Economy / 23 September 2019, 12:30pm / Edward West
CAPE TOWN - South Africa is in the grip of an energy crisis and Eskom is just part of it - there are also deep structural problems in the petroleum industry.
Globally, vehicle engines are being designed to use cleaner petrol than is used in South Africa, and the multibillion-rand projects to make lower particulate diesel and petrol at oil refining facilities in South Africa were put on ice in 2017 because the industry and government were in negotiations to recoup the upgrade costs.
The government wants to build a new oil refinery in Richards Bay, in partnership with Saudi Aramco, to produce the Euro 5 cleaner fuels, but this project is still on the drawing boards.
The government's own fuel industry companies are making losses of billions of rand which, considering the country's fiscal constraints, does not make for a conducive environment for further investment.
In the meantime, electric vehicles (EV) are sold in increasing numbers across the world.
Many developed countries have stipulated time frames from which new cars with full combustion engines will no longer be allowed to be sold. In the UK, for instance, the year is 2040.
These cars are cheaper and cleaner to operate, but only three premium models have been available in this country. But, like all new technologies, the price is likely to fall sharply considering the rapid growth of EV elsewhere.
It may seem realistic to expect petrol and diesel cars to be around in South Africa and the rest of Africa for many years to come, but consider the rapid adoption of mobile technology and associated services across the continent.
So the time gap to build a new oil refining capacity, or upgrade, is narrowing. Cleaner petrol and diesel will have to be imported imported in the meantime.
However, my view is that Africans have proven to be early adopters of new technology if it works for them. EV is likely to grow very rapidly, globally, and at least in this country, on the continent, and in spite of the current problems at Eskom.
Mobility, electric, is a key component of the Fourth Industrial Revolution.
On the JSE, there are a few companies gearing up for the long-term change, or are at least likely to play a major role in it.
Motor industry stalwart Metair, through its energy storage division, which makes solar systems, batteries, starter batteries, back-up systems, standby systems and charging systems, is one of these companies.
Its lithium-ion applications in mining cap lamps and automotive starter batteries demonstrates knowledge and expertise in new technology applications.
The share price was R23.88 on Friday at an undemanding * :e of 6.5.
EV and associated technologies should bring significant cost benefits to logistics companies.
The benefits for Motus, South Africa’s biggest automotive group with operations in the UK and Australia, seem self evident, especially in its vehicle hire and retail businesses.
Its share price at R71.27 on Friday was also at a low * :e of 7.1.
Bidcorp, which moves its food mainly by road on five continents, should be a beneficiary of these cost benefits over time as well. Its R331.26 share price traded off a * :e of 24.69.
Hudaco Industries, importer and distributor of batteries and energy solutions products, chargers and solar batteries, among an array of other products that it supplies to the auto and engineering industries, will undoubtedly also be a player in the mobility revolution.
The more than a century-old company reported flat earnings in the six months to May 30, but until then its annual 20-year shareholder return was 25 percent. The R109 share price was also off a low * :e of 8.42 on Friday.
An interesting project to watch is Anglo American Platinum's joint venture to develop new technology, using platinum and palladium, that claims to significantly boost the power of lithium ion batteries.
Admittedly, it is very early days yet for this technology.