SA Nuclear Energy Corporation & National Nuclear Regulator Annual Reports 2012

Energy

11 October 2012
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The National Nuclear Regulator (NNR) and the South African Nuclear Energy Corporation (NECSA) briefed the Committee on their Annual Reports for 2011/12. NNR assured the Committee that nuclear installations and entities under the oversight of NNR did not expose workers to harmful levels of radiation or cause nuclear damage to the environment in 2012. NNR had successfully fulfilled its fiduciary duties and continued to discharge its mandate in accordance with best practices of governance. After the Fukushima Daiichi accident, safety assessments performed on Koeberg and SAFARI-1 nuclear installations indicated that these facilities would withstand earthquakes and tsunamis. The facilities under its control, and the way in which the nuclear activities were regulated, was outlined. In 2011/12, NNR had granted 27 authorisations and carried out 333 inspections. The situation with special case mines was specifically explained. It had participated in a number of international, regional and national initiatives, including safety awareness campaigns and working with other authorities to move informal settlements situated close to mine dump tailings.

NNR was operating under a new structure, following an organisational restructuring process aimed at improving efficiency and operations. Financial resources had been managed conservatively with a total operating revenue of R125,6 million, a 14% increase on the last financial year.
NNR achieved 75,3% of its planned strategic initiatives during 2011/2012. The large depreciation costs were due to the move to new headquarters. Overall, NNR showed an operating surplus of R1,2 million, which was just below 1% of the total budget. It had obtained an unqualified report for the third successive year, although the Auditor-General (AG) had raised issues around asset managements, changes to the financial statements, internal control deficiencies in cash administration, and performance targets that were not time bound. Irregular expenditure of R5.8 million related to the lease at headquarters. These had been addressed. Amendments to the NNR Act were pending. The activities of the Audit and Risk Management Committee were outlined in detail. Members asked if there were sufficient inspectors, enquired about those near the Tudor Shaft Settlement, asked for an update whether residents in Wonderfonteinspruit had epidemiological studies done, and enquired about the Pelindaba incident, and security measures at that site. NECSA was asked to explain the approval for import of ten tonnes of depleted uranium, and its purpose. They asked for further explanations on the monitoring of special case mines.

National Energy Corporation of South Africa (NECSA) then presented its Annual Report for 2011/12, highlighting the
reassessment on the SAFARI-1 nuclear reactor, which revealed it was safe, and describing the innovations taken to replace this, in time, with a new SAFARI-2 model. NECSA was regarded as a research rather than a commercial institution. It had recorded 11 new innovation disclosures and 39 peer reviewed publications, NTP (a subsidiary) remained one of the world leaders in the supply of medical isotopes. NECSA was awarded US$ 25 million by the United States Department of Energy for its successful production of Mo-99 using low enriched uranium target plates. Group revenue had gone from R1.61 billion to R1.64 billion although there were a number of pressures in the radioisotope market. Not all the financial key performance indicators were met, although its operational targets were exceeded. The Auditor-General had raised questions about financial sustainability, and it was explained that NECSA had had to make some severe cutbacks, including retrenchment of some non-core staff, and although it had implemented other austerity measures this may not be sustainable in the long term. It had, however, managed to recruit black technical professionals and exceeded its marketing and compliance targets. Its training programmes were fully described. It managed also to use less water and electricity in this year. Although it had an unqualified audit report, there was a matter of emphasis on restatement of corresponding figures, and an issue of fruitless and wasteful expenditure. The Audit and Risk Committee was fully functional, met regularly and was taking steps to address key commitments, including post-retirement liabilities. Finally a feasibility study on the SAFARI-2 was presented. Members asked for clarity on the position of NECSA, given the funding it was receiving for operations, as well as the costs for the SAFARI-2 and what benefits it would offer. The lessons learned from the Japan incident were queried. Members wondered if enough information on waste management was given out. Members asked about potential future joint ventures, and proposed that the Eskom model of skills might offer some lessons.

Meeting report

National Nuclear Regulator Annual Report 2011/12
Mr Boyce Mkhize, Chief Executive Officer, National Nuclear Regulator, noted the Regulator (NNR) theme for the year as “Assuring South Africans of World-class Nuclear Safety Standards & Regulatory Practices.”

He gave an apology for the Chairperson of the Board, who was out of the country on other commitments.

By way of introduction, Mr Mkhize said that NNR was established as a public entity and governed in terms of Section 3 of the National Nuclear Regulator Act (the Act). It was to provide for the protection of persons, property and the environment against nuclear damage, through the establishment and enforcement of safety standards and regulatory practices. The vision and mission were outlined (see attached presentation).

