Infraco and Pebble Bed Modular Reactor (Pty) Ltd on their 2009/10 Annual Reports: briefing

Meeting report

Opening Statements
Mr K Dikobo (AZAPO) asked if there were any Infraco board members present at the meeting.

The Chairperson explained that she had received a call from the Infraco board chairperson the previous day. He apologised for not attending the meeting because he was in Brazil. She reprimanded him for not attending the meeting. He said that the Committee Secretary kept changing the date of the meeting, which affected his schedule. She wondered why another board member could not attend the meeting in the chairperson’s place.

Mr David Smith, Chief Executive Officer: Infraco, replied that the chairperson was travelling abroad attending to other government business. He had delegated the responsibility of attending the meeting to the chairperson of the audit and risk committee, who was also the Chief Executive Officer (CEO) of Strate, Ms Monica Singer Saul. Unfortunately, she had to attend a board meeting that Strate was holding.

Briefing by Infraco
Mr David Smith, Chief Executive Officer: Infraco, told the Committee that after 28 months of operations, Broadband Infraco had made significant progress in both national and international elements of business. Some progress was made in the legal and regulatory environment, such as being awarded an Individual Electronic Communications Network Services (I-ECNS) licence. Infraco completed the development of its product and services offerings and would be ready to enter the market once a number of capital projects had been completed. Ongoing network infrastructure expansion and improvement had been done, and Infraco’s internal operational capability was bolstered by a number of key initiatives and capital projects in the past year.

In 2006/07 Infraco completed and commissioned an initial nx2.5 Gigabits Lambdas for the Neotel launch. Between 2008 and 2010, additional fibre routes were added to provide service protection capabilities and for overall capacity expansion. The West Africa Cable System (WACS) governance structures were in place when Infraco signed a supply contract on 8 April 2009 for an international cable system. The contract came into force on 25 May 2009. The manufacturing of various cable system components was underway. The Portugal shore-end cable had already been installed and the main fibre route installation was to commence shortly. The landing station in South Africa would be at Yzerfontein and the system was expected to go live during the third quarter of 2011. The bulk of the plant equipment had already been manufactured and accepted by the WACS Inspection Authority. The tender process for the WACS Network Operation Centre (NOC) and overall maintenance coordinating functions had also been concluded. The main NOC would be in Midrand, South Africa.

Infraco discussed its human capital. At the end of the 2009/10 financial year, Infraco had a staff complement of 76. Currently, the head count was at 125. This was complemented by outsourcing contracts with original equipment manufacturers and external service providers to ensure the necessary skills to operate and expand the network infrastructure. Appointments were made in the functional areas of marketing, sales, network engineering, project management, human resources, finance, procurement, legal and enterprise risk management. Broadband Infraco racial and gender equity appointments equalled 79% and 46% respectively by year end.

In terms of corporate governance and compliance, ongoing progress had been made at Broadband Infraco in establishing and implementing business processes, organisational controls, compliance and governance practices, which resulted in clean Public Finance Management Act (PFMA) and Compliance audits for the reporting period. The Board of Directors was actively involved in charting the strategic direction for the organisation. They provided effective oversight of the activities and operations of the company. Infraco developed and maintained a risk management policy and strategy, a fraud prevention plan, and a whistle-blowing policy in the year under review.

The Shareholders’ Compact performance showed that telecommunications prices had been reduced by 73% compared to Infraco’s target of 60%. However, Infraco did not achieve its target in terms of broadband connectivity for the country. Regarding the financials, Infraco made a loss of R28.3 million compared to the R216.7 million loss they thought they were going to make. The Shareholders Compact showed that Infraco achieved 91% of its targets.

