the Northern Cape Economic Development and Investment Promotion Agency (NCEDA) to ensure a well-coordinated and shared response to skills planning for the green hydrogen economy.

Yershen Pillay, CHIETA CEO CHIETA will also actively pursue a green hydrogen research chair position in collaboration with public institutions to advance excellence and innovation in green hydrogen for the future development of scarce skills. The Authority will invest more than R5-million into the CHIETA Green Hydrogen Research Chair as part of its increasing investment into research and development. The local chemical industry has a significant role to play in the evolution of renewable energy. Sasol, for example, is leading the green hydrogen economic drive in South Africa. It is conducting a feasibility study for the production of green hydrogen at Boegoebaai, a port in the Richtersveld

municipality. As our biggest member company and largest skills levy contributor, Sasol hopes to establish the port as a global centre for green hydrogen production. Through projects and initiatives such as Sasol’s Boegoebaai research, a roadmap is being crafted that will stand the chemical industry in good stead and position the country as a global leader in the production of green hydrogen energy. To this end, CHIETA is working on a green hydrogen skills plan for the petrochemicals sub-sector. It will enable us to identify the top 10 skills in the green hydrogen economy and close the hydrogen skills gap by ensuring that talent is locally produced.

CHIETA are to identify the top 10 skills in the green hydrogen economy and close the hydrogen skills gap by ensuring that talent is locally produced.”

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

ELECTRICAL

DES customer satisfaction in a continuously changing environment

ince 1993 Diesel Electric Services (Pty) Ltd is a turnkey power solution provider based company and can add value by keeping all electrical power infrastructure requirements under one umbrella. This includes: design, manufacture, delivery, installation, commissioning, service, repairs and maintenance of generator sets, distribution boards, UPS and associated products to suit the needs of practically any organisation. We offer our customers affordable business solutions, backed by leading industrial brands, supported by service, relationships and attention to detail. Through our business philosophy of value-based management, we focus on creating sustainable value for all our stakeholders. The staff compliment at Diesel Electric Services (Pty) Ltd is approximately 550 full time staff, at 50 000 m² premises in Johannesburg with fully equipped mechanical, electrical and electronic workshops. At present we have two panel shops where manufacturing is taking place in excess of 8 500 m². All control panel wiring, fabrication and machining is done

in-house, allowing planned integrations of all components. The fully integrated facility provides for optimum performance economy in all processes, ensuring total control over quality and delivery. Our test bay facility allows for the comprehensive load testing of all our machines at unity power factor with load banks rates up to 6000kW. Strong emphasis is placed on design optimization with both the mechanical and electrical design being computerized. Our design facility is equipped with the latest software packages. Spares availability is assured for a minimum of ten years from date of manufacture. We are able to guarantee this commitment

owing to the in-house manufacture of our own electronic control equipment as well as our extensive spares holding. Our objective is to ensure customer satisfaction in a continuously changing environment! Diesel Electric Services believes in providing and empowering learners with skills development training to secure and implement a sustainable growth pion for the company. Our training provider MTW Investments (PTY) ltd is a multi-disciplinary training provider offering a wide range of medium voltage 3-phose and basic electrical skills programmers, generic management qualifications, as well as general skill workshops e.g. maintaining stock control, team leader, customer care and software courses.

Diesel Electric Services (Pty) Ltd 27 / 29 Mewett Street, Ophirton, 2091 Tel: 086 110 6633 email: dieselelec@icon.co.za

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

safripol.com

ENERGY

RENEWABLE

ACED is at the forefront of renewable energy projects in southern Africa

frican Clean Energy Developments (ACED) is a South African company dedicated to the development and asset origination of renewable energy projects in southern Africa. In business since 2008 and headquartered in Cape Town, ACED is at the forefront of the renewable energy industry in the region. The company has successfully developed 1.3GW of renewable energy projects in South Africa, most of which are already operational and others are under construction. This comprises nearly 800MW of wind energy facilities and 500MW of solar, mainly through the South African Government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The

company recently concluded a wheeling power purchase agreement with Sasol for a 69MW wind farm for Green Hydrogen production at their Sasolburg operations. It is also involved in a 30MW solar project for Harmony Gold comprising wheeling and net-metering connections. This track record of installed capacity ranks ACED as one the most successful renewable energy developers and asset originators in the South African market. The ACED team has unlocked renewable energy projects with a capex value of more than R30 billion (US$1.75 billion). In the short term, ACED has more than 400MW of private power or commercial and industrial (C&I) wheeling projects due to reach financial close and commence construction

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

in 2023. This makes ACED a market leader in the wheeling and C&I segment, and we will continue to focus on deploying our pipeline for customers in that market. We are very proud of this and look forward to implementing these projects for our industrial customers. We will, however, remain an advocate of the REIPPPP and look forward to continuing to support the Government in the rollout of renewable energy for South Africa. We will also continue growing our footprint in sub-Saharan Africa. ACED is 50% owned by African Infrastructure Investment Managers (Pty) Ltd, 25% by the Infrastructural, Developmental and Environmental Assets Managed Fund (IDEAS) from Old Mutual Life Assurance Company (South Africa) Ltd, and the balance is held by management.

RENEWABLE

ENERGY

WHAT WE DO Develop or Acquire Projects ACED identifies the potential for high-quality renewable energy projects through sophisticated prospecting. It secures land rights and develops projects into sustainable and bankable assets. It does so by optimising technical efficiency, conducting rigorous and competitive procurement processes and obtaining the environmental approvals and other permits required to construct the plant. ACED also has a strong pipeline acquisition track record. Close Projects One of ACED’s key differentiators as a developer is its track record as an asset originator, taking projects from early development to financial close and through to the commencement of construction. It also works with project co-sponsors and lenders to managing the finalisation of all funding, land, construction and off-take agreements and other development and transaction work streams. Manage Projects ACED offers project co-sponsors and lenders additional comfort and continuity when delivering a project by providing construction management services. This entails overseeing the implementation of contractors’ construction contracts and managing finance, payments, stakeholder engagement and reporting on behalf of project owners.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

THOUGHT LEADERSHIP ARTICLE

Untapped Africa: A frontier for ESG By Catherine Tinavapi, Principal & Regional Head of Market Insights at Standard Chartered Bank Africa & Middle East.

If ESG in African markets is to thrive, then governance needs to be urgently improved.”

frica’s capital markets are reputed to be challenging for foreign institutions to navigate. Despite this, the region could be the next frontier for Environmental, Social, and Governance (ESG) investing. African economies along with many other frontier and emerging markets, suffered from heavy foreign investor outflows during the initial stages of COVID-19. Although recovering somewhat, the recent flurry of macro headwinds is limiting foreign investment into Sub-Saharan Africa (SSA).

changes to tax rules or regulations – often with little forewarning. All of these risks need to be carefully considered by investors in Africa.

In many of the smaller SSA countries, the local equity markets are thinly traded and broadly un-tapped. However, this could give forward-looking international investors a first mover advantage and the ability to identify market mispricing opportunities. While African fixed income has historically been traded by local investors such as pension funds and insurance companies, global institutions are starting to take an interest. However, many are sitting on the sidelines owing to concerns about inflation and the impact which interest rate hikes could have on the region. Investing in Africa is not always a straightforward undertaking. For some of the largest institutions, the risk-reward benefits of investing in the smaller, more illiquid African economies do not make sense primarily because their sizeable capital allocations risk saturating the local market. There are also several logistical and operational challenges investors need to be cognisant of when building up exposures in the region, not least of which is the propensity for certain markets to impose currency controls and FX restrictions.

