NECSA’S BRIEFING TO THE SELECT COMMITTEE ON ECONOMIC DEVELOPMENT By: Ambassador Mochubela Seekoe, Chairperson Mr Phumzile Tshelane, CEO Ms Mbali Mfeka, Acting Group Executive: Finance and Information Management 11 June 2013

Index 1.Necsa’s Legislative and Policy Mandate 2.Alignment to Government Policy 3.Necsa Group Corporate Plan Human Resources 5.Necsa Group Predetermined Objectives and Key performance Indicators for 2013/ /16 6.Necsa’s Achievements in 2012/13 2

Necsa’s Legislative and Policy Mandate

Necsa’s Main Functions (in terms of the Nuclear Energy Act, 1999)  To undertake and promote research and development in the field of nuclear energy and radiation sciences and technology and.… to make these generally available.  To process source material, special nuclear material and restricted material and to reprocess and enrich source material and nuclear material.  To co-operate with any person or institution in matters falling within these functions. Also: Execute institutional responsibilities on behalf of government, e.g. operation and utilisation of SAFARI-1, decommissioning and waste management, international obligations. 4

Necsa in the Nuclear Energy Policy (2008)  Necsa shall serve as the anchor for nuclear energy research, development and innovation in South Africa.  Necsa shall be encouraged to participate in the uranium value chain.  Government, through Necsa, shall undertake/investigate... – the development of uranium conversion capabilities, – the viability of developing its own uranium enrichment capabilities and simultaneously seek to obtain access to established uranium enrichment programmes, – a strategy to develop nuclear fuel fabrication capabilities.  Government’s intention is to…establish a modern nuclear technology industry including manufacturing and construction capabilities as well as services. 5

Alignment with National Development Plan

National Development Plan 7 NDP Priority AreaNecsa Group Alignment Providing Quality Health Care  NTP Radioisotopes produces medical radioisotopes, some of which are utilised in the South African health system for diagnostic studies and cancer treatments. An Economy that will Create More Jobs & Improving the Quality of Education, Training and Innovation  NTP and Pelchem product sales on world markets contributes to SA balance of payments  Apprenticeship training offered by Necsa Skills Development Centre (trained 442 people during 2012/13) DTTC 33 pre-test, 246 trade test preparation and 232 artisans trade test  Security learnerships launched in 2011/12 (9 graduates in 2012/13)  Necsa Bursary Programme (Graduate-in-training programme 11 students, Undergraduates 15 and 5 postgraduates for 2012/13); Internship programme (36 students for 2012/13); post- graduates and post-doctoral fellows supported with research projects at Necsa (62 for 2012/13) and Universities (36 for 2012/13) Expanding Infrastructure Necsa has embarked on several key infrastructure projects, including:  the manufacturing plant for low enriched uranium (LEU) material test reactor (MTR) fuel;  the SAFARI-2 research reactor project;  achieved ASME III accreditation for its nuclear manufacturing centre (NMC) so that South Africa may procure localisation benefits arising out of its nuclear energy expansion programme;  preparations for a pressurised water reactor (PWR) fuel component manufacturing facility; and  The Minister of Energy officially launched the Necsa Visitor’s Centre in February 2011 to assist in improving public understanding of nuclear technologies.

National Development Plan 8 NDP Priority AreaNecsa Group Alignment Transitioning to a Low- Carbon Economy  Recognising the role nuclear energy can play in reducing SA’s greenhouse gas emissions as well as the importance of raw material beneficiation for the SA economy and based on the requirements of the NEP Necsa has drafted a report showing the status of local uranium reserves and how these resources can be locally beneficiated through the production of nuclear fuel which is especially pertinent to SA’s nuclear energy expansion programme. South Africa in the Region and the World  Necsa continues to be extensively involved in technical cooperation projects of the IAEA’s African Regional Cooperative Agreement for Research, Development and Training related to Nuclear Science and Technology Programme (assisted Ghana with site characterisation for its first Borehole Disposal unit for disused sealed radioactive sources. Also undertook successful conditioning missions to Sudan and Tanzania for sealed high activity radioactive sources (SHARS), a world first Necsa developed and designed technology).