The external auditors, KPMG, audited Infraco’s annual financial statements. It was their opinion that the financial statements presented the entity’s financial position fairly. The financial statements showed a loss after tax of R28.3 million compared to the profit of R101 million they made the year before. The operating revenue for the year of R317.5 million was below the total budgeted revenue of R334 million by R16.5 million. This variance was primarily due to budgeted incremental revenue from the South African Research Network and the wholesale market that was not realised during the reporting period. Expenditure increased to R407.1 million. The increase was due to the cost of network operations, maintenance and repairs. Broadband Infraco received funding of R208 million from the Department of Public Enterprises (DPE) during the financial year. The Industrial Development Corporation (IDC) contributed funds of R73 million bringing the total equity to R426 million to retain their 26% shareholding in the company. Infraco had sufficient equity funding to meet all of its capital and operating expenditure obligations during the reporting period.

The entity’s main priorities for the 2010/11 financial year were to focus on their National Business Unit, their International Connectivity mandate, and network infrastructure. Broadband Infraco would be officially launching on 18 November 2010. Customers would be able to connect to the network through open access Points of Presence (POPs) in data centres, at other Broadband Infraco service sites, and via Neotel. The entity identified 37 underserviced areas in collaboration with the Independent Communications Authority of South Africa (ICASA) and the Universal Service and Access Agency of South Africa (USAASA). Infraco would establish POPs and connectivity to the long distance network in each of those areas within the next seven years.

Discussion
Mr A Mokoena (ANC) noted that broadband was not very accessible to the public. He asked how Infraco would justify its existence in improving infrastructure for communication and broadband. There was a digital divide between the north and south hemispheres. How could Infraco overcome this challenge?  When South African Airways and South African Express presented to the Committee, they showed that there was an inability for aviation to be executed properly because there was a problem regarding signals in the African continent. He wondered if Infraco dealt with these types of challenges.

Mr Smith replied that Broadband Infraco did not extend to having a role above 63 000 feet. The entity’s mandate covered long distance capacity and price as well as international capacity and price.

On the digital divide, he answered that because Infraco did not serve the consumer market, it was difficult for them to get a direct bearing on the digital divide between the northern and southern hemisphere. He knew that South Africa was still behind in terms of bridging the digital divide. There was still a lot of work to be done.

Ms G Borman (ANC) noted that Infraco’s tax loss carried forward seemed to increase from R20 million to approximately R43 million. There was no bonus provision for the previous financial year, but there was one for 2009/10. She asked for clarity on this. Page 69 of the Annual Report showed a huge increase in employee costs and directors emoluments. She assumed this increase had to do with the expansion of Infraco’s work, which resulted in new people coming on board. Also on the same page, there were big increases in auditor remuneration. She asked them to explain why this was so.

Mr Suren Maharaj, Chief Financial Officer: Infraco, addressed the question of the increased tax loss carried forward. The reason for the increase was that in the 2009 financial year there was a taxable income of R1 million, and in the 2010 financial year there was a taxable loss of R40 million. This explained the doubling of the tax loss carried forward.

He said that bonuses were only awarded to employees in the 2009 financial year, but were paid in the 2010 financial year. The 2010 bonus provision was included in this amount and would only be payable in the current year. This was why no provision for bonuses was shown in the prior year’s financial statements.

Mr Maharaj explained that there were a few reasons why employee costs and directors emoluments increased in the past year. One reason was that the staff headcount doubled over the past year. Secondly, it was the first time that bonuses were paid. There were also pro rata costs included in the total amount.

Mr C Gololo (ANC) asked how far Infraco was in acquiring the I-ECNS and I-ECS licences. Infraco’s main duty was to provide connectivity to under-serviced areas such as rural areas. He was aware that this was not a profitable operation. Was there anything else Infraco could do to provide under-serviced areas with connectivity if they did not go to these areas? He wanted to know who would fund the Network Build Programme.

Mr Smith answered that Infraco acquired the I-ECNS licence, which allowed them to deliver on a wholesale business model, that is, to be able to given services to other operators that were licensed or licensed exempt. The lack of an I-ECS licence meant that Infraco was not allowed to supply anyone if he/she was not licensed, that is, they were not allowed to supply to the public.

The Chairperson clarified that Infraco was not mandated to service the metropolitan areas and the public in general. The entity needed an I-ECNS licence as well as an I-ECS licence in order to service anyone in the country. This implied the Act said Infraco should have an I-ECS licence. This meant the Act said the entity had to do something that they were not really mandated to do. The Minister of Communications had issued a policy directive, which instructed ICASA not to consider Infraco’s application for the I-ECS licence.

