Zuma, the Guptas and the Russians — the inside story

President Jacob Zuma wants to build nuclear reactors. Vladimir Putin wants to build them. The Guptas want to supply the uranium

LILY GOSAM

19 FEBRUARY 2016

FOUL PLAY

On 9 of December 2015 president Jacob Zuma fired finance minister, Nhlanhla Nene. In his place he installed David van Rooyen, a treasury outsider of little reputation[1], and who — when mayor of the Merafong city local municipality — had his house fire-bombed before being chased out of town by the incensed residents[2] [3]. The question remains of why did Zuma do it, or as someone caught up in the whole intrigue exclaimed, “What the f**k is going on here?”[4]

With the assistance of an “outside hand” and a patronage network, Zuma has been strategizing for years — from the nuclear procurement programme, to South African Airways (SAA), to the obstruction of our rights and freedoms, to castle-in-the-sky voter promises. Each time, ratcheting-up the pressure and moving his players into position.

Below exposes Zuma’s game-plan, from ignoble start to dictatorial end, and the multitude of fouls in between.

CORRUPTION GOES NUCLEAR

I wish to make it clear from the outset that this piece is not about arguing the merits or demerits of nuclear energy. It is whether Zuma’s decision for nuclear energy is based on sound economic principles for the good of the country, or for some other purpose.

Zuma’s (rabid) pet project

On 9 of December 2015 (and hours before Nene was fired), Zuma’s cabinet approved the 9 600 MW nuclear procurement programme (nuclear programme). This paves the way for nuclear vendors to present proposals in March 2016 to build 6 to 8 nuclear reactors, at an estimated cost of between R800-billion and R1.6-trillion ($50-billion to $100 billion)[5] [6] [7.

The nuclear programme, however, glows with controversy. According to Peter Attard Montalto (an emerging market economist at Nomura), the nuclear programme is Zuma’s “pet project”, and is highly interwoven with politics and the succession issue[8]. His analysis is supported by a Mail and Guardian [M&G] source who said that the programme was regarded as one of Zuma’s “presidential legacy projects” [9]. Professor William Gumede, of Democracy Works, added that the programme is being implemented essentially from a purely patronage point of view[10]. While Andrew Feinstein, executive director of Corruption Watch UK (and former ANC MP), said simply, “I fear that the corruption in this deal might dwarf the arms deal” (News24)[11].

A nuclear procurement process in a constitutional democracy should be transparent, logical, considered, legal, participatory, and unbiased.

Yet Zuma has assumed personal control of the nuclear programme, and it has been characterised by: secret meetings; undisclosed documents and classified financial reports; deceit; aggressive campaigning; damage control exercises; illegality; use of apartheid (‘national key-point’) legislation[12]; sidestepping of Eskom’s technical and financial oversight; destruction of oversight organs of state; disregarding of industry experts; refusal of public consultation; ignoring of the ANC’s national executive committee (NEC) and ANC resolutions; and the removal of any government opponents, the most notable of whom was Nene.

From Russia with love of all things nuclear

Russia is Zuma’s “preferred partner” for the 9 600 MW nuclear build, according to energy experts, analysts and journalists. He has had numerous personal negotiations (some undisclosed) between 2009 and 2014 with his Russian counterparts — Vladimir Putin and Dmitry Medvedev[13] — and within that time two agreements were signed (and both concealed from public scrutiny[14] [15] [16]).

Should the nuclear programme go ahead as Zuma and his benefactors have planned, Rosatom — Russia’s state-owned nuclear company — will build the nuclear power plants.

Rosatom consists of 360 companies, with 34 reactors in operation, and 29 under construction, including nine in Russia [M&G][17]. It is a nuclear mass production machine designed and dependent on worldwide nuclear energy expansion and domination[18].

Over the past five years, Rosatom has quietly cornered the market in nuclear energy, systematically seeking out agreements and contracts with roughly 30 nations interested in the installation of nuclear power plants. According to Global Risk Insights, Russian-built nuclear power plants in foreign countries become more akin to embassies — or even military bases — than simple bilateral infrastructure projects. The long-term or permanent presence that accompanies the exportation of Russian nuclear power will afford president Vladimir Putin a notable influence in countries crucial to regional geopolitics[19] [20].

Vladimir Slivyak (senior lecturer on Environmental Policy at the Russian National Research University and part of a Russian organisation called Eco Defence) stated that Rosatom is a cross between a state organization and a private-owned company. It is, in essence, a “state within the state,” functioning under no one’s control but its own[21]. Consequently, it is nothing short of a breeding ground for abusive practices, said Slivyak.

In 2010, Ecodefense and Transparency International (Russia) conducted a study into Rosatom and found that 83 out of 200 (41%) of Rosatom’s purchasing contracts had violated the company’s own procurement rules. Several years after the study was published more than 300 Rosatom employees were fired over corruption allegations, several cases involving top officials (reports Slivyak)[22].

Recently, a director of Rosatom’s fuel supply arm — which supplies almost half of the enriched uranium fuel used at Koeberg (thanks to a deal struck by Zuma) — was arrested by the FBI [Fin24][23]. In September 2015 the director pleaded guilty to charges of conspiracy to commit money laundering and for facilitating $2-million bribes[24]. As of writing, he is still to be sentenced, but could face up to 28 years in prison[25].

Slivyak concludes that “With vast resources and solid state support at its disposal, the Russian nuclear industry remains under almost no external control. The lack of transparency, widespread corruption, failure to demonstrate high levels of safety, and the unresolved waste and decommissioning issues must be of high concern to any potential customer of Rosatom’s on the international market.”[26]

Radioactive idea goes rogue

To try and grasp the scale of the nuclear programme, the initial costs of the controversial arms deal announced in 1999 was only about 13% of the year’s budget. By contrast, the nuclear programme — at an estimated maximum cost of R1.6-trillion[27] — equals approximately 100% of 2015’s total budget and a third of our gross domestic product (M&G’s amaBhungane)[28].

The National Union of Mineworkers (NUM) — an affiliate of Cosatu — described the energy investment as “national suicide”[29].

And the figures exclude the cost of delays (and a depreciation rand). Nuclear plants can be completed in as little as four to six years[30], yet it took an average of 13.8 years to finish the reactors that were completed in 2011[31]. And as of July 2015, 75% (47) of all nuclear building sites globally are delayed, often by years.[32]

Questions have also been raised as to Russia’s ability to fund its overall worldwide nuclear projects.

World Nuclear Association strategist Steve Kidd said that it was highly unlikely that Russia would succeed in carrying out even half of the projects in which it claims to be closely involved. While a world nuclear report by two independent international energy consultants concludes that, “the lack of realism and overblown market expectations drive nuclear companies and traditional utilities into ruin”[33]. This may explain why rating agencies consider nuclear investment risky and the abandoning of nuclear projects explicitly ‘credit positive’[34].

Slivyak, speaking on South Africa’s $100-billion nuclear programme, said that even at better times, Russia has never funded foreign reactor construction with anything close to this amount [Fin24][35].

Montalto maintained that treasury under Nene found initial evidence that the 9 600 MW deal was unaffordable [Business Day and Fin24][36]. In fact, the energy department’s own updated Integrated Resource Plan (IRP2013) concluded that the nuclear programme should be “delayed”[37] until at least 2025 and even until 2035[38] [39], and should be “abandoned” altogether if costs exceeded $6 500/kW[40]. (Costs were estimated in July 2015 to be about $8 000 per kilowatt installed, by Prof Steve Thomas[41] [42] [43]— and these are just for “overnight costs”, which excludes finance, insurance, operational costs, conversion and enrichment, fuel manufacture and substitution, waste disposal and decommissioning[44]).