ESG opportunity in Africa Fuelled by an assortment of investor demand and regulatory pressure, ESG assets under management (AuM) have skyrocketed with the Global Sustainable Investment Alliance putting AuM at U$35-trillion in 2020, up from US$30.6-trillion in 2018, and US$22.8-trillion in 2016.

Catherine Tinavapi, Principal & Regional Head of Market Insights, Africa & Middle East at Standard Chartered Bank

Take Nigeria, where thin FX liquidity is a persistent challenge for foreign investors repatriating their funds. In this market, the mandatory conditions of FX allocation now include the bundling of spot and forward deals. Intermediaries and foreign investors whose risk management frameworks do not allow FX forward deals in Nigeria have limited access to repatriation funds in the market. Investors in African capital markets have occasionally found themselves being blind-sided by the authorities making sudden

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

As capital continues to accumulate in ESG funds, Africa is likely to be a major beneficiary, especially as many countries in the region have strengthened their sustainable bond markets. In 2021, Ghana announced that it was considering issuing US$2-billion worth of green and social bonds, with proceeds being deployed to fund development programmes. While African markets are giving serious thought to ESG issues, governance continues to be an Achilles heel in certain countries. Without strong governance, companies are at risk of not meeting their ‘E’ and ‘S’ objectives. If ESG in African markets is to thrive, then governance needs to be urgently improved upon in many countries. African markets show enormous potential as investors increasingly chase ESG opportunities.

THOUGHT LEADERSHIP ARTICLE

Giving the green light to green deals in Africa By Jason Wilkinson, Partner, Bowmans South Africa

nvironmental, social and governance (ESG) initiatives are key market drivers for governments and corporate leaders, given the overwhelming need to advance sustainable investing.

investment strategies, was published in November 2020. It sets out various principles and practice recommendations with an emphasis on ESG and broader sustainable development issues. It also proposes a shift from an ‘apply or explain’ to an outcomesbased, ‘apply and explain’ application regime.

Regulatory regime Regulatory requirements are a driving force behind sustainability in the lending market. Key to this is the Paris Agreement, and one of its critical parameters: to reduce greenhouse gas emissions by 40% by 2030 to levels in the 1990s.

The majority of investors and asset managers support CRISA and apply its principles. Many institutional investors will regularly publish ESG policies and sustainability reports dealing with ESG issues. There is also a growing number of ESG-related products being provided by the various asset managers.

From a South African perspective, several foundational documents inform the domestic regulatory framework to achieve the country’s ESG goals, including the Paris Agreement on Climate Change and the UN’s 2030 Sustainable Development Goals. In May 2020, National Treasury released a paper that aimed at increasing access to sustainable finance and stimulating capital investment in a developmentfocused and climate-resilient economy. It also recommended the enactment of a taxonomy similar to the EU Sustainable Finance Taxonomy (EU Taxonomy), in force since July 12, 2020.

Jason Wilkinson, Partner, Bowmans South Africa

In June 2021, National Treasury published the Draft Green Finance Taxonomy (Draft Taxonomy), an official classification document that defines a minimum set of assets, projects, and sectors that are eligible to be defined as ‘green’ in line with international best practice and national priorities.

Investor appetite Due to its role in capital distribution, the financial services sector is integral to achieving sustainable development. Generally speaking, institutional investors and asset managers in South Africa recognise the importance of ESG and are taking steps to improve the integration of ESG into their operations.

South Africa’s green economy should be viewed from two perspectives: • economic activities that are intrinsically aligned to and/or are expected to make a substantial contribution to the future South African green economy; and

• economic activities that presently have a significant detrimental environmental impact but are needed as part of the future South African green economy and for which there are currently no known alternatives.

A revised draft Code for Responsible Investing in South Africa (CRISA) 2.0, a voluntary initiative that seeks to guide institutional investors in developing and implementing sustainable, responsible and long-term

Consumer considerations International lending markets have embraced green loans and sustainability linked loans (SLLs). Over the past four years alone, the volume of sustainable finance has grown 15 times. In South Africa, green and ESG initiatives and related financings are no longer a theoretical aspiration. Ultimately, sustainable finance transactions depend on the nature of (and how measurable is) each key performance indicator or sustainable performance target. Finance providers will likely look at several factors when assessing potential financings, with reporting and verification being of primary importance. The younger generation is prioritising ESG initiatives. The next few decades will see the largest generational wealth transfer in history, from the baby boomers to millennials. With this will come newly prioritised investment criteria. ESG is likely to become a core strategic concern for corporates, driven by exogenous and endogenous factors and pressures, including a shift towards a more stakeholderinclusive capitalism.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

INVESTMENT

Market shocks and geopolitics impacted the ESG agenda in 2022

David Levinson, Head of Responsible Investment at Nedgroup Investments

he annual Nedgroup Investments Responsible Investment Report is a good proxy for the status of ESG in the South African asset management industry. David Levinson, Head of Responsible Investment at Nedgroup Investments, says that 2022 had been a complex year for Responsible Investing (RI). The world tried to deal with the effects of the Covid-19 pandemic as well as newer shocks like the conflict in Ukraine and the subsequent energy shock – all of which have had an impact on how companies approach RI and ESG. “ESG was put under the microscope in a big way last year. Our report shows that while it is top of mind for key players in the asset management industry, global forces have certainly impacted the progress made in certain aspects of the RI agenda,” he says. Levinson explains that as global prices for gas, oil and coal soared, funds with the ESG label that exclude fossil fuel exposure underperformed by some margin. “Although a rather over-simplification, as no two approaches to ESG are the same, this has bolstered the platform of ESG’s most vocal critics.” The survey, which was in its third year in 2022, canvasses the asset management industry of South Africa alongside our global partners. It has shown a marked increase in the extent to which environmental, social and governance factors play a role in decision-making among asset managers. According to the data, 86% of fund managers disclose their AGM voting results to investors and the public, up from 78% in 2021. Impressively, 96% of fund managers interact with boards and executive

leadership teams in an attempt to influence the company’s management of ESG factors, and a further 69% specifically look to address people diversity issues. However, only 52% of those surveyed have an engagement policy in place. “This is an encouraging indication that transparency in the industry is being driven from the top, but there is still a need for a more structured and consistent approach,” says Levinson. It’s also clear that the past year has brought human and social risks to the forefront for many asset managers. Sixty-six percent of fund managers surveyed identified human or labour rights risks to their portfolios – such as labour rights in mining, human rights risk in supply chain and unsettled labour and union strikes, among many others.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

ABOUT NEDGROUP INVESTMENTS Nedgroup Investments is a marketleading global asset management company managing over R300bn in AUM. Nedgroup Investments offers a range of unit trusts, tax-free investments, retirement funds and multi-managed funds.