Dr D van Dyk (DA) noted it was his understanding that the government had issued Infraco with a mandate, but was now preventing the entity from doing its work by denying them an I-ECS licence.

The Chairperson agreed. She added that the Constitution allowed Parliament to hold Cabinet accountable for its actions. The Committee had to do its duty and hold Cabinet accountable on this matter.

Mr Smith explained that in terms of the Electronic Communications Act (ECA), Infraco was not allowed to provide a service to the state without an I-ECS licence. Part of the Broadband Infraco mandate was to set aside national and international capacity for projects of national interest. For Infraco to provide services to these entities, they needed an I-ECS licence. Alternatively, entities had to be licence-exempt in order for Infraco to provide them with services.

Ms Borman asked if acquiring the I-ECS licence would make a difference in terms of allowing Infraco to penetrate the rural areas.

Mr Smith replied that Broadband Infraco could not provide a service to an end user in a rural area.

Dr G Koornhof (ANC) noted the update from Infraco. He said it was now up to the Committee to take the process forward. The Committee had to deliberate and decide what to do.

Ms C September (ANC) suggested that the Committee also had to revisit the ECA, as the Act was also a contributing factor to the problem.

The Chairperson noted the suggestion and said the Committee would consider it.

Mr Chris Forlee, Deputy Director-General: Energy and Broadband (DPE), added that the Minister agreed that there would be a retraction of the directive issued about the I-ECS licence. This meant that ICASA did not have to consider it anymore. Sentech was a government institution and it had an I-ECS licence. There was an agreement that Infraco should collaborate with Sentech as much as possible to enable its mandate. If there was an impact on Infraco’s business or if they could not fulfill their mandate, then this agreement would be reconsidered. This was the Department of Communications (DoC) undertaking.

The Chairperson noted that this happened a year ago. She asked if anything had changed.

Mr Forlee answered that Infraco was still engaging with Sentech. The DPE felt that this was an area that had not been given proper attention. They hoped the situation would improve in the next three to six months. If it did not, they would raise the issue of the I-ECS licence again.

The Chairperson noted that this had been the solution a year ago, but the Committee was not seeing any results. The Committee would meet on its own to deliberate on the matter and to map a way forward. The issue would then be communicated to the relevant Minister.

Mr M Sonto (ANC) wondered what would become of the organisation if customers decided to switch from Neotel to another network operator. Infraco was quite new; they were only 28 months old. He asked what informed the 50% increase in Infraco’s staff.  Slide 16 of the presentation showed there was an operating loss of R46 million in 2009. This year, the operating loss more than doubled. What informed this increase? Slide 12 mentioned a fraud prevention plan and whistle-blowing policy. He asked if Infraco had been successful in the cases they had dealt with. Infraco received R208 million from the Department of Public Enterprises (DPE). The presentation did not contain a plan for the following year. He asked if the DPE was going to give Infraco the same amount next year.

Mr Smith replied that they were offering to extend customer’s contracts by another five years. In addition to this, eleven “large” customers were initiating network trials for Infraco to focus on conversion into the commercial processes. The entity was being prepared for diversification of the customer base. 

Mr Smith said that Infraco’s staff complement increase was guided by a full organisational design. The guideline was also benchmarked against international best practice.

Mr Maharaj addressed the question of the increased operating loss. One of the main reasons was that in 2009 there was other income that reduced the operating loss. The guideline looked at the organogram of the organisation and the number of people required to deliver on Infraco’s services. This was also captured in the entity’s corporate plan. The number of staff would be increased to approximately 180 in the future.

Dr D van Dyk (DA) stated that Infraco was established in conjunction with Neotel in order to compete with Telkom. Infraco said that telecommunication prices had been reduced by 73% since its establishment. It sounded magnificent, but the question was what percentage of the telecommunications area Infraco covered. He wanted to know what Infraco’s share in competitiveness was as far as Telkom was concerned. The Committee understood that Infraco had some problems with the DoC in the past. Very little was said during the presentation about the relationship between Infraco and DoC. Was Infraco satisfied with their relationship with the DoC?