The government’s IRP2013 findings were confirmed by international consultants at KPMG and Deloitte, who were commissioned by the energy department (but whose findings were withheld from the public as being classified)[45]. Moreover, independent energy experts (at UCT’s Energy Research Centre; the CSIR; and the University of Stellenbosch) concluded that the nuclear technology is not needed, as there are viable alternatives[46].

Before Nene’s firing, he told Business Day in an interview that he would not sign off on the nuclear power deal if it was unaffordable, and would not be swayed by political meddling[47].

Like Nene, Pravin Gordhan — as newly appointed finance minister — stated that the nuclear procurement would go ahead only if it was “affordable” [48].

Nevertheless Russia will tailor-make its procurement proposal so that it seems attractive, such as a 20 year loan repayment agreement, at low interest rates, and a grace period such that South Africa only begins to pay once a nuclear plant is operational. However, the costings will exclude delays, inflated prices from tenderpreneur practices, rand depreciation, insurance costs, operational costs, conversion and enrichment, fuel manufacture and substitution, waste disposal and decommissioning[49].

Steve Thomas (energy policy professor at the University of Greenwich Business School UK – who has monitored South Africa’s nuclear plans since 1997) said that the South African government was not alone in being misled by uncritically accepting over-optimistic cost forecasts made by nuclear proponents[50].

A law unto oneself

Montalto maintains that if Zuma’s cabinet approved the 9 600MW programme without national treasury cost-benefit analysis and affordability sign off, it is an illegal move under the Public Sector Finance Management Act [Fin24][51].

It would also be in direct conflict with the ANC’s National Development Plan (NDP) [52] and ANC 2015 national general council resolutions, both which stipulated that it was vital an in-depth cost-benefit investigation into the financial viability of nuclear energy was performed, including a re-assessment of such a programme, and that “Government must also announce publicly that nuclear energy can only be procured in line with the legal prescripts”[53].

Policy makers have also expressed grave concern over a 2014 signed agreement between Russia and South Africa (which was leaked to the media by Slivyak)[54] [55]. It is said to contain clauses that are against our country’s national interests, is in conflict with our constitution, and leans heavily in Russia’s favour.

Over and above that, the project as it stands threatens our country’s sovereignty, since our energy supply will be solely in the hands of Russia, which Allister Sparks describes as a country with “one of the world’s nastiest dictatorships” [Business Day][56].

Gordhan, after being newly appointed as finance minister, stated that the nuclear programme would only go ahead if it was not only affordable, but that the formal procurement process would be in accordance with South African law [57]. As shown above, that pirate ship has already sailed.

Who Benefits?

Will the nuclear programme at least result in cheaper electricity?

Based on findings from the Council for Scientific and Industrial Research (CSIR), the (levelised) cost of electricity from nuclear power is 25% more expensive than new coal or solar photovoltaic, and 67% more expensive than wind [Fin24][58]. Columnist Allister Sparks wrote that the nuclear programme would result in 10 to, maybe, 50 times higher electricity costs than we are paying now [Business Day][59].

UCT energy policy expert Hilton Trollip said the government’s rush to sign a nuclear deal is unnecessary and unwise as South Africa did not need 9 600 MW of new baseload power by 2025. Trollip said, “That is nonsense. There are alternatives. We did recent modelling which shows that we can have a growing mining and minerals economy without nuclear power.”[60]

The question then arises, if South Africans won’t benefit from the nuclear programme, who will?

A report by independent researcher Brenda Martin and an African Energy scholar, Dr David Fig, noted in July 2015 that Zuma is a firm advocate of nuclear power supply and has made it clear since 2010, that nuclear power investment in South Africa is non-negotiable, and that all necessary actions should be taken to ensure realisation of a new nuclear power programme[61].

Below exposes the reasons why Zuma is so hell bent on forcing the Russian 9 600 MW programme through, irrespective of: the evidence against it (from independent and government sources); the laws that stand in his way; the people that advise against it; and the grave concerns of his own party.

Radioactive plant-feed

Nuclear reactors require uranium to function, in particular low-enriched uranium (LEU). But first one must mine the uranium, and for South Africa’s 9 600MW nuclear programme, plus the existing Koeberg Nuclear Plant, the demand for uranium would steadily increase as the nuclear power plants come online. Luckily South Africa is said to have 6% of global identified resources of uranium (or 970 000 tons), the seventh highest share in the world [OECD-NEA, 2013][62].

With a 9 600MW nuclear deal, local uranium reactor demand would grow from the current 290 tons of Uranium (Ut) per year, to eventually 3300 Ut per year, once all the reactors are operational [OECD- Nuclear Energy Agency, 2014][63]. That’s a dramatic 11 times increase in local demand for uranium.

And as it just so happens, in 2010 the Guptas (a family well-known for their backing of Zuma), along with Zuma’s son, Duduzane, emerged as buyers of a South African uranium mine — the Dominion Rietkuil Uranium Project — amid claims that Zuma intervened to ease state funding for the project (according to amaBhungane – M&G’s investigative arm)[64].

[For summaries of the Guptas’ influence with Zuma and his family, read Verashni Pillay’s 2013 M&G article, or Franz Wild’s 2015 Bloomberg article. There are also excellent standalone articles on the Guptas dealings with the state, such as the Sunday Times piece by Sabelo Skiti on how Eskom allegedly went to extraordinary lengths to make sure the Gupta family landed a R4-billion coal deal, or M&G’s amaBhungane articles on a former Gupta associate allegedly involved in R835-million Transnet kickbacks]

All mine

Uranium One Incorporated (Uranium One) — a public company in Canada — owned a number of uranium mines around the world, including a uranium and gold mine in the North West province, South Africa[65] [66]. The local mine was called the Dominion Rietkuil Uranium project, which proved to be a disappointment to the company and so it was mothballed in late 2008.

Uranium One’s global uranium holdings attracted the attention of Rosatom, which from 2009 onwards began buying up the company’s shares through one of its many wholly-owned subsidiaries. (Rosatom would eventually indirectly secure 51% ownership of Uranium One in 2010, and 100% in 2013, after which it was delisted[67])[68].

As Rosatom (through its subsidiary) was buying into Uranium One, the company sold the South African Dominion Rietkuil Uranium project. Reporters picked up on Uranium One’s “low-key announcement” in April 2010 of the sale of the mine to an undisclosed party[69] [70]. The mine was sold for $37.3-million, at a loss to the company of $242-million (based on the company’s interim financial statements)[71]. Thus the mine was sold for about 14% of its reported value.

One month later, in May 2010, the media got wind that the mine — which would come to be known as Shiva Uranium — was bought by Oakbay Resources and Energy Limited (a Gupta-controlled company) together with minority shareholders, which consist of companies within companies (like a Russian nesting doll), including indirectly the ANC’s MK war veterans and its women’s group[72], and the black economic empowerment group Mabengela Investments (Mabengela).

Mabengela is headed by Zuma’s son Duduzane and Rajesh “Tony” Gupta (the youngest of three Gupta brothers). 45% of Mabengela is owned by Duduzane Zuma; 25% by Rajesh “Tony” Gupta (the youngest of the three Gupta brothers); 20% by an array of Gupta employees, former business partners and friends; and the last 10% is owned by an obscure offshore company, with its sole owner a Dubai resident with discernible traces in South Africa[73] [M&G]. The M&G wrote that Mabengela appears to be the vehicle for the Zuma family’s empowerment by the Gupta family[74].