THOUGHT LEADERSHIP ARTICLE

Moving the world forward with Responsible Investing By David Levinson: Head of Responsible Investing at Nedgroup Investments

espite heightened scrutiny in 2022, the field of ESG continues to attract assets. This has been driven by several factors, including regulation, emergent investment opportunities, investor demands, and a broader desire for investments to have positive real-world outcomes. As per the chart below, equity funds with an ESG component have attracted almost US$1 trillion in assets over the past four years, split evenly between active and passive strategies. This contrasts with traditional non-ESG active funds, where asset outflows have accumulated close to US$ 3 trillion. According to a study by Citi Research, climate change and the energy transition continue to attract the greatest investor attention and will have central roles in addressing today’s environmental challenges. The energy transition from traditional fossil fuels to a production mix that includes greater use of renewables illustrates the complex intersection of society and the environment. Fossil fuel lobbyists often highlight the number of people that depend on the oil and coal value chains for their livelihoods, while those in the renewables corner draw on the need to upskill and evolve the workforce in line with industrial and technological progress. The chart illustrates the growth in jobs across the various clean energy sources. It offers a glimpse into how the energy sector may evolve and look to absorb some of the losses from the traditional value chain. The relationship between companies

and their investors on ESG issues can all too often take on an antagonistic nature. Instead, investors should look to encourage and, importantly, support company management to transition their businesses for a low-carbon and inclusive economy. Shareholder support will embolden management to break from historical inertia and proactively pursue better societal outcomes. Engagement initiatives, such as Climate Action 100+, build on pre-existing engagement efforts across the globe. Significant focus has been placed on materiality, where this group has committed to engaging with 167 pre-identified companies that are strategically important to the net-zero emissions transition. A complexity for fund managers often lies in the challenge of integrating fast-evolving ESG information with decades-old investment processes and philosophies. The work of Amy Jansen, Head of Behavioural Solutions at Nedgroup Investments, showcased the cognitive overload that sustainability often presents to investment professionals. Across Nedgroup Investments’ regions of operation (South Africa, United Kingdom, and Europe), or anywhere in the world for that matter, environmental and social challenges are real and pertinent. By managing these risks, we believe our investments will be more resilient and participatory in the real economy. Our conversations and responsible investment efforts will play a significant role in better serving our environment, its people, our partner managers, and our clients.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

THE LOCAL CONSTRUCTION SECTOR CAN IGNITE THE FUSE ON SA’S INFRASTRUCTURE RENAISSANCE Nicole Martens

Siboniso Nxumalo

Head of Stewardship at OId Mutual Investment Group

Chief Investment Officer at OId Mutual Investment Group

construction sector has faced many challenges in recent years

THE ROLE OF ASSET ALLOCATORS IN CREATING A ROBUST CONSTRUCTION SECTOR

led by a lack of infrastructure spend post the World Cup boom,

The interaction between allocators of capital, institutional

the Covid-19 pandemic, a sharp economic downturn and

investors and purposeful stewardship is often understated

ongoing energy woes. However, despite its shrinking, the

when it comes to empowering listed construction firms to

sector has a critical role to play in the development of

play their part in South Africa’s infrastructure renaissance.

infrastructure to support solutions for SA’s energy woes and

The urgency surrounding the development of renewable

therefore must be allowed to thrive.

energy infrastructure, while offering huge opportunity for the

As recently highlighted by construction giant WBHO, the local

ASSESSING THE CHALLENGES AND OPPORTUNITIES Policy uncertainty remains a serious constraint for construction, and the industry has been further weighed down by slow progress in the awarding of crucial government and state-owned enterprises (SOE) tenders, as well as the legacy of State Capture.

sector, also presents risk given the fast-tracked development needed for energy production which could bring governance abuse and compromises. Investors have a responsibility to ensure construction companies adhere to their governance to reach their full potential to fulfil their critical role in the national agenda. REAL WORLD IMPACT OF INFRASTRUCTURE EXPENDITURE

The private sector has been more buoyant. However, due to

Given the systemic importance of the sector, it has been prone

poor sentiment, private sector Gross Fixed Capital

to abuse in the past, however, following the vast amount of

Formation/GDP has also been trending downwards. Private

investment in addressing and overcoming these abuses, we

sector-led Independent Private Power Producers (IPP)

are now at a point where all the stakeholders, including

investments are therefore a positive theme for the construction

financial institutions, NGOs, and relevant private sector

sector going forward.

stakeholders, need to collectively keep up the momentum to ensure the old malignancies don’t take hold again.

The upcoming COP 28 discussion is expected to be dominated by the question of financing significant infrastructure

Once the mega projects have been agreed to support the

development to accelerate the transition globally. With the

energy crisis agenda, locally listed construction companies

national agenda currently also aligning around a just energy

must play their part in capacitating the state to deliver.

transition, new sustainable approaches to consumption and production are emerging as a realistic solution. This is being

These companies will be fundamental in addressing critical

underpinned by Eskom’s energy plan and Transmission

infrastructure issues and will certainly be involved in much of

Development Plan. Government and its various SOEs are also

the renewable build to ‘plug the gap’ left by Eskom’s ailing

focusing on the urgent need for infrastructure maintenance

coal fleet. And with the help of active stewardship by investors,

and upgrades – along with new projects – in sectors like

they are positioned to play their part in rebuilding the

electricity distribution and supply, roads, rail and sea

country’s infrastructure within an ESG framework. The hope is

transportation, and water and sanitation.

that by building the capacity of the leadership of these companies to apply international best practice standards of governance, and fast-tracking procurement, all South Africans will benefit from the GDP multiplier that large, listed construction firms offer.

INVESTMENT GROUP DO GREAT THINGS EVERY DAY Old Mutual Investment Group is a licensed FSP.

TRANSPORT

MOVING TOWARDS A GREEN ECONOMY It has been 12 years since Gautrain first opened its doors to passengers on June 8, 2010. Since then, it has become a system Iembedded in the public transport infrastructure and economy of Gauteng.

uring this time, the Gautrain has carried 126 million train passengers and 38 million bus passengers safely and with almost perfect reliability. Just like the rest of the world, the Gauteng province is facing global warming through unsustainable

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

carbon emissions. The transport sector plays an important role in this matter. It is responsible for 18% of all man-made greenhouse gas emissions. The International Association of Public Transport estimates that by 2025, 60% of the world’s population will live in

y s

blic

the

tons of carbon dioxide emissions a year would be saved by using the Gautrain instead of taking trips in cars. An independent study in 2018 used international standards to calculate the benefits of a reduction in carbon emissions. It revealed that the average single trip on the Gautrain saves 2,8 kilograms of citiesemissions and 6.2-billion private motorised trips will be undertaken CO2 per passenger trip when compared every day in cities worldwide. to a private car. The result will be gridlock, pollution, road traffic accidents and

That means that the Gautrain trains have saved wasted time. The current trajectory is unsustainable, and public around 000 are tons of carbon pollution transport360 solutions needed. Earlier in dioxide the year, the MEC for since they started operating June 2010. the Gauteng Department of Roadsinand Public Transport, Jacob Mamabolo, madeexperts an announcement Phase 1 route International valuedetermining carbon thesavings at of the proposed extension of the rapid rail line from Sandton around R700 per ton. When added to time savingsto the north-western areas of Gauteng. A plan that will support the and reduced road accidents costs, each passenger greening of the Province’s economy. In 2014, the CSIR did a study trip on the Gautrain has an economic value of that calculated the impact of people moving out of their cars and around onto rail R74. – specifically the Gautrain. The institute calculated that by

