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Rigorous review process needed for SA nuclear deal

Opinion
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If the nuclear deal goes ahead, the much-beleaguered Eskom will conduct the procurement process and secure the necessary finance, says the writer. File picture: Independent Media archives
New Finance Minister Malusi Gigaba has the rubber stamp of approval out that Pravin Gordhan kept locked away, writes Lauren Hermanus.

The day before Ahmed Kathrada passed, on 27 March, now ex-Finance Minister Pravin Gordhan was recalled from an investor roadshow. In shock, we all asked ‘why?’ Our president knew the answer but he wasn’t in a talking mood. After Gordhan’s axing the rand took a dive and so did our nerves. Overnight the nuclear expansion programme and the South Africa-Russia procurement deal that’s been looming since 2013 became an imminent reality.

It took the debutant Minister of Finance Malusi Gigaba only hours to declare that the energy system has stabilised in South Africa and that it was time to unite to stimulate “investment, create new jobs, increase productivity and raise incomes”. Perhaps he got his notes from Eskom CEO Matshela Koko, who claimed just a few months ago, “The successful execution of the new nuclear build programme will not only fuel GDP growth, but could alleviate levels of unemployment in SA.”

In keeping with the vacuous tone of pro-nuclear discourse to date, these statements lack supporting evidence and analysis. How will it boost unemployment? How many jobs will it deliver? How does this compare with jobs in renewables and what are the relative returns on investment and payback periods?

During a recent press conference in Pretoria, Minister Gigaba said that no formal decision has yet been taken, but nuclear-based energy generation would be implemented to ‘diversify our energy mix’ based on ‘what the country can afford’ and that the process would be managed at a pace and scale our fiscus can handle.

Okay Minister, but take into consideration that our fiscus is already struggling to handle housing, social grants, higher education and public health. It has not yet handled water management infrastructure upgrading (just to make it real for the middle class), and if it can handle nuclear, we certainly have not been told how, and over what time period.

Gigaba has the rubber stamp of approval out that Gordhan kept locked away. And this is a problem, because the numbers we saw from the government-sponsored CSIR are very worrying and indicate that we should be investing in renewables instead.

What is Gigaba’s plan?

Conservative estimates put the cost of nuclear construction at $50 billion. Given the scale of the 9,600MW nuclear programme, it would be wise to draw on our experience with other large-scale energy infrastructure investments to learn some valuable lessons and check our assumptions. The almost 4,800MW coal-fired Medupi has fallen behind schedule, and while estimated at R69.1 billion in 2007, stood at R195 billion in June of 2016. So, what happens when the nuclear deal, large as it is, goes even a little off course, which nuclear builds typically do? How will we pay for that? What is Gigaba’s plan?

If the nuclear deal goes ahead, the much-beleaguered Eskom will conduct the procurement process and secure the necessary finance. It bears repeating that a loan by Eskom ultimately falls to the public purse to pay. Eskom, already weighed down in debt and scrambling to pull in payments from defaulting municipal clients, cannot afford to fail. National Treasury will not let it, as its success is critical to the survival of our economy. A bad bet on nuclear is a bad bet on our behalf, and when the need for fiscal triage arises, we will pay for it through increasing electricity prices, and tax funds diverted from other urgent priorities. Additionally, the integrity of Eskom’s procurement processes was called into question in the State of Capture Report. We should reasonably require that no massive procurement is undertaken before the extent of financial mismanagement is publically determined and transparently addressed.

The need for nuclear is the most fundamental concern

Any energy investments made must be deemed absolutely necessary before adding to Eskom’s indebtedness and our national debt. The 2010 Integrated Resource Plan (IRP) that Gigaba used to justify nuclear was replaced by a 2013 update that called for only around a third of the nuclear capacity of its predecessor. Now, four years later, it is unclear that we need any nuclear at all.
2013, we will recall, was also the year that, against the Department of Energy’s (DoE) official position, a nuclear transaction was first designed and taken into talks with Russian service providers the following year.

While Cabinet pushes for nuclear, local governments pull in a different direction. Municipalities like Nelson Mandela Bay (well before they went DA) and the City of Cape Town have identified renewables as engines of local economic development, inclusive of local manufacturing opportunities, the holy grail of our industrial policy. In fact, many municipalities are pursuing localised renewable energy, which is at odds with a national nuclear expansion strategy. Mayor Patricia de Lille announced earlier this year that she would take the Minister of Energy to court over the right to buy energy directly from REIPPPP power producers without having to go through Eskom.

It will not be the only court case requiring the attention of the recently appointed Minister of Energy, Mmamoloko “Nkhensani” Kubayi. The nuclear deal is already the subject of a Cape High Court case, for allegedly failing to meet the standards of parliamentary review and public participation required for an investment of this scale.

Reframing the debate

The bare facts of the nuclear deal have been obscured by political rhetoric and false opposites. There is now an urgent need to unearth points of common concern between actors that may have very different views on how our energy sector should be structured.

Something must be said that has not often been said. You do not need to believe that REIPPPP (South Africa’s Renewable Energy IPP Procurement Programme) is the future of the South African energy sector to oppose this deal. REIPPPP is one possible tool. But you can equally argue for an Eskom-led renewable energy strategy, building on their already growing portfolio of wind and solar investments. You could argue for further municipalisation of the energy sector, for localised, small-scale energy generation and the use of residential and commercial microgrids. I happen to be pro a combination of all of the above, aimed primarily at keeping energy affordable and accessible for all.

This nuclear deal must be opposed because it makes no economic sense. It appears to benefit private interests against the public good, it may bankrupt the country over the coming decades and it will likely leave us with an overcapitalised energy sector. Moreover, like Gigaba said, our energy system is stable for now, and there is no reason to rush on nuclear. Let’s talk numbers and put this investment through the appropriate rigorous parliamentary and public review processes of our hard-won democracy.

Being opposed to the nuclear deal does not make you a racist, a classist, anti-ANC, pro-DA, pro-EFF, pro-privatisation or anti-transformation. It is a valid, evidence-based position that can be held by a range of different actors, some terrible and some not so terrible. Consensus building to create coherent policy and strategy in a pluralistic and contested political space is the point and prize of democracy.

Minister, give us, the people of South Africa, policy, finance and energy experts, NERSA, Eskom, Municipalities, the DOE and all interested parties, the chance to flex our democratic muscle and apply our minds, and through contest and collaboration we will develop a national energy plan so thorough as to eclipse the draft 2016 IRP and support the economic development of our beloved country with our best knowledge, experience and collective intelligence.

* Lauren Hermanus is a sustainable development specialist and Strategic Director of the Massive Small Collective, focused on urban resilience, energy innovation and equity. 

** The views expressed here are not necessarily those of Independent Media.

This story first appeared on The Journalist
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