Mr Mkhize noted the highlights of this period. The nuclear installations and entities under the regular oversight of NNR did not expose workers to harmful levels of radiation or cause nuclear damage. The Board and its Committees were successful in fulfilling their fiduciary duties and continued to operate within the set charter and principles of good governance. After the Fukushima Daiichi nuclear disaster in Japan, on 11 March 2011, NNR had directed Eskom and Nuclear Energy Corporation (NECSA) to perform reassessments on the Koeberg and SAFARI-1 nuclear power stations, to determine if these would withstand natural disasters. The reports disclosed that the facilities were sufficiently robust to withstand events such as tsunamis and earthquakes. Man-made or induced events such as flying an aeroplane into the facility, fire as a result of sabotage and related issues were also considered, and concluded that the facilities were designed appropriately and that response measures were in place in case of an incident.

Mr Mkhize said that as part of the continual improvement of safety, and in preparation for potential new nuclear projects, the NNR participated in the South African Government’s Integrated Nuclear Infrastructure Review (INIR) process, a process intended to culminate in the production of a National Report that would be presented to the Executive Ministerial Committee responsible for the nuclear new-build expansion programme for South Africa.

On 1 July 2011 NNR began to operate under a new structure, following several months of intensive work involving both internal and external consultation.  The organisational restructuring process entailed a comprehensive review of the NNR structure and processes, with the aim of streamlining the organisation to improve efficiency and operations. This had resulted in NNR arresting the salary bill to manageable limits.

Mr Mkhize outlined the financial position. In the 2011/12 financial year, the NNR’s total operating revenue for the year was R125.6 million, of which R88.7 million was derived from services rendered to holders of nuclear licences (Koeberg Nuclear Power Station and National Energy Corporation of South Africa ), and holders of certificates of registration (mines and small users of radioactive materials and processing). The remaining R35.4 million came from a direct government grant.

In terms of the organisational performance, Mr Mkhize said that NNR was using the balanced scorecard methodology. This indicated that NNR achieved 75,3% of its planned strategic initiatives during 2011/2012, an improvement on the previous financial year.

Mr Mkhize noted that the facilities and actions that were currently under the regulatory control of the NNR included the Koeberg nuclear power station, the Pelindaba nuclear fuel cycle, production, and research facilities, the Vaalputs nuclear waste repository and mining and minerals processing facilities. He added that NNR’s regulatory process entailed authorisation, safety case review and assessment, development and issuing of regulations, and the undertaking of compliance assurance and enforcement activities as appropriate.

The regulation of nuclear activities by the NNR was performed by two technical divisions, namely Standards, Authorisations, Reviews and Assessments (SARA) and Compliance Assurance and Enforcement (CAE). The former was primarily responsible for the development of nuclear safety standards, granting nuclear authorisations; conducting safety reviews and managing special nuclear related projects while the CAE division was responsible for the establishment of effective and efficient systems related to compliance and enforcement over nuclear safety and security, including conducting compliance assurance inspections, audits, investigations, surveillances, environmental monitoring and sampling activities.

27 authorisations were granted by NNR in 2011/12. These included Certificates of Registration, Certificates of Exemption, Nuclear Vessel Licencing and Variations to Nuclear Installation Licenses (NIL). 333 inspections were carried out during the period under review in order to verify the degree of compliance with conditions of authorisation. He explained that in terms of worker exposure, the worker dose prescribed was an (average) effective dose of 20m millisievert (Sv) per annum, averaged over five consecutive years, and the “as low as (is) reasonably achievable” (ALARA) target for the annual average individual dose was 4mSv per annum. He added that both occupational exposure and projected public exposure at Koeberg Nuclear Power Plant, Pelindaba Site, NECSA, Vaalputs Radioactive Waste Disposal site and mining and mineral processing facilities were within prescribed regulatory limits. At Koeberg, although the trend indicated an upward surge in the number of workers exposed to radiation, the exposure was within regulatory limits and was managed through the operational radiation protection dose programme. The projected public doses resulting from the effluent releases (both liquid and gaseous) were well within the dose constraints for the 2011 calendar year for Koeberg. Public exposure at NECSA Pelindaba and worker dose at NECSA Vaalputs were all within the regulatory limits.

In relation to the special case mines, Mr Mkhize explained that for a mine to be classified as a special case mine by the NNR, the ‘potential’ of the monthly dose rate must be 1.7mSv and above, or the projected dose of 20mSv should be exceeded. He added that the NNR had identified 17 mining and mineral processing facilities with the potential to exceed the set regulatory limit of 20mSv/a if these were not closely monitored. These facilities continued to implement appropriate corrective measures, such as engineering and administrative controls, to ensure that all dose levels were kept as low as reasonably achievable, as part of the on-going monitoring programme.

