Gordhan’s first state-capture revelation: SA’s nuke deal

SA’s R1 trillion nuclear deal with Russia, pushed forward vigorously by former President Jacob Zuma’s administration, was the first indicator of the state being captured and repurposed to benefit individuals wielding political influence. 

This is according to the testimony of public enterprises minister Pravin Gordhan, delivered at the State Capture Commission of Inquiry on Monday. Gordhan said it was as early as 2014 when he realised that SA’s nuclear deal would be a key symbol of the state capture project.

“The kind of events that took place in early 2014 and the way nuclear was dealt with suggested there was a wider set of intentions underpinning it. The connecting of dots happened thereafter,” Gordhan told the inquiry.

No need for a nuclear deal

Energy experts warned that a potential deal with Russia – which SA could not afford and did not need – was at the centre of corruption allegations during the Zuma era. 

According to Gordhan, the nuclear deal would cost SA in excess of R1 trillion, which was more than the total revenue of R824 billion the fiscus generated in the 2011 financial year.

“The cost implications for South Africans as a whole could have been serious,” he said. The deal would potentially add SA to a growing list of developing nations that are at the mercy of loans from the International Monetary Fund. 

Gordhan said the nuclear programme could have been done in “bite sizes” and at a “pace and scale SA could afford”. This tone was the antithesis of the Zuma administration, which wanted to implement the nuclear programme in a single phase and at full scale.   

The Integrated Resource Plan, which was promulgated in 2011, projected that 9.5 gigawatts of nuclear power generating capacity would be added to the national grid between 2023 and 2030.

Enter Zuma

On November 10, 2011, cabinet announced its decision to establish a National Nuclear Energy Executive Coordinating Committee to provide oversight around the country’s nuclear policy. Gordhan said that following the establishment of the committee, he met with Zuma and his energy advisor Senti Thobejane, along with former National Treasury director-general Lungisa Fuzile, at the presidential residence in Pretoria in 2013. This was during Gordhan’s first stint as finance minister. 

Gordhan said it was evident that Zuma wished to procure nuclear power capacity for SA from Russia. This was despite Gordhan suggesting that South Korea, France, China and the US could be competitive bidders and suppliers for the programme.

Gordhan has become the first sitting cabinet minister to place Zuma at the centre of the state capture phenomenon.

He indicated to Zuma that nuclear was a complex issue and that there were competing suppliers as well as environmentalists to consider. He also told Zuma that Treasury would undertake an exercise to design a procurement process for the nuclear deal so that it complied with the legal and procurement framework.

Tax incentive for Russia

Treasury became aware of the nuclear deal when the energy department approached it with a draft agreement to be signed with Russia, featuring a tax incentive to be awarded to the country. Gordhan said Treasury officials objected to SA making firm fiscal commitments to Russia.

The insistence of Gordhan and former finance minister Nhlanhla Nene to stick to procurement regulation for the nuclear deal would be the basis of their firing by Zuma. The removal of Nene as finance minister in 2015 sparked a markets rout as the rand weakened, and the JSE saw a sell-off in shares while bond yields spiked – wiping billions of rands from SA’s economy.

Nene replaced Gordhan as finance minister in May 2014, and Zuma took over as chair of the nuclear committee the following m0nth, after it had been converted to the Energy Security Cabinet Subcommittee. Committee members included, among others, former energy minister Tina Joemat-Pettersson, former public enterprise minister Lynne Brown, and former state security minister David Mahlobo. 

Gordhan said he heard “anecdotally” that the committee was constituted in a way to ensure that the majority decision of pushing the nuclear deal “was not difficult to obtain”.

“The new sense of urgency was entering the equation,” he added.

With the advent of Cyril Ramaphosa’s presidency and realisation of SA’s precarious financial position, a much more measured tone on nuclear has emerged. Ramaphosa informed Russian president Vladamir Putin at the recent Brics summit in Johannesburg that South Africa could not sign a nuclear deal for now.