Nuclear chair resigns as governance crisis boils on

The goings-on at the Nuclear Energy Corporation of SA (Necsa) over the last two years seem incomprehensible even to people who work there.

Moneyweb has learned that chairman Rob Adam, who replaced suspended chairman Dr Kelvin Kemm barely six months ago at the insistence of former energy minister Jeff Radebe, has resigned his position.

He resigned on Thursday (July 4) with immediate effect, stating that his “full-time work as MD of the South African Radio Astronomy Observatory means that I am unable to give the Necsa role the attention it deserves”.

Others in the company believe the reason is more likely to do with governance issues highlighted in an internal Necsa document, which was passed on to Moneyweb. Curiously, Adam served 10 years in jail as an anti-apartheid activist in the 1980s. He later ended up at the top of the country’s sole nuclear company.

His resignation has been welcomed by labour, which regarded Adam’s appointment as irregular and illegal. He is also regarded as one of the architects of a plan to axe 400 staff at the nuclear company.

An internal document from Necsa’s chief legal advisor Vusi Malebana – addressed to the minister, the Necsa board and the director-general of energy – highlights numerous governance and legal breaches by the company:

• The company’s auditors (EY) were improperly appointed, and audit fees of R10 million (compared to the previous year’s R5 million) are likely to escalate despite there being no appointment letter authorising the commencement of services. “Necsa has exposed itself to an irregular expenditure finding or litigation to pay audit fees,” says Malebana’s letter. The auditor-general is responsible for auditing state-owned companies, but often sub-contracts outside companies to conduct specific tasks.
• The appointment of an acting CEO by Radebe violates the Nuclear Energy Act. Only Necsa employees may assume this position. Three acting CEOs have been appointed in a matter of months. Gavin Ball is supposed to take over as acting CEO on Monday (July 8). This too violates the act as he is an employee of NTP Radioisotopes, a subsidiary of Necsa. Necsa has also exposed itself to potential liability over the aborted appointment of Alan Carolissen as acting CEO.
• A turnaround strategy plan for the company envisages laying off 400 workers. This was submitted to the Department of Energy without consulting Necsa’s executive committee (exco) and in violation of Section 189 of the Labour Relations Act, which demands consultation with workers and unions if any retrenchments are contemplated. This turnaround strategy was withheld even from Necsa’s exco. “As a form of courtesy the board should have at least sought input from the Necsa exco as a sign of good corporate governance,” says the internal document.
• The board started advertising for the Necsa CEO position without briefing the minister, whose job it is to appoint the CEO. This was done knowing full well that suspended CEO Phumzile Tshelane is challenging his 2018 dismissal in court where “the board-appointed MNS Attorneys have as much as conceded that the case against the former CEO [Tshelane] is weak at best. Continuing with a process to fill a post without ministerial blessing in the face of a possible adverse CCMA finding exposes Necsa to huge financial risks.”
• The legal advisor also says it is doubtful whether Necsa has adequate insurance cover in place, “if at all”. “The board is hereby advised to inform National Treasury and the minister of this risk as it will be the South African Government which will have to stand good for any potential nuclear liability should such an occurrence materialise.”

The Safari-1 nuclear reactor, which produces life-saving medical isotopes that are shipped to more than 60 countries around the world, has been shut down three times in 18 months for safety lapses which are really lapses in paperwork. The reactor was shut down for months by the nuclear regulator because the paperwork was not in order. That has cost the company R3,5 million a day in lost sales and has ravaged the financials of a once model state-owned company that two years ago made a R300 million profit, but is now asking parliament for a R500 million bailout.

Trade union Nehawu (National Education, Health and Allied Workers’ Union) says this crisis was manufactured by Radebe, whose portfolio has now been taken over by mines minister Gwede Mantashe. Radebe interfered in the running of the company and suspended the previous board for “defiance and ineptitude”. Few at Necsa believe any of this.

“The real problem started when the former minister of energy Jeff Radebe interfered in the running of what was a great and profitable company,” says Zolani Masoleng, Nehawu branch chairperson at Necsa.

“He suspended the previous board for no good reason. We now have confirmation that Necsa was planning to lay off 400 workers which is what we suspected all along. Before this company is wrecked completely we are calling for the removal of the current Necsa board, as well as Tina Eboka [MD of the subsidiary NTP, which produces the medical isotopes].”

The suspended directors – former chairman Dr Kelvin Kemm, former CEO Phumzile Tshelane and director Pamela Bosman – are challenging Radebe’s decision in court.

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