/ 23 April 2010

Money rows over PBMR

Allegations are surfacing that billions of taxpayers’ rands were squandered on South Africa’s pebble bed modular reactor (PBMR) project.

The Mail & Guardian was told that:

  • The project missed critical deadlines because of squabbling between PBMR managers and the National Nuclear Regulator over shortcuts taken by the project that cost millions;
    • Contractors were appointed before construction work could begin, consuming more funds;
    • Senior managers travelled abroad regularly and insisted on staying in the most expensive hotels;
    • Former chief executive Jaco Kriek was pushed out over questions about his management methods;
    • The workforce was inflated to meet affirmative-action requirements;
    • PBMR’s “confirmed” client, Eskom, lost interest in the programme and started to see it as a burden; and
    • United States company Westinghouse, which has a cooperation agreement with the PBMR project and would like to snatch it up at a bargain-basement price, forced the project to make a significant technological U-turn, wasting more money and time.

    But, in its defence, PBMR spokesperson Tom Ferreira pointed out this week that the project had received an unqualified audit this year, and another senior source said the high-class nuclear fuel developed by the project justified the expenditure of R6-billion.

    It is widely accepted that the PBMR is the fourth-generation nuclear reactor closest to commercial rollout.

    Ferreira said the intention was to finish the PBMR’s concept design by the end of the year, which would be used to market the project.

    Last month Finance Minister Pravin Gordhan confirmed that R8.93billion has been spent on the project since 2006 and he allocated a meagre R11,4-million to it for the next year.

    The M&G understands that the National Union of Mineworkers is investigating how the project’s massive budget was spent, though other trade unions favour a forensic investigation.

    Kriek’s resignation is the subject of much speculation. Although the PBMR insists that he quit voluntarily, a board member told the M&G that he was asked to go because the project was falling behind schedule and because of his failure to manage perceived conflicts of interest.

    Late last year Barbara Hogan, the Public Enterprises Minister, appointed a consultancy firm to make recommendations to the Cabinet on the project’s future. Ayanda Shezi, the department’s communications head, said the recession had forced the department to cut off almost all cash for projects such as the PBMR.

    “The fact that the PBMR has not yet been able to secure either an investor or a customer has meant that the programme had to effect a drastic staff reduction,” she said.

    The soundness of the technology was not in doubt, Shezi said, but “alternative funding mechanisms are being sought for this programme as the government no longer has pockets deep enough to fund it at the scale and length of time required”.

    The M&G was told that because of a shortage of black engineers, the company’s equity policy had led to the inflation of jobs in departments such as human resources and marketing. A source said the project could have been run on a staff of 300 to 400 people, but that the total complement had risen to 800.

    Unions are currently battling management over a proposed 75% cut in the workforce because of budget cuts. Company sources conceded that the staff needed streamlining, but said that a 75% cut amounted to shutting down the company.

    The remaining 200 staff would essentially be used to facilitate a bid for the New Generation Nuclear Plant contract funded by the US department of energy.

    The bid would give the project a dedicated client and is seen as a last attempt to secure funding for the programme. But the PBMR is not the only bidder and there are no guarantees that the US government is considering its technology.

    Workers are unhappy about the alleged wasteful practices of management and several sources claimed that family members sometimes travelled with senior managers overseas on “fact-finding missions”.

    But Ferreira countered that to date travel expenses made up less than 1% of PBMR’s total spend.

    The M&G understands that Eskom, which signed up as a future client in 2005, gradually grew more disillusioned with the project.

    “We call Eskom ‘the runaway bride’,” a senior manager said. “They were keen on the engagement, but didn’t show up for the day.”

    Sources said a major factor contributing to missed deadlines was squabbles between PBMR and the regulator. Engineers said the regulator “micro-managed” the project and put “unrealistic” requests to project managers. They said that engineers had made “calculated shortcuts” that did not work in an “immature nuclear environment that did not understand the pressures”.

    At the same time, project managers are said to have jumped the gun by commissioning manufacturing without the regulator’s authorisation.

    A clear example of this, sources said, was the ordering of a reactor vessel. Only two companies in the world could manufacture this and PBMR managers were keen to secure a manufacturing slot upfront.

    But when the regulator discovered the PBMR had moved ahead without its consent, it gave instructions for work to stop. This had resulted in a lost manufacturing opportunity that “hurt PBMR tremendously”.

    Commenting on allegations that the engineering procurement and construction management contract was awarded too early in the process, Ferreira confirmed that R380-million had been spent on the contract.

    “The competence built under this contract, however, could serve South Africa’s nuclear build programme in future,” he said.

    Johan Slabbert, PBMR’s chief technology officer, conceded: “At the end of the day, the South African nuclear industry was simply too infantile for a first-of-its-kind nuclear project such as this. The nuclear environment was not developed enough to evaluate the safety and engineering needed.”

    But Slabbert believed it would be an injustice to South African taxpayers to hand the project to Westinghouse, and many PBMR workers concur.

    “Our money would then have paid for revolutionary technology that the Americans are just itching to get their hands on,” said one.