(The North West province — where the mine is situated — is governed by Supra Mahumapelo, the province’s premier, and he is said to be a member of the so-called “premier league”, which consists of premiers loyal to Zuma. The other premier-league provinces are the Free State and Mpumalanga[75]. For the 2014/15 period, the auditor-general found the number of “clean audits” — that is, financial statements that present a fair and accurate picture and comply with accepted accounting principles — for the departments and public entities in Mpumalanga and the North West came to 24% and 4% respectively, while 32% of the Free State’s audits were deemed clean[76] [77]. This excludes financial statements by departments not submitted on time, or at all[78].

amaBhungane and the Sunday Times uncovered that the Guptas had expected the Public Investment Corporation (PIC) to facilitate funding for the Uranium mine purchase. (The state-owned PIC is the country’s largest institutional investor, with more than R750-billion — as at 2010 – in civil servants’ pensions under its management[79]).

Brian Molefe, the then chairman of PIC, was set to leave in April 2010 when his contract expired. However Molefe’s last day on the job would have been 12 April — two days before the Dominion Rietkuil transaction was finally clinched. The Sunday Times uncovered that Zuma had phoned the then deputy finance minister Nhalanhla Nene — who doubled as PIC chairperson — during the week preceding 12 April to ask that Molefe be kept on. A source confirmed that Zuma had asked Molefe to stay on, and so he did, and his contract was extended for a further three months.

M&G reported that it had seen internal documentation showing that the PIC was intimately involved in the Shiva Uranium project, and that a PIC employee at the time said Molefe pushed for the project, but the investment committee eventually rejected it as too risky[80].

However, the Industrial Development Corporation (IDC) was less perturbed by the risk, and provided the loan.

After the Guptas had succeeded in allegedly lobbing Zuma for his assistance, the IDC loaned Oakbay Resources and Energy (Oakbay) R250-million for the purchase price of R275-million (April 2010 R/$ exchange rate for $37.3-million)[81]. The Gupta family effectively owns 64% of Oakbay[82] [Business Day], and Oakbay obtained a 74% stake in Shiva Uranium[83] [84]. The Gupta family, in March 2011, said that it never benefited from BEE, but had sponsored BEE deals [City Press][85].

Later, when Oakbay listed on the Johannesburg Stock Exchange (JSE) in November 2014, the IDC received a 3.57% share of the company in exchange for the R250-million loan[86] [City Press]. Based on the company’s February 2015 net assets (instead of using the company’s market cap, which is “way off kilter” [87]), IDC’s 3.57% shareholding equates to R182-million, giving Oakbay a discount on its loan of at least R68-million[88] [89] [90] [M&G calculations updated to Feb 2015]. There are also more than R300-million interest charges on the loan that is payable by 2018 [City Press][91].

(The IDC is a state-owned development financier set up to stimulate industry and create jobs. Thus each loss on an investment means it is less able to fulfil its mandate on behalf of all South Africans [M&G][92]. The activity of the IDC centres on, amongst other policies, the National Development Plan, which has advised caution and reassessment of the nuclear programme.)

At the time of the purchase of the Dominion Rietkuil Uranium mine, journalist Brendan Ryan [Fin24] pondered, “Who in their right mind would buy one of the most notorious dogs in the entire South African mining sector — the failed Dominion Uranium mine — and do it at a time when uranium prices are still depressed? That’s the $64 000 question following news that the Gupta family — the ultimate controlling shareholder in Shiva Uranium — has bought Dominion for $37.3-million. It’s either the steal of the century — given that developers Uranium One wrote off an investment of $1.8-billion when they shut Dominion down in October 2008 — or it’s a classic case of throwing good money after bad.”[93]

Unbeknownst to Ryan, at the time, was that Zuma and his benefactors had set the course for a large-scale nuclear programme.

Atomic timeline: 2000 to 2010

In the early 2000’s, Zuma — then South African deputy president — met the Guptas for the first time, as a guest at a business function held by a Gupta company, Sahara Computers[94].

In 2005, during the power struggle between Zuma and Thabo Mbeki for the presidency, the Guptas were said to have sided with Zuma, even after he had been fired as deputy president. The Guptas had tried to court Mbeki, but did not get far. (The Guptas claim that they were friends with Mbeki as much as they are friends with Zuma). The Guptas don’t mind telling whoever cares to listen that they were there for Zuma when his days were dark [Business Day][95].

Early in 2007, Eskom approved a plan to expand South Africa’s overall electricity capacity by the year 2025. The plan included the construction of 20 000 MW of new nuclear capacity, consisting of up to 12 nuclear reactors. France’s Areva and the United States’ Westinghouse were contenders[96].

In December 2007, Zuma was elected as ANC president[97].

Six month’s later, in June 2008, Duduzile and Duduzane, Zuma’s daughter and son joined the board of the Gupta-controlled company, Sahara Computers[98] [99]. (Duduzile resigned from the position in 2010[100]. Duduzane and Gupta family members are directors of at least 11 of the same companies, as at December 2015 [Timeslive][101].)

In September 2008, Mbeki resigned as South African president.

In December 2008, Eskom abandoned the 20 000MW nuclear plan for being unaffordable in the wake of the 2008 global financial crisis and the renewed appreciation for coal production[102] [103] [104][Professor J. van Wyk of Political Sciences]

Zuma was inaugurated as South African president in May 2009. In November 2009, the Guptas’ formed a new company, which would come to be known as Oakbay Resources and Energy Limited[105](Oakbay).

One month later, in December 2009, Zuma declared at the United Nations Climate Change Conference in Copenhagen that South Africa was going to reduce its carbon emissions by 34% by 2020[106]. His announcement took both local and international commentators by surprise, but it revealed Zuma’s nuclear ambitions.

Four months after that, in April 2010, the Guptas, Duduzane Zuma, and other investors bought the mine — soon to be called Shiva Uranium — with Zuma allegedly ensuring state assistance. The Guptas and Duduzane then jumped into action, refurbishing the uranium and gold plant “very aggressively”[107] to make the plant operational for production. They also possessed due diligence studies and a comprehensive bankable feasibility study (a document required to raise capital)[108] [109].

A couple of months later, in June 2010, the Guptas accompanied Zuma on his first state visit to India (the Gupta’s original birthplace, and where some of their family members are still based[110]). It was an important trade meeting, intended to entice investment in South Africa. However, the Guptas appeared to have acted as gatekeepers for Zuma on the trip. At one banquet … Zuma made it clear that interested investors had to go through the Guptas, prompting several high-powered businessmen to leave in disgust”. One businessperson told the M&G at the time, “It was clear that the family wanted to use Zuma to establish connections for themselves.” [Verashni Pillay’s 2013 M&G article][111].

In August 2010, Zuma met with his Russian counterpart, Dmitry Medvedev, during his first official visit to Russia. Zuma was accompanied by 11 cabinet ministers and more than 100 South African business people[112].

During the trip, Zuma concluded a deal with Medvedev for Rosatom to supply 40% of Koeberg’s enriched uranium needs until 2017 to 2018[113] [114]. The Head of Rosatom told reporters that the company hoped to eventually control 45% of the low-enriched uranium (LEU) market in South Africa[115].”Our share of the market in South Africa will rise,” he said.

