• Former president Jacob Zuma axed Nhlanhla Nene for not cooperating with the Gupta family.
• Nene was seen as an obstacle to the country’s plans to procure 9.6 GW of nuclear.
• Nene also resisted pressures from Zuma and former SAA board chairperson Dudu Myeni to approve transactions for the ailing airline.

Former finance minister Nhlanhla Nene’s resistance to a nuclear deal and other transactions for ailing airline South African Airways (SAA) cost him his job, the latest instalment of the State Capture Commission’s report shows.

Part four of the report, released on Friday, deals with the attempted capture of National Treasury.

Nene was appointed finance minister by former president Jacob Zuma in May 2014. He was axed in December 2015 over his refusal to cooperate with the Gupta family and other attempts by Zuma and former SAA board chairperson Dudu Myeni to get Treasury to “approve wrongdoing”, the report read.

In his testimony, Nene indicated his refusal to budge on unaffordable transactions for SAA linked to a contract with Airbus and the establishment of a new route between Johannesburg and Khartoum got him in Myeni’s bad books.

Myeni and Zuma were becoming frustrated with him, the commission heard. Nene believes his tough stance on SAA contributed to Zuma’s decision to fire him.

But ultimately, the trigger for his dismissal was the position he took on the proposed nuclear deal, the report shows.

The 9.6 GW nuclear procurement programme would have constituted the “largest public investment programme” in the country’s history and would have been one of the largest public sector investments undertaken internationally, Nene told the commission. The investment would have consequences for Eskom and the country’s debt and the fiscus the commission heard.

Nene was particularly concerned about the consequences of recovering the costs of the build programme through tariffs. The public had been resistant to the payment of e-tolls, which meant the cost recovery on the construction of the roads was being covered by general tax revenue. He did not want the same to happen with the nuclear programme. The funding model for the nuclear programme would be critical to determine its affordability.

Nene indicated that feasibility studies from the Department of Energy indicated that costs would be “astronomical”.

In Nene’s testimony, he shares how he refused to sign off on a letter drafted by then-energy minister Tina Joemat-Pettersson for Russian authorities. The letter was not an agreement on nuclear procurement but would have bound the South African government to a financial commitment. Nene said he would not sign off without seeing and approving a funding model for nuclear and without due processes being followed for such a “big project”.

Zuma ‘very unhappy’

He told the commission that because he did not sign the letter, he was seen as the “person standing in the way of the nuclear deal”. He said that Zuma was “very unhappy” with his refusal to sign the letter. His Cabinet colleagues – the former minister of state security David Mahlobo and former international relations minister Maite Nkoana-Mashabane – treated him with hostility.

Nene said that former deputy finance minister Mcebisi Jonas confirmed to him that Zuma was dissatisfied with him over the stance he took on the nuclear procurement process. Nearly two months before Nene’s axing, Jonas was offered a bribe from Rajesh Gupta to take on the position of finance minister and to work with the family in advancing their interests. Jonas refused the bribe.

READ | Rajesh Gupta must be charged for offering bribe that Mcebisi Jonas refused – state capture report

Nene subsequently appointed a joint task team with Treasury officials and representatives of the Department of energy to prepare a technical report on the financial implications, a funding model and risk mitigation strategies related to the procurement of the proposed 9.6 GW nuclear build programme. This was to be submitted to Cabinet.

The task team found that “even under optimistic assumptions” about the cost of the programme, government debt would grow “exponentially”. This would be “absolutely fiscally unsustainable,” Nene told the commission.

Treasury proposed that construction be spread over a longer period of time, and that the programme be flexible. The department of energy officials agreed with Treasury’s inputs.

Nene and Treasury officials, as well as other Cabinet ministers involved in the nuclear deal, met on 8 December. Upon arriving for the meeting, Nene recalled that Zuma and the other ministers – Mahlobo, Nkoana-Mashabane, Joemat-Pettersson and then-public enterprises minister Lynne Brown had met earlier without Treasury.

In the meeting that followed, the Department of Energy officials presented the proposed nuclear programme – which excluded the inputs of the Treasury and its concerns about the feasibility of the programme.

According to Nene, the energy department’s assumptions were “extremely optimistic”, resulting in a lower cost for the programme than what was realistic. There were no considerations for the fiscal implications under different economic scenarios.

The Department of Energy’s presentation assumed an exchange rate of R10 to the US dollar, whereas Treasury’s scenarios assumed an exchange rate of between R12 and R14 to the dollar. The actual exchange rate on the day was R14.57/$. Essentially the proposal had understated the cost of nuclear by 40%.

Nene raised concerns that Treasury’s inputs were not included, that the exchange rate assumptions were optimistic and that no funding model was included.

At the Cabinet meeting that followed on 9 December – Cabinet approved the Department of Energy’s proposal for nuclear. Ultimately the department would have to issue requests for proposals on the nuclear build programme. The final funding model would be based on the responses to the RFPs.

Nene said the concerns of Treasury were ignored. “That pressure was immense,” the report read. Nene agreed that the nuclear deal was the trigger for his dismissal- after he refused to support the deal at the Cabinet meeting on that same day.

Shortly after the meeting, Nene said that on his way home, he was called to meet with the president once more. At this meeting, Zuma informed him he would be deployed to the African Regional Centre of the BRICS bank.

Nene then sent a message to Treasury director-general Lungisa Fuzile which read: “‘The axe has fallen.”

The impact of Nene’s dismissal on financial markets and the economy was huge.

The value of financial and property shares fell by R290 billion over two days. South African bonds lost 12% of their capital value and the rand depreciated from R13.40/$ to R15.40/$ overnight.

Treasury calculated that Nene’s axing, dubbed “Nenegate” cost 1.1% of GDP by the end of 2017, and translated into 148 000 jobs lost. The JSE market capitalisation was reduced by R378 billion.