Mahlobo’s nuclear deal or Ramaphosa’s ‘New Deal’: let the delegates decide

Energy Minister David Mahlobo recently called for a “decent debate” about nuclear power. That word must be contextualised to see what it means for delegates. Since whoever wins can likely pass their proposals, the question becomes: should delegates choose Mahlobo’s nuclear deal or Deputy President Cyril Ramaphosa’s New Deal?

Mahlobo claims the issue is not “cost”, since funding need not come from government (for example, the Russians could pay).

The issue is rather “need”. That word must be contextualised.

Mahlobo’s faction appeals to mostly rural areas, where hubs have been “deindustrialised” by failed industry. Consider Ficksburg, Mbombela, Bethlehem and so on.

Workers migrating to such hubs often found the single reliable resource tob be the public sector. Consequently, the Zuma faction depends upon the politics of patronage. One thus understands:

Mahlobo wants nuclear to make it seem that his “patron” can still assure access to resources in a state of near-bankruptcy.

Can delegates believe the nuclear deal promises? Since we can’t discuss cost, let’s apply scenario planning.

It uses “total laws”, in this case “If all of something is used, no more remains.” If actions now use those laws, we can predict the outcome with 100% certainty.

To finance an expensive build for us, any country would need guarantees. Since South Africa currently cannot bail out SAA for a few billion, it would likely offer rights to its minerals (valued at around R230-trillion).

So, suppose the Mahlobo (thus, the Nkosazana Dlamini-Zuma) faction wins. The government awards a nuclear contract to, say, Russia. (“Russia” is just an example; we’re modelling events within South Africa.)

As expected, the Russians pay for the build. Yet, however much they pay upfront, we need to pay eventually and — by the total law — are unable to. One cannot simply “find” the money any more than a spaza shop owner earning R2 000 monthly could “find” enough for a R300 000 delivery truck. Worse, during the build, over 10 years, our debt wouldn’t need paying, but would accumulate interest. Thereafter, we will need to pay for the build, interest and electricity. And we still won’t have enough money.

Three scenarios are then possible. First, we default on our debt. No money is paid — neither to Russia, nor the BEE entities that expect commission. South Africa becomes bankrupt, and seeks relief from international agencies.

That requires us to restructure our country to meet the debt repayment. Our industry dramatically declines and jobs vanish.

As a second scenario, we ask Russia for help to avoid bankruptcy, and they agree to trigger the minerals guarantees.

For the central BEE partnership (named in the contract), this could be a financial bonanza. It could be arranged in advance that such guarantees also require a BEE component (like the deal last year with Russia, which paid empowerment partners in perpetuity). The rest of the country, however, gets no benefit.

Instead, since we are in breach of contract, the Russians can bypass our labour laws and their mines will be mechanised and employ little South African labour.

Also, during this period, our currency depreciates.

The result is a concessions multiplier, where more concessions result in a shrinking economy, a further-dwindling currency, so more mineral concessions, et cetera.

Ultimately, we become a colony of Russia in all but name, since we owe them a never-decreasing amount even when they own much of the country’s resources.

The third scenario is that South Africans struggle under debt and electricity costs, and alternatives are suggested to lighten the load. The Russians again trigger the minerals clauses — with the same outcome of implicit colonisation. At this point, collapsing industry likely leads to massive unemployment and reduction of social grants. It entails the risk of widespsread famine.

By contrast, Ramaphosa’s New Deal is not bound by total laws so we don’t know that it will work. However, it provides real policies. To start, it advocates “special economic zones” to draw investment to “deindustrialised” areas. Such investment does not hinge on South Africa finding an impossible amount, since investors will put money in instead of taking it out. Ramaphosa emphasises traineeships, so youth in deindustrialised areas can at last find jobs in established companies.

The nuclear deal threatens devastation and recolonisation. The New Deal, while it leaves work to do, addresses “local” need and offers wealth for many. Now the choice is up to the delegates.

Galetti is a postdoctoral researcher at Yale University and the University of Johannesburg