Atomic timeline: 2011 to 2013

In January 2011, the CEO of Shiva Uranium said, “We’re looking at very shortly starting up the uranium processing plant” [Bloomberg].[116] By February 2011 Shiva produced 1.4 tons of elemental Uranium (Ut)[117] [118] (or 0.25% of South Africa’s yearly uranium production[119]).

In March 2011 Zuma’s cabinet approved the Integrated Resources Plan (IRP2010) 2010-2030, which was a 20 year road map, outlining the mix of the country’s future electricity generation, which included the need for 9 600 MW of nuclear power[120] [121] [122]. That same month the Gupta-Zuma plan hit a wall, or more specifically a tsunami hit Japan, causing the Fukushima Daiichi nuclear plant disaster. As a result, the South African government put its nuclear programme on hold pending a nuclear safety review[123] [124].

In April 2011, Russian president Medvedev and Zuma meet in China’s Sanya City while attending a BRICS summit. This was the first time South Africa was taking part in the forum[125].

Two months later, in July 2011, the two presidents held talks at a luxury spa in Sochi, on the side-lines of a Russian-Nato council meeting. The content of the talks is unknown[126].

In September 2011, the energy department submitted its nuclear tender proposal to the cabinet, and the then energy minister said it would finalise the proposal before the end of the year. Bidding was said to begin in 2012[127].

At the end of 2011, the OECD Nuclear Energy Agency made puzzling findings on Shiva’s activities, stating that beside the initial 1.4 tons of uranium in February 2011, “no [more] information is available on 2011 production.”

As for 2012, The OECD-NEA found that, “Shiva did not produce uranium in 2012 and no information on the reasons for not producing uranium as planned are available. It is also not known when uranium production will resume[128].”

In March 2013, Russia’s Rosatom opened offices in Johannesburg. The nuclear company said at the time that it had not yet decided if it would pursue nuclear energy production in South Africa or other African states. (According to the International Atomic Energy Agency, Nigeria, Kenya and Egypt were considering nuclear technology[129]).

That same month, Zuma and Putin met before a BRICS summit in Durban, and again two months later, in May 2013, at the Black Sea resort of Sochi. Engineering News reported that the then energy minister, Dipuo Peters, held talks with the director general of Rosatom during the Sochi visit, and Russian news agencies reported that nuclear co-operation was discussed at presidential level too[130]. (Peters had successfully led the procurement of renewable energy from independent power producers, before being removed in a cabinet shuffle in July 2013, and replaced with Ben Martins.[131])

In July 2013, Zuma took control of the inter-ministerial National Nuclear Energy Executive Co-ordinating Committee (NNEECC), by replacing its Chair, deputy president Kgalema Motlanthe, with himself. The NNEECC guided all spheres of government that had a stake in the nuclear programme[132] [133]. The M&G reported at the time that Zuma’s move was not widely known, and took well-placed industry insiders by surprise[134].

In November 2013, in the run up to the Atomex African Forum, Russia’s state-owned news agency reported that Rosatom is “to build eight nuclear electricity units [9 600 MW] in South Africa. Formal agreements about this are to be signed….on the fringes of Atomex[135].” It had been suggested that Rosatom embarrassed South Africa by letting the cat out of the bag about the reactor deal before the government was ready to make an announcement [M&G][136].

At a G20 Summit and at Atomex, in September and November 2013 respectively, the Russians became increasingly impatient, and were said to have pushed Zuma “aggressively” for the signing of the nuclear agreement[137] [138].

The M&G uncovered that Zuma in turn appealed to finance minister Gordhan at the G20 Summit to make the necessary financial commitments needed to conclude the Russian nuclear deal. Gordhan apparently declined and warned Zuma such a step would be unwise[139].

Montalto said Gordhan had always objected to the nuclear programme, due to the cost and the possibility of corruption[140].

On 21 of November 2013, the energy department released its revised Integrated Resource Plan (IRP2013), which advised that South Africa should delay its nuclear plans until at least 2025 and even 2035[141], and abandon it altogether if it proves too expensive. The revised findings were — and still are — ignored by Zuma and his cabinet.

On 25 of November 2013 — four days after the IRP2013’s release which advised the delay of the nuclear build — the then minister of energy Ben Martins acted as witness to the signing of an agreement between Rosatom and the South African Nuclear Energy Corporation (Necsa), which gave the energy department the go-ahead to procure 9 600MW of nuclear power from Russia[142]. (A government gazette noting the agreement was only published two years later in 2015, quietly sneaked through on the eve of Christmas [Rand Daily Mail][143], and a couple of weeks after the firing of Nene).

Atomic timeline: January to October 2014

In Zuma’s State of the Nation address in February 2014, he said, “We expect to conclude the procurement of 9 600MW of nuclear energy.”[144]

In May 2014, Zuma announced his new cabinet, including a shock transfer of Gordhan as finance minister to a lesser portfolio, and replacing him with the low profile but respected Nene[145] [146].

Zuma also appointed a new energy minister, the “political lightweight” Tina Joemat-Pettersson. M&G reported at the time that her appointment sparked the strongest reaction, ranging from concern to absolute outrage — “particularly in light of the possibility that a nuclear build, involving trillions of rands in tenders, may be on the horizon”, and that “poor decisions will result in problems that will dog the country for 30 or 40 years to come and have huge economic impact”[147].

In July 2014 Zuma met with Putin at a BRICS summit in Brazil. A month later, in August 2014, Zuma flew to Russia for a six day visit; this was his fifth trip to the country. Both Russian and South African journalists were surprised by the visit[148]. It was called a “working visit”, but strangely, Zuma was only accompanied by an international relations deputy minister and, curiouser still, the state security minister. The delegation did not include any of cabinet’s economic cluster, despite the reason for the trip being to discuss trade and investment between the two countries[149] [150].

TimesLIVE noted at the time that Zuma and Putin had become pretty close, meeting at every available opportunity (four times in 15 months). The newspaper pondered what benefit Zuma derived from his relationship with Putin, and that trip specifically [151].

In September 2014, Zuma made himself chair of the cabinet’s energy security subcommittee (which Zuma had established a few months earlier to replace the NNEECC.) The Subcommittee was led by the minister of energy Joemat-Pettersson. This then sidestepped Eskom as the owner and operator of the nuclear fleet[152], and excluded any technical and financial oversight by them [Business Day], while also neutralising minister of public enterprises Lynne Brown, who is more sceptical of the nuclear programme [M&G][153].

The stage was thus set for an opaque “country-to-country” negotiation process, without the necessary participatory checks and balances [M&G].

On 22 of September 2014 a joint media release by Rosatom and the South African government announced that the two countries had signed an intergovernmental framework agreement[154] which laid the foundation for the large-scale nuclear power plants procurement and development programme of South Africa, based on the construction of new nuclear power plants with Russian VVER reactors with total installed capacity of up to 9 600MW (up to 8 nuclear power plant units)[155].

The media statement goes on to quote Joemat-Pettersson as saying. “I am sure that co-operation with Russia will allow us to implement our ambitious plans for the creation by 2030 of 9.6 GW [equal to 9 600MW] of new nuclear capacities based on modern and safe technologies.”

The announcement caught politically nuclear lobbyists, industry insiders, as well as the ANC’s own NEC all off guard [M&G]. And there was such an outcry over Russia’s unfair advantage that the energy department tried to downplay the agreement and instituted damage control by asking other vendor countries for agreements, including the USA, South Korea, France, Japan and China[156]. Nonetheless, Hartmut Winkler, Professor of Physics, University of Johannesburg, stated that the perception remains that the Russian nuclear developer Rosatom had already been assured of its front runner status[157].

