Atomic Energy Corporation

Review

(Continued)

line

 

  1. ALIGNMENT WITH OBJECTIVES OF THE NATIONAL SYSTEM OF INNOVATION
  1. Contribution to NSI goals

The Review Team was asked to assess the contributions made by the AEC (within the domains of activity and important dimensions of South Africa’s national system of innovation as set out in the White Paper on S&T, at the level of the institution as a whole and of its constituent core competence clusters) to innovation, to technology transfer and services, and to its own internal capacity-building in anticipation of providing future services.

In terms of recent history, the AEC can be said to have made a substantial contribution to ‘innovation’ and indeed to employment creation (but originally in a distinctly population-sectoral way) through its massive uranium enrichment programme. On closer analysis however it might well be argued that this programme was innovative in its scope and size rather than in its technical/scientific features, in a flagrantly cost-insensitive way (leading, inter alia , to the embarrassing debts with which the AEC is still encumbered today). Of course the flaw in this accolade, if it is to be interpreted as such, is the motive for this ‘innovative’ work, which was inspired in terms of strategic (political) interest and, as we now know, despite frequent mea non culpa public protestations of innocence. The AEC, on government instructions, had in fact embarked on a mission of producing highly enriched uranium for the purposes of making nuclear bombs and in fact succeeded technically in producing enough bomb-grade material for 6 or 7 devices, which were fortunately never deployed, if indeed they were ever deployable.

The remaining question as posed is whether the AEC has also "contributed to technology transfer and services, and to its own internal capacity-building in anticipation of providing future services". If by technology transfer and services is implied the transfer into the public domain beyond the confines of the AEC itself, the answer is to such a limited extent as to be almost non-existent. Considering the vast deployment of public resources in these ventures, the return on investment is probably negative in the sense that the AEC staff of today are faced with an understandable legacy of public distrust.

As regards "internal capacity-building", it is a pity that the commendable "Pelindaba Skills Institute" appears to be entirely externally focused rather than on building the capacity of its own internal staff. However, the AEC 2000 Focus programme, launched in 1995, covers a number of aspects such as managing change, leadership and management development, quality of life and training.

In fairness, however, it must be placed on record that current AEC staff largely concede the unfortunate nature of the historical record, and many have genuinely tried, with unfortunately to date but limited success, to transform the AEC into a more relevant organisation.

  1. Assessment of factors which have led the AEC to select its current priorities and to allocate its available resources in the way in which it has chosen to do so, and its capacity to reallocate its resources as necessary in the face of changing external needs

This is an omnibus requirement and only a detailed historical account of what the AEC decision-making processes and criteria were in the past could do full justice to it!

The priorities of the AEC were:

Among the factors which led to the historic decision to develop and exploit the nozzle-based enrichment process were political/strategic considerations in accordance with the government of the day. When this political programme was abandoned, the AEC was probably influenced by staff morale and a quest for a new major purpose, leading to the decision to pursue the molecular laser isotope separation process seriously. We understand that preliminary work had already been in progress for some years, and that one of the driving motivations was the potential return to South Africa from the added value to uranium when sold as enriched UF6. The AEC pursued this venture by the deployment of substantial resources, with regard to both personnel and finances, and over the last few years by bringing in a French partner on a 50:50 basis. As to the AEC’s "capacity to reallocate its resources as necessary in the face of changing external needs", the AEC has responded to the withdrawal of COGEMA by terminating the programme. It is not yet clear how the MLIS budget will be re-allocated but presumably there will be substantial costs in respect of staff redundancies and decommissioning.

The original uranium enrichment work required the production, handling and treatment of uranium hexaflouride (UF6) and so provided a scientific and technical capacity in the field of the chemistry of fluorine and fluorine-based compounds. This appears to be a technology for which skills do not at present exist elsewhere in SA, and which should be marketable in particular in AEC - industry collaborative endeavours. The AEC is quite capable of reallocating its resources to meet this external market, and indeed has already done so. The key question however is whether this will be consistent with the (amended) AEC mandate, particularly as regards the "nuclear-related" stricture. The fluorine capability, while in the case of the AEC unquestionably nuclear in origin, is not necessarily nuclear-related in its further pursuit.

