/ 10 December 2015

Where will David van Rooyen’s priorities lie?

Caution over the prohibitively expensive nuclear project cost two finance ministers their jobs.
Caution over the prohibitively expensive nuclear project cost two finance ministers their jobs.

“Mine is a colossal task that comes at a time of a difficult global climate.” New Finance Minister David van Rooyen couldn’t have spoken truer words at his swearing in on Thursday afternoon at the Union Buildings in Pretoria. He has a few pressing financial challenges that have befuddled previous ministers: the National Health Insurance, free education and, of course, the nuclear deal with Russia, a key backdrop to his appointment. Where will his priorities lie and where will he find the money?

Nuclear: The deal is a minefield

Earlier this year, Energy Minister (for the time being, perhaps) Tina Joemat-Pettersson insisted that the planned fleet of nuclear power stations that is to add 9 600 megawatts of nuclear energy to the grid by 2030 was affordable, even though funding models had not yet been completed.

The energy department, the presidency and Eskom have all refused to put hard numbers to the plan, leaving others to do the crunching. And the numbers do not look good.

Rough estimates put the top end of the nuclear bill at $100-billion, which in rand terms was considerably more on Thursday morning, after the sacking of finance minister Nhlanhla Nene and the resulting slump in the currency, than it was early on Wednesday night.

Russia has offered to provide vendor financing for the full build price, and China (and perhaps others) are expected to do likewise. Under the mooted Russian finance model, South Africa would pay back the capital cost of construction over 20 to 30 years, though the repayments would only come due when the first reactor comes online. But, with debt denominated in dollars, the risk to South African taxpayers would be enormous, even if the money could be found for the expected repayments in a budget stretched by the demands of healthcare, education and civil servant salaries.

In other countries, interest rates for similar deals have run between 4% and 5%.

There is good reason to believe that Nene’s predecessor, Pravin Gordhan, was axed because he refused to accede to Zuma’s demands over nuclear procurement. There are also grounds to believe that Joemat-Pettersson’s predecessor, Ben Martins, was axed because he was too slow in responding to our Russian ally’s nuclear overtures.

Now the geopolitical situation has changed, Russia has other problems, and the Chinese chequebook is open for business.

The treasury has been dragging the nuke dream back to earth. Despite Zuma’s promises to launch a tender process by year end, Nene set aside only R200-million for medium-term technical studies and planning.

It is understood that financial assessments procured and proffered by the treasury have stressed the dangerously high risk and cost of nuclear, despite efforts by Zuma’s nuclear chorus to sing a song of affordability.

On this too, Nene was holding the line. So he had to go.

Will his successor, David “Des” van Rooyen join the chorus and punt the nuclear deal?

And will he do this at the expense of other pressing priorities on the national agenda? – Phillip de Wet & Sam Sole

Education: Will #FeesStillFall?

Fees have fallen, but will David “Des” van Rooyen ensure they stay that way?

Perhaps unknown to him, he is running right into the tornado of the students’ #FeesMustFall riots.

The Mail & Guardian understands that President Jacob Zuma has secured the R2.3?billion he committed to cover the universities’ shortfall as a favour for not increasing fees next year.

But R2.3-billion was always going to be a drop in the ocean for the administration. Van Rooyen’s real test is the R51-billion Higher Education and Training Minister Blade Nzimande needs to achieve fee-free university and college education for poor and lower middle-class students.

After receiving a report in 2012 that found the introduction of free university education for this category of students was feasible, Nzimande asked the treasury for the R51-billion.

This would increase student funding from the R9.2-billion currently allocated to the National Student Financial Aid Scheme. Citing an acute shortfall in funding, the scheme currently excludes thousands of students who qualify for it each year.

But the sacked Nhlanhla Nene, and Pravin Gordhan before him, maintained that the government did not have the money.

Asked about the matter earlier in the year, spokesperson Phumza Macanda told the M&G that the treasury was implementing “cost-containment measures”.

Khaye Nkwanyana, the higher education spokesperson, told the M&G on Thursday that the department was waiting with bated breath to see whether Van Rooyen would change the government’s approach to student funding.

“We don’t know what his approach will be. Since he’s new, let’s wait for him. We will give him time to settle in the portfolio.”

Belinda Bozzoli, the Democratic Alliance spokesperson on higher education and training, foresees that protests will flare up again on campuses in early 2016 because of outstanding tuition fees.

“Students owe universities R4?billion in debt. That means there are going to be a lot of students who won’t even worry about free education; they just want their debt paid,” she told the M&G.

“Many of them have actually finished their degrees, but can’t graduate because they owe so much money. That debt needs to be dealt with by government in some way or another.”

Protests sparked by student debt have already forced the two Soshanguve campuses of the Tshwane University of Technology (TUT) to close without the students writing final-year examinations.

About 5 000 TUT students are said to be indebted and therefore won’t be allowed to register or graduate.

TUT management has moved the examinations to January, in the hope that protests do not erupt again. – Bongani Nkosi

Health: No quick fix for NHI

The National Health Insurance (NHI) scheme is still looking for finance.

Experts say the replacement of former finance minister Nhlanhla Nene by David “Des” van Rooyen will make the environment in which the country’s NHI scheme will be implemented unpredictable. The NHI white paper, for which the country has been waiting more than four years, will be released by Health Minister Aaron Motsoaledi on December 11.

“One of the biggest problems with Van Rooyen is that he is an unknown entity, and that creates a lot of instability. If it was somebody we knew more about, we could predict what would happen to the NHI, but with this guy it’s impossible to tell what would happen,” says the health economist Daygan Eagar, from the Rural Health Advocacy Project at the University of the Witwatersrand.

Although Nene supported the implementation of the NHI, he was considered cautious about it.

“The NHI requires additional taxes, and an additional health budget, so Nene had a relatively conservative approach. He wasn’t against the NHI, but he was very cautious about the implications for the economy and how quickly it could be implemented.”

Eagar believes Van Rooyen, as a Zuma loyalist, will support the NHI – the president’s public statements broadly support it – but Eagar argues that the “hiring of an unknown person is worrying”, because it would affect how fast the NHI can be implemented.

The white paper has to detail how the NHI will be funded, who will administer the funds and who will be contracted to provide health services. Health experts say Nene’s treasury was stalling the process in an effort to determine where the additional funding would come from in a constrained economic environment.

“Van Rooyen’s appointment will now almost certainly result in further implementation delays,” says Eagar.

The NHI green paper stipulates that the system should be implemented over 14 years, starting in 2011. But Eagar warns that it’s unlikely that one individual, “even if he is in a powerful position”, could “shift things quickly in either direction. The NHI’s implementation needs to go through several processes, so I don’t think Van Rooyen’s appointment is going to change the government’s position in the short term.” – Mia Malan