The Gautrain currently sustains around 12 000 jobs each year in its supply chains and has spent more than R4,4 billion on local materials and equipment. During the operating period, there have been TRANSPORT many other achievements, which the GMA hopes to replicate in the extension of the rapid rail line. As a catalyst for sustainable development, the

The Gautrain Project has also responsible for major Gautrain has to meet the been needs of the present socio-economic development around the stations, such the generation without compromising the abilityas of construction of retail, residential, office and warehousing space, meeting the needs of future generations. It which further contribute to the economic growth of the province.

complements and supplements other public transport modessustains in Gauteng, allowing The Gautrain currently around 12 000 jobs eachcitizens year in a supply safe,chains efficient and reliable solution. Gautrain its and has spent more than R4,4 billion on local materials and equipment. the operatingtoperiod, there have goes even further During by attempting be sufficiently been many other achievements, which the GMA hopes to attractive with convenient travel times and replicate in the extension of the rapid rail line. improved safety and security to serve people who would otherwise select private transport. supports As a catalyst for sustainable development, the GautrainIthas to meet transit-oriented development by encouraging the the needs of the present generation without compromising the growth of transport modes serve as enablers of ability of meeting the needs of futurethat generations. It complements 2020 over 70 000 tons of carbon dioxide emissions a year would supplements other public transport modes hubs in Gauteng, allowing saved by using thetime Gautrain instead there of taking trips in cars. for and Inbeaddition to the savings, are savings economic activity in the emerging of Gauteng. citizens a safe, efficient and reliable solution. Gautrain goes commuters on the Gautrain in terms of their vehicle In short, the Gautrain facilitates sustainable even An independent study in 2018 used international standards to by attempting to be sufficiently attractive with convenient operating costs. At current fuel costs, the further growth and liveable cities. calculate the benefits of a reduction in carbon emissions. It revealed travel times and improved safety and security to serve people Gauteng Management Agency (GMA) calculates that the average single trip on the Gautrain saves 2,8 kilograms of who would otherwise select private transport. It supports transitthe average f u e l cost used on a car. trip oriented development by encouraging the growth of transport CO2 emissions per passenger trip when compared to a private between Hatfield and Johannesburg plus modes that serve as enablers of economic activity in the emerging That means that the Gautrain havecars saved around 360 000 basic maintenance on trains these at R130 per hubs of Gauteng. In short, the Gautrain facilitates sustainable tons of carbon dioxide pollution since they started operating in growth and liveable cities. trip. A Gautrain single trip inclusive of parking June 2010. and a bus trip for the 'last mile' is R97 per trip between Hatfield Park savings stations for someone International expertsand value carbon at around R700 per using a monthly ticket. ton. When added to time savings and reduced road accidents costs, each passenger trip on the Gautrain has an economic value ofmonthly around R74. Every commuter between Johannesburg

and Tshwane (someone who uses the Gautrain In addition to the time savings, there are savings for commuters every toofand work for acosts. month) will on theworking Gautrain inday terms theirfrom vehicle operating At current save around sevenManagement hours perAgency month(GMA) andcalculates up to R1 fuel costs, the Gauteng the 300 perfuelmonth andHatfield car and maintenance average cost usedin on apetrol trip between Johannesburg plus basicAnd maintenance these cars at R130 per trip. A Gautrain costs. with oncongestion increasing, these single trip inclusive of parking and a bus trip for the ‘last mile’ is savings will only get bigger. In addition, each R97 per trip between Hatfield and Park stations for someone Gautrain commuter saves 120kg of CO2 emissions using a monthly ticket. every month. “We need to move people off the roads and back into between rail. It Johannesburg is greener, cheaper and Every monthly commuter and Tshwane (someone who uses Gautrain everytoworking day to and more efficient. Wethe look forward contributing to from the work for a month) will save around per month and green economy through our seven new,hours planned up to R1 300 per month in petrol and car maintenance extensions,” said William Dachs, GMA CEO.costs. And with congestion increasing, these savings will only get bigger. In addition, each Gautrain commuter saves 120kg of CO2 emissions The Gautrain Project also been every month. “We need tohas move people off responsible the roads and for back major socio-economic development around theforward into rail. It is greener, cheaper and more efficient. We look to contributing green economy through our new, planned stations, suchtoasthethe construction of retail, residential, extensions,” said William Dachs, GMA CEO. office and warehousing space, which further

Follow Gautrain on: @TheGautrain www.facebook.com/gautrain www.gma.gautrain.co.za 0800 42887246 32693

contribute to the economic growth of the province.

ver

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Supporting a climate-friendly world By Malixole Gwatyu, AVBOB’s Manager for Communications

limate change has become part of our everyday lives. Society cannot immediately reverse the clock or undo the climate impact overnight. We can, however, act by doing the right things and learning to adapt to our new reality. As climate change and the effects thereof continue unabated, the need for corporates to reduce their impact on the environment is of vital importance. In South Africa, there are efforts to limit emissions, and the Presidential Climate Change Commission is overseeing and facilitating a just, equitable transition to a low-carbon economy and climate-resilient society. If we are to secure a future for our business, our employees and our members, it is vital that all stakeholders contribute to the sustainability of our world by investing in initiatives that reduce our carbon footprint. As a mutual society, AVBOB recognises the need to manage the relationship between our business, society and the environment. We understand the value of evolving and moving with the times. Over the past century, we have had to adapt to numerous challenges and have adopted an agile approach to the many facets of our business. AVBOB’s sustainability initiatives are a major differentiator in how we give back to society. We partner with communities to deliver tangible benefits and value over the long term. In doing so, we boost the economic engines of tomorrow by improving the lives of our members and stakeholders today. Adopting new ways of doing Globally, the depletion of natural resources continues to place a strain on the environment. Going green not only makes the entire planet sustainable and habitable but also helps everyone, as it enables

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Malixole Gwatyu, AVBOB’s Manager for Communications

humanity to preserve the environment by adopting new ways of living in harmony with nature. In recent years, and more so during the COVID-19 pandemic, we have become aware of the challenges that municipal cemeteries face, such as limited burial space in many major metropolitan areas. Furthermore, the negative impact that the burning of fossil fuels has on the environment is an issue that concerns all of us. At AVBOB, we know that we have both a direct and indirect impact on the environment, which is why we are deeply committed to preserving our natural resources. In running our operations, we measure our impact on the environment constantly and go to great lengths to reduce any negative impact. With this in mind, in 2019, AVBOB introduced aquamation in South Africa – a planetfriendly alternative to traditional flame-based

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Over the past century, we have had to adapt to numerous challenges and have adopted an agile approach to the many facets of our business.”