Necsa Group Corporate Plan

Key Objectives of the Necsa Group Nuclear Power Cluster  To establish the Nuclear Manufacturing Centre as a viable entity.  To implement Pelchem’s strategy for growth and sustainability, including an increase of income from R178.0m (2012/13) to R376.1m by 2016/17.  To assess the viability of a future nuclear fuel cycle (front end) services industry in South Africa and to progress towards the development or demonstration of required processes and technologies. 10 Continues…

Key Objectives of the Necsa Group Radiation Science and Applications Cluster  To maintain full operational capability of SAFARI-1 and implement the reactor’s ageing management programme.  To expand SAFARI-1 based R&D facilities and outputs.  To achieve the project targets for the establishment of an LEU fuel and target plate manufacturing plant.  To continue with the feasibility study on a multipurpose research reactor to replace SAFARI-1 at the end of its operational lifetime.  To grow NTP Group income from R937.3m (2012/13) to R1513.4m by 2016/ Continues…

Key Objectives of the Necsa Group Necsa as Host of Nuclear Programmes Cluster  To increase Necsa’s research, development and innovation outputs.  Maintain and improve the Necsa Group safety culture, SHEQ processes and procedures, audit and reporting practices to ensure full compliance with all regulatory and best practice requirements.  To achieve a reduced but sustainable salary bill within existing funding constraints.  To maintain infrastructure at a suitable level. 12

Cross-cutting Executive Management Driven Priorities In addition to the strategic objectives already listed Necsa Executive management has selected the following main management priorities for the near term: –Obtaining early Shareholder support for key strategic projects. –Raising the performance of R&D, NMC, NURAD, the NTP Group (specifically its off-shore subsidiaries) and the Pelchem Group. –Increasing the awareness of Necsa research and production outputs and the positive impact thereof. –Finding sustainable funding models for the expansion and enhanced viability of Necsa subsidiaries. 13 Continues…

- Expanding R&D collaboration with iThemba LABS and the rest of the National System of Innovation, including government departments such as DST. - Future proofing of Necsa activities through the SAFARI-2 feasibility study, ensuring LEU fuel and target plate security of supply and commercial sustainability, and driving SAFARI-1 life extension within a proper regulated framework. - Maintenance of site infrastructure based on the risks and potential liabilities associated with such infrastructure. - Strengthening Necsa’s project management and business development capabilities. - Skills development and transformation by advancing employment equity, growing the pipeline of graduates and lowering the average age of researchers. - Ensuring optimisation and efficiency of all Necsa resources 14 Cross-cutting Executive Management Driven Priorities

Key Risks for the Necsa Group  Growing financial constraints experienced by Necsa Corporation. The fixed cost base which increased at a higher rate than the government grant and self-generated income;  Ageing equipment and infrastructure as well as production plant availability;  Business sustainability challenges and extremely tough global market conditions experienced by both the NTP Group and the Pelchem Group, which are being addressed though a range of interventions aimed at the restoration of Pelchem’s financial viability and removing some constraints among offshore subsidiaries of NTP; 15

Critical Success Factors for the Group  Improved sustainability of Necsa  Expand efforts to access research based and other grants from the DST and its entities  Obtain external funding for commercial projects.  Optimise the business relationship between NTP and its subsidiaries to ensure that the required growth and profitability targets are achieved within an appropriate governance framework  External direct investment in Pelchem is vital for its future development and sustainability 16

Government Grant – Total 2010/11 to 2015/16 R’000 17

NECSA Group Total Income 2013/14 18

Necsa Group Income: Per category (Rm) 19

NECSA Group Expenditure 2013/14 20

Necsa Group Capital Expenditure 2013/14 to 2016/17 – Classification 21 Classification BudgetPlan 2013/142014/152015/162016/17 R’000 Necsa Group Consolidated Land & Buildings Plant Furniture & Fittings Motor vehicles and transport containers Office Equipment IT equipment Research Facilities Leasehold improvements Machinery and equipment Component spares Startup Costs Intangible assets Total

Necsa Group Capital Expenditure 2013/14 to 2016/17 – Per company 22

Necsa Corporation Capital Expenditure 2013/14 to 2016/17 Classification 23 Classification BudgetPlan 2013/142014/152015/162016/17 R’000 The South African Nuclear Energy Corporation Limited Land & Buildings Plant Furniture & Fittings Motor vehicles and transport containers Office Equipment IT equipment Research Facilities Leasehold improvements Machinery and equipment Component spares Startup Costs Intangible assets Total

