Job Growth promises are in Green Economy

This piece originally appeared in the Business Day on 9 December, 2016.

At last week’s meeting of Parliament’s portfolio committee on energy, the deputy director-general for nuclear energy in the Department of Energy, Zizamele Mbambo, made the extraordinary claim that a nuclear build in SA would create 200,000 new and permanent jobs.

Despite providing no evidence to support this claim, he said that while most direct jobs in the nuclear business were “highly professional”, a “multiplier effect” would create other jobs through localisation efforts.

Nuclear industry lobbyists typically claim that jobs are created directly during the construction and operation of nuclear power plants and indirectly via the economic growth that is said to flow naturally from the generation of more electricity.

Sadly, the truth is that these claims are very unlikely to be realised in SA for a number of interrelated reasons.

Since the government’s 2010 announcement that it intended to procure new nuclear power stations, various claims have been made by government officials and nuclear vendors about the number of new jobs this would create.

Russian company Rosatom — considered the frontrunner in the procurement process — stated in 2013 that 15,000 new jobs would be created directly by the procurement, with another 100,000 created in supporting industries because for every job created directly, seven would be created indirectly.

In March, Rosatom claimed that 5,760 direct jobs would be created, with a further 70,000 created in supporting industries because for every job created directly, 12 would be created indirectly.

The huge variation in their projections shows that their figures are guesses, especially about the indirect jobs.

International experience shows that while upwards of 10,000 people (often migrant labour) may be employed during the construction phase of a nuclear power plant, when it enters operational phase, the vast majority of its employees tend to be highly paid and skilled. The corporate services group executive of the state-owned Nuclear Energy Corporation of SA confirmed as much in 2014, when he stated that any new jobs created would be “high-tech, high-skilled”.

The relatively small number of permanent jobs needed to operate a nuclear power station is illustrated by Eskom’s claim that Koeberg employs “approximately 1,200”, with another 600 employed indirectly.

We should be extremely cautious when evaluating claims about job creation through the procurement of foreign technology. The arms deal, now estimated to have cost at least R50bn, promised to create 60,000 permanent new jobs. In reality, less than 4,000 were created at an estimated cost of R12m per job.

If nuclear procurement creates a highly unlikely 100,000 new jobs, this would mean that, at a conservative procurement cost of R500bn, each permanent job would cost SA R5m.

If the more realistic procurement cost of R1-trillion is incurred, each permanent job would cost R10m. Even Mbambo’s wildly ambitious figure of 200,000 new permanent jobs would result in each job costing R5m!

If we replace Rosatom and Mbambo’s speculative job creation figures and use Koeberg as a basis for comparison, a R1-trillion procurement deal would mean, if we assume that 10,000 permanent new jobs will be created, that each new permanent job would cost SA R100m.

Nuclear power plants are far from being labour intensive and will do little to ease SA’s unemployment crisis, despite the claims of the pro-nuclear lobby.

Nuclear proponents will claim that new jobs will be created by the economic growth they assert will inevitably
follow the generation of
more electricity. There are numerous problems with this simplistic argument.

The government has not yet proved that 9.6GW of new generating capacity is necessary. Assuming the country does need this, other generation options are cheaper.

Recent research from the Council for Scientific and Industrial Research indicates that nuclear power is expensive compared with other energy sources, costing at least R1.17/kWh, compared with new solar and wind energy at R0.62/kWh.

The Energy Research Centre at the University of Cape Town has shown that if energy costs are high, economic growth slows and jobs are lost.

National Union of Metalworkers of SA research from 2012-13 has shown the negative effect of Eskom’s numerous electricity price increases on jobs in recent years. Expensive electricity generation results in jobs being lost.

This contrasts starkly with evidence from renewables.

Research by the Institute for Sustainable Futures indicates that a phased switch to renewable energy generation in SA that includes the domestic manufacture of technologies could create approximately 180,000 new jobs by 2030.

These jobs can be created only if government activity supports local renewable energy manufacturing and installation, and the training of workers.

To date, evidence suggests that far fewer permanent jobs are being created in renewables because of a lack of government support for local manufacturing; capacity constraints due to inadequate training and support; because the private sector purchases renewable technology from overseas, where it is relatively cheaper; and because local communities are largely side-stepped in the procurement processes.

For 180,000 jobs to be created in renewable technologies, the government needs to take a far more proactive role in funding, managing and directing the process in the interests of all South Africans.

Job creation in renewables can be part of a wider transition to a green economy, which has the potential to create hundreds of thousands of new jobs.

The One Million Climate Jobs campaign has demonstrated how new jobs can be created in retrofitting homes and business premises; ensuring that all new buildings are environmentally friendly; converting waste to energy; maintaining biodiversity and restoring ecosystems; producing biofuels; and developing more environmentally friendly farming techniques, among other things.

Any hopes of realising significant numbers of new jobs in the green economy will be entirely undone by the proposed procurement of nuclear power. The scale of the financial commitment is so large as to essentially foreclose significant spending elsewhere.

Evidence suggests that the government is either planning to ask the nuclear vendors to finance the deal or try to finance it on the open market.

The costs of any financing arrangement are likely to be astronomical.

SA’s debt to GDP ratio is already at a post-apartheid high and although a credit downgrading from ratings agencies has been averted in 2016, it remains on the horizon.

These factors will make borrowing extremely expensive, with a R1-trillion deal resulting in at least R100bn in payments per year just to service the debt.

The government is already spending more annually in servicing its debts than it spends on healthcare.

The magnitude of such a debt threatens existing jobs and the ability to create new ones. It threatens to deepen unemployment by crowding out government spending in other areas of the economy where new jobs could be created.

The long lead-in times of nuclear power plants and the long-term financing commitments that will be made will lock SA into pursuing nuclear power for decades to come. This will result in SA being unable to take advantage of cheaper and more environmentally friendly ways of generating power or of spending the money committed to nuclear power in other ways to create new jobs.

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