The state was prepared to lie to South Africans over the estimated costs of former president Jacob Zuma’s nuclear plan.
Cabinet also decided to go ahead with the nuclear power deal on the grounds of hopelessly incorrect and over optimistic “facts” that the energy department presented to Cabinet – such as an assumption that the exchange rate would stay at R10 a dollar.
A top secret Cabinet notice and accompanying memorandum – which have now been declassified and were handed to the state capture commission last week, revealed for the first time how close South Africa was on the edge of an economic crisis, and how desperate Zuma and his cronies were to push through the nuclear power deal.
Last week, Finance Minister Nhlanhla Nene told the commission investigating the extent of state capture how Zuma chastised him because he wasn’t making quick enough progress over the nuclear deal.
During a state visit to Russia in July 2015, then minister of energy Tina Joemat-Pettersson wanted Nene to sign a one-page agreement.
It was a letter addressed to the Russian authorities, Nene said, adding that he couldn’t remember the precise details of the letter but he remembered that it effectively gave a guarantee to the Russian authorities over the nuclear programme, if they agreed to finance it.
Nene refused to sign it because it would have been catastrophic for the country, he said.
Zuma wasn’t impressed, because he wanted to be able to present something to President Vladimir Putin when they met.
A few months later, Joemat-Pettersson’s department was still forging ahead with the project, despite warnings from Treasury.
On December 9 2015, the day Cabinet approved the nuclear deal, Nene recalled been summoned into a meeting with then president Zuma. It lasted less than five minutes and he was informed that he was being removed from his role as finance minister.
He was replaced by Des van Rooyen, which set off a spiral of uncertainty for the markets.
The secret Cabinet notice showed that the government wanted to downplay the cost implications of the deal. Prices should not be communicated prior to the procurement process being completed, it said, and if any communication was to be done around the costs of the programme, it was decided to talk about the low end of the range.
No negatives for nuclear, only positives - Cabinet told
Zizamele Mbambo, deputy director-general and head of nuclear energy, told Cabinet that building eight nuclear units that would supply 9600 megawatts of electricity would cost between R240 billion and R720 billion – and these were with estimations done on what it would cost to build a nuclear power station in Asia.
His submission was glowing, and said the programme’s advantages must be highlighted for the public.
When it came to possible negatives, such as safety concerns, the department pointed out that nobody had died in the Fukushima disaster in Japan. Yet, a report released earlier this year indicated that, more than seven years after the March 2011 Fukushima nuclear crisis, radioactive water was continuing to flow into the Pacific Ocean from the crippled No. 1 plant.
According to the Cabinet documents, the government was also weighing up applying for a loan from the Brics bank to finance the project.
The department relied heavily on a study done by Professor Dawie Serfontein from the North West University’s school of nuclear science and engineering. He found that the programme could possibly cost R650 billion but would make a R54 billion profit every year for 60 consecutive years.
Based on this, the department presented a possible profit of R3.2 billion to Cabinet.
But Serfontein told Rapport that the figures were calculated in 2011.
“The figures were done at an exchange rage of R8.50 to the US dollar, which was the forecasted exchange rate in the 2010 integrated resource plan,” he said.
When Joemat-Pettersson and Mbambo presented their proposal to Cabinet, the exchange rate was already R14.28 to the dollar but according to the proposal, an exchange rate of R10 to the dollar was used.
The Cabinet notes revealed that the lowest nuclear build cost would be about $2500 per kilowatt power generation capacity, while high-end estimates were between $6500 and $7500 a kilowatt.
The secret Cabinet notice showed how the government wanted to downplay the cost implications of the deal.
The numbers show that nuclear would have ruined South Africa
A nuclear engineer from a large Western nuclear power company, who also tendered for the project, told Rapport that the numbers were completely unrealistic.
The number of $2500 a kilowatt was from nuclear power stations being built in Asia – mainly China and Korea. It would be unrealistic to think that it would be possible to build a nuclear power station in South Africa at such a low price, he said.
“In South Africa, if everything goes according to plan, you could bank on it costing about $5000 per kilowatt,” he said.
Both the engineer and Serfontein said that, under the best circumstances, the project would cost more than R1 trillion.
If Cabinet had gone ahead with this binding agreement, it would have ruined South Africa financially, they both said.
When Joemat-Pettersson was approached for comment, she told Rapport that no proposal or agreement was signed while she was minister.
She added that a one-page letter couldn’t be a proposal for an acquisition of that scope.
She wouldn’t comment on questions on why outdated exchange rates were used in her proposals to Cabinet and why it was necessary to mislead the public over the actual costs of the nuclear deal.
“We asked for information so that we could get more accurate information,” she told Rapport.
At that time it was widely known that the Russian state-owned nuclear power company, Rosatom, would be the preferred bidder because Joemat-Pettersson had signed a framework agreement with Rosatom more than a year before, on September 22 2014, that would make the Russians the sole supplier for South Africa’s nuclear power programme.
Last year, the High Court set aside this agreement and framework agreements with other countries.