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R10bn govt project worth zilch

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The Pebble-Bed Modular Reactor (PBMR) nuclear project, after costing government R10 billion, has a net asset value of zero and can probably be sold for scrap at R16 million.

This was revealed by the Department of Public Enterprises (DPE) at its 2010/11 annual presentation to the parliamentary portfolio committee last week.

However, under its transfer payments for 2010/11 section in the annual report, the department notes that it transferred R20 million to the project during the financial year.

PFMA exemption

In September last year, then minister Barbara Hogan announced government would be pulling the plug on the nuclear project, saying it was no longer worthwhile to invest in it.

The DPE now said it has been overseeing the implementation of the PBMR transition to “care and maintenance” status, and so had to secure a Public Finance Management Act exemption from submitting corporate plans, shareholder compacts and quarterly reports, while the company operated with a reduced staff complement.

Committee members questioned what the asset value of PBMR is, and how long it would take to get if off the books.

The department's deputy director-general (DG) of Energy and Broadband, Chris Forlee, said the net asset value is technically zero, because the plant and equipment had all been written down.

He added that it would probably realise about R16 million if sold as scrap. The PBMR has R169 million in the bank, of which R60 million is being kept aside to decommission the fuel laboratory.

The projections when going into the “care and maintenance” period was that it would be a two-year phase up until 2013 and, as things are going better than expected, there could still be R50 million left over at that stage.

The project now only has nine staff members, operating from a facility for which the lease expires in March 2013. The main issue in closing is to sort out the agreement with the other shareholders. The annual general meeting is due to be held in November, and the intention is to further downsize.

The PBMR was started in 1999, with the aim of developing a new form of nuclear power generation. It's a helium-cooled, high-temperature reactor.

High demands

The DPE said at the meeting that it's looking at various alternative funding options since SA's demand for infrastructure far exceeds the capacity of state-owned enterprises (SOEs) to deliver.

Committee chairpersonPeter Maluleke commended the department on being one of only three government departments to have consistently received an unqualified audit from the auditor-general.

During the 2010/11 period, public sector infrastructure spending amounted to 9.8% of gross domestic product (GDP), compared to 4.6% in 2006/07, and was expected to average 8.4% of GDP over the medium-term period, totalling R809 billion.

It added that the DPE is a very small organisation and relatively under-capacitated in relation to the requirements of its oversight mandate.

In recent years, changes in leadership led to a high staff turnover rate and a serious loss of skilled professionals.

According to the DPE, exit interviews indicated that the high turnover rate was directly linked to instability at the top of the organisation, which included having four ministers and three acting DGs within two years.

However, it added that during the past 10 months, there had been stability, direction and leadership, and staff turnover had decreased.

Tshediso Matona, DPE DG said the current total establishment stood at 188 personnel, with 18 vacancies still to be filled. The appointment of 17 new staff members in the past six months, with only six resignations, reflected a slowdown in turnover.

Hotline response

One of the department's targets for the financial year in review was to ensure timeous responses to queries submitted through the presidential hotline.

There were an average of 280 calls received an attended to per quarter, resulting in a 96.49% success rate.

“Although an average of 13 calls remain open per month, the DPE is highly responsive to the presidential hotline,” said the department.

Budget cut

The DG highlighted that there had been a massive decline in the DPE's budget, from R3.991 billion in the previous year, to R555.5 million.

This was because of the transfers to SOEs in 2009/10, which did not happen in the past year.

The under-expenditure of R15.5 million was largely due to lower compensation costs as a result of a high vacancy level.

Matona reiterated the department's need to enhance its capacity by employing and retaining people with the specialised technical skills.

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