Eastern Cape Economic Development MEC, Mcebisi Jonas, says economic and regional development in South Africa has been dominated by a Minerals Energy Complex.
Delivering the opening address at the Nuclear Industry Association of South Africa's conference in Nelson Mandela Bay today, Jonas said this energy complex had determined the shape of South Africa's socio-economic development trajectory over the past half century.
He says the Eastern Cape had developed on the margins of this energy complex and consequently never saw the kinds of resource flows generated in other regions of the country.
The most coherent framework for understanding economic and regional development in South Africa suggests that South Africa has been dominated by a Minerals Energy Complex, which emerged around the mining and energy sectors in symbiosis with elements of the financial sector. This complex has determined the shape of South Africa's socio-economic development trajectory over the past half century and continues to set the path dependencies shaping developmental choices in South Africa even in the post 1994 period.
The Eastern Cape developed on the margins of this complex and consequently never saw the kinds of resource flows generated in other regions of South Africa.
The recent global economic crisis and the energy crisis which it intensified has opened up a new set of possibilities for an energy mix for South Africa and the Eastern Cape. This also offers the real possibility of the emergence of an alternative energy complex with the former minister of Energy referring to the Eastern Cape as the "New Energy Hub". Our provincial industrial development strategy has since 2010 underpinned our efforts to grow the green economy and renewable energy sector in particular.
The significant wind, solar and bio-fuels projects which we are implementing also suggest that resources are flowing into this new sector. However, to really drive the industrial development programme as outlined in our industrial strategy will require higher levels of regional energy supply, security and long terms cost stability. Although we have viable coal deposits in the province we are fossil fuels poor and the prospect of a base load facility linked to nuclear energy becomes a viable and attractive option.
The Integrated Energy Plan (IEP) is the key mechanism through which energy policy and technology development road mapping occurs, future energy 'landscapes' and trajectories are defined and described and therefore also the foundation for defining long term energy infrastructure investments. The IIE was initially conceptualised in the White Paper on Energy Policy in 1998 and was then legislatively defined in terms of the Energy Act of 2008. According to the Energy Act (2008) the Minister of Energy is mandated to develop and publish the IEP annually. The first IEP was released in 2003 and the 2012 IEP is currently undergoing stakeholder consultation.
The draft Integrated Energy Plan 2012 very appropriately suggests that:
"As a fast emerging economy, South Africa needs to balance the competing need for continued economic growth with its social needs and the protection of the natural environment. South Africa needs to grow its energy supply to support economic expansion and in so doing, alleviate supply bottlenecks and supply-demand deficits." (Draft IEP 2012 released in August 2013).
The draft IEP objectives are also instructive and worth rehearsing in order to remind us of the basis from which we must move forward in terms of the nuclear programme. The deliberations at this forum should also be informed by the need to realise these objectives:
" Objective 1: Ensure the security of supply;
" Objective 2: Minimise the cost of energy;
" Objective 3: Increase access to energy;
" Objective 4: Diversify supply sources and primary sources of energy;
" Objective 5: Minimise emissions from the energy sector;
" Objective 6: Promote energy efficiency in the economy;
" Objective 7: Promote localisation and technology transfer and the creation of jobs; and
" Objective 8: Promote the conservation of water.
In managing the complexity of the challenges associated with these objectives I want to suggest that we need to develop an approach of ensuring maximum visibility.
Managing Complexity through Visibility - the developmental challenges associated with the Nuclear Build
High levels of visibility are critical to ensuring that high levels of trust, certainty and predictability are built into the nuclear programme. Visibility and transparency of the programme will also defuse potential backlashes from civil society and the anti-nuclear lobby. Visibility as used loosely in this address includes supply chain and pipeline visibility (of project related opportunities which go beyond first tier supplier identification, information and resource availability), knowledge and information visibility and accessibility (through project transparency as well making technically complex knowledge and information available to a wide range of non-specialist stakeholders).