cremation. AVBOB had been looking into new, innovative alternatives to conventional burials and flame-based cremation for quite some time and started doing extensive research into aquamation more than nine years ago. This included visits to facilities in the United States and consultations with various local and global stakeholders. Furthermore, AVBOB has embarked on several sustainability initiatives, such as using solar energy at some of its premises around the country. In 2016, we installed a bank of 134 KW photovoltaic panels on the roofs of our manufacturing facility in Bloemfontein – as part of a pilot project. Due to the success of this pilot project, AVBOB accelerated its initial roll out plan. Photovoltaic panels at the Bloemfontein manufacturing facility now generate 80% of

the factory’s initial demand. The long-term plan is to continue to roll out energy-saving projects and use more energy-efficient equipment, which will indirectly increase our in-house energy generation. Changing weather patterns Climate scientists have found that the probability of disastrous events occurring has doubled and their intensity increased between 4% and 8% due to climate change. Climate change is thus increasing the intensity of extreme weather events, such as the recent heavy rainfall in KwaZulu-Natal and the subsequent flooding. In April 2022, AVBOB donated R7 million to assist KwaZuluNatal communities affected by the floods. Apart from the need for shelter, food insecurity becomes more acute in times

of disaster. Access to food remains a daily struggle for about 14 million South Africans. This situation has worsened due to the COVID-19 pandemic, rising cost of living, and climate change. Climate change affects food security through its impact on rainfall patterns, drought, production outputs or new crop diseases, among other things. With the population in South Africa expected to grow to over 70 million people by 2050, the demand for food is set to increase exponentially. Experts warn that if local food security challenges are not adequately addressed, the hunger problem will likely reach disastrous proportions in the next three decades. Food insecurity is not only a local issue. The State of Food Security and Nutrition in the World 2022 (an annual UNICEF report) indicates that world hunger rose to as many as 828 million in 2021 and that 11.7% of the global population faces food insecurity at severe levels. The impact of climate change (and its escalation of extreme weather events and food insecurity) is thus broad and complex. It requires all hands on deck to drive meaningful and sustainable solutions.

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Despite its challenges, ESG investing is here to stay By Teboho Makhabane, Head of ESG and Impact at Sanlam Investments

n article in the Financial Times in June 2022 suggested that ESG investing is at a reckoning. Some even claim that the term environmental, social and governance (ESG) investing is misleading and, at times, even contradictory. The war in Ukraine is a case in point. It has forced some European governments to follow ethical rather than environmental values by reverting to fossil fuels to avoid buying gas from Russia.

adequate infrastructure, unemployment and lack of economic growth, South Africa cannot transition too rapidly without the adequate reskilling and retention of the fossil fuel workforce. The consideration of ESG factors, along with financial concerns, will continue to play an essential role in ensuring that investment does more good than harm and that the transition is truly just. Asset managers need to continue supporting companies that have already embraced sustainability and those that still need to transform in the future. As such, we will continue integrating ESG factors into our investment decisions and play an active role in driving the change we want to see in our investee companies.

Although not a new concept within global investment circles, ESG investing has grown considerably in popularity over the past three years. According to US financialservices firm Morningstar, ESG assets under management surged by 53% year-on-year to US$2.7 trillion in 2021 as funds scrambled to take advantage of the sustainable investing trend. This can be attributed to the increasing awareness of environmental issues and the need for industries to decarbonise as well as the societal inequality highlighted by COVID-19.

Our sustainable investment policy is constantly evolving and covers different asset classes. These include sustainable investments related to public equity, fixed income, private equity and indexation. Our efforts are focused on four key areas: • Board quality and strength - part of the UN’s Sustainable Development Goals (SDG 16 and SDG 5) • Diversity, equity and inclusion (SDG 5) • Climate action – a just transition (SDG 13) • Shareholder alignment through remuneration (SDG 16)

Given the European energy crisis, rising inflation and the turbulent geopolitical climate, some critics believe that there is now a need to step back and once again focus more on profit and returns and less on the ‘doing good’ side of investing. This is especially true if one considers how well defence, oil and gas stocks are doing on international markets, making them hard to ignore. Actively driving the change we want to see In South Africa, transitioning towards renewable energy has been impeded by our electricity supply problems and subsequent heavy reliance on diesel and coal. Five of the biggest economies in Africa, including Nigeria, Algeria, Morocco, South Africa and Egypt, are still highly dependent on fossil fuels. Given our existing challenges of poverty, lack of

Teboho Makhabane, Head of ESG and Impact at Sanlam Investments

Sanlam Investments remains committed to ensuring long-term sustainability for local and international investors and current and future generations through responsible investment practices, as is evidenced in our Sustainable Investments and Impact Report 2022.

Five of the biggest economies in Africa, including Nigeria, Algeria, Morocco, South Africa and Egypt, are still highly dependent on fossil fuels.”

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Sustainability is a big deal for small business By Kyle Durham, Head of Sustainable Finance and ESG Solutions at FNB

here’s a widely held misperception that sustainable development and climate action are the exclusive domain of governments and large businesses. It’s not hard to see why this misperception exists. The sheer enormity of the task of achieving the United Nations Sustainable Development Goals, coupled with budget discussions involving billions, even trillions of dollars, leave most individuals and small businesses doubting the value of any contribution they could make towards building a more sustainable world. Of course, this thinking is very misguided. In fact, without the commitments of individuals and communities, real sustainable development will not be possible. And when you consider that small and medium enterprises (SMEs) make some of the largest contributions to economic growth and job creation in most countries, it’s clear that they have a vital role and an absolute responsibility to champion the sustainability cause in all their business dealings. But for most SMEs, sustainability is not just a responsibility; it’s also a massive opportunity. And failing to recognise and understand both these sides of the sustainability coin could be the downfall of the uninformed SME. Here are three of the reasons why this is the case: • SMEs have a growing role to play in the ESG aspirations of large organisations The massive importance of Environmental, Social and Governance (ESG) factors for businesses, especially for large and listed organisations, means that most of these companies need to build relationships with suppliers and business partners that support and enable their ESG aspirations. This is having a notable effect on procurement practices, many of which are being transformed to

ensure that goods and services are acquired from businesses that can demonstrate a strong sustainability commitment. Much as has been the case with BEE, it’s likely that big businesses are increasingly going to be needing to demonstrate that their supply chains are made up of companies that are as committed as they are to sustainable development. It’s vital for SMEs to get ahead of this trend and establish strong sustainability credentials, not just to avoid the risk of losing business, but also to have access to the growing number of opportunities that a demonstrable sustainability commitment will bring. • M ore and more customers expect sustainability from your businesses As Africa’s consumer base becomes steadily younger, it is also becoming increasingly sustainability conscious. Customers are no longer content with simply shopping for the cheapest product or service. They are becoming highly discerning about where they are prepared to spend their money and choosing businesses that demonstrate a sincere commitment to using their resources to build a better world. What’s more, the immediacy of social media, and the growing impact its growing cohort of influencers has on markets, means a business that doesn’t live up to the sustainability commitment expectations of today’s consumers can quickly find itself out in the cold. Of course, the opposite is also true, which is why becoming sustainability-minded, irrespective of what line of business you are in, makes sound business sense. • It’s not a cost, it’s an investment in the future Many smaller businesses still suffer under the misguided belief that being sustainable is simply too expensive. Unfortunately for them,

For most SMEs, sustainability is not just a responsibility; it’s also a massive opportunity.”

Kyle Durham, Head of Sustainable Finance and ESG Solutions at FNB the real cost of failing to integrate sustainability into their businesses is much higher than the relatively minor investment required to do so. What is needed is a significant paradigm shift. When you consider that your business can only be sustainable if your markets are as well, it becomes clear that sustainability is not a cost. It’s an investment. Without a resilient, inclusive, and self-sufficient society, businesses would quickly run out of customers. So, helping to build that resilient society should be at the heart of every business plan. It’s not a cost centre, it’s a source of value – and every business needs to be tapping into it. The bottom line is that achieving meaningful, sustainable development can’t just be left up to large corporates and national governments. It’s a responsibility shared by every citizen in the world, and that includes small and medium businesses. There is no time to lose. SMEs need to act on the imperative to embrace the role they can and must play in sustainably transforming our planet and its people. It’s one of the most important investments a business can make today, and the returns are potentially endless.

