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Stalled nuclear plan exposes Zuma’s waning power

Nov 23 2016 14:46
Mike Cohen and Paul Vecchiatto, Bloomberg News

Cape Town - South Africa’s decision to stall plans championed by President Jacob Zuma to build nuclear plants has exposed his waning authority.

News of the delay came on Tuesday when the Department of Energy said additional atomic power won’t come on stream until 2037 under its “base case” scenario, 14 years later than previously projected.

READ: Energy battle set as nuclear delay on cards - as it happened

While Zuma says reactors are key to addressing power constraints in Africa’s most-industrialised economy, Finance Minister Pravin Gordhan, economists and ratings companies warn that South Africa can’t afford them now.

“Essentially the project has been indefinitely postponed and the final decision on nuclear power will only be taken by Zuma’s successor,” said Robert Schrire, a politics professor at the University of Cape Town. “This is a great victory for economic rationality and political expediency and reflects the new political balance of a weakened Zuma administration.”

READ: Expert reveals why energy plan should have no nuclear

Zuma is scheduled to step down as leader of the governing African National Congress next year and his second term as president ends in 2019. Calls for him to quit have multiplied as political missteps and a feud with Gordhan over the tax collection agency roil markets.

Compounding his woes is a top court ruling that he violated his oath of office by refusing to repay taxpayer funds spent on upgrading his private home. The nation’s investment-grade credit rating is in the balance.

READ: Step-by-step: How Zuma has used state institutions to stay in power

Zuma has so far weathered the criticism because most members of the ANC’s National Executive Committee remain loyal to him.

Gordhan’s victory

Gordhan won a victory this month after prosecutors withdrew fraud charges against him for allegedly approving a pension payment to a tax agency official, two days before he was due to appear in court. The Democratic Alliance, the main opposition party, alleged that Zuma intended using the court case as a pretext for firing Gordhan and in the process remove the biggest obstacle to his nuclear ambitions.

READ: Protecting Gordhan's job could deter ratings downgrade - economist

The party also says that Zuma may have already signed a secret nuclear power supply deal with Russia and that the program would be used to benefit his own financial interests and those of his allies. The president and the government deny the allegation. The appointment of Gordhan, itself, almost a year ago was a major blow for Zuma.

The president was forced by his own party and business leaders to replace Des van Rooyen, a little-known lawmaker, just four days after his decision to name him as finance minister caused the rand and the nation’s bonds to plunge. Since then Zuma also acceded to Gordhan’s demand for a new board at state-owned South African Airways.

Revised plan

“The revised energy plan will give some comfort to those concerned about the risk of reduced influence of institutions such as the Treasury and central bank in favor of a more presidential system,” said Mark Bohlund, Africa economist with Bloomberg Intelligence in London.

Bongani Ngqulunga, Zuma’s spokesperson, referred queries on the power plan to the energy department. The plan wouldn’t have been released without the government’s backing, he said.  

Energy Minister Tina Joemat-Pettersson told reporters the power blueprint was updated to reflect developments in the energy industry, including changes in technology costs and lower-than-anticipated demand. The draft plan will be finalised next year.

Eskom Holdings, which supplies about 90% of the nation’s power, isn’t shelving its nuclear plans yet. The state utility will continue seeking requests for proposals to build new reactors pending the completion of the energy plan, because it could ultimately determine they will be needed as soon as 2025, Matshela Koko, its group executive for generation, told reporters.

It won’t be able to fund a fleet of nuclear reactors itself and would need Treasury guarantees to finance them, according to Dennis Dykes, chief economist at Nedbank Group.

The dynamics of power in South Africa are shifting, according to Keith Gottschalk, a political scientist from the University of the Western Cape in Cape Town.

Zuma is “still able to out-vote and out-maneuver his opponents in the ANC, but the mounting pressure has meant he has not been able to always get his own way all the time,” he said. “He is on the way down like a slow-leaking puncture.”

© 2016 Bloomberg LP All rights reserved

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anc  |  pravin gordhan  |  jacob zuma  |  electricity  |  sa economy  |  nuclear

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