Re-building a nuclear supply chain in South Africa and the Eastern Cape will require targeted supplier development programmes which allow local existing firms to register and comply with rigorous nuclear industry related standards and regulatory requirements. It may also include encouraging diversification and innovation by existing suppliers into technologically new areas. Support to local firms must also include start-up and SMME support in those areas with lower barriers to entry. Finally, partnerships and joint ventures between local firms and foreign nuclear suppliers need to be supported and encouraged.
In order to ensure that these partnerships realise local developmental outcomes means that they cannot be shaped by market forces alone and various agencies within the state must play crucial support and enabling roles. Key to this role will be signalling and visibility of the nuclear build programme and its associated support programmes, incentives etc.
Nuclear build programmes are long term and complex undertakings that could easily crowd out local partners in realising some of the associated opportunities if there are not high levels of visibility and access to supplier support. Here I mean that we need high levels of pipeline and supply chain visibility accompanied by information and knowledge visibility linked to the quality, standards as well as the technical requirements of the sector amongst other things. NIASA has been facilitating some of these processes already in partnership with the DTI and DST and we would like to support these programmes further through provincial partnerships where possible.
In many ways the nuclear sector is no different from any others. Where it is different is in terms of the more stringent and complex standards and international regulatory requirements expected of suppliers. We can therefore enable many of our existing companies in a range of sectors including manufacturing, construction and services to enter the nuclear sector by ensuring that they comply with the standards and regulations of the sector. In the same way that local auto and other suppliers are diversifying into the renewable sector so too must we encourage their diversification into the nuclear related sector.
At the same time though we also need to ensure that technology transfer and development takes place in order to ensure that local suppliers meet the technological as well as quality standards requirements of the sector. The huge capital costs of a nuclear build programme requires on-going and integrated cost containment process which are underpinned by on-going visibility and oversight of cost drivers linked to the programme.
Strategic challenges
Supplier development through the UNIDO programme has achieved some successes in the Eastern Cape and has demonstrated that a benchmarking process if linked to a capability support programme can go a long way in upgrading regional capabilities, enhancing the competitiveness of suppliers as well as linking suppliers with procurement opportunities. The challenges for the nuclear supply chain will require a rigorous programme for supplier development which I believe NIASA is already busy with in partnership with national government.
We need to consolidate and extend existing efforts of NIASA, DTI and DST amongst others in terms of ensuring the participation of local suppliers in the nuclear sector. The most significant challenges facing local suppliers, even those with world class capabilities seems to be a mind-set shift. Here I think we can partner NIASA and the national departments to demystify the nuclear sector and to enable existing suppliers to meet the regulatory and quality standards of the industry. The role of our regional development agencies will be to identify existing companies with potential who can enter the nuclear industry and to link them up with potential development initiatives to ensure that they become compliant. The existing partnerships that are emerging between local and international suppliers from nuclear producing countries needs to be encouraged as a critical mechanisms to ensure technology transfer to our suppliers as well as preparing them to enter export markets and become global nuclear suppliers.
The Eastern Cape Universities (NMMU in particular) have a critical role to play as a potential partner in maximising R+D and innovation triple helix partnerships where possible. They must also play a critical role as an agent promoting visibility - for civil society, for government and for the private sector. In other words the university needs to enable developmental outcomes above all through adopting the role of translating the complexity associated with the nuclear industry into visible knowledge and information which is accessible and digestible by all partners.
In Germany the nuclear industry is largely being dismantled due to social rather than economic pressures. The potential for a social backlash to the nuclear industry is an important factor that needs to be managed and this can only be done through high levels of visibility and communication between the project drivers and those concerned in civil society.
The proposed nuclear build programme has enormous developmental significance for the Eastern Cape since it potentially supports the re positioning of the province in terms of the national spatial economy, mobilises significant resources for investing into the regional economy, offers opportunities to build local capabilities and to enhance the development of existing sectors in the Eastern Cape. However in realising the developmental outcomes and localisation opportunities in particular will require a number of supporting initiatives based on intergovernmental and inter institutional partnerships to ensure that localisation opportunities are maximised. I hope that the deliberations over the next few days will begin to chart a course towards realising these.