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Solving the power crisis in SA By James Cumming, GM of African Clean Energy Developments

ACED’s De Wildt PV Project

UNLOCKING GRID CAPACITY AND IMPROVING GRID ACCESS PROCESSES ARE KEY TO HELPING SOLVE THE POWER CRISIS WITH RENEWABLES

n many occasions, while on a Teams or Zoom conference call, negotiating construction contracts or funding agreements for renewable energy plants, the meeting has ironically been cut off due to load shedding. When the call resumes (for those lucky enough to have an alternate power supply), in response to the often-used, ‘sorry, load shedding’, we cheekily say, ‘we’re working on that’. The trouble is, it’s getting harder and harder to ‘work on that’ at the scale required and in the areas best suited to renewable energy projects. These areas have a vast stock of highly competitive, fully-permitted wind and solar projects, ready to be funded and built. The challenge is not because of

issues that used to plague the renewables industry - overly burdensome bureaucratic red tape in developing projects, delayed and unpredictable timing of the Department of Minerals, Resources and Energy (DMRE) Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Windows (BW), or political interference. The renewables industry is facing a new challenge. There is extremely limited power line and transformer capacity for connecting additional generation to the grid in the Cape provinces. This lack of grid connection capacity is a serious issue as these areas, with high wind and solar resources, are home to more than 75% of the most competitive shovel-ready renewable energy project stock available.

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James Cumming, GM of ACED

We must commend the Government, largely driven by the Presidency, for how, over the last 12 to 18 months, they have created an enabling environment for renewable energy and private power generation and offtake to help solve South Africa’s power crisis. The Government has mostly done away with protracted NERSA generation licensing processes and project-size thresholds. They have expedited permitting timeframes and made various government agencies available to unlock bottlenecks to bring generation online faster, where possible. Renewable energy is by far the cheapest form of electricity generation. It is sustainable and climate-friendly. One would therefore assume it should be completely unhindered in solving the power crisis.

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This grid connection capacity issue means there will be a significant lag in getting renewables projects developed and constructed at scale in other parts of the country (Free State, North West, Mpumalanga, KZN) as studies and permits take time, especially for wind projects. These provinces are more densely populated, with sensitive environments in parts, which can lead to further complications and smaller projects. Wind and solar resources are worse relative to the grid-constrained areas, which means power from these plants will be more expensive.

Turbines at ACED’s Cookhouse Wind Farm

However, to address the grid constraints, we need multi-billion Rand upgrades in the form of new power lines and substations. This could take five to eight years, potentially longer, if the private sector isn’t involved alongside Eskom and the Government. Eskom are also fixated on N-1 levels of security in power supply – i.e. N-1 security means that power evacuated by a transmission line must have an alternate evacuation route in the event that it fails. The grid is therefore already effectively doubled up relative to the capacity that Eskom has it rated for. Ensuring this level of grid security at a time when we don’t have any semblance of power security needs serious consideration. The renewables industry is also facing the complex issue of developers and IPPs oversubscribing for grid connection capacity in Eskom’s grid access application process via the Commercial or Industrial (C&I) market. While there is currently availability of technical connection capacity in these areas, the opening up of the South African renewables industry for the private offtake/ wheeling market, coupled with the grid connection application process, has resulted in this confusion and over-subscription.

cannot be built at the scale and timelines that the country requires to solve the electricity crisis. As we saw in BW6, REIPPPP could have procured up to 4.2MW of renewables projects yet only awarded 860MW of solar PV in areas with less contested grid capacity. BW6 projects had to commence construction by mid-2023 to comply with the bidding rules, which was achievable. By comparison, the largest single private power procurement process to date has only been circa 600MW, which is significantly larger than the next biggest. Furthermore, timelines for construction commencement in the C&I market are delayed by extended contract negotiations. Despite all of the activity in the C&I market, only about 250MW of wheeled power projects had reached financial close by the end of 2022. Between 400-600MW are due to close in the first half of 2023. It will take two to three years before the C&I market can do 4.2GW in a single procurement event. That BW6 was not fully allocated is a wasted opportunity for a further 3.4GW of renewables projects that could have started construction by mid-2023.

Solutions are available but timing and coordination are critical The private sector must be allowed to implement grid upgrades on behalf of Eskom. We need to move beyond the privatisation of generation only and either amend regulation or develop a procurement process for grid expansion. This could be similar to a toll road or concession model, which successfully privatised public infrastructure in the past. Furthermore, with a review of the rules and the models used to manage the grid, determine capacity, and N-1 requirements, one could unlock very significant capacity at the stroke of a pen. Then the IPP market could rapidly mobilise and provide over 10 GW of fully permitted wind and solar projects. In addition, grid access where grid is available needs to be improved. The lack of Eskom queuing rules is behind the failure of BW6 and much confusion and speculation in the C&I market. This must be addressed immediately to ensure certainty in renewables procurement at scale, fast. It is unlikely that we can solve load shedding without unlocking the grid , as well as ensuring REIPPPP does not fail again, as it did in BW6.

The impact of this is that Eskom and the DMRE cannot adequately assess private project feasibility and maturity. In the absence of an Eskom connection application queuing system, in REIPPPP BW 6, no wind farm projects were awarded when the allocation up for grabs was 3.2GW. It was widely believed that at least 2GW of capacity was (or is) available. Challenges facing the renewables industry While it is excellent that the C&I market is growing so fast, it’s still in its infancy and

ACED’s Hopefield Wind Farm

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HEINEKEN IS BREWING A BETTER WORLD Our aspirations as a responsible corporate citizen are encapsulated by Brew A Better World; a strategy which guides our actions in the areas of ENVIRONMENTAL, SOCIAL and RESPONSIBILITY. Each of these pillars has clear goals: in the area of Environment, our sights are set on achieving carbon neutrality, circularity and healthy watersheds. Our Social priorities are diversity, fair and safe workplace, and positive community impact, while our Responsibility pillar sees us focusing on healthy choices, addressing harmful use of alcohol and promoting moderation. These goals can be summarised as a path to zero impact; a path to an inclusive, fair and equitable world, and a path to moderation and no harmful use. During the past year, we undertook a number of initiatives in support of these aims.

ENVIRONMENTAL

SOLAR PLANT

ARBOUR WEEK

Our efforts to reduce carbon emissions were bolstered by the establishment of a solar plant at our Sedibeng Brewery. The output of the 14 000 panels that make up the plant will help us decrease our carbon impact by 30%. We’re addressing carbon emissions from a different angle, too, using tree planting as a de-carbonisation mechanism. This year, through our partnership with Food and Trees for Africa, we planted trees in densely populated urban areas, across 27 beneficiary sites and sequestering 125,13 tonnes CO². Our accent on promoting healthy watersheds led to the establishment of a water reclamation plant at our Sedibeng Brewery. This makes it possible for us to recycle the water used in our production processes, ensuring that we use less municipalitysupplied water. We have also introduced education campaigns around water preservation, to raise awareness among staff members. We continue to take part in recycling initiatives and projects that promote the circular economy. Project Vuselela, a KZNbased programme which encourages the collection and recycling of glass bottles, is a case in point.