PFMA S54 (2) (D) Approvals Required for CAPEX The following capital projects are above the significance level as per the significance and materiality framework, and will be subject to a section 54 approval process. All of these projects are scheduled to be undertaken over the MTEF period: 24 Item Classificatio n Company Total estimated Cost over MTEF Rm The LEU Fuel and Target Plate Manufacturing Facility Plants Necsa SOC LtdR50.5 SAFARI-2 Plants Necsa SOC LtdR 19.8 HEU Recovery from NTP Tailings Plants Necsa SOC LtdR HVAC System Plants NTP Radioisotopes SOC LtdR43.1 New Radiopharmaceutical production facilities Plants NTP Radioisotopes SOC LtdR35 Kabelo II Plants Pelchem SOC LtdR50 SAFARI-1 Ageing Management Programme Mainly Machinery and Equipment Necsa SOC LtdR80.8 Ketlaphela (Pelchem only a 10% shareholder) PlantsPelchem SOC LtdR1 553

Necsa Corporation Income: per category (Rm) 25

Necsa Corporation Expenditure: per category 26

Human Resources

Human Resource Development Priorities  Increase the ratio’s of technical staff in regard to support staff.  Increase the number of Previously Disadvantaged Individuals (PDI) technical staff.  Increase the number of researchers with Masters and PHD degrees.  Establish a nuclear education and training unit within the Necsa Learning Academy.  Establish an advance manufacturing skills welding centre of excellence.  Launch the Radiation Protection Training Centre. 28

Human Resource Development Priorities Program Number of Beneficiaries 2012/ /2014 Study Assistance Scheme (SAS) Mentoring & Coaching96110 Adult Education and Training (ABET)7688 Necsa Graduate Support Program (NGSP):  Graduates-in-Training Scheme (GiTS)117  Undergraduates15 10  Postgraduates56 Necsa Internships7685 Necsa Skills Development Centre:  Apprentices and Learnerships  Toolmakers Apprentices4690  Safety & Security Learnerships100 Decentralised Trade Test Centre (DTTC):  Pre-test preparation for Trade Tests3330  Trade Test Preparation required by SETAs  Artisan Trade Tests

Necsa Learning Academy (NLA)  Nuclear Skills Development Centre (NSD) The NSD continues to grow and fulfill its mandate in terms of the National Skills Development Strategy and has increased the number of students in its facility by catering for the following clients: –Department of Public Works (42 students) –Development Bank of South Africa (46 students) –Grinaker LTA (96 students) –Sesto (55 students) –NTIP (46 students) –Others (157 students) 30

Necsa Learning Academy (NLA)  Apprenticeships and Learnerships - The NSD plans to train 218 at its facilities. - NSD was accredited as the preferred training provider to train the Master Tooling artisans for Industry (DTI project). The first 46 students are enrolled and the number will be extended to 96 during the year. - NSD has extended it’s welding division to accommodate Coded Welding which will be launched in August. The project is funded by Alstom.  Decentralised Trade Test Centre (DTTC) The target for the DTTC is to increase the number of people coming to 2880 for the following: –pre-tests to determine the readiness of candidates for the final trade tests - Trade test preparation required by the SETAS, and - trade tests assessments and - Those who pass their trade tests (53%). 31

Necsa Group Predetermined Objectives and Key Performance Indicators

Necsa Group Predetermined Objectives and KPIs for 2013/ /16 33 KPAKPI2012/13 Actual 2013/14 target2014/15 target 2015/16 target 2016/17 target Necsa Corporate financials External sales revenue R309.9m (target not achieved) ≥R391m≥R420m≥R435m≥R457m NTP Group financials Revenue and profit after tax R937m R137m (targets exceeded) ≥R1017m ≥R93m ≥R1235m ≥R162m ≥R1396m ≥R158m ≥R1514m ≥R200m Pelchem Group financials Revenue and profit after tax R178.7m (R20.5m) (targets not achieved) ≥R 217m ≤(R11m) ≥R 239m ≤(R6m) ≥R256m ≤(R11m) ≥R375m ≥R13m Research outputs Research publications 34 (target not achieved) ≥40≥45≥50≥55 Innovation value chain Innovation disclosures 17 (target exceeded) ≥14≥17≥20≥23

