The South African Nuclear Energy Corporation (Necsa) is facing “significant financial distress”, according to its former chief executive and newly appointed board chairperson, Rob Adam.
He said the auditor general had issued the company with a disclaimer, because there was “not enough information provided by the company to have a confident assessment of the financial situation”.
“[This] is quite a poor position to start from,” Adam said on Wednesday, but he added that his intention was to “fix things”.
Energy Minister Jeff Radebe announced Necsa’s new board last week. The minister accused the previous board of governance failings, including financial mismanagement and signing a strategic document with Russian interests in express contravention of the minister’s opinion.
But the former chairperson, Kelvin Kemm, board member Pamela Bosman and Necsa chief executive officer, Phumzile Tshelane, who was placed on precautionary suspension, have launched a legal challenge.
Necsa has been unable to finalise its financial results for the 2017-2018 year and was granted an extension by Parliament to submit them by February next year. Among the reasons for the delay has been the protracted shutdown of its historically successful subsidiary, NTP Radioisotopes, because of problem with safety procedures problems.
Adam said this had been a significant loss for Necsa because it was the group’s main income stream. According to Necsa’s previous annual report, NTP’s revenues reached almost R1.4-billion in 2016-2017 and its profits were more than R202-million.
Overshadowing the tasks facing Adam and his new team is Kemm’s high court bid challenging his removal. His application sheds light on the disagreement between Kemm and the minister about the signing of a strategic document between Necsa and Russian nuclear agency Rosatom’s health care unit, Rusatom Healthcare, on the sidelines of the Brics (Brazil, Russia, India, China, South Africa) summit in July.
This took place even though Kemm had been advised on the morning of the event that Radebe had not agreed to it.
Kemm argues in his court papers that, because the agreement was nonbinding and did not involve any financial commitment or other binding obligations, the minister’s assent was not required. He said it would have been “politically embarrassing” if the signing ceremony had not taken place, especially “with the Russian President [Vladimir Putin] across the road for the Brics summit”.
But, according to a Necsa media statement at the time, Necsa and Rusatom planned to “partner in the construction of two innovative solution reactors on the territory of South Africa”, valued at R500-million. This suggested the partnership went beyond a friendly agreement.
Kemm said in reply to the Mail & Guardian’s questions that Radebe’s assent was not required for “the development of a nuclear healthcare business strategy”, which had been in development for more than two years, with Rusatom. “Firm language in a document of intent for mutual benefit is standard practice,” he said.
The two small reactors, now under development, would be dedicated to medicine production and would be built in South Africa as a “mutual project”. Although they were valued at R250-million, “Necsa is not buying reactors from them”, he said.
He said the former board, far from failing, had “performed extremely well” and “by objective merits should have been appointed to a second term”.
South Africa’s nuclear landscape has changed dramatically in the past year, with vastly different implications for the state-owned company. Necsa envisaged an expanded role for itself given former president Jacob Zuma’s ambition to increase nuclear power generation by 9 600 megawatts.
But the appointment of President Cyril Ramaphosa has sidelined Zuma supporters who advanced the nuclear agenda, such as former energy minister David Mahlobo and former Eskom chief Brian Molefe, who has been embroiled in state capture allegations.
This has seriously weakened the push for a new nuclear build, according to Hartmut Winkler, at the department of physics at the University of Johannesburg.
The administration’s shift is crystalised in the new draft Integrated Resource Plan (IRP 2018), which does not envisage more nuclear power until after 2030.
Winkler said, even if the Zuma administration had remained in the driving seat, nuclear procurement was “just too expensive and there would have been endless hiccups [such as court challenges] and delays”.
There were also too many international examples of nuclear projects failing because of drastic cost overruns and time delays, national crises [such as war] or changes to governments, he added.
The chances of a completed nuclear build “were always very low and are now effectively zero, [but] this has not stopped the most strident nuclear supporters and they continue working very hard to achieve their aim”, Winkler said.
Because of the changed outlook, Adam said the group would have to find a new trajectory under the scenario outlined in the draft IRP. “One has to accept that the IRP is what it is,” he said, adding that it was unlikely that new nuclear build would start until the 2030s.
But his first task would be to fix Necsa. “It’s not as if we have got a very, very healthy organisation that we then have to redirect. It’s not healthy. We have got to fix that first.”
Adam was confident that the fortunes of NTP could be turned around. The company is a world leader in nuclear medicine, particularly in the production of a key medical radioisotope, molybdenum-99 (Mo-99), which is scarce globally. Adam said NTP had a good chance of getting back to its former position.
After a year-long shutdown, the firm has only recently restarted partial production, which is being monitored by the National Nuclear Regulator.
Necsa’s handling of the shutdown has also generated controversy. The amaBhungane Centre for Investigative Journalism reported that the shutdown was allegedly used by Necsa to suspend NTP’s top managers and make a play for the profitable NTP’s cash resources.
Radebe has not cited these allegations as a reason for his action, but Necsa’s poor management of the crisis is, and contributed to Radebe’s decision to delegate the task of resolving the matter to his deputy, Thembisile Majola.
But Kemm said in his application that the minister’s accusation that the board’s failure to resolve the NTP matter was an “incorrect and distorted understanding of the facts”.
Winkler argued that the Necsa court battle went deeper than a simple boardroom fight. The new board had a far more sober outlook and would not recklessly pursue nuclear expansion.
The battle with the minister notwithstanding, Kemm said the outlook for nuclear was undimmed. “Nuclear power has not been shifted to after 2030,” he said. The current IRP was a draft containing proposals for public comment. Not all pro-nuclear technology advocates had been discredited and the “minister is required to wait until a bona fide process is concluded, taking professional opinion into account”, he said.
He dismissed the idea that his efforts to hold on to his job were an attempt to continue advancing a grander nuclear power agenda.
The court matter had “nothing whatsoever to do with nuclear power” but “was related to nuclear medicine”, he said, and “the
Necsa chair, chief executive and board would work within any nuclear policy as determined by government”.