Plans for a nuclear build programme are still on track and the question of affordability is yet to be determined, said new Finance Minister Malusi Gigaba.
He was speaking at a press briefing following Standard & Poor’s decision to downgrade South Africa’s sovereign rating to junk status.
Among the concerns raised by S&P was the country’s contingent liabilities. State-owned enterprises will continue to need government support, S&P said in its review. Eskom, the procurer of the nuclear build programme, is expected to require guarantees of R350bn. This is 7% of the country’s gross domestic product for 2017.
“We estimate Eskom will have used up to R300bn of this framework by 2020.”
Gigaba in turn explained that the nuclear build programme will be implemented at a scale and pace the country can afford. He also said the programme is part of government’s attempts to diversify the energy mix and make it environmentally friendly in the light of climate change.
He added that the economy is unable to rely on energy produced by renewables like wind and solar.
The Integrated Resources Plan 2010 has made room for government to model different scenarios for the energy mix. “At present, no firm decision has been taken except that 9.6 GW generating capacity is required. No firm decision has been taken on whether the country can afford nuclear, that is premature and we will answer at the right time when all work is done,” said Gigaba.
Cost of nuclear
At a press briefing on Saturday, Treasury director general Lungisa Fuzile said that even though Eskom is the procurer of the nuclear build programme, if the power utility defaults on its debt it will still be Treasury’s responsibility to foot the bill.
“If theoretically, they were to over commit themselves and be unable to service the debt, it becomes government’s business.” How Eskom borrows and how it finances that debt is still very much government’s concern, Fuzile explained.