On the international side, NNR had coordinated and submitted South Africa’s national report to the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management, to the Joint Convention Secretariat in October 2011. Following the submission, it was found that South Africa’s practices were comparable to international best practices. The NNR had also participated in the 5th Review meeting of the contracting parties to the IAEA Convention on Nuclear Safety. South Africa had acceded to the Joint Convention on the Safety of Spent Fuel Management and to the Safety of Radioactive Waste Management (Joint Convention) on 15 November 2006.NNR had participated in the Nuclear Safety Standards Committee (NUSSC), Radiation Safety Standards Committee (RASSC), Waste Safety Standards Committee (WASSC), Transport Safety Standards Committee (TRANSSC), Commission on Safety Standards (CSS), IAEA Technical Co-operation Project SAF9004, IAEA Technical Co-operation Regional Project RAF/0/033 and the Multinational Design Evaluation Programme (MDEP).

Regionally, South Africa was a member of the African Regional Co-operative Agreement (AFRA) which was established by the heads of state of African countries that were members of the IAEA. NNR continued to represent South Africa in the Forum for Nuclear Regulatory Bodies in Africa (FNRBA).

In the national field, Mr Mkhize said that NNR had held a Joint Co-ordinating Committee (JCC) meeting with the Civil Aviation Authority (CAA), South African Maritime Safety Authority (SAMSA), Railway Safety Regulator (RSR), and Road Traffic Management Corporation (RTMC).

Mr Mkhize advised that that NNR had created safety awareness by distributing safety information in local languages to dwellers in the Tudor Shaft Informal Settlement, informing them of the mine dumps and residues in the locality. The first measure undertaken was to relocate people who had settled on top of the tailings and although this had been done successfully, there remained some settlers within close proximity to the tailings. The removal of the mine dumps by Mogale City, which had been secured at a cost-free basis, was halted by the Federation for a Sustainable Environment (FSE) who obtained a court interdict, and Mogale City was working on other measures to address this facility. He added that Public Safety Information Forums had been established by Eskom for the Koeberg Nuclear Power Station, and by NECSA for Pelindaba and Vaalputs respectively.

Turning to internal matters, Mr Mkhize said that the staff complement of the NNR was 106 in all, or which 19 were management, 61 were technical/professional staff and 26 were support staff. NNR achieved a 55:45 male/female split on the legislators, senior management and managers’ level during this period. In line with the NNR’s employment equity objectives, African females accounted for 31.4% of the entire workforce, while African males accounted for 28%.  9% was coloured males, and 2.2% coloured females, with Indian females at 3.3% and Indian males at 1.1%. White males were at 17% and white females at 8%.

Financial performance
Mr Dakalo Netshivhazwaulu, Chief Financial Officer, NNR, said that NNR’s revenue grew by 14% from the previous financial year, as a result of an increase in authorisation fees. The compensation of employees had also increased by 10%, due to the minimal growth on capacity and annual cost of living adjustment.

Mr Netshivhazwaulu noted a 138% increase in the depreciation costs because of the property that NNR acquired for its new headquarters in Centurion, through an operating lease with an option to purchase. The move was positive, as it resulted in a 15% decline on maintenance costs during the year under review. Overall, NNR had realised an operating surplus of R1.2 million, which was just below 1% of the total budget, and this was an indication that the NNR had ensured that it worked within its budget.

Mr Netshivhazwaulu presented an analysis of the financial position. Trade and other receivables had increased significantly by 148% during the year, due to the deposit of R20 million paid for the leased building to secure the option to buy the property. This, however, resulted in a decrease in the cash and cash equivalent. The post-retirement liabilities, in terms of the previous-order arrangement under which medical cover was provided for NNR employees and their dependents, had increased by 122%. However, this was being stabilised as members were exercising options to surrender the facility. The provisions decreased by about 27%, mainly due to finalisation of organisational restructuring and utilisation of the funding that had been provided for in the previous year.

NNR had obtained an unqualified report for the third successive year, which signified that the financial standing of NNR was still healthy. However the Auditor-General (AG) had raised a number of issues that still required attention. These issues related to asset management (due to the lease), significant changes to the financial statements through audit adjustments, internal control deficiencies on cash administration (which were due to a key staff member having died), and that fact that some performance targets were not time bound, and there were questions around the reliability of information. Management of NNR had reviewed and addressed time frames during the second quarter of the financial year. NNR would continue to monitor and scrutinise performance information on a quarterly basis, to ensure accuracy and completeness of reported performance.

