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South Africa’s ‘R1 trillion nuclear deal will guarantee SA junk status’

‘R1 trillion nuclear deal will guarantee SA junk status’ 9 April 2017 ANA Reporter Cape Town – It is an undeniable fact that South Africa cannot afford, and does not need, government’s planned nuclear energy deal, the Democratic Alliance said on Sunday.

Media reports on Sunday that the nuclear deal was going full-steam ahead were extremely concerning and would essentially guarantee that South Africa would be downgraded by more ratings agencies and make recovering from this status even more difficult, DA spokeswoman Natasha Mazzone said.

Fitch Ratings stated in no uncertain terms on Friday that a key driver behind the decision to downgrade SA’s long-term foreign currency debt and long-term local currency debt to “BB+”, or “junk status”, was that “Eskom has already issued a request for information for nuclear suppliers and is expected to issue a request for proposals for nuclear power stations later this year.

The Treasury under its previous leadership had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so the Treasury will likely have to substantially increase guarantees to Eskom”.

Just days before, S&P Global also downgraded South Africa to sub-investment level – “junk status”. Mazzone said the DA would ask public enterprises portfolio committee chairwoman Dipuo Letsatsi-Dub for an urgent meeting of the committee to ensure that Parliament, as a key oversight body, would fully interrogate all aspects related to the nuclear deal.

“The undeniable fact is that South Africa cannot afford, and does not need, the nuclear deal. Indeed, international ratings agencies agree and this deal has been repeatedly cited as a cause for great concern and a key factor in downgrades not only for Eskom, but the country as a whole.

“These downgrades have already and will continue to have a devastating effect on our economy. Jobs will be lost and the cost of living will increase, which will hurt the poor,” Mazzone said.

Earlier on Sunday, City Press reported that a confidential document reveals that South Africa’s nuclear-build programme kicks off in earnest in June when Eskom issues a formal request for proposals from companies bidding for the estimated R1 trillion contract.

The nuclear deal – for which Russian company Rosatom was widely considered to be the front runner – was, according to senior National Treasury officials, “directly related” to President Jacob Zuma’s axing of finance minister Pravin Gordhan and his deputy Mcebisi Jonas, the newspaper reported.

“It is well known that Gordhan was against the project as he said the country couldn’t afford it.Eskom will be issuing a request for proposals in June and that really is the beginning of procurement. Gordhan had to go because he was going to block it again,” a senior official reportedly said.

The internal Eskom document dated three days before Gordhan and Jonas were axed revealed a tight timeline for the programme that would see four plants built to provide 9600 megawatts of electricity to the country.

After the request for proposals was issued in June, the deadline for bids was September, for evaluation in December. The winning bidder would be decided in March 2018 and the contract signed between December next year and March 2019, City Press reported.

The document also revealed that most of the major nuclear contracts would be implemented through “turnkey” procurement, which Treasury officials were concerned about.

“While Treasury allows for turnkey procurement, we know that it is often used to hide corruption. Companies that are asked to deliver turnkey projects are accountable to themselves. They appoint whoever they like, however they like,” a senior official reportedly said.

Turnkey projects were when a single company was appointed to manage and deliver an entire project. The management company became responsible for appointing all contractors and service providers. This was different from an open tender that was spread over a range of different contractors appointed by the state, City Press reported.


April 10, 2017 - Posted by | business and costs, politics, South Africa

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