OUTA: SA’s Gazprombank and nuclear procurement plans ‘dubious’

SA’s Gazprombank and nuclear procurement plans announced in December 2023 are ‘dubious’ says the Organisation Undoing Tax Abuse (OUTA). According to Engineering News, government’s plan to pursue 2 500 MW procurement from nuclear, and endorse a R3.7-billion investment deal between PetroSA and Gazprombank, “appears to have been taken in haste and lacks sufficient transparency, clarity and rationality, says OUTA.

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The latter, which will see Russian Gazprombank resuscitate PetroSA’s gas-to-liquids refinery in Mossel Bay, “smacks of a government that’s desperate to secure dubious contracts ahead of the 2024 elections,” says OUTA CEO Wayne Duvenage. He believes many in their current positions may no longer be in power after the elections, and that’s why procurement is being rushed.

SA’S GASPROMBANK AND NUCLEAR PROCUREMENT DEALS

Worrying still is the fact that PetroSA’s evaluation committee warned against awarding the bid to Russian Gazprombank. However, the state-owned entity (SOE) ignored the advice and awarded the tender anyway. Gazprombank is under sanctions because of Russia’s war with the Ukraine and potential secondary sanctions for South Africa are a reality.

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“One would expect government to proceed (on SA’s Gazprombank and nuclear procurement) with caution, especially against the background of the AGOA trade deal (with the US) that has already come under the spotlight because of the ANC’s close relationship with Russia,” said Duvenage.

WANTON PROFITEERING

PetroSA closed its gas-to-liquid fuel refinery back in 2020. OUTA explained in its statement that the bulk of PetroSA’s revenue exists in imported diesel, which it sells to Eskom. This allows it to profit from taxes and fees built into the retail price of diesel. PetroSA’s turnover increased from R12-billion last year to an estimated R20-billion in 2023, due to Eskom’s significantly higher diesel usage to cover load-shedding.

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Similarly, Duvenage questions the transparency of SA’s nuclear procurement plans. Especially around the fact that the National Energy Regulator of South Africa (NERSA) has not officially announced approval of the decision. Duvenage also disputes the claim that the cost of nuclear procurement will be at R0.60/kWh, as was stated by government.

SKYROCKETING COSTS

“This is absurd, to say the least. International financial advisory firms like Lazard indicate the cost of new nuclear energy to be well above R2/kWh, with others saying it will be more likely above R3.50/kWh in South Africa’s case, after taking local conditions, construction time and other factors into account,” says the OUTA statement.

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Owing to the long lead time, no such nuclear power station can be built before the mid-2030. Therefore, nuclear technology will play no immediate role in ending the country’s prevailing load-shedding crisis. In conclusion, SA’s Gazprombank and nuclear procurement deals requires further scrutiny, says OUTA.

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