Mr Netshivhazwaulu then outlined further measures taken by NNR. A new asset management system had been acquired, to ensure maximum compliance. All vacant positions within the finance component had been filled with suitably skilled people. A permanent Chief Financial Officer had been appointed from 1 July 2012.

Irregular expenditure of R5.8 million was noted, and this revolved around the lease of the NNR Headquarters.

Mr Mkhize finally noted that the NNR Act amendments were currently with the Department of Energy and State law advisors had made their comments. NNR was considering how best to take the process forward.

Audit and Risk Management Committee report
Mr Tshepo Mofokeng, Chairperson: Audit and Risk Management Committee, NNR, said that the Audit and Risk Management Committee (ARMC) was a Committee of the Board that consisted of the Board members and one independent member, and was chaired by a Chairperson who was a
Chartered Accountant and Certified Internal Auditor and an independent non-executive director. He added that the Committee included experts in IT Assurance, Risk Management, Finance, Audit and Nuclear Science.

The Portfolio Committee, the CEO, CFO, Internal Audit and Risk Manager and Auditor General of South Africa (AGSA) had a standing invitation to the ARMC meetings. This ARMC was also required to report to the board at least quarterly, and it met on at least a quarterly basis itself.

Mr Mofokeng said that the Committee focused on four areas: namely, risk (planning, identification and response), performance (finance, sustainability and performance/IT), assurance (external audit, internal audit and special audits) and compliance (compliance programmes, identification and reporting).

In relation to the internal controls of NNR, ARMC considered governance arrangements, organisational objectives to be achieved, set up enterprise wide Risk Assessment, via processes, systems and people that would carry out the activities, focused on financial, operational, compliance and environmental performance. It would call for assurances from management, internal auditors and the external auditors. These would be done within the confines of the legislation, different policies and committee charters and organisational procedures.

The major ARMC activities and control measures were described. The ARMC had r
eviewed and recommended for approval policies in IT, performance, risk management, finance and Supply Chain Management (SCM). It had also considered the performance scorecard and the related budget, the risk management plan and the three year strategy and internal audit annual plan, the AGSA audit plan and proposed fees and the status of implementation of action plans to address identified external audit findings. It looked at the compliance programme of the regulator and the IT Strategy. It considered the quarterly financial, performance and compliance reports presented by management and assignment reports and quarterly reports from internal audit in the implementation of the risk management plan. It also gave consideration to the funding plan of the NNR in accordance with its operational requirements for the next three years.

NNR would also focus on enhancing activities in information technology and compliance. The major challenges faced during the year were the absence of a Chief Financial Officer for the major part of the year. That had reduced the report review capability. Some material errors were detected before submission of Annual Financial Statements to the Auditor-General. There were also differences in interpretation around the changes to the regulations. Asset issues arose from the move to the new building. Finally, the limited funding resulted in limited ability to plan and forecast appropriately.

Discussion
Ms N Mathibela (ANC) asked if NNR had enough inspectors to do the monitoring work on the 17 special case mines. She wondered if NNR was satisfied with the numbers of those exposed, when travelling up and down the mines.

Mr Mkhize replied that NNR did not have enough inspectors and its capacity was severely limited. There were over 140 facilities with radioactive material, and the ratio of the current inspectors was about one inspector for 17 to 20 facilities. NNR had, however, made a recommendation to the National Treasury (NT) for an increase in resources, but had been informed that there were no funds. On exposure, NNR was satisfied that matters were under control, except in the special case mines, where NNR had made special regulatory directives.

Mr L Greyling (ID) asked if there were still people living near the tailings in the Tudor Shaft Settlement.

Mr Mkhize replied that not all residents had been relocated, except those living on top of the tailings. Relocation of settlements was not in the domain of NNR, as it was a housing issue that would appropriately be dealt with by the local municipalities and the Department of Human Settlements. NNR’s role was limited to pointing out the challenges to the relevant authorities, so they could take action. Relocation of the settlements was dependant on other variables, such as housing policy, availability of land and a whole host of other issues in the municipality. He added that FSE’s obtaining of a court interdict was ill-advised, grossly unreasonable and insensitive to the dwellers in that area.

Mr Greyling asked for an update on the current status on the Wonderfonteinspruit Catchment Area (WCA), and whether epidemiological studies had been carried out on residents living in that area.

Mr Mkhize replied that this matter had to be approached from a multi-party arrangement. A task team had been set up, in which NNR was playing a role. The Department of Water Affairs and the Department of Environmental Affairs were other role players. In future, that task team would have to be invited before the Committee, to give a report on the milestones achieved. He said that no epidemiological studies had been done, but the Department of Health would take this up as part of the rehabilitation process of the area.