Mr P van Dalen (DA) noted that the price of telecommunications had decreased. He asked how much of the reduction was because of Infraco’s operations and how much of it was due to coincidence due to increase in cables. He wanted to know how Infraco measured its effect on the market. According to the Shareholders’ Compact performance, Infraco only met 91% of its targets.  Were the targets too stringent? What was the DPE doing to ensure that Infraco reached 100% of its targets? It should mean that the entity’s directors should not receive their bonuses this year.

Mr Smith answered that he did not include the statistics on the reduction in telecommunications prices in the presentation to “blow Infraco’s trumpet”. Even though the prices offered to customers by Infraco were very low, they could not claim that the general reduction in telecommunications prices was because of them as they had not yet launched their product publicly, nor had they published their prices.

Dr G Koornhof (ANC) noted that the Committee had met with Infraco just over a year ago. Members were told that Infraco would receive the Individual Electronic Communications Network Services (I-ECNS) licence without any disputes. In the same meeting it was said that the Individual Electronic Communications Services (I-ECS) licence was not available to Infraco. Yet, it was fourteen months later and the ECNS licence had not been issued. Page 9 of the Annual Report said that because the I-ECS licence had not been awarded, the impact would be most severe from a financial perspective in the context of the business plan for Broadband Infraco’s investment in the international submarine cable project. He asked how it had impacted on Infraco and the people of the country when they were not awarded the I-ECS licence. Why was the awarding of the contract delayed? On page 20 of the Annual Report, it showed that there were three board members that attended only 50% of the meetings. This included the chairperson. He asked for an explanation for the insufficient attendance. Page 34 of the Annual Report looked at Infraco’s performance dashboard. It showed that certain targets had been met while others had not been met. One of the targets that were not met included the target to improve actual times to restore core network faults. The target was to bring the time down to ten hours, but in reality the actual time was almost 34 hours. What was the cause of this problem? The same went for the percentage of projects put into commercial operation against approved plans. Seven out of 19 projects were not delivered. Why was this so? The independent auditors report was conducted by a registered auditor but the internal audit function was outsourced to Price waterhouse Coopers (PwC). He asked what the rationale was for this. The audit remuneration increased from R1.2 million to R3.2 million. This was a huge increase in cost.

Mr Smith addressed the questions on the performance dashboard. He clarified that the 13% projection against the variance for projects was in fact a cost saving exercise resulting from negotiations with suppliers for better prices. Projects that were not delivered included projects awarded to alternative operators and projects rolled over to this financial year. The core restoration time was a performance measure that related to faults over 20% of the network. The issue that Infraco faced, prior to establishing its own operations network and going forward, was that the entity was dependent on access to Eskom and Transnet’s infrastructure for repairs. Currently, Infraco was looking at alternative technologies to eliminate this constraint going forward. Unfortunately, there was no “quick fix” for this problem.

Mr Maharaj explained the auditors’ remuneration costs, saying PwC was only engaged for part of the year in 2009 and was fully engaged for the 2010 financial year. This explained why the internal audit fee doubled in the past year. In terms of the external audit fee, there was a provision that was not included in the 2009 that was provided for in the 2010 financial year. Infraco also engaged KPMG on other services that did not relate to the external audit such as tax advice.

Mr Smith added that it was felt that it was not cost effective for Infraco to set up an entire internal audit function so early.

Mr Dikobo said that he was happy that Infraco had almost met all of its targets. They performed relatively well. He was very unhappy that Infraco could not find a single board member to attend the meeting. He asked for a breakdown of the staff complement so that Members could understand the racial and gender equity, as well as the employee disability situation in the entity. He asked for information on one or two of the biggest whistle-blowing cases that Infraco had.

Mr Smith responded that Infraco was targeting the appointment of potential disability candidates, specifically in the network operations environment. Infraco would forward the Committee a report detailing its racial and gender equity situation.