Necsa Group Predetermined Objectives and KPIs for 2013/ /16 34 KPAKPI2012/13 Actual 2013/14 Target2014/15 Target 2015/16 Target 2016/17 Target Nuclear fuel cycle (NFC) programme initiatives Achievement of programme objectives Progressing well towards next revision of enrichment prefeasibility study report. NFC strategy in place and remains the same; awaiting roll-out of nuclear programme. Strategic plan for establishment of viable NFC front end in SA Negotiation with selected NFC vendors on localisation in alignment with NPP procurement process Begin compilation of detailed business plans for conversion, enrichment and fuel fabrication. Finalise detailed business plans for conversion, enrichment and fuel fabrication. Establishmen t of LEU fuel and target plate manufacturin g plant Achievement of project objectives Basic design and construction SAR not completed. Project suspended due to delivery challenges Business plan for LEU fuel and target plate plant Construction SAR approved by NNR Plant construction

Necsa Group Predetermined Objectives and KPIs for 2013/ /16 35 KPI2012/13 Actual 2013/14 Target 2014/15 Target 2015/16 Target 2016/17 Target SAFARI-1 operation Operational availability (days per year) days available(target exceeded % availability) 303 D&D programme execution Execution of Annual Plan of Action as approved by DoE 110% (Programme target exceeded) 100% Compliance to SHEQ, license and other regulatory requirements Disabling Injury Incidence Rate (DIIR) Not a target in 2013≤0.8≤0.7≤0.6≤0.5 Public dose impact (expressed as % of allowable limit) 5.5% mSv for the 2012 calendar year, i.e % of the allowable annual public dose <20% KPA <20%

Necsa Group Predetermined Objectives and KPIs for 2013/ /16 36 KPAKPI2012/13 Actual 2013/14 Target 2014/15 Target 2015/16 Target 2016/17 Target Staff composition Technical staff as % of total staff 48.84% (target achieved) 50%52%55%58% Black technical staff as % of all technical staff 45.76% (target achieved) 47%49%52%55%

Abbreviations  ANSTO – Australian Nuclear Science and Technology Oragnisation  CTBTO – Comprehensive Test Ban Treaty Organisation  D&D – Decontamination and Decommissioning  DST – Department of Science and Technology  IAEA – International Atomic Energy Agency  iThemba LABS – Ithemba Laboratory for Accelerator Based Sciences  LEU – Low Enriched Uranium  MTR – Material Test Reactor  NMC – Necsa’s Nuclear Manufacturing Centre  NURAD – Necsa’s Nuclear and Radiation Services Division  PWR – Pressurised Water reactor  R&D – Research and Development  SETA – Sector, Education and Training Authority  SHARS – Sealed High Activity Radioactive Source  SHEQ – Safety, Health, Environment and Quality  SIP – Strategic Infrastructure Project of the Presidential Infrastructure Coordinating Council 37

38 Thank You!!!

Government’s Programme of Action 39 Government Outcomes and Outputs Necsa Group Outputs Outcome 6: An efficient, competitive and responsive infrastructure network Necsa has embarked on several key infrastructure projects, including:  the manufacturing plant for low enriched uranium (LEU) material test reactor (MTR) fuel;  the ‘dedicated isotopes production reactor’ (DIPR)  achieved ASME III accreditation for its nuclear manufacturing centre (NMC) so that South Africa may procure localisation benefits arising out of its nuclear energy expansion programme;  preparations for a pressurised water reactor (PWR) fuel component manufacturing facility; and  The Minister of Energy officially launched the Necsa Visitor’s Centre in February 2011 to assist in improving public understanding of nuclear technologies. Outcome 10: Environmental Assets and Natural Resources Protected and Continually Enhanced  Recognising the importance of raw material beneficiation for the SA economy and based on the requirements of the NEP Necsa has drafted a report showing the status of local uranium reserves and how these resources can be locally beneficiated through the production of nuclear fuel which is especially pertinent to SA’s nuclear energy expansion programme.

Government’s Programme of Action 40 Government Outcomes and Outputs Necsa Group Outputs Outcome 11: Create a Better South Africa and Contributing to a Better and Safer Africa in a Better World  Output 5: Enhanced African Agenda and Sustainable Development  As the focal point for technical cooperation between the IAEA and the Government, Necsa continues to facilitate the implementation of the African Regional Cooperative Agreement for Research, Development and Training related to nuclear science (assisted Ghana with site characterisation for its first Borehole Disposal unit for disused sealed radioactive sources. Also undertook successful conditioning missions to Sudan and Tanzania for sealed high activity radioactive sources (SHARS), a world first Necsa designed technology.