Mr Greyling asked if the Committee would be provided with the report by the International Atomic Energy Agency on South Africa’s readiness for the expansion of a nuclear power plant.

Mr Mkhize said this decision rested with the Department of Energy. NNR was only an invited participant.

Mr Greyling asked for the status of the ex-workers at Pelindaba.

Mr Mkhize said that the issue had not been resolved. NNR was working with NECSA and with some of the people who claimed to be representing the ex-workers. A list was sent to NECSA for verification, but it was found that some of the claimants had never worked at Pelindaba. The matter was still receiving attention. Meetings were held and there was an on-going process, on which NECSA should report.

Mr Greyling also asked about the security measures of Pelindaba, in regard to the highly enriched uranium at the site.

Mr Mkhize said that issues concerning the highly enriched uranium had been accounted for both to the NNR and the IAEA under very stringent safeguards and controls. Proper accounting and verification was in place and NNR was comfortable with the security measures. He said that there was a three layer defence strategy at the site for the internal perimeter but additional security measures had been proposed to NECSA, for the outer perimeter.

Mr Greyling noted that NNR granted approval for the import, transport and storage at NECSA UMET Facility of ten tonnes of depleted uranium from France, and questioned why South Africa was taking nuclear waste from other countries.

Dr Tim Hill, Manager: Nuclear Power Plants, NNR said that the depleted uranium was not waste, but was raw material used for the manufacture of transport containers (shielding material).

Mr Phumzile Tshelane
, CEO, NECSA added that the containers made from the depleted uranium prevented the emission of radiation from the radioisotopes while they were being transported on board aircrafts to different countries.  This was a way of safeguarding passengers and handlers of these isotopes. 

Mr E Lucas (IFP) inquired as to what had caused a dip in exposure of workers in 2010.
 
Mr Mkhize said that dip was perhaps due to the on-going review improvement processes that were instituted by the facilities in terms of how they managed issues of exposure. It was possible that general controls at the time yielded much better results than in other years. NNR was to pursue some of these issues vigorously to ensure that the exposure levels were within the acceptable regulatory levels.

Professor S Mayatula (ANC) asked as to what was meant by the 27 authorisations.

Mr Mkhize said that this was a reflection of the applications that were received. NNR would review the applications it received, and once a safety case had been well demonstrated, a licence would be granted. NNR was doing the best it could, despite a lack of adequate resources.

Mr Mofokeng noted that although, in terms of the Public Finance Management Act, the Audit Committee was obliged to meet three times a year it would meet more often if it had more items it had to deal with. There was a need to embed the culture of risk into the system, such as a compliance model.

The Chairperson said that NNR had to keep an eye on the 17 special case mines, because of their potential damage. He told the Committee that an opportunity would be needed to look further into the Tudor Shaft matter, the mine dumps and the Pelindaba ex-workers. He said that the NNR should report back next year on the improvement in the 25% of matters that were not achieved.

Mr Mkhize said that South Africa took an initiative and the IAEA was also offering assistance with regard to the highly enriched uranium in Pelindaba. In terms of achievements, he clarified that in fact NNR achieved 338 out of the 341 targets, falling short by 8 targets, and this was due to capacity challenges.

South African Nuclear Energy Corporation South Africa (NECSA) Annual Report 2011/12
Mr Phumzile Tshelane
, Chief Executive Officer, NECSA introduced the new chairperson of the NECSA Board, Dr Mochubela Jacob Seekoe. He said that NECSA’s primary mandate in terms of section 13 of the Nuclear Energy Act, No. 46 of 1999 was to undertake and promote research and development in the field of nuclear energy and radiation sciences and technology; and the processing of source material, special nuclear material and restricted material and the reprocessing and enrichment of source material and nuclear material.

He presented the highlights for the year under review. After the Fukushima Daiichi incident in Japan, NECSA conducted safety re-assessment on SAFARI-1 research reactor and its operational systems in accordance with the NNR directive. The re-assessment confirmed that the fundamental safety and integrity of the reactor and its operations.

Mr Tshelane said that NECSA recorded 11 new innovation disclosures and 39 peer reviewed publications. He added that
NTP Radioisotopes Soc Ltd (a subsidiary of NECSA) remained one of the world leaders in the supply of medical isotopes and that it was able to achieve two million disabling injury free hours as work was being carried out. NECSA was also awarded US$ 25 million by the United States Department of Energy for its successful commercial scale production of Mo-99, using low enriched uranium target plates.


