NECSA funds abuse bombshell – Yelland

It has become a recurring refrain in South Africa; another state-owned enterprise in trouble with barely enough funds to pay their staff looking for a government bailout. This has also happened at the SA Nuclear Energy Corporation (Necsa) prompting the largest union at Necsa, the National Education, Health and Allied Workers’ Union (Nehawu) to send up an emergency flare late in September saying that there may not be enough funds to pay salaries until November. This was an organisation that made a profit of R300m two years ago and have subsequently asked the Government for a R500m bailout. Trouble at Necsa has also resulted in multiple closures of the medical isotopes plant at Pelindaba near Pretoria in the last 18 months due to paperwork lapses linked to safety. The Necsa board was replaced by Energy Minister Jeff Radebe in December 2018 and the suspended board members and the Necsa head of legal, Vusi Malebana are in a protracted legal battle with Radebe and are using the courts to hang on. A letter to the energy oversight committee in Parliament reveals new information on how former senior executives and the board at Necsa used ring-fenced funds to pay for operating expenses. – Linda van Tilburg

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

By Chris Yelland*

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

Chris Yelland

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.

For example, the letter says that in FY 2018/19, Necsa raided R268m from the Safari LEU (Low Enriched Uranium) Spent Fuel Waste Disposal Fund meant for future disposal of spent nuclear fuel waste, in order to meet operating costs.

Furthermore, in FY 2017/18, the letter indicates that Necsa borrowed R58.5m 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.

In FY 2016/17, Necsa is said to have used R100m of investments of the Safari LEU Spent Fuel Waste Disposal Fund as security for a R100m overdraft facility from Nedbank, which the bank later withdrew due to absence of a turnaround strategy to address Necsa’s strained financial position.

This, according to the letter, then forced Necsa to raid R100m from the Safari LEU Spent Fuel Waste Disposal Fund to meet operating costs, and this R100m 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 R445m 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 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 former Minister of Energy Jeff Radebe in December 2018, and there is ongoing litigation in this regard.

  • Chris Yelland, investigative editor, EE Publishers.