Fight between energy minister and nuclear company board gets nasty

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

The three suspended board members of the South African Nuclear Energy Company (Necsa) will get their day in the Pretoria High Court next week, but are having to fund it themselves – to the tune of R1.5 million. They are bringing an urgent case before the court to overturn the minister’s dismissal.

The trio believed their court costs would be paid by their employer as funds had been set aside for just such an eventuality. Instead, they are having to fund their court application with borrowed funds.

Energy minister Jeff Radebe suspended chairman Kelvin Kemm, CEO Phumzile Tshelane and audit and risk director Pamela Bosman in November last year on the grounds of “defiance and ineptitude”.

Read:

South Africa axes state nuclear firm Necsa’s board

Axed Necsa board blames resistance of ‘privatisation by stealth’ for dismissal

The removed board members say more sinister motives lie behind their dismissal; that the minister is party to plans to sell NTP Radioisotopes, a 100% Necsa subsidiary and one of the few profitable state-owned companies, to an American customer.

Radebe has specifically accused the suspended board members of unauthorised foreign travel, dissemination of false information to the media, unauthorised increases in remuneration, the months-long shutdown of the NTP medical isotope production facility, and the “unlawful” signing of a memorandum of understanding with Russian nuclear healthcare company Rusatom.

In his answering affidavit, Radebe says the matter lacks urgency as a new board has been appointed and reinstating the suspended board members will disrupt activities at the nuclear company. The board and CEO positions were in any event up for renewal in 2019, and the Department of Energy recommended scouting for new appointments ahead of time. This is the minister’s responsibility.

One of the issues raised by Radebe is a motivation from Necsa’s then CEO Phumzile Tshelane to convert 70% of a R115 million debt in a subsidiary company, Pelchem, into equity so as to improve its solvency. Radebe says it is a breach of protocol for the CEO of Necsa, rather than the chairperson, to communicate directly with him. The proposal violated the Public Finance Management Act and exceeded Necsa’s “approved delegation authority” which was R91 million. Necsa had also violated the Companies Act by failing to pass the Solvency and Liquidity test prior to such a transaction.

The minister claimed that the shutdown of NTP’s medical production unit in November 2017 by the National Nuclear Regulator (NNR) was as a result of an apparent lack of leadership by Necsa. Unhappy with the explanations for the alleged transgression by the board members, he decided to suspend them from their positions.

Minister’s allegations ‘incorrect and distorted’

In his founding affidavit before the High Court, Kemm says the minister’s allegations are “incorrect and distorted”. Though NTP is a wholly owned subsidiary of Necsa, it has its own legal personality, board and balance sheet. It was therefore legally flawed for the minister to assume Necsa was directly responsible for safety issues at NTP. Kemm says the regulator acknowledged the legal distinction between the two entities – Necsa and NTP – by addressing its instruction to shut down Cell 19 of the reactor directly to NTP.

On November 13, 2017, Tshelane wrote to NTP MD Tina Eboka and relieved her of her duties over safety and compliance, which would now reside with Necsa’s Compliance and Services Division. The safety issues were related to the completion of compliance and safety reports.

Necsa had therefore intervened promptly and appropriately to resolve NTP’s safety issues, says Kemm’s affidavit. Eboka and several other NTP personnel were placed on special leave by NTP’s board, pending investigations. Some months later Radebe overstepped his powers by instructing the Necsa CEO to reappoint Eboka as MD of NTP despite the NTP board’s objections (they held her responsible for the safety lapses at the plant). Radebe’s affidavit says it is highly irregular for the Necsa CEO to suspend, discipline or influence disciplinary proceedings against NTP’s MD. He also questioned the technical competence of the management imposed on NTP by Necsa.

‘Evidence of wrongdoing’

By December 2017 the reactor was ready for recommissioning, and a work-readiness plan was sent to the regulator. On February 14 last year Noko Ramaboya Attorneys advised that there was prima facie evidence of wrongdoing against Eboka and the three other executives placed on leave, and that other NTP employees may have to be charged along with the NTP executives.

The NNR gave permission in February to recommence operations, which ran without hitch until May 31, when a violation of standard procedures was detected: operators were not ensuring the facility was in safe mode prior to starting a production run. The responsible employees were subject to disciplinary procedures by Necsa and removed from the production facility. Three of the disciplined executives were re-engaged after acknowledging their accountability, while one took early retirement.

According to Kemm, Radebe unlawfully instructed his deputy minister to assume oversight of the NTP business, and claimed this intervention was the cause of production recommencing, when in fact production had recommenced prior to her involvement. The deputy minister resigned from her post at the end of December 2018.

Russian agreement

One of the reasons cited by Radebe for dismissing the Necsa board members was a memorandum of understanding (MoU) of intent to collaborate in the expansion of oncology centres in Africa. It was signed by Kemm with Russian nuclear medical company Rusatom. The minister claimed this was in contravention of the Nuclear Energy Act and against his wishes. He adds that NTP was of the opinion that the Russian agreement could conflict with a similar agreement already in place with the Australian Nuclear Science and Technology Organisation and could create diplomatic tensions with Australia.

Kemm’s affidavit says the MoU was non-binding and therefore the minister’s approval was not needed. It was anticipated that the Russians would assist in building additional medical isotope facilities, but no such commitment had yet been made. The minister was made aware of the proposed agreement in May last year but had remained silent.

On the day of the signing on July 26, 2018, at the Brics summit in Johannesburg, Radebe says he communicated his dissatisfaction, though this is disputed. “That belated and unexpected communication placed me in a dilemma,” says Kemm’s affidavit. “I … justifiably believed that it would have been politically embarrassing for the signing ceremony not to have occurred, more particularly for the Russian president across the road from the Brics summit and extolling the cooperation between SA and Russia, and the signing which had originally been scheduled for Sochi in May 2018 already having been postponed to considerable embarrassment.”

Unauthorised remuneration hikes

Another reason given by Radebe for the board’s dismissal was unauthorised increases in board and CEO remuneration. Kemm says the increases were within the rules allowable for state-owned companies, and that CEO Tshelane’s R1 million salary increase was approved by Radebe’s predecessor and was consistent with Necsa policies.

Kemm was also accused by the minister of a conflict of interest for providing services through his company Nuclear Africa to Necsa. Kemm replied that this was fully disclosed to the board, and that most of these services occurred prior to his appointment to the Necsa board in 2016.

The minister also wanted Bosman removed as a director of Necsa over a previous court case relating to her work with the Eastern Cape Development Corporation (ECDC). She lost that case, but is appealing it.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.