Mr Tshelane said that the NECSA Visitor Centre received nearly 10 000 visitors since February 2011, 447 apprentices had completed semester training programmes offered by NECSA’s Nuclear Skills Development Centre (NSD). 11 interns were enrolled at NECSA’s NSD centre to complete studies in technical trades. He added that the NECSA Group had donated a
Positron Emission Tomography (PET) Camera to Tygerberg Hospital, which was useful for assessment of biological processes at the molecular level.

In regard to performance, he noted that the financial key performance indicators (KPIs) had not been met, as a result of a decline in Group sales, due to the difficult market conditions in the manufacture and medical isotopes sectors, and a reduction in baseline allocation. However,  NECSA’s operational KPIs had been exceeded in terms of research publications outputs and innovations; and the Safari -1 reactor had availability of 308.3/303 days.

In terms of human resources, KPIs were exceeded, through the recruitment of a high number of Black technical professionals. Investment in staff training had also exceeded its target. Marketing KPIs were exceeded due to NECSA’s brand penetration, through its direct involvement in addressing nuclear safety questions, following the Fukushima incident.

Mr Tshelane said that the compliance KPIs had been met. Not only had NECSA achieved an unqualified audit, but the absence of National Key Point incidents and public dose impact of annual releases at only 4.8% of the NNR authorisation limit were further achievements.

In terms of environmental performance, Mr Tshelane said that NECSA continued to look for efficiencies in terms of water utilisation. Less water and electricity had been used during the year under review than in the previous year. 

Ms Nishina Dayaram, Chief Financial Officer, NECSA, repeated that the NECSA Group had received an unqualified audit report for the year 2011/12. There was however an emphasis on restatement of corresponding figures (which arose through an error in classification of leases) although this adjustment had been corrected before the audit. The financial sustainability of NECSA was also questioned in a view of one material certainty that raised queries about NECSA’s ability to fulfil certain obligations as they became due. The AG also raised an issue of fruitless and wasteful expenditure.

Ms Dayaram reported that the Audit and Risk Committee had
standing agenda items on compliance with regulation, income audit as well as risk management. Terms of reference had been adopted that spelt out roles and responsibilities. This Committee was satisfied that internal controls and systems had been put in place and that these had functioned effectively during the period under review. The Committee had met with the external auditors, without management being present, during the year, and it had accepted the audit opinion of the Auditor-General on the annual financial statements. She added that the financial sustainability of NECSA was currently being discussed by the NECSA Board.

She outlined some key points on the financial position of NECSA. Much focus had been placed on the critical infrastructure and assets for commercial purposes within the subsidiaries, and that explained the increase in fixed assets during the year. Much priority was given to investment funds for waste generation within the group from operational facilities. Cash was a key concern of NECSA and that although the Group had reported positive cash results, NECSA, and Pelchem Soc Ltd, were under significant cash constraints, with the latter operating at overdraft level while NECSA had to withhold credit at year end in order to avoid going into overdraft. The cash generated by the Group had been set aside for possible strategic projects (mainly SAFARI–2).

From a liability perspective Ms Dayaram said that the NECSA Group faced significant constraints with regard to post-retirement medical aid liability. Last year the liability had gone from  357 million to R395 million. However, NECSA had taken steps to address the situation and had put in place a 25 year plan to fund the liability.

Ms Dayaram said that revenue in NECSA had risen from R807 million to R855 million. Most of the revenue came from services to subsidiaries, such as NTP and Pelchem. Group revenue had gone from R1.61 billion to R1.64 billion; this performance had been affected by the competitive pressure in the radioisotope market. Overall, the Group had generated a gross profit of R72 million, less than its profit of R129 million in the previous year, but had in fact ended up with a significant loss of R46 million in 2012 as compared to R8 in 2011. This had an impact on the asset base and equity. This led to a rise in total equity and liability of R1.8 billion in 2011, to R2 billion in 2012.

Mr Tshelane gave an overview of the revenue generators for the NECSA Group. NTP Group achieved sales of R842 million) Pelchem SOC Ltd achieved sales of R186 million, Nuclear Manufacturing Centre achieved sales of R44 million, Analytical and Calibration Services achieved sales of R26.7 million but its management continued to be expensive, and Nuclear Liabilities Management achieved sales if R15 million. 

Mr Tshelane noted the particular challenges. All commercial revenue generators for the Group were under financial pressure, due to market pressures, global economy, lack of economies of scales that were due to supplying only the South African markets. In addition, they had ageing infrastructure, faced a competitive medical isotope market and saw strain in achievement of targets. Although austerity measures were being implemented, these were not medium to long-term solutions, as they would stifle growth.

