Restoring stability is top priority for new Necsa chair

Staff morale also needs a boost.
In addition to financial and operational stability, Nicholls wants the state nuclear company to reduce its dependence on government support. Image: Moneyweb

David Nicholls, newly-appointed chair at the Nuclear Energy Company of SA (Necsa), says restoring financial stability to the company is his top priority.

The former chief nuclear officer at Eskom, responsible for the Koeberg nuclear power station, and before that head of the Pebble Bed Modular Reactor project, says Necsa has a crucial role to play in developing a sustainable energy future for the country.

Read: Former Eskom chief nuclear officer appointed chair of Necsa

But before that he wants to restore staff morale and make sure there is enough money to meet monthly expenses. Last year the company asked Parliament for R500 million to cover its monthly operating expenses. The company has been in turmoil since 2018 when the board was dismissed by then-energy minister Jeff Radebe. It has lost an estimated R1 billion due to repeated shutdowns of its medical isotopes production plant.

“Given the present financial crisis at Necsa, there’s very little money in the kitty,” Nicholls told Moneyweb.

“We’re in discussion with the Department of Mineral Resources and Energy and through them other government departments, and also with the banks about getting support. We paid wages last month and all other bills, and that’s going to be a challenge for the next few months.”

Repeated changes in directors and management, coupled with the financial crisis, has taken a toll on staff morale.

Restoring morale and reviving commercial operations are key priorities for the new board.

WATCH: David Nicholls talks to Moneyweb

The NTP medical isotopes division is the main money-spinner at Necsa, but has been shut down for the best part of a year for both technical and regulatory reasons.

It is now up and running, but the supply interruptions caused by the shutdowns have damaged customer relations, which could take a year to restore, says Nicholls. It exports life-saving medicines used in the treatment of cancer to more than 60 countries. The nuclear regulator ordered the shutdown of the NTP medical production plant for several months, due to inadequate paperwork related to safety compliance – a move that was slammed as regulatory overkill by many in the industry. 

Another key division is the Pelchem fluorochemical production facility. The plant is in serious need of investment and upgrade, says Nicholls.

The Safari-1 reactor is more than 50 years old and will either have to be shuttered or replaced in 2030. “We have to look very carefully at the long-term viability of that industry to make sure we’re not building something to meet a need that’s going to go away.

“If we’re going to go on being in the business and exporting radionuclides, we need to address that and look at replacing the reactor,” adds Nicholls. “It clearly will not be cheap, so there must be a business case to go along with it. The discussion with government is what is the acceptable cost of the reactor replacement.”

Manufacture of antiretrovirals

Pelchem has a strong customer base and a number of short-term projects that should increase its profitability. It has established, along with Mintek, a business case for the local manufacture of antiretrovirals (ARVs), and these could be brought to market in the near future. Pelchem is the largest manufacturer of fluorochemicals in the southern hemisphere.

Necsa has been dogged by accusations of political interference under Radebe, who fired the board led by then-chairman Kelvin Kemm and CEO Phumzile Tshelane in 2018. Kemm’s suspension, as well as that of another board member, Pamela Bosman, was overturned by the Pretoria High Court in 2019. This is being appealed by Necsa. Tshelane’s dismissal is the subject of ongoing disciplinary proceedings.

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

The organisation has had no fewer than six CEOs and four chairs in little over a year. In 2018 it had ten board members, but the last four remaining members – including the previous chairperson Phulane Kingston – resigned in January, blaming Minister of Mineral and Energy Resources Gwede Mantashe for his lack of support.

Read: Remaining Necsa board members resign

Mantashe took to Twitter to express his dissatisfaction with the outgoing board, saying: “We can’t allow dysfunctional governance. We must appreciate that correcting governance is painful.”

Though barely three weeks into his new appointment, Nicholls says the court cases and disciplinary proceedings involving former staff will have to be resolved. “I’m taking the view that they must look forward and not backwards. It may be challenging to go through a CEO selection process while we have still got a CCMA [Commission for Conciliation, Mediation and Arbitration] case with former CEO Phumzile [Tshelane].”

Nicholls says he has experienced no political interference, nor does he expect any. “I’ve not to date had any pressures or instructions from anybody. I don’t intend to have any.”

The immediate goals for the new board are to stabilise Necsa, restore staff morale and ensure that Necsa is performing within its mandate from the state.

It should also be returned to profitability after gradually reducing its dependence on state support. However, it may still require some ongoing state support due to Necsa’s responsibility in terms of nuclear accountability, such as safety requirements. 

Necsa has the capability of building nuclear grade components that can supplied to any new nuclear power plants envisaged under the Integrated Resource Plan (IRP), the government’s energy plan for the country. The latest IRP, issued in 2019, envisages 2 500 megawatts of energy supplied from new nuclear power after 2030.

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