The Chairperson replied that the Committee wanted the figures within the next ten days.

Mr Smith responded to the question on whistle blowing. He said there had been three whistle blowing matters through Infraco’s hotline. Unfortunately, there had also been mischievous use of the hotline and unfounded allegations had been made about procurement processes. These had all been investigated and cleared by the external investigators.   

Mr M Nhanha (COPE) expressed his disappointment in DPE, saying that they should have helped Infraco to get the I-ECS licence. He was disappointed that the issue was not brought before the Committee so Members could talk to their colleagues in the Communications Portfolio Committee and the DoC. He referred to page 72 and page 73 of the Annual Report. The financial statement showed that the directors and management personnel’s remuneration increased from R6 million in 2009 to R11.8 million in 2010. He asked what the reason was for the sudden increase.

Mr L Greyling (ID) noted that there were a lot of cables laid down between the US and Asia in the 1990s. But, when the dot com bubble burst there was an over-supply of capacity that decreased the price of broadband. As a result, many companies went out of business. South Africa welcomed a price reduction, but would something like this affect Infraco’s profitability going forward?  He noted that it was not profitable to service under-serviced areas. He asked what the reason for this was or if it was because it was costly to put in cables in places where they did not receive enough revenue from its use. What kind of solutions could Infraco recommend? He thought that it should be a priority to put the cables in schools in the country.

Mr Smith answered that Infraco was looking at a number of options to provide schools with broadband. They were looking at whether they could do it wirelessly or with fibre to establish points in the communities where local community halls could be connected with schools, clinics, police stations, and the local government office. Infraco had to collaborate with Sentech to deliver on this. This would take at least six months.

Ms C September (ANC) wanted to know the extent to which the current economic climate affected Infraco’s financial performance. It would help the Committee to engage with the entity better if their Annual Report presentation compared its strategic plan. This way Members would see if they were meeting their policy objectives and legislative mandate. She noted that most service delivery constraints were due to the unavailability of infrastructure. She asked how Infraco was assisting with this situation. She noted that South Africa’s telecommunication rates were still one of the highest in the world. She asked what Infraco was doing to address this matter.

Mr Smith addressed the question on the economic climate’s effect on Infraco. He explained that it was an economies of scale issue that affected the entity’s capital costs and revenue.

Mr Dikobo asked if Infraco had a plan to move to a situation where they could break even or move to a profitable situation.

Mr Smith replied that Infraco was satisfied with its performance as they were performing ahead of their corporate plan. The corporate plan would project breakeven in the third year of the entity’s commercial operations. Infraco was not expecting any additional funding from the fiscus, the IDC or from DPE, unless the business model changed in relation to the under-serviced areas requirements.

The Chairperson stated that if Infraco’s business model changed, the Committee would have to sit down and discuss it with them. 

The Chairperson reminded Committee that the Money Bills Amendment Procedure and Related Matters Act allowed the Committee to receive quarterly reports from entities. She suggested that Infraco be prioritised. Infraco’s mandate demanded that they reduce the costs of telecommunications and that they ensure accessibility for all. This was a performance matter that the Committee had to keep an eye on. DPE also had to take note of this. When there were many players in a field, the cost would decrease naturally. But, people in rural areas were not accessing broadband at a cheap rate. It seemed that Infraco was failing in what they were mandated to do. Was this due to the entity not acquiring an I-ECS licence? It was concerning that the entity did not have any board members present at the meeting. She wondered how many of the board members were sitting on other boards. These members received good salary packages. She asked DPE for their own account of the Infraco board’s performance. The Committee also wanted a report on other boards of entities under the DPE’s observation. Members expected the DPE to perform its oversight role properly. The Committee wanted the report before the end of the year. She asked what Infraco’s relationship was with other service providers. This relationship was important as it would help Infraco to fulfill its mandate.

The Chairperson stepped out of the meeting for a few minutes and asked Mr Koornhof to serve as Chairperson in her absence.

Chairperson Koornhof noted that the Committee had run out of time. He thanked Infraco for their presentation and for addressing some of the tough questions asked by Members.

