Corruption in South Africa: the nuclear connection

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.

Zuma, the Guptas and the Russians — the inside story
Part 1: In pursuit of satisfying his insatiable greed — Jacob Zuma will liberate us from our constitutional democracy, and destroy the chance of a ‘better life for all’ 
Zuma, the Guptas and the Russians — the inside story RAND DAILY MAIL LILY GOSAM 02 FEBRUARY 2016

“……..PART 1: 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…………

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]).

……….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]……..

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…………….

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]………..

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. ………

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 ……….

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]……..

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]………..

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. http://www.rdm.co.za/politics/2016/02/02/zuma-the-guptas-and-the-russians–the-inside-story

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