South Africa is poised to issue the largest tender in its history — an estimated one-trillion-rand contract to build six new nuclear reactors by 2030.
The energy department submitted its nuclear tender proposal to the Cabinet last month, and Energy Minister Dipuo Peters has been quoted as saying it will finalise the proposal before the end of this year. Bidding will begin next year.
Dwarfing the arms deal, which is worth a mere R70-billion, the contract could account for as much as 20% of the world’s total nuclear spending over the next two decades.
Five companies — from France, China, South Korea, Russia and a joint United States-Japanese consortium — are in the running.
All the bidders are desperate for a slice of the action and so are the construction companies, tenderpreneurs, lobbyists, agents and the middlemen who invariably orbit around a deal of such magnitude.
There is huge scope for high-pressure lobbying and other forms of inducement.
Franco-Sino joint bid?
Government and industry sources, including those close to French manufacturer Areva, have indicated that the French and Chinese are preparing a joint bid. Sources suggest that the combination of French nuclear expertise and Chinese financial might would make such a joint bid politically unassailable, given South Africa’s geopolitical sympathies.
Areva, which built the Koeberg nuclear power station outside Cape Town, leads the pack in terms of the intensity and effectiveness of its lobbying machine, as WikiLeaks cables dating back to 2007 indicate (see “French kissing irks US competitor” below).
The French went to great lengths to court former president Thabo Mbeki and successfully negotiated the tricky political transition to a Jacob Zuma-led administration, to remain one of the frontrunners.
Zuma has had a string of to and fro meetings with the French since 2007.
In February this year the company renewed a comprehensive nuclear co-operation agreement with the South African Nuclear Energy Corporation. Although the letters of intent explicitly rule out giving Areva any advantage in the bidding process, they lay the foundation for collaboration in all aspects of the nuclear fuel production cycle until 2013.
The French have started lobbying a key South African interest group — organised labour in the energy sector — much to the discomfort of unionists (see “Areva lobbies unions to ensure smooth nuclear ride” below).
China has edged out the US and Japan in recent years to become South Africa’s biggest trade partner. The Industrial and Commercial Bank of China acquired a 20% stake in Standard Bank in 2007, giving the Chinese a conduit through which to fund the massive nuclear project.
Deputy President Kgalema Motlanthe concluded a state visit to China last week. Although the nuclear programme was not formally discussed, a $2.5-billion financial co-operation agreement between the Development Bank of South Africa and the China Development Bank could become a second source of nuclear financing.
The last time South Africa was close to finalising a nuclear deal was in September 2008. In the same week that the Zuma-led ANC removed Thabo Mbeki as South Africa’s president, Eskom withdrew the tender, citing a lack of capital.
Pro-nuclear campaigners in the government and industry argue that South Africa’s new nuclear policy will secure long-term energy supply, combat climate change, beneficiate uranium deposits and create jobs.
Critics have raised concerns about the affordability of the project and whether it is the most cost-effective way to secure South Africa’s energy future. In 2009, lobby group Earthlife Africa said the building of six nuclear plants could bankrupt the country.
French kissing irks US competitor
French government support, a network of partnerships and strong political connections — these were the three major advantages French-owned mining and energy company Areva had over its competitors for South Africa’s nuclear business, according to leaked diplomatic cables from the United States embassy in Pretoria in 2007.
At the time Areva and US-based consortium Toshiba-Westinghouse were competing for the first nuclear power tender, but Eskom withdrew the tender in 2008. Both companies are expected to compete again when the new nuclear contracts go out to tender.
The diplomatic cables paint a fascinating portrait of active lobbying by the French that left their US rivals trailing in the dust.
According to one cable the department of energy’s nuclear chief at the time, Tseliso Maqubela, told a US diplomat that Areva and the French were “all over” his department. “Where is Westinghouse?” Maqubela reportedly asked.
The biggest coup engineered by the French, however, was a state visit to South Africa by President Nicholas Sarkozy in February 2008, to which one US cable wryly referred as “Eskom’s French kiss”.
“The French are pulling out all the stops to win,” the Americans fretted, as cables buzzed between Pretoria and Washington.
Sarkozy was accompanied by 40 senior business executives, including representatives of Areva, French utility Électricité de France and electricity distribution company Alstom, which signed several co-operation agreements with their South African counterparts.
Sarkozy’s state visit was “impeccably timed”, noted a cable, because it occurred shortly after the closing date for the tender submissions, but before Eskom’s board was due to make its recommendation on the preferred supplier.
In contrast with the French success the US had struggled in vain to sign a nuclear research and development co-operation agreement with South Africa for at least a year before Sarkozy’s visit. To the Americans’ “disappointment” and “frustration” the South Africans repeatedly postponed signing the agreement until September 2009.
Viewed through US eyes the French appeared to have expertly negotiated the complex transfer of political power from Thabo Mbeki through to caretaker president Kgalema Motlanthe and then Jacob Zuma between 2008 and 2009.
Although Sarkozy met lame-duck president Mbeki during the February 2008 state visit, a cable suggests that the French leader had secretly encountered Zuma as early as October 2007, even before he became ANC president.
Three more meetings between Zuma and the French followed in February, April and May 2008, after he became head of the ANC.
Eskom was expected to announce the winning bid in September 2008, in the same week that the ANC removed Mbeki as the country’s president. The winner was never announced and the tender was shelved that December.
Zuma has also been on two state visits to France since becoming president of South Africa.