Pebble Bed Modular Reactor (PBMR) briefing
Mr Nico Botha, Acting Chief Financial Officer: Pebble Bed Modular Reactor (Pty) Ltd, informed Members of PBMR’s key initiatives regarding their engineering performance.  These included focusing on nuclear engineering developments, looking at test facilities and fuel developments, checking technology results, transferring the Reactor Pressure Vessel (RPV), and focusing on human capital building. Since PBMR was closing down, they were focusing on technology transfer. The test facilities at North West University would be transferred to the university from PBMR, subject to the DPE’s approval. PBMR’s RPV had been transported to Saldanha. Unfortunately, there were no funds available to transport the RPV to NECSA. PBMR sponsored an undergraduate student’s bursary scheme, but due to financial constraints, the PBMR bursary scheme was transferred to NECSA.

An employment equity report as at 31 March 2010 showed that 35% of the PBMR workforce was female and 65% was male. Of the overall workforce, 325 if the workers were African, 57% were white, 7% were Indian and 4% were coloured.

The independent auditor’s report (KPMG) said that PBMR’s annual financial statements presented fairly in all respects the entity’s financial position as at 31 March 2010. PBMR received an unqualified audit opinion. The net equity at the end of the financial year amounted to R183 949 000 and PBMR received a profit of R4 610 000.

The presentation also looked at events that had happened subsequent to the balance sheet date. PBMR had not received any funding since 1 April 2010. In Feb 2010, the initial rationalisation was approved to retrench a contemplated 75% of employees (from 830). Employees were afforded several opportunities to apply for voluntary severance packages. This reduced the staff complement to 245. Further rationalisation ensured that PBMR could continue as a going concern until March 2013. On 2 September 2010, the rationalisation was approved and the staff complement was reduced to nine employees on 31 October 2010. PBMR was currently preparing for a care and maintenance programme phase. This would last until 31 March 2011. The actual implementation phase would last from 1 April 2011 to 31 March 2013.    

Discussion
Dr Koornhof noted there was nine staff members left in PBMR. He asked if the six board members were included in this. The Property, Plant and Equipment assets had a closing value of R35.7 million. How was PBMR going to wind this down?

Mr Rob Adam, Board Member: PBMR, explained that there were six board members to govern the nine employees. He was aware that six board members were too many to oversee the employees. This number would be whittled down going forward. The new Minister would apply his mind very soon and let them know.

Mr Nelius Snyman, Commercial Manager: PBMR, addressed the question on property, plant and equipment. He said that management had decided that people that were being retrenched by PBMR were allowed to take their tools of trade as part of their severance packages. These would include, desks, computers etc. Some of the furniture would be sold or auctioned off. The plants, like the one in the North West, would be transferred to universities and other places. 

Ms Borman noted the slide that the showed a Reactor Pressure Vessel (RPV) stored at Saldanha. The slide said that there were no funds to transport the RPV to NECSA. She asked if the RPV would remain in Saldanha indefinitely. There was another matter that bothered her. It seemed to her that when Westinghouse pulled out, it was the final straw that caused the decision to close down the PBMR. She asked if the directors had seen this coming or if it had happened suddenly. Why did Westinghouse pull out so suddenly? What was the difference with regard to the first batch and second batch of severance packages that PBMR employees received?

Mr Adam addressed the RPV at Saldanha. NECSA spent a fair amount of its own money on a bursary programme and to employ PBMR people. They decided it was better to pay for the people than pay for the metal. This meant that the RPV was going to sit in Saldanha until someone decided what to do with it.

Mr Adam said that PBMR was surprised when Westinghouse pulled out of PBMR. They had gone into this as partners and negotiated very hard with the US Department of Energy. Initially, PBMR was told that two companies, Westinghouse and PBMR, could not submit a proposal in a consortium. One company, mainly a US company, had to submit. This meant that Westinghouse had to submit the proposal and PBMR had to be sub-contracted to the US Department of Energy. PBMR accepted this because it appeared that there was no other option. However, PBMR then received a letter from Westinghouse saying that the  SA government had to give a guarantee of commitment for PBMR going forward, otherwise Westinghouse would pull out. It was impossible to even convene a process to discuss this matter given the short deadline that Westinghouse gave PBMR. That was what happened.

