Declassified cabinet minutes show that Jacob Zuma’s government decided to keep the costs of the proposed nuclear deal with Russia secret until it was done and dusted, and the procurement process completed.
The minutes are part of evidence public enterprises minister Pravin Gordhan submitted to the commission of inquiry into state capture last week. They deal with the cabinet meeting of December 9 2015, at which the programme was approved.
The nuclear build was a pet project of the former president, who after the meeting fired finance minister Nhlanhla Nene for refusing to back it.
Zuma also had energy minister Tina Joemat-Pettersson sign an intergovernmental agreement with Russia in which SA agreed that the latter would build the plants.
A memorandum attached to the minutes, and prepared by department of energy deputy director-general Zizamele Mbambo, also shows that the project would cost more than the R500bn he had estimated publicly. Excluding financing, the cost would range between R240bn and R720bn. But the lower limit was based on an extremely unrealistic price of $2,500/kW and the upper based on $7,500/kW.
However, as these were based on an unrealistic exchange rate of R10 to the dollar, when the rate was already at R15, and excluded interest, estimates by the Treasury that the eventual cost would be R1-trillion or more are not far off.
This, Gordhan told the commission, would have amounted to the entire budget for the year.
In the record of its decision in the minutes, the cabinet asks that the prices be amended to reflect current exchange rates. It endorses the proposal in Mbambo’s memorandum, which recommends that the pricing be kept secret.
States the memo: "The worst case programme-cost scenario should not be part of our communication strategy. Prices should not be communicated prior to the procurement process being complete in order to enable government to achieve a better price during this period."
The memo proposes that the procurement would be handled by an especially established project management office in the department of energy.
It says that the department had put the project to the Brics bank for financing, which would "mitigate the risk for the fiscus".
It is doubtful though that the New Development Bank — formerly known as the Brics bank — would have financed the nuclear project as the criteria for the first round of loans to all countries was that they be for green projects. SA and Russia are members of Brics, together with Brazil, India and China.
Despite being endorsed by cabinet at the end of 2015, the nuclear deal was in the end scuttled by two environmental lobby groups, Earthlife Africa and the SA Faith Communities Environment Institute, in 2017. They won a court judgment setting aside the agreement with Russia. The court also ordered that government begin the process to procure nuclear energy again from scratch.
While the department of energy tried to use an old decision of the National Energy Regulator of SA to allow the commissioning of nuclear energy, the court said that the process needed to be done afresh.
The new Integrated Resource Plan (IRP), which plots SA’s long-term energy needs and mix of technology up to 2030, was published by energy minister Jeff Radebe in September and does not envisage any new nuclear energy. However, a vociferous lobby still exists in the energy sector, backed by some trade union and political interests, for the commissioning of nuclear energy after 2030.
As evidence of this, parliament’s portfolio committee on energy decided on Tuesday to recommend that the IRP "make it explicit that coal and nuclear will remain important elements of SA’s energy mix".
In July, at a Brics summit held in Johannesburg, President Cyril Ramaphosa said he had discussed the nuclear procurement with his Russian counterpart, President Vladimir Putin, and told him that it was unaffordable for SA at present.
Correction: November 28 2018
This article was corrected to reflect the correct name of the Integrated Resource Plan
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