Ms Ntebatse Matube, Senior Manager: NECSA, gave an outline of the training programmes. It was not easy to get imported skills as NECSA was an area of specific skills, and this justified the reason for developing the skills itself. There was a shortage of skilled people in core business, a need to create indigenous experts, a shrinking knowledge base due to an ageing existing workforce, a need to invest in big projects to attract young professionals and to sustain knowledge transfer from ageing workforce to young professionals.

Ms Matube also noted the priorities, which included a need to increase the ratio of technical staff in regard to support staff, the number of researchers with masters and PhD degrees, and the number of Previously Disadvantaged Individuals in terms of technical staff. NECSA was looking to establishing a Learning Academy to increase capacity of manufacturing skills, radiation safety, leadership, management and supervisory training and transversal skills.

NECSA had established a study assistance scheme to assist NECSA employees to develop their skills by obtaining further educational qualifications at higher institutions of learning throughout South Africa. NECSA was currently assisting four PhDs and nine MSc students. A mentoring and coaching programme had been established to accelerate the transfer of skills and experience in core skills areas to young graduates who were progressively entering the organisation. In the year under review, 18 mentors and 23 mentees had participated in the programme.

The NECSA Graduate Support Programme was initially established to ensure the creation of a sustainable pool of critical skills. This consisted of the Graduate-in-Training Scheme, Undergraduate Bursary Scheme and Postgraduate Bursary Scheme. NECSA was also heavily involved in an internship scheme, which was a pool for future employees. NECSA was involved with Chemical Industries Education and Training Sector Education and Training Authority (CHIETA), Department of Science and Technology (DST) and Department of Energy (DoE). NECSA had been awarded 398 apprenticeships by several Sector Education and Training Authorities (SETAs) and it had also been awarded provider accreditation by the Safety & Security Sector Education and Training Authority (SASSETA) for the provision of ten learnerships.

NECSA also had an Adult Basic Education and Training (ABET) programme, driven by the need to increase long-standing employees of NECSA in particular to a certain educational level. NECSA’s Nuclear Skills Development Centre (NSD) was steadily growing and fulfilling its mandate in terms of the National Skills Development Strategy. It had partnered with several clients externally, such as the Department of Public Works, Development Bank of Southern Africa, Alstom and DB Thermal.
 
NECSA had established a Decentralised Trade Centre (DTTC) to arrest the backlog at the Trade Centre at Gauteng. In its first year the 120 pre-tests to determine the readiness of candidates for the final trade tests had been conducted, 245 candidates wrote the artisan trade tests and 207 had passed reflecting 84.5% pass rate.

She then outlined the staff composition and said that NECSA was still struggling to achieve equity in the staff composition, particularly in the areas of professionals and engineers. There was not very much that NECSA could do to address this, other than look for opportunities from NSD, and natural attrition. The targets for black professionals had not been very ambitious. They were not met because of the new training period at NSD of 32 weeks, instead of 24 weeks, required by CHIETA.

Mr Tshelane then spoke to the NECSA Group employment. The Group’s staff complement decreased by 4.59%, from 2 179 in 2010/11 to 2 097 at the end of the reporting period, due to resignations and retirements. The number of contract staff decreased from 311 in 2010/11 to 199 in 2011/12, in line with NECSA’s strategy to co-ordinate and consolidate its workforce to deliver on its strategic mandate. In order to achieve its budget, NECSA had to make some retrenchments, which were due to a reduction in baseline allocation from the Department of Energy, high electricity tariff increases, high costs of running the NECSA site and the sales targets that were challenged by market conditions.

In addition to the retrenchments, NECSA had considered other high level actions such as selecting key priority programmes, identifying and removing programmes, projects, and support functions that did not support priority programmes; finding strategic/investment partners for its subsidiaries, implementation of austerity measures, reduction of employee costs, effective and efficient utilisation of existing staff on mandated projects, freezing of non-critical vacant posts, reduction of structure from eight to five divisions, a moratorium on external appointments, and voluntary reduction initiatives.  Compulsory retrenchment would be a last resort.

SAFARI Feasibility Study
Mr Tshelane finally addressed the Committee on the SAFARI-2 feasibility study. NECSA was carefully planning for the replacement and retirement of SAFARI-1, which would reach the end of its operational life between 2022 and 2030, depending on ageing management programme. It had undergone an extensive maintenance programme to optimise and extend its remaining lifetime within safety and licensing limits.