He said that the first set of severance packages was voluntary. The second set was a negotiated package. It was his opinion that the employees that received the negotiated packages received better severance packages than the employees that left voluntarily. The packages were quite fair compared to what people received normally.

Mr Mokoena said that the Committee should have been more rigorous with its oversight over PBMR as there had been warnings about the entity’s viability. The Committee could have been more aggressive and tried to minimise PBMR’s loss. This was a lesson for the government in the future not to engage with very expensive experiments.

Mr Adam replied that the Committee should not blame itself for performing inadequate oversight. Members could beat themselves up about it, but there were certain things that they could not have foreseen such as Westinghouse pulling out. PBMR was moved that the Committee had treated them in such a caring way.

Mr Sonto thanked the presenters for making such a difficult presentation. If the Committee looked at events that occurred subsequent to the balance sheet, it seemed that PBMR was still hopeful.

Mr Botha explained that the aim was to maintain the company as a going concern until March 2013. If no unforeseen major events occurred, PBMR would be able to sustain itself until 2013. 

Mr Gololo was concerned about the collaborations that PBMR had with foreign countries to develop certain technologies. He asked what would happen with the collaborations or if they were called off. He congratulated PBMR on all the awards they had received. He was sorry that PBMR was closing down; as it meant that the country would lose a lot of intellectual property (IP) to foreign countries.

Mr Adams answered that the international collaborations would come to an end as there was nothing to collaborate on anymore. He said there were about three employees that had left to work overseas.

Mr van Dalen thought that PBMR taught people many things. This showed that the R10 billion used on the project was not a waste. Westinghouse had a 5% share in PBMR. If he understood the situation correctly, they actually gave the money to PBMR and were not given anything in return. This entitled them to a share of the IP or assets in PBMR. He asked if they thought of selling PBMR to someone else or if it would be scrapped completely.

Mr Adam agreed, saying that if there was no PBMR then the country would have been in a much worse position in terms of localising certain aspects of the project. For example, if the country procured nuclear power plants, they wanted some of that money to be spent locally. One of the benefits of the PBMR investment in IP was that the country now had people that could make this happen. Even if some of these people had left, they would come back.

Mr Greyling said that he had voiced his concerns about the PBMR project from the beginning. He thought the workers at PBMR did a sterling job and had good expertise that the country needed. His real problem with PBMR was the economic model that was used, which he constantly questioned. He was also concerned about the government’s decision processes and the way in which they decided to embark upon the project. The government had to look at the situation now and see what they could learn from it. The country had to take note of what was happening now regarding its energy choices - given its experience with the PBMR.

Mr Dikobo added that it was sad that so many people were losing their jobs. It was as if the Committee was attending a memorial service.

The Chairperson stated that she felt the same way too. It was a good thing that there were not going to be any legal consequences, but people’s lives had been badly affected. She wanted to know what choice of severance packages people had been given. Some of the Committee Members visited PBMR and everything looked fantastic to them. But, the reality was that things at PBMR were not good and had to come to an end. PBMR had to manage its IP from the very beginning. The question was what government had learnt from this situation. Her observation was that the government’s management of IP was very bad. She noted that Westinghouse did not seem to want anything from PBMR. She wondered if they had gotten everything they wanted from the entity. Was the PBMR rounded up according to its founding Act?

Mr Adam said that PBMR did not have a founding Act; it was simply collated under the Companies Act as a subsidiary of Eskom.

Mr Adam thanked the Committee for the caring way in which they managed the session. It was not a joyous occasion for the people at the meeting. They were proud of the work that they did, but it felt like they were attending a funeral.

The Chairperson thanked PBMR for their presentation, as it had been a very fruitful meeting. She wished them all of the best and thanked them for all the effort they had put into the project.

The meeting was adjourned.