MASSIVE opportunities will become available for South African businesses as the nuclear build programme targets as much as 50% localisation.
The nuclear build programme, thus presents a “sweet spot” for South Africa’s local business. A sweet spot is when a business or an economy finds a unique advantage in relation to capabilities and is able to perform better than its competitors.
Presently, about 80% comes from coal and 5% comes from nuclear. South Africa envisages that nuclear energy should contribute about 23% to the national grid by 2030.
The nuclear build programme, however, has been received with mixed reaction by the South African public, with labour federation Cosatu expressing outright disapproval and other stakeholders raising concerns ranging from environmental concerns, to the insurmountable costs of R1 trillion just for building the nuclear plants.
But government seems to be determined to forge ahead with the programme. The sites for building the envisaged 9.6GW nuclear power plants, in the Eastern Cape and the Western Cape have already been selected.
Speaking at a conference organised to inform local businesses about the benefits of the nuclear build programme, South African Nuclear Energy Corporation (Necsa) CEO Phumzile Tshelane said South African businesses should quickly realise the massive opportunities that were likely to come with building the multi-billion rand electricity generation programme.
South African authorities though, would still need to convince the public on thorny issues, such as the cost burden, financing models, environmental concerns surrounding waste disposal and radiation, as well as the overall business case of going nuclear.
Tshelane on Friday said the nuclear build programme could cost as much as R400bn if built on time and on budget, despite the R1 trillion that was being punted around.
The R400bn was more than sufficient to construct the 9.6GW by 2030, and would be paid for through the sale of electricity.
He said an international consulting firm called the Trusted Sources estimated that the cost of nuclear could escalate to as much as R800bn, a figure closer to the widely speculated R1 trillion.
This, he said was largely based on unrealistic assumptions, such as estimating that the nuclear build programme would take as long as 10 years to build.
The Trusted Sources also estimated a modest tax rate of $5 (R74)/ton, rising to about $22bn/ton, with a zero carbon tax rate as the nuclear power plants do not emit carbon emissions.
Tshelane said the multiplier effect on the build programme, could go as much as 3.4 times, meaning that every rand invested in the nuclear build programme would produce as much as R3,40 cents for the economy.
He said uranium was profuse in South Africa as a free by-product of gold, which South Africa produced abundantly.
By failing to use uranium, which is an input in nuclear energy, the country had lost the economic benefit of mines that were now closed, he said.
With the tricky aspect of financing the nuclear build programme, Nuclear Industry Association of South Africa CEO Knox Msebenzi said the misconception about financing the nuclear programme was that it would need the entire R400bn, all at once.
This as many observers assumed that the 9.6GW would be built overnight, with the entire cost requiring immediate settlement. Msebenzi said the capital needed to finance the nuclear build programme was likely to finance itself.
This as the first unit would be in operation by the time the last unit was completed, generating part of the revenue used to repay the existing debt.
The first unit was likely to be commissioned in 2028, ensuring that the electricity produced was fully absorbed by demand.
Tshelane said the programme could be finance in other ways such as signing inter-governmental agreements that provided funding for the nuclear power plants.
South Africa has already signed intergovernmental agreements with China, France, South Korea, US and Russia.
An intergovernmental agreement with Canada was signed, but remained inactive.
“One way is using export credit finance whereby a company that builds your project sells you parts and you only pay back the money later. Alternatively one can finance this by asking money from the bank,” he said.
Should South Africa be graded junk status by international credit rating agencies, looking for loans from China could become the best option.
Localisation during construction
Local companies were likely to benefit most from the construction phase as this would be the period whereby roads were reconstructed, bridges rebuilt and the steel and engineering industry supplying massive inputs of steel.
“Most of the localisation on construction will be in civil engineering, construction and electrical engineering,” Msebenzi said.
However, after the initial and construction phase, manufacturing could see an uptick as the electricity supply became more available.
Echoing similar sentiments was Phumzile Tshelane, indicating that: “you can’t be a developing country hoping to industrialise while you have a shortage of electricity.”
He said a reputable crane producer was something South Africa did not have and local businesses should look for ways to tap into that space well in advance.
“What we are doing today is that we are de-industrialising further. South Africa did not invest in energy sources. Are we then surprised that mine shafts are shutting down,” he said.
Defusing an anti-nuclear storm
Necsa chairperson kelvin Kemm said the biggest problem with anti-nuclear lobby groups was that most concerns they raised were based on emotional arguments rather than credible scientific evidence.
He said although other sources of electricity generation such as wind and solar were perceived to be cheaper than nuclear, they were in actual fact incapable of producing load base power which is necessary for industrialisation or being able to power a heavy current electric train.
Kemm said while there was a growing campaign by anti nuclear lobby groups to discredit South Africa’s nuclear build programme, pro-nuclear organisation were failing to take a similar step, lobbying society in support of nuclear.-Vusmuzi Shabangu