LOOKING back, it now seems like ages ago, in another era – but as South Africa was preparing to announce the winning bid for the nuclear new build in September 2008, the ANC decided to pull the rug from underneath then president Thabo Mbeki’s feet.
This was done for unrelated party political reasons. At the time, there were two contenders for the bid to construct South Africa’s next generation of nuclear power plants (reportedly a fleet of six), the first time since Koeberg nuclear power station was commissioned in the early 1980s.
The two contenders were French multinational Areva and America’s Westinghouse Electric Company. Westinghouse is now 87% owned by Japanese Toshiba, whereas Electricité de France has recently been given the go-ahead by the French government to purchase majority shares (75%) in financially troubled Areva.
During the six months following Mbeki’s departure from office, Kgalema Motlanthe was interim president and Bridget Mabandla his interim minister of public enterprises (formerly Mbeki’s minister of justice). Eskom reported to her department. Eskom also had finely dotted lines to Buyelwa Sonjica, the minister of minerals and energy during that period.
The interim set-up, combined with an economic climate that was rapidly taking a turn for the worse, did not provide the right climate for the government to go ahead with the nuclear deal. Mbeki had been accused, among others, of alienating Cosatu and the SACP from government decision-making.
The gulf that sat between him and Luthuli House made many ANC big hitters nervous, especially after he had fired his then deputy, Jacob Zuma, also for unrelated reasons.
It became clear that signing off on a massive deal to construct a new generation of nuclear power plants in South Africa could not be placed at the top of the interim administration’s priority list; it was also becoming increasingly unaffordable with each passing week.
In the meantime, both Areva and Westinghouse had invested millions in the construction of massive office blocks and brought in additional engineering capacity into the country in anticipation of a bid outcome each hoped would go their way.
To satisfy government’s localisation condition, they had also signed empowerment deals of sorts with domestic companies and committed to ensure that there would be nuclear skills development and economic empowerment in South Africa. Many of these plans either had to be undone completely or reduced in size in the years that followed, to keep operating costs down.
Despite the changed political and worsening economic climate, the South African government remained steadfast that it would go ahead with the nuclear new build. A process driven by the Department of Energy was undertaken to develop a comprehensive Integrated Resources Plan, still dubbed IRP 2010-2013 despite having been slightly updated in 2013, to ensure broader buy-in.
The IRP is meant to serve as government’s blueprint for determining the requirements for SA’s investment in electricity generation capacity. It models a number of scenarios determining what the best energy mix would be for South Africa.
Does Rosatom know something we don’t?
Fast-forward to 2014 leading into 2015, and the list of contenders for the nuclear new build has grown. In addition to the French and the Americans/Japanese, the Russians, Chinese, and South Koreans have entered the race. Going by media coverage alone, and considering President Zuma’s very public mock-dancing with Russian President Vladimir Putin, we could all be excused for suspecting that Rosatom, Russia’s government-owned nuclear company, knows something we don’t.
But now, as happened in 2008, the economic conditions are worsening again. The rand has reached historic lows again and the mining sector is in trouble, threatening to shed thousands of jobs in order to stay afloat.
Other economic sectors are also feeling the pinch. Thanks to government indecision and Eskom’s inaction, electricity prices have skyrocketed, small businesses are bleeding, new vehicle sales have dropped and consumer confidence is at one of its lowest points.
Still, government is either unable or unwilling to tell us where it will get money to finance the nuclear new build and, crucially, how this will be repaid. If this important investment decision will be financed on the basis of the revised IRP, which anticipates reduced energy demand owing to weakened economic activity, some argue there should no longer be any urgency for government to aim for the planned 9.6 GW of nuclear energy.
They also argue that economic growth predictions of 5.4%, as per the National Development Plan, are no longer realistic in the currently underperforming economy.
So, should South Africa go ahead with the procurement of 9.6 GW of nuclear power or is it time to return to the drawing board, given the changed demand projection and economic outlook?
What will proceeding blindly do to the country’s image?