The radiation services include-

The reactor was seen, in common with practice elsewhere in the world at that time, as an essential focal point for a (national) nuclear (research) facility, and the production of radioisotopes for medicine, industry and agriculture followed. Whether the best choice of research reactor was made is not at this time an appropriate matter for debate but this Oak Ridge design materials reactor, designed and manufactured in the US, is unquestionably a good facility, and a sensible programme of isotope production and irradiation services is sustained on it.

The question posed as regards the "capacity (of the AEC) to reallocate its resources as necessary in the face of changing external needs" is an interesting one in this case : in the fullness of time (15, 20, 25 ...... years ?) radiation damage is believed to become a safety problem, bringing to an effective end the use of the reactor. This perforce will bring to an end a substantial AEC endeavour. What sensibly follows ? It is conceded by all that it is most unlikely that it will be possible to justify a new nuclear reactor on economic grounds, but it is hard to predict the situation in perhaps 25 years’ time. However, in the event of closure, what then happens to the services at present provided by the Safari ?

Presumably, if the techniques, for example in the field of nuclear medicine, are still current state-of-the-art practice, the necessary radioisotopes will have to be imported from abroad, provided they are not very short half-life reactor isotopes. The other irradiation services will have to be acquired abroad or replaced by other techniques. Hence the AEC’s "capacity to reallocate its resources as necessary in the face of changing external needs" takes on a rather different meaning in this regard: it is likely that there will be no sensible change possible that is consistent with its nuclear-related mandate. So, for example, to replace reactor-produced isotopes with cyclotron-produced isotopes would not be sensible as this would conflict with the already established interests of the National Accelerator Centre (NAC). It seems more likely that if the AEC still has a nuclear-related stricture in its mandate, there will simply be no call for a "capacity to reallocate its (i.e. AEC) resources .....", and the AEC as we know it now would have to scale down in regard to the expenditures allocated to the reactor-related activities. Indeed, this scenario might be enforced earlier on, if government is no longer prepared to subsidise this facility.

This still leaves the other activities under this heading open for consideration: the van de Graaff accelerator activities would seem to be relatively easy to dispose of. During the past year the AEC has itself considered the closure of this activity, and justifiably so. The actual usage of this facility has decreased to so small a scale that there is no apparent justification for not mothballing the facility or disposing of it. If there is any ongoing need for the experimental expertise of the scientific and technical staff associated with this accelerator, they should be deployed for the use of the existing van de Graaff accelerators operational in other centres in SA.

In regard to the bulk irradiation facility based on the use of imported cobalt, this apparently successful activity, if commercially viable, should be fully privatised. This could happen even at the present time. There is no apparent reason why the AEC should not be able to respond positively to this change in external needs, indeed the AEC should see it as one of their success stories.

There is uncertainty as to the Vaalputs waste storage facility’s potential for the storage of high-level waste. Extensive tests will be necessary before this can be established and before further expenditure is undertaken. In the mean time, the question of the further transportation and disposal of low- and intermediate-level waste from Koeberg needs resolution.

  1. Assessment of the design and performance of the strategic management function within AEC, and in particular the actual performance of that system in decision-making relating to either the addition or subtraction of areas of emphasis in the work program of the AEC within the context of the national system of innovation

It must be very difficult for a management that has been central to the responsibility for earlier policy formulation and implementation to have to dismantle this policy and seek for new directions, new thrusts. In assessing the performance of management in respect of this difficult task it must be borne in mind that they have laboured under the problem of an historic mandate and an inadequate revised mandate. Having said that, it stands to their credit that they abandoned the enrichment process on which so much money and effort had been expended and for which such extravagant claims had been made – although decisions to close elements in the fuel "chain" have generally been too late, thus unnecessarily wasting public resources. So much for the "subtraction" side of a major, indeed a dominating area of interest. On what is then the "addition" side, management initiated the exploitation of fluorine chemistry. In actual performance this development or trend must be regarded as positive. The word "trend" is used as developments cannot yet be considered as definitive: fluorine chemistry must still be confirmed as being within their current nuclear-related mandate and must find even more extensive commercial support from the private sector.