The agreement (which was leaked to the media in January/February 2015 by Slivyak) showed that Russian technology would be used exclusively for the 9 600MW deal and that it appeared to be written to sidestep constitutional requirements for open and competitive tendering [M&G][158].

Prof Winkler wrote (in 2015) that “The speedy and secretive manner in which government initiated a process with massive and long-term cost implications, and the inexplicable decision to declare Russia as a preferred partner ahead of other potential options, immediately led to intense suspicion of corruption.” He went on to say that the nuclear build became labelled as an arms deal “on steroids” [159].

Atomic timeline: November 2014

From 2012 to November 2014, the Shiva Uranium mine operated under management allegedly without up-to-date permits for many of its environmental impacts [M&G][160]. Its signboards on the property became bleached almost illegible by the sun, and the anticipated jobs for the local residents never materialised[161]. The company funded the care and maintenance of the plant through open-pit gold mining[162].

On 28 of November 2014, three months after Zuma’s “working visit” to Russia, and two months after the nuclear SA-Russia cooperation agreement was signed, Oakbay listed its shares on the Johannesburg Stock Exchange (JSE)[163]. (JSE’s listing time frame is normally about two to three months)[164].

City Press wrote that no matter the declarations of innocence, the timing of the Oakbay listing and the discussions around the state’s massively contentious trillion-rand nuclear build programme saw eyebrows meet hairlines among jaded South Africans[165].

In Oakbay’s press statement, the then CEO George van der Merwe declared that it was an opportune time to list given the strong global uranium market and Shiva’s turnaround under Oakbay. He said, “Demand for uranium is generally driven by nuclear power plants. With 439 in operation worldwide, 62 under construction and 465 more in planning, the market is wide.” The statement added that current uranium production lags consumption (190 million pounds pa) by 50 million pounds[166] [167]. (The figures also appear in the company’s pre-listing statement.[168])

It may be coincidental, but the number of nuclear power plants and pounds of uranium he quotes to justify the timing of the company’s 2014 listing, as opposed to doing it sooner, matches precisely that of an article written by Virginia Uranium Inc in 2011/12 (article link) — nearly three years prior to Oakbay’s listing. (Even so, the numbers could be confused since they have changed relatively little from 2012 to end 2014[169] [170].) There is one numerical difference between the two sources, though — where van der Merwe refers to a 50 million pound lag in uranium production versus consumption, the article concurs but adds that for that period the difference was made up by secondary sources. (The article goes on to say that those secondary sources will drop by 50% over the next decade, while global demand is expected to increase, widening the supply-demand gap.) According to figures by Morgan Stanley research in December 2014, there was global oversupply from 2010 to 2013 and an estimated oversupply for 2014[171].

At the end of 2014 when Oakbay listed, Nuclear Engineering International and Morgan Stanley stated that there was a uranium oversupply, which was forecasted to continue through the year 2020[172][173]. (To illustrate with a more recent example, Cameco Corp. the world’s second-largest uranium producer, reported lower adjusted quarterly earnings in October 2015, “as an oversupply in the market continued to affect demand and price.”[174]). The oversupply has led to significant stock build-up in Japan (with a 6 year stockpile)[175] and China (with a 10 year stockpile)[176] that could reduce future demand growth. Local producer Sibanye Gold (Oakbay’s only publicly listed rival for uranium and gold production) has also been stockpiling its uranium[177].

David Sadowski, a mining analyst with Raymond James, said in July 2014, “For years now, analysts have been touting the uranium supply shortage, but looking at the current market, that prospect no doubt seems laughable.”[178] (He added that the supply deficit that was once expected to hit the market in 2018 has been delayed until 2020 at the earliest.)[179]

So it appears somewhat doubtful that the number of reactors worldwide and overall uranium demand can be attributed to the timing of Oakbay’s listing.

In Oakbay’s November 2014 pre-listing statement, it referred to the nuclear programme thus, “The South African government has developed a master plan for the roll-out of a nuclear build plan and has commenced signing co-operation agreements with various countries with nuclear expertise. Should this plan commence, there will be a local demand for uranium in addition to the increased international demand for the commodity.”[180]

(Varun Gupta would later caution — in 2015 as the new CEO — against linking Oakbay’s operations and the SA nuclear programme, saying that Shiva Uranium would be producing uranium within about two years, whereas SA’s new nuclear power would only come on stream several years later[181].)

CEO van der Merwe said in November 2014 that it expected an increase in [global] demand for uranium, and so had begun the process of commissioning a definitive feasibility study on its mineral deposits with a view to raising R800-million, and anticipated the study to be completed in 12 months’ time[182].

Atomic Timeline: January to August 2015

In Zuma’s State of the Nation Address in February 2015, Zuma reiterated, “Government is also exploring the procurement of the 9 600MW nuclear build programme as approved in the Integrated Resource Plan 2010-2030” [183] (Once again he ignores the revised IRP2013 findings). He added that, “Our target is to connect the first unit to the grid by 2023, just in time for Eskom to retire part of its aging power plants.”

Also in February 2015, M&G reported that the board of the South African Nuclear Energy Corporation (Necsa) — which is a state-owned entity that is earmarked to drive the nuclear programme’s local skills development and industrialisation plans – suspended its chief executive, Phumzile Tshelane, for disciplinary lapses, including allegedly donating state money to the ANC, the company’s financial position had “nose-dived” from a cash surplus to a projected shortfall of tens of millions of rands, and there were irregular payments to the Necsa chairperson Mochubela Seekoe (who received triple the remuneration of the next highest board member). Necsa declined to confirm or deny these figures, but said “no such scenario has occurred or been envisaged” [M&G].

M&G stated that Tshelane and Seekoe are considered as the “lynchpins” in Zuma’s contested plan for new nuclear power stations. (Seekoe denied the allegations.)[184]. Like Zuma, Tshelane held several meetings with the nuclear build front runners of Russians; and Seekoe is the former South African ambassador to Russia (and Russian-educated and Russian-Speaking). (Necsa had signed an undisclosed agreement in November 2013 with Rosatom for the go-ahead to procure 9 600MW of nuclear power.)

The energy minister acts as Necsa’s nominal shareholder; however, the board she appoints is legally entitled to perform an independent oversight role [M&G]. Nevertheless, energy minister Joemat-Pettersson was accused of stepping in to protect Tshelane, allegedly under pressure “from above”.

Four months later, in June 2015, Necsa board members were in open conflict with Tshelane and wrote to Joemat-Pettersson about their implacable opposition to his reappointment and questioned his fitness for office[185]. The board then attempted to “summarily dismiss” Tshelane for allegedly “withholding information” from the auditor general [M&G][186] while also questioning his suitability to perform a key role in the impending nuclear programme. The board wrote to the energy minister: “The nuclear industry is one that prides itself in transparency, especially when it comes to compliance, safety and financial accounting. The very future of nuclear in South Africa depends on these pillars to assure that nuclear energy should not be feared, but embraced. The actions and conduct of the CEO … have trampled these very values and made a mockery of the government’s efforts to ensure a world-class nuclear industry, in preparation of the planned nuclear new-build programme.” [M&G][187]

(Update: Carol Paton reported in Business Day in October 2015, that Necsa is in financial and organisational disarray: it failed to finalise its annual financial statements; the board has collapsed; and the CEO is holding on to his job by a tenuous thread[188]. As of December 2015, Tshelane and Seekoe retain their positions at Necsa, while some board members have since left.)