‘A drop in the bucket’
A cable sent a few months after Sarkozy’s 2008 state visit quoted an Irish diplomat’s claim that France had invested “roughly €20-million into South Africa recently”, which he described as “a drop in the bucket compared to what they will reap”.
Westinghouse’s gloomy assessment at the end of 2009 was that it had invested $10-million in the bidding process “without any assurance that there would be a contract at the end of what will now be a much longer process”.
In all the cables Westinghouse indicated that it intended countering French influence by showing its “commitment to localisation”.
Westinghouse acquired a South African nuclear company in 2007 and maintained a stake in the ill-fated pebble bed nuclear reactor -project until the bitter end.
Areva “exhibits some advantages in being the supplier for the existing nuclear power facility at Koeberg”, a cable noted.
With a healthy dollop of schadenfreude, the US hoped that “problems and shut-downs” at Koeberg — where Areva continues to provide technical assistance — would be “an additional boost” to Westinghouse.
Westinghouse did not respond to a request for comment.
Areva lobbies unions to ensure smooth nuclear ride
French nuclear conglomerate Areva is lobbying hard to influence the policy direction of a strategic union in the energy sector, causing unease in union ranks.
According to a National Union of Mineworkers (NUM) official with full access to the union’s nuclear policymaking process, one representative from Areva and two from French utility Électricité de France have attended all the union’s mainly monthly nuclear policy workshops at its Johannesburg headquarters since April last year.
The union is opposed to nuclear power but is reviewing its energy policies ahead of its national congress in mid-2012.
Although the union has no say over who wins the tender its stance could affect how smoothly the nuclear programme proceeds. It is among Cosatu’s strongest affiliates and its members are likely to work on every stage of reactor construction and the nuclear fuel cycle.
The union invited the French representatives to attend its meetings, but some officials felt uncomfortable about it. “The French were there to answer questions and provide technical advice, but the question is why only the French?” said one official. “I find it odd that they were there, because they have specific interests in the sector. It was a bit improper. Other colleagues also felt uncomfortable.”
The official asked not to be named, because he is not mandated to speak on the union’s behalf.
The Mail & Guardian has also learnt that the three French lobbyists were ejected from an energy consultative meeting convened by Cosatu at Cosatu House in Johannesburg on May 24 because the federation had not invited them. The meeting’s purpose was to update other energy sector unions about the NUM’s nuclear policy.
Cosatu’s convenor, industrial policy co-ordinator Jonas Mosia, said that when discussions at the meeting turned to the fact that Germany had scaled back its nuclear power generation plans since the Fukushima disaster, the French representatives objected, arguing that Germany still imported nuclear power from France. It was at this point that Mosia discovered that the French lobbyists were not union members and asked them to leave.
“It was a mistake, by the way,” he said. “The French had been attending the NUM meetings and had been added to their mailing list, so when we invited the union by email the French also got the invitation.”
But NUM deputy general secretary Oupa Komane suggested otherwise. “I would be lying if I knew how they came to attend.”
Representatives of the union and the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union (Ceppwawu) are understood to have toured nuclear facilities in France in February at Électricité de France’s invitation. The “study tour” coincided with a high-profile state visit by President Jacob Zuma, who was accompanied by Energy Minister Dipuo Peters and others.
Areva and the French utility are joined at the hip: the former builds France’s nuclear power stations while the latter manages them. Both companies have a major global footprint, including offices in South Africa.
Komane said that the three French lobbyists were invited “to make some inputs” at the beginning of the NUM’s policy review, after being introduced to the union by shop stewards at Eskom.
“We did invite them, then they offered to host us in France and perhaps they did begin to take advantage of our platform,” he said.
The French have a long-standing relationship with Eskom, stretching back to the mid-1970s, when they helped build two Koeberg reactors.
After the Cosatu meeting, Komane said, he asked the French lobbyists not to attend union workshops in future. “We are now looking at South African experts in the industry to provide us with guidance,” he said. Komane added that the NUM and Ceppwawu had funded the “study tour” to France. “If we are going to run away from getting information from people with business interests, then we’re never going to learn anything. We’re not going to procure nuclear reactors; all we want are facts,” he said.
He said that lobbying “by its nature is inherently corruptive” and that the union was “totally against those types of tendencies”.
“We know there are many vultures outside the country who would want to get involved, and we will definitely consider setting up a nuclear anti-corruption watchdog in due course.”
EDF did not respond to questions.
On lobbying Mbeki and Zuma:
“Areva doesn’t participate in the national politics of countries where it does business. As nuclear energy is always a subject which involves government, it is only normal that Areva engages with the SA government, irrespective of who the President is.”
On lobbying energy-sector unions:
“Areva participated at two meetings where it was invited to present its activities and on nuclear energy as a whole. Areva is not aware that other vendors were not invited and has no comment on this. Areva was not aware of any dissent around its participation in the meeting. Areva holds regular stakeholder sessions around the world, without specific links to its commercial activities.”
On company lobbying ethics codes:
“The group’s Values Charter applies to all group activities, both nuclear and non-nuclear, in all countries where the group operates. Recently, Areva adopted a common set of principles of conduct with the world’s other leading nuclear plant vendors. Many of the principles incorporate obligations that already exist in international treaties and conventions … and the industry’s own customs.”
On engaging agents for the tender bidding process:
“Areva does not have and does not need to hire sales agents to promote itself in the country.”
For Areva’s full response, go to mg.co.za/areva
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