  1. Assessment and recommendations on the appropriateness, in today’s (and anticipated future) circumstances, of the institutional placement of specific core competence clusters within the national system of innovation

The core competence clusters identified by the AEC themselves are only three in number-

The first of these is not accepted by the Review team as a "core competence" in the strict sense in which it has been defined, although it represents an area of much acquired skill and experience. If the Safari were to close, activities such as radio-analysis and radiochemistry could be located elsewhere.

The second of these, fluorine chemistry, is possibly a contentious one in terms of the question which is being posed. This field is accepted as a hazardous one, hence its location in an area away from urban densities is probably wise, although urban and peri-urban development of the Hartebeestpoort Dam area will need to be constantly monitored. If the hazards are not as great as imagined, then presumably the plant(s) could be located in industrial areas as is the case with other plant for chemical production in SA.

  1. MAIN FINDINGS AND RECOMMENDATIONS
  1. Overall

This review has given the opportunity for a fresh and radical (incisive, to the roots) analysis of the AEC, which provides an understanding of its history and current operations as a basis for developing a clear set of proposals for its future, within the context of a changing political and economic environment.

It is always difficult to accept, and even more difficult to implement, radical proposals. Yet that is what is now required of the AEC. It is clear to anyone with intellectual integrity that the main raison d’etre of the AEC no longer applies. South Africa does not envisage investment in nuclear power in the foreseeable future – either for nuclear weapons (there is no coherent strategic rationale for their deployment), or for the production of electricity (cheaper alternatives exist). South Africa, thus, has no obvious need for an indigenous capability in nuclear energy. Put another way, South Africa is no longer prepared to pay a premium to secure local production of nuclear fuel. And with the closure of the conversion plant and the MLIS programme, the AEC is no longer involved in international nuclear fuel markets or possibilities.

The original nuclear research mandate is now also being questioned. Research work related to Safari and its associated facilities is minimal. Commercial activities are unable to cover the costs of the reactor. Some have presented political arguments in favour of retaining the Safari because of its role in the IAE A AFRA programme, but a decision has to be taken as to whether the state wishes to continue to subsidise this operation.

Withdrawal from nuclear fuel production and closure of the Safari would reduce the AEC’s core nuclear activities to essentially D&D and radio-active waste management, i.e. cleaning up the consequences of years of wasteful expenditure.

There is another major issue: did the historical investment in the AEC result in the development of core technological competencies and capabilities which are now a precious national asset and which should be nurtured as a basis for industrialisation and added economic value? This Review has concluded that there are a number of technologies which might eventually be profitably commercialised (particularly in the fluorine chemicals area). However, it is not logical or desirable to fund technology development in these areas in a non-transparent manner from the Department of Minerals and Energy, and the Department of Trade and Industry might initially be a more appropriate parent organisation. The potential of these technologies must be tested in the market place and the commercialisation/industrialisation process must be placed under appropriate management, in a different organisation/company with different financing mechanisms. Any interim need for public funding must be weighed on an equal footing with other national requests for technology development support within the National System of Innovation and Government’s Industrial Policy.

  1. Governance, mandate and structure

The above analysis suggests a clear direction for thinking about the future mandate and structure of the AEC. Firstly, residual nuclear fuel related functions (such as D&D, and radioactive waste management) should be separated from technology development functions. Indeed, there is little sense for the two to remain ultimately in the same organisation. The former function continues to exist, not because of any future economic potential, but only because of national obligations to deal with existing hazardous nuclear material. The technology development function has a completely different ethos. It requires a different management orientation and practice.

  1. The Core AEC
  1. AEC Technology
  1. Core competencies
  1. Resource allocation

In 1997 the AEC earned R287m in external sales and received a government grant of R356m from the DME. The latter was allocated as follows (only the larger categories are listed): R62m for nuclear fuel and waste services, R29m for decommissioning and decontamination, R35m to support Pelindaba site services, R17m for public and government affairs, and R59m for technology development, of which R25m went to the Safari Reactor and R30m to the MLIS programme. A further R62m went to commercialisation of technology, mostly in fluorine chemistry related projects. A further R80 million was for financing costs and redemption of historical loans. It is difficult to understand why an Energy Ministry should be supporting many of these operations while the AEC does not contribute at all to energy production in South Africa and when the total budget of the DME for the rest of the energy sector is a fraction of the above.