A feasibility study had been performed on a Dedicated Isotope Production Reactor (DIPR) to follow SAFARI-1. This was going to be a commercially financed reactor that would focus mainly on production rather than research. Changes to the global economy led to the expansion of the scope of DIPR to include the feasibility of upgrading to a Multi-Purpose Reactor (MPR), a move that would be beneficial in securing funding from multiple sources.

Mr Tshelane outlined the benefits of SAFARI-2. These would include maintaining and securing global leadership as an international medical isotope producer, based exclusively on the use of low enriched uranium. It would enhance research and development capabilities while maintaining the existing track record of SAFARI-1, maintain South Africa’s nuclear leadership role in Africa and provide an opportunity for learning before the New Build construction programme. SAFARI-2 would be a launching pad for nuclear skills development and training and also a way of underpinning NECSA’s financial requirements with steady foreign income.
 
Finally, M
r Tshelane told the Committee that NECSA had Ministerial delegation to carry out the responsibilities of the National Radio-active Waste Management Institute (NRWMI), which were for the minimisation of waste.

Discussion
Mr Greyling asked whether NECSA should be considered as a research institute or an economic enterprise, considering that it was receiving about half a million rand per year to fund its operations. He also wanted to know how much money NECSA was spending on research, and South Africa’s benefits in terms of development.

Mr Tshelane replied that the Nuclear Energy Act was clear on the mandate of NECSA, that it was a research and not a commercial enterprise. However, NECSA could have an offshoot on the technology side to function as a commercial arm. He added that South Africa’s benefit from research was not financial but intellectual, and went to diagnosis of diseases such as cancer. Government would not get money back from NECSA, because there were innovations at NECSA that presently could not proceed due to the limited allocation of funds.

Mr Greyling asked how much would it cost to invest in the SAFARI-2 reactor, how much would be realised from it and if there was proper infrastructure for expansion.

Mr Tshelane replied that SAFARI-2 cost-effectiveness could be compared to SAFARI-1, in that when this was being built, no one knew what level of production was going to be. It had transpired that SAFARI-1 became core to the work of NTP in terms of production of radiation-based products. A feasibility study would indicate the cost of investing in the SAFARI-2 reactor, and other issues such as the level of infrastructure necessary for the expansion. Mr Tshelane noted that the extension of the SAFARI-1 was necessary because it would allow for planning for a replacement reactor, determination of viability, funding, regulatory compliance and multiple stakeholders that have to participate.

Mr Lucas asked what had been learnt from the Japan incident.

Mr Tshelane replied that NECSA had learnt to plan for accident ‘black swans’ by considering the design basis and understanding that it one size did not fit all conditions. Designs of facilities were never intended to be standard and they could differ, depending on a number of factors.

Mr Lucas said that the reduction in government funding was a serious issue, and that NECSA had to assess the situation because at a skills level, high salaries were being paid out to people that were not doing much. In terms of waste, he said that there was a need for NECSA to convince people that nuclear waste was under control.

Professor S Mayatula (ANC) was concerned about the shortage of skilled people. He also noted that the naming of the Annual Report was confusing.

Mr Tshelane noted the point about the name. In relation to the skills, he replied that the release of people was not optional. It was something that NECSA did not want to do and was counter-intuitive, but it had had sprung from financial constraints. Those affected were non-core workers with non-core skills that were not critical to the performance of the operations. 

Ms B Ferguson (COPE) said that NECSA seemed to do a lot in the same basket. She agreed that internships were viable. In terms of waste management, she asked if the man on the street had enough information on how this was handled.

Mr Tshelane said that NECSA was educating people in various forms, but In terms of waste management, more was to be done in educating the public. He made the points that the NECSA training was not only offered for NECSA itself, but other entities as well. Apprenticeships were done, and although NECSA could not absorb all trainees, the rest of the workforce would benefit from the spill-over. Mr Tshelane said that at the moment, the business of NECSA could not be considered as commercial because it was still a small industry. The Nuclear Manufacturing Centre was currently providing services to the NTP and SAFARI-1.

The Chairperson asked whether NECSA had exploited any joint ventures to compensate for budget shortfalls and asked how it had prepared for the future build program.

Mr Tshelane said that possible partnerships were normally delayed by due diligence reviews but that NECSA had associations in Australia and Europe. NECSA was currently producing raw materials for the world market and a partnership had been secured with IDC Australia on the sterile insect technique, to stop malaria mosquitoes from multiplying. He noted that before the future build programme could be undertaken, there was a need for sanction from the Department of Energy.

The Chairperson said, in conclusion, that there was a need for quarterly feedback from NECSA. He proposed that NECSA considers the Eskom model of skills, which might give beneficial ideas.

The meeting was adjourned.


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