Nuclear proposal omitted key information, had exchange rate wrong – Nene

Finance Minister Nhlanhla Nene today told the commission of inquiry into state capture how officials from the energy department gave a presentation on the nuclear deal project at a presidential residence which missed key information.

This after the Treasury team provided the minister with a preliminary report on September 2015 which revealed that the nuclear new build programme would be fiscally unsustainable.

On December 8, 2015, former president Jacob Zuma met with Cabinet ministers whose portfolios were relevant to the nuclear deal at the presidential guest house Madlaba Ndlohupfu (now known as Sefako Makgatho), Nene said.

The minister said when he arrived at the meeting, after it had been rescheduled from 3pm to an hour later, he learned that Zuma, former state security minister David Mahlobo, former international relations minister Maite Nkoane Mashabane, former public enterprises minister Lynne Brown and former energy minister Tina Joemat Peterson had held consultations without either himself or the Treasury team being present.

Nene said he found it strange that Treasury officials had been excluded from these consultations and perceived the exclusion as the department being viewed as not willing to partner in the nuclear project.

At the meeting, Nene said he was accompanied by Treasury Director General Lungile Fuzile, Deputy Director Generals Max Sachs and Michael Mkgajane, who were initially excluded from the meeting, but once he, Nene, realised that Joemat-Peterson had brought in officials from her department, he requested that Treasury officials should also take part.

Nene said officials from the department of energy gave a presentation on the nuclear deal which excluded Treasury’s input on concerns about the project’s feasibility.

“Instead, the energy officials presented a procurement plan based on the production of the entire 9.6 gigawatt of nuclear energy. The department’s assumptions were extremely optimistic with respect to the assumed construction cost and exchange rate implications, resulting in a lower cost than was realistic,” Nene said.

The exchange rate assumed by officials from the energy department was R10 to the dollar, when Treasury had assumed between R12 and R14 to the dollar – on the specific day it was R14 to the dollar.

This, Nene said, meant the committee at the presidential guest house was presented with a 40% understatement – or an estimated R550 billion.

Nene said after the presentation, Zuma asked for his input. He had then pointed out the exclusion of Treasury’s concerns and that the exchange rate assumptions had been optimistic, and that the model did not have a funding model.

“I didn’t really think that there was a point in saying more and resisting any further.”

He added that he suggested that the energy officials should finalise the presentation for the Cabinet meeting the next day, and that he requested Fuzile give input on the presentation.

Nene said Fuzile expressed serious concerns regarding the proposal’s cost implications and the failure by the officials from the department of energy to phase the construction over a longer period of time.

Nene reiterated that he had kept his input minimal because he felt he had done everything humanly possible to bring up Treasury’s concerns over the nuclear project, which were repeatedly being undermined.

The minister said the meeting concluded with the decision to go ahead with the nuclear programme proposal by the energy department despite the concerns raised by Treasury.

“In fact the president made an off the cuff remark that Treasury ‘will not do to us what you did with PetroSA,’” Nene said.

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