23
Sep
Russia has signed a landmark nuclear agreement with South Africa, paving the way for a potential deal to construct eight nuclear reactors at a cost of up to $100-billion (U.S.), in the latest sign of Moscow’s rapid rise in the expanding African business sector.
Russia has won a series of major contracts in Africa recently, including a spy satellite deal in South Africa and a $3-billion platinum mine in Zimbabwe, but the nuclear deal could be the biggest of all. If the deal is finalized, the reactors would become the first Russian power plants on the African continent.
The Russian nuclear deal has long been rumoured in the South African media, and the speculation gained momentum after President Jacob Zuma travelled to Moscow last month for a mysterious six-day visit. Few details emerged from his Moscow meetings at the time, but Monday’s announcement of the nuclear agreement came just a few weeks after that visit.
Details remain murky. Some analysts caution that a formal contract has not been signed and South Africa could still be considering other bidders. But the announcement on Monday seemed to give Moscow a big edge in the competition for the lucrative South African deal, one of the biggest potential nuclear contracts in the world.
South Africa’s industrial sector has suffered chronic electricity shortages for many years, hampering its growth. Mr. Zuma announced in June that he wants a “radical transformation” of the energy sector, including a bigger role for nuclear energy, which he said could generate more than 9,000 megawatts of energy. Perhaps not coincidentally, the agreement on Tuesday would allow Russia to provide 9,600 megawatts of nuclear power to South Africa from eight new reactors.
South Africa today gets almost all of its energy from coal, and its new coal-fired plants are far behind schedule. Only about 5 per cent of its energy comes from nuclear power, but Mr. Zuma believes this could be dramatically expanded. The cost, however, remains unclear and highly controversial.
The announcement on Monday – issued by Moscow but quoting South African and Russian officials – said the nuclear deal could provide thousands of jobs and at least $10-billion in business to suppliers.
Yet the cost could be far higher in the end. The Itar-Tass news agency quoted a Russian nuclear energy official as saying that the final deal could be worth $40-billion to $50-billion, based on a cost of $5-billion for each reactor. And the South African media have estimated that the deal could eventually cost as much as $100-billion – more than the country’s entire annual tax revenue.
“South Africa today, as never before, is interested in the massive development of nuclear power, which is an important driver for the national economy growth,” South African Energy Minister Tina Joemat-Pettersson said in the statement.
“I am sure that co-operation with Russia will allow us to implement our ambitious plans for the creation by 2030 of 9.6 [gigawatts] of new nuclear capacities based on modern and safe technologies,” she said.
South Africa’s state-owned electricity supplier, Eskom, has been removed from the nuclear deal, putting the decision more directly under political control. The deal will reportedly be funded through an opaque system of “vendor financing.” This would allow the Zuma cabinet to bypass skeptical lenders, but it could also encourage the nuclear suppliers to cut corners to save money.
“South Africa must repudiate the siren song of ego-driven megaprojects that have the potential to bankrupt us,” said an editorial last week in the Mail & Guardian, a leading South African weekly newspaper.
The newspaper reported that the Zuma government has already made a decision on the nuclear project. “Russia will get the deal,” it said.
In recent years, China has become the biggest trading partner of most African countries, and one of the leading investors in the continent. But other emerging powers such as Russia and India are also making big inroads in Africa, seeing the continent as a huge potential source of growth.
In its own economic and political strategies, South Africa has increasingly given priority to the BRICS partnership of countries: Brazil, Russia, India, China, and South Africa itself. The five countries hold an annual summit and collaborate on a widening range of issues.
Source: http://www.theglobeandmail.com/report-on-business/international-business/south-africa-russia-sign-10-billion-nuclear-power-deal/article20726023/