The past week’s announcements on Russian wins for the Mossgas plant refurbishment and a proposed 2 500MW nuclear plant follow the template applied by the ANC in the disastrous Kusile and Medupi contracts, where tender documents were massaged to favour Luthuli House’s preferred partner. In this episode of UNDICTATED, shadow minerals and energy minister Kevin Mileham shares background to these latest deals, and what the DA is doing to ensure there is no repeat of the Eskom plant debacle. He spoke to BizNews editor Alec Hogg.
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Relevant timestamps from the interview
- 00:00 – Introduction
- 02:05 – PAIA
- 03:26 – The Refurbishment of Mossgas
- 05:50 – Sanctions against countries doing business with Russia
- 07:09 – Hopes for what the PAIA request will reveal
- 10:07 – South Africas strategic oil reserves sold bellow market price
- 11:20 – Nuclear
- 13:27 – Why are the Russians involved?
- 17:20 – Will the PAIA report expose corruption?
- 19:19 – Potential for change in SA
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Edited transcript of the interview by Alec Hogg with DA DA Shadow Minister of Mineral Resources and Energy, Kevin Mileham MP
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Alec Hogg: Kevin Mileham from the Democratic Alliance serves as the shadow minister of minerals and energy. In this edition of Undictated, we delve into the Russian bank Gazprom bank’s appointment to fund a $200 million refurbishment of the Mos gas refinery and Cabinet’s announcement of a 2,500-megawatt nuclear build determination. Many questions arise.
Kevin, this development is not a sudden entry into the public arena; it has been in gestation for some time, starting with the nuclear build. We initially faced a potentially bankrupting nuclear proposal that Jacob Zuma attempted to push through in 2015, leading to the firing of a finance minister. Although seemingly halted, it has now resurfaced, along with the Mossgas story. Your colleague James Lorimer has been highlighting the exciting prospects off the Southern Cape coast, positioning South Africa as the next significant oil and gas province globally. However, it seems South Africa is favouring Russian involvement in both these matters. You’ve raised questions about this for quite some time, and today, you are seeking answers. Could you explain what this P-A-I-A is, its significance, and why you’ve pursued this route?
Kevin Mileham: A Promotion of Access to Information Act (P-A-I-A) request is a formal inquiry to the government seeking specific documents related to their record of decision. This includes the nuclear determination, the Section 34 determination made by the Minister of Mineral Resources and Energy, and/or the Minister of Electricity, Kgosientsho Ramakgopa. We have also submitted a P-A-I-A request for all bid criteria, scoring, and related documents concerning the PetroSA Gazprombank deal. Our aim is to scrutinise the rationality behind these decisions, and if any questions arise, they may be subject to review.
Alec Hogg: Let’s address the second issue first. Presumably, there were other bidders for the Mos gas refurbishment. Still, the Russian bank emerged as the sole entity meeting all the criteria. This scenario echoes what happened at Medupi and Kusile, where the ANC manipulated requirements to ensure a single winner. Can you shed light on this?
Kevin Mileham: Approximately a year ago, there were several unsolicited bids to refurbish the PetroSA refinery in Mossel Bay. The refinery had been idle since 2020 due to a lack of feedstock, impacting the local economy significantly. Unable to secure the necessary raw materials, the refinery was mothballed, affecting both direct employment and secondary industries. To restart operations, an extensive refurbishment process was required, prompting the tender. Despite unsolicited bids, the PetroSA board initiated a formal bid process, disqualifying 19 out of 20 bids, ultimately leaving Gazprom Bank, the finance arm of the Russian state-owned entity Gazprom, as the sole qualifying bidder.
Alec Hogg: Kevin, can you provide some clarity here? The whole world is imposing sanctions on those engaging in business with Russia. Are we not exposing ourselves to that risk?
Kevin Mileham: Certainly. It’s not a matter of direct sanctions but rather what we call secondary sanctions. These could involve exclusion from the American Growth and Opportunities Act (AGOA), which plays a crucial role in financing many of our trade deals with the US. While it’s not an imminent threat, it remains a potential risk. National Treasury and the PetroSA board were both alerted to this risk, yet they chose to proceed against the advice, and Cabinet endorsed this decision.
Alec Hogg: Let’s be clear on this. Out of 20 potential bidders, the winning entity is a state-owned or state-supported enterprise from Russia, introducing new risks. Other bidders were effectively excluded from consideration. The situation seems suspicious. What are you hoping to uncover through the PAIA request?