  1. Commercialisation

The largest opportunities are in fluorination chemistry and the major projects are in PTFE, Organic Fluorides (NP0 and Triflic Acid) and in SF6 and NF3. Opportunities also exist for the beneficiation of Zircon. PTFE could generate the largest return, followed by Zirconia, SF6, and NP0. PTFE carries the highest risk and its projected NPV over 10 years is still negative. Short-term returns are most likely with NF3 and Triflic Acid.

Some opportunities exist for radiation-related businesses, but the most important of these rely on the use of the Safari Reactor whose overall operation is uneconomic. If Safari closes, then these business opportunities fall away.

Smaller opportunities exist in the mechanical systems area, and a strategic decision needs to be made as to whether this area can provide sufficient focus and income growth in the future.

Despite a sustained effort since 1990, the AEC’s track record in commercialisation has not been impressive. Few PTP businesses are making a profit: indeed some will have to be closed down. Some end-users criticise the AEC for their distance from the market – and the Tobotek model of commercialisation appears, in practice, to be driven by "technology push" rather than "market pull".

  1. Management

The Review Team wish to express their concern that during their visit to the AEC in September 1997, AEC management were adamant that the conversion plant could and would be viable, and that the MLIS programme held great promise – thus justifying substantial further investments. Less than three months later, a radically different position had been taken. Either the Team was not taken into Management’s confidence (effectively we were misled) or AEC management is worryingly out of touch with reality.

The above experience encapsulates a management approach which all too often has been clandestine and defensive, rather than inspiring and visionary; and overly optimistic rather than realistically informed.

While AEC management has been relatively successful in developing strategic planning and management tools and has managed to close down some uneconomic operations, lay off surplus staff, reduce state subsidies and grow external income, the Review Team is of the opinion that strategic management and leadership has been deficient in the following respects:\

The restructuring suggestions made above will have an impact on management:

  1. Equity and Redress

While some progress has been made since 1990 in increasing the number of black and female staff at the AEC, and a number of important human resource systems are in place, the organisation faces serious challenges with regard to equity and redress. Procedures need to be put in place which will-

  1. Contribution to the National System of Innovation

In relation to the vast sums of money spent over the years on the AEC, the South African public, and by implication any National System of Innovation, has benefited but little. Because of the directives of an earlier government and the consequent nature of the developments at the AEC, there is a real possibility that the AEC will be found to have inadequate relevance to the future needs of the country, and that the grandiose and extensive array of buildings on the Pelindaba and Valindaba sites will stand as monuments to ill-conceived historical ambitions.

The most optimistic scenario for the future AEC as a worthy contributor to the National System of Innovation would be if the fluorine-based chemistry prospects were to survive an incisive and professionally conducted market research exercise, were to be proven in pilot-scale operations, and were to be developed within a new company, AEC Technology and privatised in the new future.

Whether these success stories will be realised, and hence whether the AEC will in future contribute to the National System of Innovation, is at this time an open question.

  1. The way forward

The implications of these recommendations are far-reaching. In essence, we have concluded that the original mandate of the AEC is no longer relevant and that the attempts to transform the AEC have led it to undertake activities so different in purpose and character from the original mandate that it is difficult to manage these in a way which can transparently achieve the goals and requirements of the new government in a transparent manner. The AEC’s nuclear production activities have ceased and the government-related commitments that remain (primarily D&D and radio-active waste management) are very different kinds of operations (and require different management skills and experience) to the growing and challenging activity of technology development, commercialisation and industrialisation. Our proposal to group the latter activities in a new company which will be privatised over time, coupled with the closure of the Safari unit and transfer of the NPT and Safeguards monitoring, leaves the AEC a shadow of its former self. The impact of these recommendations is enormous – in terms of government budgets, utilisation of resources (not least the Pelindaba and Valindaba sites) and deployment of human resources. Careful consideration will have to be given to the restructuring process.

This review on behalf of DACST has relevance to other AEC review processes and should feed into the DME White Paper on Energy Policy, the redrafting of the Nuclear Energy and Nuclear Safety Acts, the NFA restructuring process and the review of the AEC Board.

ADDENDUM

The Review Team wish to point out that a number of references in the latest AEC 2000 Plus Plan (dated 26 November 1997) to the views of the DACST Review Team are premature and inconsistent with the findings and recommendations of our final report.

 

Back to AEC Review page

line