PROJECT VUSELELA

GREEN SEEDS PROGRAMME

KZN FLOOD SUPPORT

SOCIAL The challenges presented during the past year have placed enormous strain on South Africans. We rose to the occasion, offering aid and support wherever possible, in our efforts to have a positive impact on our communities. With the understanding that our staff is our most important community, we took special care to offer support to employees affected by the KwaZulu-Natal floods or impacted by the Covid-19 pandemic and looting. We broadened our support to external communities affected by these disasters, too, distributing food parcels for victims of the floods. We assisted with the rebuilding of a residence for the blind in KZN and distributed water in communities. We also distributed food parcels for recyclers in our communities, increasing our activity in this area around Mandela Day, when we also distributed care packs. HEINEKEN also participated in various unique projects including renovating and providing supplies for a Victim Empowerment Centre; installing water tanks and hygiene stations in water scarce areas and setting up a communal food garden amongst others.

RESPONSIBLE We are long-time supporters of responsible consumption campaigns, especially those promoting safe driving without drinking. In fact, we’re helping to make moderation cool by allocating 10% of our annual media spend on campaigns promoting responsible consumerism; reaching one billion people. However, we have gone beyond this to tackle the issue of excessive consumption in South Africa, with a tavern outreach programme to educate visitors about responsible drinking. This is part of our endeavour to address harmful use. We are also a proud member of Aware. org, an organisation helping the youth and adults understand the dangers of harmful drinking and how this impacts on all areas of life. To ensure we practise what we preach, we encourage retailers to make sure that Heineken 0.0 is readily available. This strategy falls under our commitment to ensure there is ‘Always a choice’, and sees us ensuring that there are alcohol-free options. To make it easier for people who want to make different choices, we have committed to ensuring that all of our products feature accessible, transparent product information.

HEINEKEN SOUTH AFRICA LAUNCHED S’FIKA SONKE A UNIQUE ROAD SAFETY CAMPAIGN

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World-class logistics meets the challenge of distributing medicines in Africa By Jacques Vermeulen, Group CEO, Coca-Cola Beverages Africa

In response to the Covid-19 pandemic, Project Last Mile supported Mozambique’s Ministry of Health and USAID in rolling out the national vaccination campaign. This involved expanding the storage capacity for Pfizer vaccines and improving strategic planning to strengthen vaccine distribution. Project Last Mile conducted a national audit of cold chain equipment and ultra-low temperature freezers across eight provinces to ensure readiness for receiving and distributing the vaccines.

oing business in Africa comes with a unique set of challenges, and for a fast-moving consumer goods company like Coca-Cola Beverages Africa, one of the biggest of these is the vast distances involved in delivering products to market using a limited road network. The same problem confronts government and development agencies wanting to get life-saving medicines to the remotest parts of a country. Solving this route-to-market challenge in the most cost-effective way possible is a big part of staying competitive for an African business, especially now as we deal with very low growth in the economies where we operate, coupled with significant cost challenges related to petrol and diesel prices, sugar tax, raw material price increases, high inflation and currency devaluation. A small saving on each kilometre along delivery routes can translate into large savings for the business. Part of our response to the current economic challenges has been to initiate a reassessment of our entire value chain, including logistics, to identify every possible opportunity to improve how we do things. Our world-class logistics expertise is a key strength of our business, and one that we are also putting to use in the service of the public health sector through partnering with an initiative called Project Last Mile. Project Last Mile has worked in 17 countries in Africa to strengthen public health systems by applying best practices from The Coca-Cola system to improve the public sector’s ability to deliver medicines, vaccines, and supplies reliably and efficiently to facilities and patients. Coca-Cola Beverages Africa partners with Project Last Mile across eight countries

Coca-Cola Beverages Africa CEO, Jacques Vermeulen where our footprints coincide; South Africa, Mozambique, Zambia, Uganda, Malawi, Kenya, Tanzania and Eswatini. The work done in Malawi and Mozambique are good examples of how our expertise has been used to assist Project Last Mile. Since 2016, Project Last Mile has partnered with the Ministry of Health, Central Medical Stores, and The Global Fund to fight AIDS, Tuberculosis and Malaria to strengthen the public health system in Mozambique. With the support of Coca-Cola Beverages Africa’s expertise and vehicles, the project has mapped 80,000 km of road networks and confirmed GPS locations of 93% of Mozambiques’s health facilities across 11 provinces. The project has generated detailed information on road conditions in the wet and dry seasons, the category of vehicle required to deliver to each health facility, as well as a calculation of costs.

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In Malawi, Project Last Mile applied similar capabilities to strengthen storage of vaccines that require cold or ultra-cold temperatures. The project, with the help of the Coca-Cola Beverages Malawi team, has done an assessment of every unit of cold chain equipment in the country’s health facilities and compiled a database that includes information on its warranty status and current functionality to enable proper preventive maintenance and repair planning. Going a step further in Malawi, Project Last Mile, with Coca-Cola Beverages Africa’s support, has begun training government technicians in cold chain equipment maintenance and basic repair, with a commitment to train 100 individuals. The partnership with Project last Mile shows how governments can draw on the know-how of businesses like Coca-Cola Beverages Africa to strengthen the capacity of the public sector to serve citizens more cost-effectively and efficiently. As the biggest bottler on the continent, accounting for 40% of Coca-Cola volumes sold in Africa, Coca-Cola Beverages Africa takes pride in our vision to refresh Africa and make the continent a better place for all. Project Last Mile is just one of the ways we’ve been able to put our vision into practice, with tangible results.

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Financial institutions have the power to fight climate change By Sasha Cook, Standard Bank Head of Sustainable Finance

clear transition strategy so as to facilitate transitioning the economy on a greener path.

inancial institutions, as lenders and asset managers, have a significant role to play in the transition to a greener economy.

Decentralised energy We also see significant opportunities in the decentralised energy or off-grid space. Many prominent industrial players and mining houses are working with third parties to build their own renewable energy power plants to ensure a secure and consistent energy supply. One recent transaction where we facilitated the financing of the project is with titanium producer Tronox, who partnered with South African independent power producer SOLA Group to construct a 200MW solar power plant to ensure a reliable energy supply and will also see them reduce their carbon emissions by 13%.

Committing to achieving net zero within their operations is valuable, but where they have the most significant impact is in the assets or businesses they choose to finance or invest in. Financing businesses with strategies to achieve net zero emissions targets can have a real and lasting impact in the fight against climate change. Standard Bank’s new climate policy, which targets the higher emitting sectors, includes inter alia the bank’s position that it will not finance new coal-fired power plants and has also introduced exposure caps or reduction targets in higher emitting sectors such as oil and gas and thermal coal. While focusing on reduction targets is important, financial institutions should also commit to mobilising sustainable finance. Standard Bank has committed to mobilising more than R250-billion in sustainable finance by 2026, including financing R50-billion for renewable energy power plants and underwriting a further R15-billion by the end of 2024. Although some local banks have made public commitments to sustainable and green finance, more needs to be done in this space. Transition finance Transition finance is a category of finance that is critically important to greening the economy but remains an underdeveloped segment of the sustainable finance market in Africa. Transition finance can help facilitate a move away from high carbon emitting methods of production to more climate-friendly methods, whether it be within a sector such as aviation where

Sasha Cook, Standard Bank Head of Sustainable Finance players seek a pathway to achieving lower carbon emissions or a transition away from an industry such as coal mining with its carbon-heavy activities towards more future-proof climate-friendly activities such as renewable energy. Financial institutions play a critical role in mobilising capital not only towards those in the green sectors but also towards those in higher emitting sectors in support of a

Funding the just energy transition The just energy transition is about an evolution towards a cleaner, greener energy future while mitigating any potential negative social impacts and increasing sustainable jobs. A National Business Initiative report released in December 2022 puts the cost of financing the just energy transition at more than R5,9-trillion by 2050, with more than R1-trillion required by 2030. These are staggering amounts and will require all financial stakeholders, including the government, financial institutions, private investors, development finance institutions, concessional funders and donors, to get involved. Interestingly, 40% of the necessary initiatives are not seen as commercially bankable. Therefore, a greater focus on blended finance is needed if the just energy transition is to succeed.