Kevin Mileham: We are particularly interested in understanding how the scoring process was conducted, the scores awarded, and the involvement of other bidders. Another crucial aspect is determining the source of feedstock for the new refinery. The production rights for the Brulpudda and Luiperd fields, about 160 kilometres south of Mossel Bay, are owned by Total Energy. Unfortunately, PetroSA hasn’t secured a supply agreement with Total due to pricing issues. These fields are offshore, in rough and deep waters, with production yet to commence. Even in an optimistic scenario, we’re looking at five to six years before any feedstock is available. Without this supply secured, it raises questions about where it will come from. Given that Gazprom Bank is linked to the Russian oil and gas supplier Gazprom, there’s speculation it might come from Russia. This could be a way for Russia to legitimise its oil and gas supply through PetroSA, adding significant costs due to the long transport line. Additionally, Gazprom would benefit both in supplying feedstock and gaining a share of profits from the refurbished refinery.
Alec Hogg: Potentially, this could also provide Russia with a foothold in this new prospective area. Before we move on, is this the same entity that sold South Africa’s strategic oil reserves at the bottom of the market, below market price?
Kevin Mileham: No, PetroSA didn’t sell the strategic oil reserves; that was the strategic fuel fund. However, it gets complicated as the proposed new South African National Petroleum Company, a merger of PetroSA, the strategic fuel fund, and IGAS, would include the strategic fuel fund. This fund was responsible for selling off the oil reserves.
Alec Hogg: Not a great track record. Moving on to nuclear.
Kevin Mileham: Just one thing, Alec, before we delve into nuclear. This deal raises another issue – it’s a sweetener for the potential nuclear deal. It seems like Russia is using this as an opportunity to pave the way and sweeten the impending nuclear deal we’re about to discuss.
Alec Hogg: Alright, wheels within wheels. Looking at the nuclear deal for 2,500 megawatts. How significant is this in South Africa’s overall energy landscape?
Kevin Mileham: An excellent question because our electricity crisis is urgent and ongoing. We currently face a shortfall of about six megawatts at any given time, a demand that needs immediate attention. Building a nuclear power plant isn’t a quick fix. In the presentation, Mr. Ramakgopa mentioned it would take 10 to 12 years to complete, though this timeline is optimistic. Considering the delays at projects like Flammanville and Hinkley, realistically, we might not see new nuclear power on the grid until 2035. This timeline doesn’t address our immediate electricity crisis. While it’s essential to consider the long term, the urgency is now.
Alec Hogg: Nuclear projects have a history of corruption. The decision-makers today may not be around when the plant is operational. How do the Russians have an inside track on this?
Kevin Mileham: In 2015-2016, a deal was signed with Rosatom, the Russian Atomic Energy Agency, known for aggressively promoting nuclear technology in Africa. Minister Mantashe supports a Rosatom solution, suggesting they might already be the preferred bidder. The wording of the tender needs scrutiny to ensure a fair and competitive process. Before reaching the tender, we must examine the decision-making process that led to the need for 2,500 megawatts of new nuclear. The current Integrated Resource Plan (IRP) gazetted in 2019 allows for this capacity but emphasises affordability. NUSA’s concurrence in 2022 had suspensive conditions: affordability and demonstrating the decision’s rationality. Yet, we haven’t seen cost analysis or feasibility studies. The rationality of this determination is questionable, possibly reflecting a political move by the ANC to secure deals before the 2024 elections, serving as both an economic bolster and an insurance policy.
Alec Hogg: In Andre de Ruyter’s book, he reveals the ANC’s involvement in Medupi and Kusile, receiving over a hundred million Rand in bonuses from the sanctioned company Hitachi for corruption. From your perspective, what are you hoping the PAIA requests will uncover? Could such questionable dealings be openly discussed?
Kevin Mileham: It might be too early to expect explicit details of corrupt dealings in the PAIA request. Currently, our focus is on understanding the decision-making process, the factors considered, and what influenced their choices. While we may not find a direct admission of making decisions for kickbacks, I anticipate a structured project model where funds flow to connected firms and cronies. The previous nuclear build revealed consultants closely tied to Jacob Zuma and the ANC receiving substantial payments. The payment path may not be direct from Gazprom to the ANC but could involve payments to consultants, followed by donations to the ANC.
Alec Hogg: Kevin, the prevailing corruption in South Africa is disheartening. Some argue that historical precedents, like the National Party’s actions before the 1994 election, justify such behaviour. Do you believe the potential for change in South Africa is real, especially with the upcoming election?
Kevin Mileham: Absolutely, I believe the potential for change is real. My party shares this belief and is actively working towards ushering in a better, accountable government in 2024. We need to scrutinise the actions of ministers and the executive, demanding transparency with publicised performance agreements. It’s crucial to hold the executive accountable to Parliament, ending the policy of cadre deployment. Appointments should be based on merit to avoid the failures seen in state-owned entities like SAA, SABC, the Post Office, Eskom, Transnet, PetroSA, and more, which despite massive bailouts, remain in dire straits years later.
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