Government’s Programme of Action 41 Government Outcomes and OutputsNecsa Group Outputs Outcome 2: Health  Output 1: Improve life expectancy  NTP Radioisotopes produces medical radioisotopes, some of which are utilised in the South African health system for diagnostic studies and cancer treatments. Outcome 4: Decent Employment through inclusive economic growth  Output 4: Increased competitiveness, to raise net exports, grow trade as a share of world trade and improve its composition  NTP and Pelchem product sales on world markets contributes to SA balance of payments Outcome 5: Skills  Output 3: Access to occupationally directed programmes in needed areas and thereby expand the availability of intermediate level skills (with a special focus on artisan skills)  Output 5: Research, development and innovation in human development for a growing knowledge economy  Apprenticeship training offered by Necsa Skills Development Centre (trained 442 people during 2012/13) DTTC 33 pre-test, 246 trade test preparation and 232 artisans trade test  Security learnerships launched in 2011/12 (9 graduates in 2012/13)  Necsa Bursary Programme (Graduate-in-training programme 11 students, Undergraduates 15 and 5 postgraduates for 2012/13); Internship programme (36 students for 2012/13); post-graduates and post-doctoral fellows supported with research projects at Necsa (62 for 2012/13) and Universities (36 for 2012/13)

Alignment with IPAP 2013/ /16  Pharmaceuticals – The Government supported Ketlaphela project to manufacture active pharmaceutical ingredients for antiretroviral treatment of patients with HIV- AIDS will be implemented in partnership between Pelchem, the IDC and Swiss company Lonza.  Nuclear Energy – Necsa participates in the Nuclear Energy Sub-working Group (NESWG) on Skills, Localisation and Industrialisation which is tasked with the development of localisation strategies and plans to support local industry. 42

Alignment to SIPs 43

Necsa’s Achievements

Achievements  Necsa Group revenue in the 2012/13 financial year amounted to R1.81 billion (including grants, other income and investment income).  NTP Radioisotopes (Pty) Ltd, the SAFARI-1 Reactor and the Necsa MTR Fuel Department managed to maintain the Necsa Group in a strong position in the radioisotope market. During the 2012/13 financial year the NTP Group achieved sales of R937 million.  The Necsa R&D division continues to meet and exceed innovation (17 innovation disclosures for 2012/13) value chain outputs with the number of peer-reviewed publications (34 for 2012/13) being doubled in the last 3 years. 45

Achievements  NTP donated a PET-CT scanner to the Tygerberg hospital to assist with oncology diagnoses. 46

Achievements  Necsa’s Radiochemistry group using NTP’s cyclotron produced a prostrate cancer imaging agent for use in a collaborative study by Prof. Mike Sathekge of the Steve Biko Academic hospital (SBAH) and the Pretoria University.  Other on-going R&D collaboration between Necsa/NTP and SBAH includes: –TB vs co-occurring cancer and TB diagnosis and treatment planning –HIV-AIDS imaging and therapy –Infection imaging 47

Achievements  Comprehensive feasibility studies relating to the re-establishment of nuclear fuel cycle programmes in South Africa was completed during Excellent relationships with most major international suppliers of fuel cycle technologies and products were developed. Significant capital investment is required if the vision of a future local fuel supply to the power reactor fleet is to be achieved.  The Nuclear Skills Development Centre received accreditation from various SETAs and recognition as a Decentralised Trade Test Centre for the final trade testing of apprentices and is currently in strong demand.  Necsa contributed to a range of policy making and public participation processes relating to the energy planning, nuclear energy R&D and related topics, and maintained participation in national and international collaborative programmes in the field of nuclear R&D and Generation IV nuclear energy systems. 48

Achievements  The Necsa Visitor Centre continues playing a significant role in improving public understanding of nuclear science and technology.  The Necsa Group continued to demonstrate compliance to good corporate governance by receiving unqualified audit reports from the Auditor General. 49

International Collaboration  Necsa to establish the Comprehensive Test Ban Treaty Organisation (CTBTO) Radionuclide Monitoring Station in the Western Cape.  Continued international R&D collaboration.  Establishment of NTP Europe.  Business collaboration between NTP and their Australian counterpart the Australian Nuclear Science and Technology Organisation (ANSTO). 50