In May 2015 Zuma and Putin held yet another ‘bilateral’ meeting. Timeslive observed that Putin was the world leader Zuma had spent the most time with since coming to office in 2009[189].

In July 2015 a frustrated Zuma summoned Nene and Joemat-Pettersson to a meeting, where he demanded answers as to why the nuclear build programme procurement process had not resumed in June that year as planned[190].”The president instructed them to iron out issues between the two departments when they return home [from a BRICS summit in Russia],” said a senior government official who was privy to the meeting. The official, who did not wish to be named, said the departments had failed to agree on a way forward — with the treasury maintaining that the project was “unaffordable” [Sunday Times][191] [192].

In mid-July 2015 — shortly after Zuma, Nene and Joemat-Pettersson returned from the BRICS summit in Russia – the energy department announced that the procurement would start that same month and that the vendor would be selected by the end of the financial year in March 2016[193].

In Zuma’s August 2015 mid-year State of the Nation speech, he said, ” For the medium to long term electricity supply, the nuclear build programme is at an advanced stage of planning and the procurement should be concluded within the current financial year.”[194]

That same month, due to growing resistance to the scale and cost of the nuclear programme, Joemat-Pettersson denied that the government had ever said it would build 9 600 MW (or 9.6 GW) of nuclear power, describing the number as “a thumb-suck”[195] [196]. This is in blatant contradiction over the previous two years of direct quotes from her, her department, Zuma’s State of the Nation Addresses, the nuclear procurement agreement between Russia and South Africa, and budget speeches.

On 27 of August 2015 Nene reaffirmed that he would not sign off the $100-billion deal to build nuclear power stations, struck between Zuma and Putin, if it was “unaffordable”[197].

Atomic Timeline: September to December 2015

In September 2015, nearly a year after Oakbay listed on the JSE: its shares were gyrating from R10 to R50 and back to R30 in the past year, reflecting thin volumes [Business Day][198] [199]; and, the company spoke of refining its bankable feasibility study to raise between R800-million and R1-billion to achieve optimal uranium production[200] [201], which is exactly what the former CEO van der Merwe had stated the previous year, with the feasibility study having been expected to be completed by this time[202] [203] [204]. From 2012 to September 2015, the company had produced no uranium.

Varun Gupta (as CEO) announced that once the capital had been raised, the company’s first (suboptimal) uranium production would be enabled within about 18 months to two years. On this basis, he denied there was a direct link between Oakbay and SA’s nuclear programme, as the reactors would only come on stream several years later [205]. However, as with the case with Japan, China, and other nuclear-powered countries — if the 9 600MW nuclear programme goes ahead, Zuma’s government may choose to stockpile uranium in anticipation of fuel requirements for the nuclear reactors as they attain criticality, and thus create an early demand for uranium. Moreover, the then CEO van der Merwe said the R800-million investment was needed to be raised over a five year period, allowing the company to ultimately achieve the mine’s maximum annual uranium output of 1100 Ut per year[206] [207]. Which — if the nuclear deal goes ahead — would more or less match the uranium demand South Africa will have five years after construction commences (barring delays), for the first phase of the nuclear build [OECD-NEA][208] [209].

In that same month, September 2015, the mineral resources minister Ngoako Ramatlhodi was in the middle of dealing with mine industry layoffs, a commodity-price slump, and an investment squeeze[210], when he was suddenly recalled from his ministerial post by Zuma, in a late-night cabinet reshuffle[211][Rand Daily Mail]. He was moved to the Public Service and Administration position, a post that had been vacant since March that year[212]. No other positions where changed.

In hindsight, Ramatlhodi’s (and Gordhan’s 2014) removal was a precursor to Nene’s shock firing. As Natasha Marrian observed in Business Day, Zuma and his cohorts were probably emboldened by how swiftly the noise died down after replacing Ramatlhodi with their man, Mosebenzi Zwane, at the helm of the strategic mining portfolio[213]. Like Nene, Ramatlhodi too was replaced with a person with no track record[214]. In less than two years, Zwane had moved from being MEC for economic development, small business, tourism and environmental affairs in the Free State to heading the province’s agriculture and rural development portfolio for three months, before being sent to Parliament [M&G][215] [216].
The M&G found that Zwane had reported business links that were in close proximity to the Guptas[217]. And he had also been linked to at least two government scandals involving the Guptas[218]: Guptagate, where Zwane was used as a pretext to explain why the Gupta’s private plane was allowed to land on route to a wedding at the Waterkloof Air Force base without having diplomatic status (the Guptas insisted they did nothing wrong, but issued an apology[219] [220] [221]) [Business Day]; and, during Zwane’s tenure as Free State MEC for Agriculture, he was linked to a R570 million Gupta-related dairy project in his home town of Vrede – the project was riddled with irregularities and was investigated by the treasury before being shut down (the Guptas deny any involvement[222] [223] [224]) [M&G]. (The Free State province is governed by the premier, Ace Magashule, who is a member of the Zuma-loyal “premier league”[225].)

Gupta and Gupta-linked companies involved in mining – including Shiva Uranium – have several times run into trouble with regulatory requirements, as well as those on environmental compliance[226] [227][TimesLive]. Due to changes in environmental and mining legislation, Zwane is in charge of enforcing those regulations[228] [229].

In January 2016 it was reported that Zwane allegedly travelled with a delegation from the Gupta-owned Tegeta Exploration and Resources company to visit Glencore in Switzerland to negotiate the purchase of Optimum Colliery. (Asked if the minister had joined the Tegeta delegation, the company’s director said it was “absolute rubbish”.) (Optimum is a coal mine that was placed in business rescue, after: Eskom slapped the company with a R2.5-billion penalty for supplying sub-specification coal; Eskom refused to renegotiate a debilitating supply contract; and the company’s mining rights were revoked by government for a few crucial days[230] [231] [232]. It was bought out by its fellow competitor, the Gupta-controlled Tegeta Exploration and Resources company. An executive at Glencore, who asked not to be named, said the company had been strong-armed into selling [IOL][233].

The buyout of Optimum Coal may allegedly be an example of corporate hijacking, with state assistance [or “private grabification” — definition to follow in Part 2 below]. IOL reports that Exxaro’s Arnot mine closed recently after Eskom refused to renegotiate its supply contract[234]. The truth about all this is yet to be told.)

In October 2015, Nene allocated R200-million to the energy department over two years (half in 2016/17 and half in 2017/18) for preparatory work to consider the costs, benefits and risks of building nuclear power stations in South Africa, and told journalists that treasury will conduct a “transparent budget process” [Fin24][235] [236].

South Africa has become one of the leading destinations for renewable energy investment, so said a 2015 research report by the Energy Research Centre UCT. The Renewable Energy Independent Power Producers Project (REIPPP) is a joint private-public initiative for renewable energy generation, mainly from wind, solar PV and concentrated solar power. Since its inception, the REIPPP has been hailed an unprecedented success. The programme is unique in that for projects to qualify, developers must contribute to the reduction of socio-economic inequity, through community ownership and economic development benefits[237].

As of October 2015, 92 projects had been selected as part of the REIPPP, mobilising private investment of R193-billion, and with a combined capacity of 6 327MW. In addition, 37 out of the 92 projects had been completed by then and they contributed 1 827MW of power to the national electricity grid (this is equivalent to one Koeberg nuclear power station), while also providing social upliftment[238] [239] [240][241]. In June 2015, the energy department issued a determination to procure a further 6 300 MW for the project[242]. The national treasury expected the REIPPP to eventually contribute 17 000 MW of electricity capacity to the grid by 2022[243].

