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What should be an economic decision has now been clouded by controversy, with political pressure to push through the nuclear build and the increasingly apparent rewards it would bring to politically linked individuals.

The nuclear expansion programme needs to be considered exceptionally carefully given that the required financial commitment is roughly equal to the total South African annual tax revenue. Loan repayments could place a devastating long-term burden on the public and on the economy as a whole….

The government-driven Integrated Resource Plan aims to increase total capacity from 42,000MW (peak demand of 39,000MW) to 85,000MW (peak demand of 68,000MW) in 2030. A key component of this plan is the construction of facilities to produce 9,600MW of nuclear power. However, this aspect of the plan has been challenged.

The biggest concern is that nuclear power is too expensive for the country. The debate gained momentum when the 2013 update to the 2010-2030 electricity plan found that electricity demand is growing slower than originally anticipated. Peak demand in 2030 is now expected to range between 52,000 MW and 61,000 MW. There is consequently widespread belief that new nuclear power stations can be delayed considerably.

South Africa’s energy generation options

South Africa has had remarkable success with speedy, cost-effective installation ofrenewable energy power plants. In addition to this, technologies for harvesting South Africa’s plentiful wind and solar energy resources are rapidly becoming cheaper, raising the question of whether the country should not invest more in these options rather than in going nuclear……

Zuma and the Russians

The nuclear debate gained a political dimension when President Jacob Zuma and his Russian counterpart, Vladimir Putin, started to develop an unusually close relationship. It culminated in an announcement that the Russian nuclear developer, Rosatom, had been awarded the potentially highly lucrative contract to build the new reactors. The agreement was laterdenied.

Rosatom was considered the preferred contender, with other bidders only there to lend the process legitimacy, according to some observers. The lack of transparency surrounding the process, coupled with a history of corruption in South African mega-projects like the arms deal, has made the whole scheme seem suspicious to the broader public.

A thickening plot

A crucial thread in this saga involves the Shiva uranium mine, about 30km north-west of Pretoria, the country’s executive capital. It originally belonged to a company called Uranium One, a subsidiary of Russia’s Rosatom. It was sold in 2010 to Oakbay Resources, a company controlled by members of the politically connected Gupta family and the president’s son, in a deal that greatly surprised economists.

The mine was deemed unprofitable and thus unattractive to other mining companies. But it was still considered worth a whole lot more than the R270 million paid by Oakbay.

The mine would, however, become highly profitable if it became the uranium supplier to the new nuclear power stations. Oakbay and its associates therefore have a very strong incentive for this nuclear build to happen.

It is here that the nuclear build drama feeds into the recent major controversy surrounding alleged state capture, meaning a corrupt system where state officials owe their allegiance to politically connected oligarchs rather than the public interest. This was highlighted by the shock dismissal of Finance Minister Nhanhla Nene, a reported nuclear build sceptic, but also by subsequent allegations of ministerial positions being offered to people by members of the Gupta family.

Political, legal and civil opposition

The nuclear build’s association with the Zuma faction in the ruling African National Congress (ANC) will be a political hot potato for decades to come. The whole scandal also offers potential opportunity to opposition parties……..

A negative nuclear outlook

Building these plants is a risky business proposition, especially for Rosatom, which is implicated in the developing scandal. The recent political mood swing against state capture and a likely credit rating downgrade add to the risk.

Rosatom has suggested a nuclear build financing option that effectively amounts to it providing a loan. It is, however, conceivable that a future government may not honour debt repayments if there is a view that the construction deal was secured irregularly……..

By Hartmut Winkler, Professor of Physics, University of Johannesburg

This article was first published by The Conversation – read the original here   http://businesstech.co.za/news/government/124993/zuma-the-guptas-and-south-africas-r1-trillion-nuclear-plans/