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South Africa is going to court to stop itself from going bankrupt

South Africa is going to court to stop itself from going bankrupt

South Africa’s controversial R1 trillion nuclear deal is currently being decided in South Africa’s High Court (22-24 February) in a case that analysts believe could decide the country’s financial future.

According to the facts of the court case, the SA government wants to build several nuclear power plants in the country to provide 9,600MW of energy.

Conservative estimates into the costs involved say such a project would cost R500 billion – though experts say it is more likely to spill over R1 trillion in reality.

This would make it the largest procurement deal in the country’s history.

With Cabinet’s approval, requests for proposals were issued, in which vendors will supply pricing and funding models. To date, government has been silent on how it will fund the nuclear build.

It has conducted its own studies into the costs, but the subsequent reports have been classified.

The case

Now, Earthlife Africa and the Southern African Faith Communities’ Environment Institute (SAFCEI) are challenging Energy Minister Tina Joemat-Pettersson’s procedural route in introducing the procurement deal.

In terms of S34 of the Energy Regulation Act (ERA), the minister is empowered to determine both the amount and type of South Africa’s future energy supply.

According to the activist groups, however, the nuclear deal was made behind closed doors by former Minister Ben Martins in 2013 and then gazetted by Joemat-Pettersson in December 2015.

The groups are arguing that a decision of such national importance could not proceed without public consultation – something the Department of energy has failed to do.

The cost

The nuclear build programme will end up costing the South African economy over R3 trillion in debt, according to civil society group Organisation Undoing Tax Abuse (Outa) in a press release in late 2016.

According to Outa, South Africa’s current debt level currently sits at approximately R1.89 trillion with the nuclear deal potentially escalating this to well above R3 trillion as the country is expected to borrow a further R1.2 trillion to finance it.

The Democratic Alliance agreed with Outa and noted that “whether its R500 billion or R1 trillion, the project is simply unaffordable.”

“Whichever funding model is chosen, you can rest assured that it will be paid for by the South African taxpayer, and that we can expect substantial tariff increases over many years,” said DA leader Mmusi Maimane.

In December 2016, the Department of Energy announced that Eskom will fund the entire build off its own balance sheet, and the funding process will be handled in the same way as the Medupi and Kusile projects.

Energy minister Joemat-Pettersson said that no funds will come from Treasury or the fiscus, with Eskom turning to global markets to raise money it needs.

Eskom’s handling of Medupi and Kusile have drawn much criticism as both projects have seen massive delays, labour issues and come in billions of rands over budget, requiring bailouts from government.

Read: You will now be taxed R239 when you fill up at the petrol station

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  • RodneyVikens

    “South Africa’s controversial R1 trillion nuclear deal is currently being decided in South Africa’s High Court”

    Let me ‘guess’ what the outcome will be? No wait. Let me not spoil the fun.

    • Mr. H

      The dog doesn’t bite the hand that feeds it…… Ooops, Did I let the cat out of the bag?

  • the-TRUTH

    This ANC-government is hypocritical, they claim that government must contain/cut costs, yet their ANCadre Deployees are pushing for a very expensive unwanted project to be implemented without the blessing of the taxpayers and citizens…
    Just look at how many millions are wasted on state vehicles, overseas trips, events. Sies, #ANCMustFall
    Let’s #VoteForChange in the 2019 national elections and during upcoming by-elections

  • the-TRUTH

    Please ratings agencies, put our country into junk status now…
    then hopefully ANC blind voters will realise they are backing a lost cause

    • Susan Leo

      Forget it….the average ANC voter cant even spell Junk Status never mind understand the consequences!

      • djza

        Correct – as long as the 17 million grants are paid every month, they’ll continue to vote ANC

    • Cynic Scepticism

      Fat chance. Even if they felt the effects of a downgrade in our sovereign credit status, you would first have to put them through 10 years of economics education before they would understand how it was brought about, and what it’s implications are, and then another 20 years to explain why that is the reason they should stop voting for the ANC. And by that time, those nuclear plants will be like our 2010 soccer stadiums. Pretty to look at, but only costs us money.

    • Brian

      That will just be the fault of white monopoly capital when there is no more money to pay grants. Poor ANC, what could they do about that???

      • 小杜 (xiao du)

        Well, that would actually be true. Its mainly white capital paying for the grants in taxes

        • Brian

          Precisely my point. But that is not how the zANC will spin it.

  • the-TRUTH

    MeBelieves that taking on the nuclear project by ANC’s government is going to force all rating agencies to put South Africa in junk because these agencies know that nuclear is going to be a HUGE liability for our country…
    We must #VoteForDA during 2019 national elections and upcoming by-elections

  • German

    The ANC must be held accountable for all these cause they are failing to redeploy Zuma. Let every South African see and joint #DA/EFF. These thieves must be locked up

  • 小杜 (xiao du)

    Current debt level according to Pravin Gordhan in the 2017 budget is 2.2Trillion, with 169billion rand in interest just to maintain the debt (and not reduce it).

    So, these figures are outdated. The situation is actually worse.

    • Nofearorfavor

      Yeah, they borrowed SA blind and on what projects were all these massive loans spent? — Remains a state secret. What pains very deeply, is the non-status, of what was a fine education system– now stuffed and down the tube, a nightmare actually– A high standard of education turfed out the window, decent teachers retrenched and replaced by poor quality and oft times not even qualified teachers–

      One often wonders whether the ANC purposefully broke down our education system, on the instructions of their globalist masters, in order to keep the bulk of their electorate, dumbed down, to ensure they keep the ANC in power, because to this day, these poor souls remain ignorant of what is for what in our dear country and that, 22 years later! Jobless and unskilled, rather keep them on state welfare– makes the ANC look good to them– the tab picked up by around 5-6 million tax payers, so I hear.

      Ah, jeez man– whereto South Africa?? You’re a genuine orphan now as the so-called custodians of our nation, have sold out on ALL their peoples and they want to scar your natural beauty by turning you into a giant nuclear power factory supplying the whole world and its wife.

  • Cape Computer Club

    No-one is building nuclear. The whole planet is shifting to solar generated electricity, why does SA, with our abundant sunshine and hitherto unusable arid spaces, have to be the one out of gear?

    • Thabi Nzuza

      Greed and corruption!

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