Yet, in October 2015, just when bidding by renewable power producers was set to start for the additional capacity[244], Brian Molefe — now CEO of Eskom — halted the process, with the non-issuance of budget quotes for the programme. He said it was a temporary measure taken to protect the financial sustainability of Eskom. Effectively, he was saying Eskom could not afford to support new REIPPP connections as well as energy purchases. He added that, “very soon a lasting solution will be found to address this matter” [Fin24][245] [246] [247]. (As of writing, no reports on Eskom’s future commitment to the REIPPP could be located.)

On Wednesday, 9 of December 2015, Zuma held a cabinet meeting to discuss key government programmes and decisions. Amongst them was the nuclear procurement programme for 9 600 MW, which was then approved by cabinet (but excluded the then Cooperative Governance and Traditional Affairs minister Gordhan, who was off sick) [Carol Paton of Business Day uncovered cabinet’s decision][248].

Just hours after the meeting, and to the cabinet’s great consternation and surprise (according to Jeff Radebe, who is a cabinet member, an ANC NEC member, and minister of the presidency)[249], they heard along with the rest of the public that Zuma had fired Nene, and replaced him with a parliamentary backbencher, David van Rooyen. The move was met with shock and disbelief in all sectors at home and abroad[250].

Two days later, on Friday, 11 of December 2015, the post-cabinet media briefing by Radebe and accompanying press statement made no mention of the fact that the 9 600MW nuclear deal had been approved[251] [252] [253]. It was only on Monday, 14 December 2015, after Gordhan had taken the helm of treasury that cabinet’s decision was publically confirmed by him.

Uranium enrichment

“Global uranium demand is predominantly driven by its use in nuclear power generation plants,”[254]declared Oakbay, the majority shareholder in Shiva Uranium. But uranium cannot be used as fuel to run nuclear reactors until it has been converted into low enriched uranium (LEU)[255] [256].

The World Nuclear Organisation states that Eskom procures its conversion, enrichment and fuel fabrication services from world markets, and that nearly half of its enrichment is from Russia. However, historically, South Africa has sought self-sufficiency in its fuel cycle[257].

In the 1970s the Apartheid government established a uranium enrichment company, which later, in 1999, was restructured to become Necsa (currently under the management of Zuma’s “lynchpins” Seekoe and CEO Tshelane). But actual enrichment operations ceased in 1995, and the only two conversion plants were both demolished. Much of the high-enriched uranium (HEU) is still stored away. (Some say there’s a 250kg cache[258]).

With the prospect of 9 600MW of nuclear power, local enrichment operations are again a priority. Necsa’s CEO Tshelane told the M&G in October 2013 that his board was “seized” about whether to re-open the country’s enrichment facilities, adding that it was an opportunity for the parastatal to “localise the back end of this procurement; we should localise as much as we can”.

One month after M&G’s interview, in November 2013, Necsa and Rosatom signed an agreement giving the energy department the go-ahead to procure 9 600MW of nuclear power from Russia (and which was only acknowledged publically in a government gazette two years later).

But besides the prospect of local LEU demand, there are even greater incentives over the horizon for an enrichment plant[259]. Several African countries have expressed an interest in nuclear power plants, including Algeria, Egypt, Ghana, Kenya, Morocco, Namibia, Niger, Nigeria, Tunisia and Uganda[260][261] — and they will all have uranium and enrichment requirements, and be dependent on those who provide them.

In an African Policy Brief (by Egmont — Royal Institute for International Relations) it stated that Putin is quietly, but with determination, executing a sound plan to build up Moscow’s economic and political power on the African Continent[262]. And it looks like Zuma wants to ride on his coat tails.

According to a December 2014 report by Earthlife, Rosatom promised that a nuclear fuel assembly facility will be built in South Africa in case the country decides to go for the ambitious 9 600MW nuclear program with Russia[263]. This was confirmed by OECD-NEA which stated that there are plans under consideration by Zuma’s government to restart enrichment for both domestic and export purposes[264].

Nuclear dating

The possibility of an enrichment plant may shed some light on Oakbay and the timing anomaly with the nuclear programme.

Construction on the first reactor is said to begin in 2019. As stated earlier, Zuma’s government may well decide to begin stockpiling uranium before any reactors come online, thus the government will look to secure long-term contracts with suppliers early on. On that score, Oakbay will be ahead of the queue due to Shiva Uranium’s unique processing capabilities that produces a higher grade uranium (according to Oakbay), as well as their unnaturally close proximity to Zuma.

Over and above all that, Oakbay plans to produce their first uranium production in 18 months to 2 years after having raised capital, while opening discussions with agents and nuclear-power firms about securing long-term supply contracts[265]. They said that they are focusing in particular on India and China[266] (both of which Rosatom has extensive dealings). There are examples of Rosatom taking 2 to 3 years to build large centrifugal enrichment plants[267], and that is from scratch, whereas South Africa has plants that can be recommissioned.

Theoretically, the first reactor is to become operational in 2024[268]. As stated earlier, Oakbay’s objective is to eventually achieve an annual uranium output of 1100 Ut per year[269] [270], which is the estimated uranium demand South Africa will have when the first reactor/s comes online [OECD-NEA][271] [272]. Moreover, Oakbay are not shy about looking for other acquisition opportunities in the energy and mining sector to boost their production output[273].

Again theoretically, the remaining reactors will come online in 2025, 2026, 2027, with the final reactors being completed in 2029 and 2030[274] [275]. This in turn will bump up uranium demand each time, until finally the full 9 600MW nuclear build will be up and running (consisting of 3 nuclear power plants, each with two or three reactors, depending on the configuration[276]), creating a steady uranium demand of 3300 Ut per year[277].

Besides the possibility of local uranium demand, as stated earlier there is the potential for a continental-scaled uranium market and enrichment need, if African countries decide to procure nuclear energy.

In 2010, journalist Brendan Ryan posed the question: “Who in their right mind would buy one of the most notorious dogs in the entire mining sector — the failed Dominion Uranium mine …?”[278] Well finally it can be answered — the Guptas, with alleged help from Zuma and his 9 600MW nuclear deal.

What a steal

Uranium is not the only commodity with dubious links to the nuclear programme.

In July 2013, John Helmer (a provocative American journalist who focuses on the Russian business sector) flagged a strange deal with a company Nemascore which had links to Zuma’s associates (including his son – Duduzane, Zuma’s legal advisor – Michael Hully, and another lawyer associated with Zuma)[279].

Nemascore had been registered for only a month, when it made an offer (with the assistance of a Russian bank) of $320-million to buy a majority stake in a Russian-owned steel producing company, Highveld Steel & Vanadium, based in eMalahleni, Mpumalanga, for double its market value. (Highveld Steel & Vanadium is the second-largest steel maker in South Africa.) Occurring almost in tandem with Russian negotiations on the nuclear deal, led Helmer to speculate that the two deals were perhaps connected[280] [281] [282].

Furthering Helmer’s theory about the link between the deals, was that the buy-out was endlessly deferred together with South Africa’s decision about the nuclear deal[283]. (For further reading: M&G article link AND Business Insider article link )

As of December 2015, and still in keeping with the nuclear programme delays, Highveld Steel & Vanadium is currently in business-rescue proceedings, and has shut down operations “temporarily”[284].