Financing businesses with strategies to achieve net zero emissions targets can have a real and lasting impact in the fight against climate change.”

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

A R6.8 BILLION AUTOMOTIVE DEAL THAT’S ALSO A BREATH OF FRESH AIR. Corporate and Investment Banking In the first ZAR-based, syndicated sustainability-linked funding package in the South African automotive industry, the R6.8 billion arranged on behalf of Motus Holdings Limited will allow our long-standing client to continue its journey towards cleaner operations. So much so that it has committed to reducing its fuel consumption used by group vehicles from 22 to 18 million litres, water from 611 000 to 538 000 kilolitres, and electricity from 80 000 to 68 000MWh by 2023 – all while driving workplace diversity and inclusion as the journey unfolds. Find out more about a deal that will change the future of the environment, communities and individuals forever at standardbank.com/cib

Standard Bank is an authorised financial services and registered credit provider (NCRCP15). The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06).

SA’S FIRST ZAR-BASED AUTOMOTIVE SECTOR SYNDICATED SUSTAINABILITYLINKED FACILITY Standard Bank has successfully led an arrangement for the first ZAR-based sustainability-linked funding in the South African automotive sector. The transaction comprises a R6 billion sustainability-linked term facility and an R800 million sustainability-linked working capital facility for leading automotive group, Motus Holdings Limited. The R6.8 billion funding package highlights the importance of Motus’s Environmental, Social and Governance (ESG) journey. What is a sustainability-linked loan? Sustainability-linked loans tie the terms of funding to ESG outcomes to support and incentivise responsible corporate behaviour and the creation of shared value. As Motus achieves its Key Performance Indicators (KPIs), it receives an incentive in the form of a favourable rate benefit, and vice versa, should it not achieve its KPIs. This drives Motus’s environmental and social impact through material KPI selection and setting ambitious targets, with a focus on its own road fuel consumption, water consumption, electricity efficiency and gender equality to drive diversity and inclusion. What was Standard Bank’s role? Standard Bank, as mandated lead arranger, bookrunner and sustainability coordinator, brought market participants together to successfully syndicate its first ZAR-based sustainability-linked funding in South Africa. The bank was able to partner with Motus to create a financing solution that supports the continued growth ambitions of the business, while also aligning with its ESG commitments.

ESG performance as a financial priority Standard Bank is focused, primarily through its Sustainable Finance division, on providing financial products and services that support positive ESG outcomes, including green and social bonds, sustainability-linked loans and bonds, sustainable trade and working capital solutions, and impact investing. “ESG performance is both a financial and ethical priority. Companies that operate in a sustainable manner tend to have lower risk profiles and outperform those that don’t over the long-term. For this reason, demand continues to grow for sustainability-linked financing that can offer clients the opportunity to narrow down the focus on their environmental impact strategy and deliver socio-economic impact,” says Anneke Lund, Sustainable Finance Executive at Standard Bank Group. CEO of Motus, Osman Arbee, says partnerships remain vital in not only providing access to financing for the company’s expansion plans, but also in leveraging extensive reach, experience, and insight into the African market’s social, economic, and regulatory landscape. “As we enter our 75th year of operations, our commitment to ESG practices and principles, will ensure we remain a sustainable and valuable contributor to our customers, employees, supply chain partners and the communities in which we operate,” says Arbee. For further information, go to standardbank.com/cib

THOUGHT LEADERSHIP ARTICLE

2023 Renewables Outlook: The year of the private PPA By Jan Fourie, Executive Vice President, Sub Saharan Africa, Scatec

he year 2023 will be the year of the private power purchase agreement (PPA) - a culmination of events that have been in the works for a long time. Firstly, the Eskom situation is not improving and will require much focus to get it back on track. This is likely to happen only in the medium to long term. Businesses must realise that they must be part of the solution, not just for themselves but for South Africa. As PPAs gain momentum in 2023, we must see this change happening on all fronts, both in government and private procurement. Both avenues are necessary to keep the lights on and to deal with the Eskom power stations that will be decommissioned in the coming years. The COVID-19 pandemic brought home just how interdependent we are and how we can be affected by the fragility of crucial industries and supply-chain networks. Whether 1MW,

100MW or 1000MW that a big corporate can bring onstream, it relaxes overall pressure on the grid and is one way in which we can limit the need for load shedding. We also saw a change in government policy in 2022. It became possible to provide private power at scale in South Africa. The cap of 100MW for self-generation was removed and signed into law. The removal of the cap was welcome news for the private power sector. The sector can now unleash the true potential of private power in South Africa and think large-scale when it comes to development and finance. The City of Cape Town’s recent imple mentation of a feed-in tariff for all small-scale embedded generation systems has paved the way for municipalities to pay residents and businesses for excess energy generated – a significant step in the right direction.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

Jan Fourie, Executive Vice President, Sub Saharan Africa, Scatec

THOUGHT LEADERSHIP ARTICLE

Corporates, sponsors and lenders now need to come to terms with what it means to procure private power. They must come to terms with the different risk allocations of a government PPA with a sovereign guarantee versus a corporate off-taker with a credit rating. We’ve seen the biggest level of alignment on a policy and political level that I can remember since I started working in the renewables space. This includes the Department of Mineral Energy and Resources, the IPP Office (Independent Power Producers), Eskom, and the Government together pulling in the right direction because of the threat we are facing as a country. The more of this kind of stability and certainty we can have, the better for our energy prospects in future. Continuity in terms of people and policy is vital.

FINANCIAL MAIL ESSENTIALS • GREEN ECONOMY 2023

A leading renewable energy solutions provider

in South Africa

448 MW in operation

540 MW

solar PV +225 MW battery storage

273 MW

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Scatec is a leading renewable energy solutions provider, accelerating access to reliable and affordable clean energy in emerging markets. As a long-term player, we develop, build, own and operate renewable energy plants, with 4.6 GW in operation and under construction across four continents today. We are committed to grow our renewable energy capacity, delivered by our close to 800 passionate employees and partners who are driven by a common vision of ‘Improving our Future’. Scatec is headquartered in Oslo, Norway and listed on the Oslo Stock Exchange under the ticker symbol ‘SCATC’. To learn more, visit www.scatec.com or connect with us on LinkedIn.

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INVESTMENT GROUP DO GREAT THINGS EVERY DAY Old Mutual Investment Group (Pty) Ltd is a licensed financial services provider. *Awarded Best ESG Responsible Investor – Africa 2022, by Capital Finance International (https://cfi.co/).