Parliament – National Treasury has said there are no conclusive figures to date on the financial affordability and social impact on procuring new nuclear plants for South Africa.
In a response to a parliamentary question released on Friday, Finance Minister Pravin Gordhan said studies released by the department of energy last week were based on limited information and called for more research, seemingly contradicting energy deputy director general Zizamele Mbambo’s statement that only an approach to the markets would be useful.
“These reports only contain preliminary observations, which were reached from limited information. Extensive work is still required before substantive conclusions are reached,” Gordhan replied to a question from Democratic Alliance finance spokesman David Maynier.
“A full cost-benefit analysis must be conducted which must include a comprehensive social and economic impact assessment before the feasibility, affordability and procurement strategy can be properly assessed by the Treasury.”
Gordhan added that the Office of the Chief Procurement Officer held discussions with the department of energy about the feasibility of the nuclear expansion programme last year. Following that, the finance ministry wrote to the department to convey its view, he said.
In September this year, the department then sent National Treasury a set of documents, including the reviews undertaken by the department’s transaction advisors.
Ten days later, Treasury sent the department a letter “ outlining Treasury’s assessment on the state of readiness of the procurement strategy”.
It planned to engage further with the department once it was able to submit more substantive documentation, he said.
Last week, the department briefed Parliament’s portfolio committee on energy on the preliminary studies, conceding that it was doing so reluctantly because it believed releasing the information would skewer the tender process for a nuclear build.
Mbambo told MPs that after National Treasury conducted an analysis in 2015 and submitted its conclusions to Cabinet, it was concluded that “any further studies will not provide more accurate answers” and that the only way to get reliable information was to go to the market.
Eskom is preparing to go to the market with a request for proposals before the end of the year, despite the newly released draft Integrated Resource Plan proposing a seven-year delay in the programme because its base case scenario projects 2037 as the commissioning date for the first new plant.
Business Day on Friday quoted the director-general of finance, Lungisa Fuzile, as saying that Eskom’s current government guarantees totaling R350 billion may not be used to fund nuclear reactors.
“The R350bn was never given for nuclear,” Fuzile said. “If Eskom were to want to use the guarantee for anything other than what was in the build programme they would have to come and negotiate with us.”
Gordhan has maintained that he would not approve a nuclear build programme the country cannot afford.
The potential cost of nuclear has become a political battle point and critics of Eskom’s plans last week pointed out that if constraints in the IRP on renewables were removed, solar, wind and gas would be the cheapest energy supply mix and also meet security of supply requirements.
The reports the energy department released to the portfolio committee outlined more than a dozen studies done since 2008. One of these, carried out by engineering consultancy group Ingerop, informed President Jacob Zuma’s announcement that South Africa would add 9 600 megawatt to the electricity grid and came up with an average capital cost of US4,918/kWe.
This was higher that the figure publicly advanced by Mbambo last year.
DA energy spokesman Gordon Mackay said Gordhan’s response was clearly at odds with Mbambo’s presentation on the studies and he would would lodge an application in terms of the Promotion of Access to Information Act for the release of both the findings of the chief procurement officer and Treasury’s assessment of the department’s findings on the feasibility of the programme.
“Why is the government continuing to hide its own cost and financing assumptions surrounding the nuclear build programme?” Mackay said.
“Is it because government itself is aware of how blatantly unaffordable it is and how unpalatable it is in an environment where South Africa is experiencing low-to-zero growth and faces continuing ratings pressures due to heightened political uncertainty?”
African News Agency