(As an aside, in December 2011, the Procurement Director of the machine engineering division of Rosatom was charged with collaborating to steal more than $4.5 million, or R36.5 million at that time, with his cohorts by forging supply certificates for reactors at home and abroad, including India, for what was low quality, cheaper steel in order to fake compliance with industry standards while keeping the difference in price for himself[285]. As of writing, no reports on the outcome of the case could be located.)

Stacked deck

Overall, the tendering process for the 9 600MW nuclear build programme will include 80% South African sourced construction companies, engineers, waste management system suppliers, security systems providers, cabling, cement, steel, finance, transport, IT firms, mining, and more[286] [287].
Which on the face of it sounds wonderful, but not when one considers it is for a nuclear programme that has already been declared by government and independent studies to be unnecessary and unaffordable, will ultimately result in 10 to 50 times higher electricity costs than we are paying now, and already exhibits alarming signs of fixed tendering through devious means[288].

Although the Guptas allegedly occupy much of Zuma’s attention as benefactors, that attention is not wholly undivided – there are other benefactors too, in various industries. For example, see the M&G article by Lionel Faull and Sam Sole on the alleged influence of Vivian Reddy (who reportedly paid R450 000 for a table at the ANC’s anniversary gala dinner). He secured a R1.25 billion “smart” electricity meter tender with City Power: “Joburg’s R1-billion ‘present’ to Zuma benefactor”(M&G article link ).

Loane Sharp — economist for the Free Market Foundation – stated in Business Day, that the Department of Trade and Industry (DTI) aims to create 100 black South African industrialists in Zuma’s present term. She said, “It is probable that the Department of Trade and Industry DTI is forcing through the new BEE codes to prejudice “white” businesses and advantage “black” businesses (the DTI’s terms) ahead of the R1-trillion rollout of government infrastructure projects.” She added that the new regulation proposed fines and mandatory prison sentences[289].

Economic development minister Ebrahim Patel announced in parliament in May 2015 that the IDC would set aside R23-billion to fund the black industrialists programme over the next five years. In addition, the IDC has committed to fund expansionary investments by R100-billion over the same period [Financial Mail][290].

The Financial Mail notes that there are questions over how the 100 black industrialists will be chosen. There is concern that the billions of rand in government resources will be used to dispense patronage to people who may not meet the requirements. Ajay Lalu, MD of Black Lite (a consultancy that also owns a controlling stake in a photovoltaic manufacturing company), said, “The biggest threat to this scheme comes from politicians masquerading as entrepreneurs. We have to vigorously guard against that.”[291]

As with Nene, Gordhan is adamant that the current nuclear procurement programme will go ahead only if it is affordable and is in accordance with South African law[292]. Yet, Gordhan has left the door open for Zuma, by stating that this does not mean the nuclear programme would never happen, “just that it may have to wait.”

What Gordhan perhaps fails to realise is that Zuma and his patronage network have constructed a tender house of cards, founded on the Russian 9 600MW nuclear deal, and they cannot afford to let it blow in the wind for very much longer. They have been building up to this moment since 2009…

Zuma is the bomb

Besides LEU, enrichment plants can also produce high enriched uranium (HEU), which is used in nuclear weaponry.

In March 2012, at a Nuclear Security Summit in Seoul, Zuma stated on the subject of HEU, “…South Africa has adopted a policy on the benefication of our mineral resources, including uranium.”[293] What Zuma meant by “benefication” was that SA has a policy of enriching Uranium and does not want to limit its options by foreswearing the production or use of HEU [IOL]. Officials further explained that Zuma was not only keeping SA’s options open for producing HEU in the future, but also defended its decision to hold on to its existing stock of HEU from the nuclear weapons programme of the Apartheid government [IOL].

In December 2012, the Draft Mineral and Petroleum Resources Development Amendment Bill was approved. It regulates uranium production and provides for the implementation of an approved beneficiation strategy through which strategic minerals can be processed domestically.

In March 2015, the M&G reported that an initiative started in 2009 by United States President Barack Obama, and which is endorsed by the United Nations Security Council, has resulted in ridding HEU from 28 out of 30 Nuclear Security Summit participating countries. However, together with Belarus, South Africa under Zuma has stubbornly refused to agree to dilute or dispose of its quarter-ton cache of bomb-grade HEU left over from the apartheid-era weapons programme[294] [295].

Simon Barber (veteran Washington-based correspondent and former Brand South Africa’s US country manager) observed in March 2015 that the timing of the disagreement between the USA and SA over foodstuffs related to the African Growth and Opportunity Act (Agoa), together with Zuma’s obduracy over relinquishing the country’s weapon-grade HEU uranium, was interesting[296]. (Agoa allows South Africa to export duty free to the United States market, which accounts for R70 billion of South African exports[297].)

Barber’s musings over trade and geopolitical manoeuvrings relate to another subject. Economic analysts and Western (US and European Union) business representatives have raised concerns and are puzzled by Zuma’s government — and the ANC under his leadership — of being unnecessarily hostile to Western trade partners[298] [299] [300]. This is despite the West accounting for 31.2% of South Africa’s exports versus 12.2% from China and Russia (2014 numbers)[301]. The West also contributes 85% of our cumulative foreign direct investment (FDI) and 90% indirect investment, compared with China that contributes 1.5% of FDI and indirect investment (November 2015 figures)[302] [303], and Russia even less so.

This is not to say South Africa must not look for new markets and trading partners; just that a balance must be found between retaining the country’s existing gains, while finding constructive ways to add to them, which takes skill, ingenuity and diplomacy.

That said, Zuma’s bias towards Russia (his preferred nuclear and trading partner) and China (his preferred trading partner), to the exclusion of the West, is unnecessarily placing hundreds of billions of rands, together with hundreds of thousands of SA jobs, at risk[304] [305].

In addition, it is endangering the sustainability of South Africa’s democracy and its institutions (according to Dr Frans Cronje, CEO of the Institute for Race Relations – IRR)[306]. Russia and China are known for their severe lack of transparency, regulatory enforcement, and human rights protections[307].

(In December 2015, possibly just ahead of Nene’s firing, Zuma signed into law the Promotion and Protection of Investment Bill[308] — the so-called Investment Protection Bill — which makes foreign investments in SA less rather than more secure[309]. The Investment Protection Bill will create “flight of investment out of South Africa”, in the words of the USA Chamber of Commerce in South Africa. Moreover, the Chairman of the EU Chamber of Commerce, Stefan Sakoschek, said in September 2015 that because of the uncertainty created by the Bill, “some investors have started divesting and reinvesting elsewhere on the continent.”[310] Sakoschek felt that there was “preferential dealing with Russia and China” by Zuma’s government, and that there is “something fishy” about the regulations being presented[311]. The American chamber represents R278 billion worth of investment and 220 000 jobs in South Africa, while Europe accounts for 77% of total foreign direct investment in South Africa, creating more than 300 000 jobs and about 150 000 indirect jobs.)

It appears Zuma has designs on despotism, at great cost to us all.

Conclusion

Zuma’s 9 600MW nuclear procurement programme and its accompanying contracts are tainted with alleged vested interests of the most deplorable kind.
If the country has any hope of having a rational, legal, and transparent evaluation of the need for nuclear energy, the procurement process has to start afresh.
This however can only occur under new leadership, which places the country’s interests ahead of its own.

If this does not occur, the future of South Africa will consist of a dark and discontented nuclear winter.

Footnotes

Radio Free South Africa

For all your South African news

Zuma, the Guptas and the Russians — the inside story

President Jacob Zuma wants to build nuclear reactors. Vladimir Putin wants to build them. The Guptas want to supply the uranium