Explosive letter sent to Parliament’s energy oversight committee by Necsa board

October 28th, 2019, Published in Articles: EE Publishers, Articles: Energize, Featured: EE Publishers, Featured: Energize

An explosive letter, dated 17 October 2019, from the current Nuclear Energy Corporation of South Africa (Necsa) board to the Parliamentary Portfolio Committee on Minerals and Energy, reveals startling new information relating to the misuse of Necsa’s funds by the former board under fired former chairman Kelvin Kemm and former CEO Phumzile Tshelane.

The letter reveals that Necsa has been making massive operating losses since 2014, which have deteriorated over the years, and has resulted in various ring-fenced funds being irregularly used to meet operating expenses, including salaries.

Phumzile Tshelane and Kelvin Kemm

For example, the letter says that in financial year (FY) 2018/19, Necsa raided R268-million from the Safari low-enriched uranium (LEU) spent Fuel Waste Disposal Fund, which was meant for future disposal of spent nuclear fuel waste, in order to meet operating costs.

The Safari-1 reactor became one of Necsa’s cornerstone facilities, especially during the mid 1990’s, where it’s main application was to be a cost-sustainable facility operating as a commercial production facility of radioisotopes and the rendering of irradiation services.

Furthermore, in FY 2017/18, the letter indicates that Necsa borrowed R58,5-million from its subsidiary, NTP Radioisotopes, which was to be repaid in 2019, but was subsequently unilaterally extended to 2021 when it became clear that Necsa could not afford to repay NTP Radioisotopes.

Necsa’s Safari-1 nuclear reactor.

In FY 2016/17, Necsa is said to have used R100-million of investments of the Safari LEU Spent Fuel Waste Disposal Fund as security for a R100-million overdraft facility from Nedbank, which the bank later withdrew due to the absence of a turnaround strategy to address Necsa’s strained financial position.

This, according to the letter, then forced Necsa to raid R100-million from the Safari LEU Spent Fuel Waste Disposal Fund to meet operating costs, and this R100-million was later repaid to the Fund from government grant funding.

The effect of the unconventional funding interventions in previous years, says the letter, was that about R445-million of ring-fenced funds were used for operations, despite being meant for other purposes, thus negatively affecting Necsa’s liquidity and solvency.

The letter further says that Necsa has been technically bankrupt since about 2016, and has survived using ring-fenced funds, which has cumulatively had an impact on the going concern status on the entity – a challenge which the current board is now faced with.

This letter from the new Necsa board to Parliament follows a damning audit report by the Auditor General of South Africa detailing the maladministration and irregular expenditure under the former Necsa board. The qualified audit report was attached Necsa’s financial statements for FY 2017/18, which were tabled about six months late by the former board.

Necsa’s nuclear facility, which houses Safari-1, near Pelindaba.

Necsa’s financial statements for FY 2018/19 are also late, as the new board grapples with the political turmoil and disruptive actions by labour union NEHAWU. It is expected that there will be further explosive revelations by the Auditor General.

The entire former board of Necsa was removed by the former minister of energy, Jeff Radebe, in December 2018, and there is ongoing litigation in this regard.

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