/ 16 September 2016

Zuma pals clinch first nuclear deal

A mysterious R171-million deal has gone to a company owned by Shantan Reddy
A mysterious R171-million deal has gone to a company owned by Shantan Reddy

Shantan Reddy, the son of President Jacob Zuma’s friend Vivian Reddy, has clinched what appears to be a landmark deal for the country’s controversial multibillion-rand nuclear programme.

Details of the R171-million contract for “the procurement of the nuclear build programme management system” emerged after an innocuous-looking entry appeared on the department of energy’s website.

Listed under the category “awarded bids”, it is scant on detail, simply naming the winning bidder of BAC-10/2016 as Central Lake Trading 149, a company trading as Empire Technology.

The little-known company’s sole director is Shantan Reddy, the son of flamboyant power and property mogul Vivian Reddy, a longtime friend of the president.

Although there is no suggestion of wrongdoing on the part of Reddy or his company, the awarding of this contract has set off alarm bells with industry experts and politicians because the government continues to maintain that it has not entered into any nuclear deal.

The contract awarded to Reddy’s company, if indeed linked to the “nuclear build”, as stated by the energy department, suggests that work may have already begun behind the scenes.

“Considering that the minister of energy is on record stating no deal has been signed and the deputy president [has said] that South Africa will not commence on nuclear if it can’t afford it, the issuance of a contract is highly irregular,” said Gordon Mackay, the Democratic Alliance’s spokesperson on energy.

The Mail & Guardian briefly spoke to Shantan Reddy about the energy department deal. He asked for questions to be sent on SMS but did not respond by deadline. (His comment will be reflected in full on the M&G’s website.)

Inquiries to the energy department did not provide any clarity on this lucrative deal. Earlier in the week, one official, when asked about the whereabouts of the original tender notice, said it “may have been archived”.

Later, the department’s director of supply chain management, Boitumelo Musi, simply offered some helpful search tips: “The departmental tenders are advertised on the website energy.gov.za (check on the icon: bids),” she said.

When told that the bid had been awarded, Musi checked and then confirmed that this was indeed correct. She then explained that it was never advertised because the “department is participating in the Free State tender, hence the documents are not on the website”.

It was handled by the department’s own bid adjudicating committee and was personally signed off by the director general in the department, she said.

Musi had no details about the specifics of the contract, only that it was commissioned “for the nuclear build and had been awarded around June”.

It is unclear why the energy department would opt to ride on the coattails of a Free State tender in preparation for one of the country’s most anticipated big-money deals.

The M&G was unable to find evidence of the original Free State government tender. It is unclear what it was for, when it was issued and on what basis the energy department sought treasury approval to deviate from normal procurement processes.

Despite being sent detailed questions, the energy department confirmed only that the two-year deal with Empire Technology was done in terms of the treasury regulations.

As such, it is unclear which arm of the Free State government holds the original contract and why it was used to issue the energy department contract. Either way, Mackay is deeply concerned about the turn of events.

“The [energy department] has been designated as the procuring agent and no procuring or procurement process has yet been determined by the department,” he said.

“Further, in terms of legislation only Eskom can build, own and operate nuclear power plants in South Africa. This would mean programme management of the nuclear new build programme would fall to Eskom or, at the very least, be subcontracted through Eskom.”

Besides, the energy department is unlikely even to need a system such as the one commissioned from Empire Technology because, as the procuring agent, it is not envisioned to handle the project management of the new build programme, he said.

Inasmuch as there is political appetite for a nuclear deal, there is also grave concern over where the money will come from. Some experts have dismissed the estimated R1-trillion bill of nuclear build but agree that it would cost well above R500-billion.

The Cabinet gave the go-ahead for the controversial 9?600MW nuclear procurement plan in December and now, after several delays, the energy department is finally scheduled to issue requests for proposals. This is despite ongoing litigation by two environmental action groups, including Earthlife Africa.

Earlier this month, Deputy President Cyril Ramaphosa reiterated that a final decision to proceed with a nuclear build programme will only be made once the request for proposals has drawn in. Bids are expected from South Korea, France and Russia’s government-owned Rosatom. The bids will be the first effective measure of how much this energy overhaul could cost.

The government has set aside just R200-million for preparatory work towards the nuclear programme.

Said Mackay: “The [energy department] reflects no additional funding in the last financial year for nuclear. Neither does it reflect future amounts for nuclear in its budget. The R200-million is a once-off additional payment to the [department’s] budget.”

He said attempts to assess the potential budget for the next financial year have been frustrated because of portfolio committee meetings being cancelled. Four such meetings, which were to include updates on the nuclear build programme, have been cancelled in the past two weeks, he said – which is odd, since requests for proposals will be going out in just over 14 days.

The clients of Empire Trading, the successful bidder for the mystery contract, include the departments of public works and science and technology, City Power in Johannesburg and SABMiller, according to its website.

The company’s contact details link back to Vivian Reddy’s Edison Power Group in Umhlanga, KwaZulu-Natal. Shantan Reddy is deputy chairperson of Edison Power, which became embroiled in controversy after it landed a R1.2-billion deal to roll out smart electricity meters for the City of Johannesburg a few years ago.

His father has often proudly confirmed his friendship with Zuma, which he maintains dates back to when Zuma returned from exile.

“He is like a godfather to my children,” Vivian Reddy told writer Ryland Fisher in an interview published by the Daily Maverick in 2013. In the same interview, Reddy also said he was ready to hand over the reins of his business empire to his son.

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Treasury to investigate mystery tender

When asked about the department of energy’s claims that the nuclear-linked deal was approved in line with national treasury regulations, the office of the chief procurement officer, Kenneth Brown, responded: “The office of the chief procurement officer has no records of a department of energy application for deviation on the matter.

“Therefore it is unlikely that the national treasury would have given an approval without a formal request [that was] fully motivated and in compliance with the framework. Such [a] request and approval would have been on our records.

“The office of the chief procurement officer will be engaging [the department] to give light on the claims that the national treasury approved a deviation.”