1

Presentation of the 2011/2012 Necsa Annual Report

Parliamentary Portfolio Committee on Energy

12 October 2012

Content

2012 Necsa Annual Report

Overview of Revenue Generators of the Necsa Group

Progress on Necsa Skills Training Programmes

Progress on Necsa Transformation Programme

SAFARI-2 Feasibility Study

Retrenchments at Necsa

Radioactive Waste Management

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2011/ 2012 Necsa Annual Report

Mandate

In terms of Section 13 of the Nuclear Energy Act, No. 46 of 1999, the South

African Nuclear Energy Corporation SOC Limited (Necsa) is mandated to:

Undertake and promote research and development (R&D) in the field of nuclear

energy and radiation sciences and technology and, subject to the Safeguards

Agreement, to make these generally available;

Process source material, special nuclear material and restricted material and to

reprocess and enrich source material and nuclear material; and Co-operate with

any person or institution in matters falling within these functions, subject to the

approval of the Minister.

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A post-Fukushima Daiichi safety re-assessment, conducted on the SAFARI-1 research

reactor and its operational systems in response to a National Nuclear Regulator (NNR)

directive, confirmed the fundamental safety and integrity of the reactor and its

operations.

In line with its core R&D Mandate, Necsa recorded 11 new innovation disclosures and

39 peer reviewed publications.

NTP remains one of the world leaders in the supply of medical isotopes and the only company in the world that produces Molybdenum-99 (99Mo) using a fully Low Enriched Uranium (LEU)-based process.

NTP achieved 2 million disabling injury free hours.

Highlights of the Review Period

Continues…

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Highlights of the Review Period

The Necsa Visitor Centre, which incorporates interactive displays on nuclear

technologies, received nearly 10,000 visitors since February 2011.

A total of 447 apprentices completed semester training programmes offered by

Necsa’s Nuclear Skills Development Centre.

Eleven interns were enrolled at Necsa’s NSD centre to complete studies in technical

trades.

Necsa Group donated a Positron Emission Tomography (PET) Camera to Tygerberg

Hospital and the instrument was be functional by the end of the fourth quarter of 2011.

Financial support was provided to the “Skills for Life” project in Diepsloot to provide

skills development to unemployed people in the Diepsloot informal settlement.

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Continues…

Highlights of the Review Period

US 25$ million was awarded to Necsa by the US DoE to acknowledge the

successful commercial scale production of Mo-99, using low enriched uranium

target plates.

During the 2011 National Science Week, Necsa hosted more than 2,075 learners

and educators from 41 schools, the attendance rate increased by 11% compared

to the previous reporting year.

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2011/12 Performance

Financial KPI’s were not met as a result of:

– A decline in Group sales mainly due to difficult market conditions in the

manufacturing and medical isotope sectors; and

– A reduction in baseline allocation;

Operational KPI’s that were exceeded:

– Research publications outputs and innovations were exceeded;

– Safari 1 reactor has availability of 308.3/303 days

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Continues…

2011/12 Performance

Human Resources KPI’s were typically exceeded:

– A higher number of Black technical professionals were recruited; and

– Investment in staff training exceeded its target.

Marketing KPI’s were typically exceeded:

– The Necsa brand penetration outperformed target mainly due to its direct involvement in addressing nuclear safety questions following the Fukushima incident in March 2011; and

Compliance KPI’s were met:

– Necsa achieved an unqualified audit;

– There were no National Key Point incidents; and

– Public dose impact of annual releases was only 4.8% of the NNR authorised limit.

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Environmental PerformanceWater Consumption

The following table reflects water consumption for the period April 2011 – March 2012

ResourceAmount (m3) Permitted

amount (m3)% of permitted amount

% change year on year

Rand Water 893 302 400 000 223.3 0.8

River Water 111230 840 000 13.2 8

Borehole 0 9 490 0 0

Total 1 004 532 1 249 490 80.4 1.6

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Continues…

Environmental Performance

Electricity Consumption

Progressive energy savings opportunities implemented resulted in significant

cost savings for Necsa. The site electricity consumption for the reporting year was

100.2 GWh (102.9 GWh for the previous year) representing a reduction of 2.7

GWh (2.6%).

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Auditor-General’s Report Unqualified report for 2011/12

Emphasis of matter

– Restatement of Corresponding Figures (as a result of an error in classification

between operating leases and finance leases discovered during the2012 financial

year)

– “The directors’ report indicates that whilst Necsa has been assessed as a going

concern for the financial year ended 31 March 2012, there has been a significant

reduction in government funding. This along with other matters set forth in the

directors report indicate the existence of a material uncertainty that may cast

significant doubt on the entity’s ability to fulfil certain of it’s obligations as they

become due”.

Fruitless and wasteful expenditure

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The Audit and Risk Committee evaluated the quarterly financial reports

– The Committee has a standing agenda item on compliance with

regulation and has adopted terms of reference which spell out the roles

of the committee.

– The Committee is satisfied that internal controls and systems have been

put in place and that these controls have functioned effectively during

the period under review

– During the year, the Committee met with the external auditors, without

management being present. The Committee accept the audit opinion of

the Auditor-General on the annual financial statements. There were no

uncorrected material errors

Report of the Audit and Risk Committee

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Statement of Financial PositionNecsa NECSA GROUP Necsa Corporate

31-Mar-12 20122011

Restated2010

Restated2012

2011 Restated

2010 Restated

Consolidated Statement of Financial Position

R'000 R'000 R'000 R'000 R'000 R'000

Non current assets 1,032,857 899,456 841,558 1,178,497 1,087,043 1,038,932

Current assets 995,300 912,310 662,001 228,331 303,889 208,847

Total Assets 2,028,157 1,811,766 1,503,559 1,406,828 1,390,932 1,247,779

Equity 748,048 709,382 558,624 394,357 469,446 466,737

Non Current Liabilities 838,039 760,095 617,657 759,786 693,420 576,982

Current liabilities 442,070 342,289 327,278 252,685 228,066 204,060

Total Equity and Liabilities 2,028,157 1,811,766 1,503,559 1,406,828 1,390,932 1,247,779

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Statement of Comprehensive IncomeNecsa NECSA GROUP Necsa Corporate

31-Mar-12 2012 2011 Restated 2010 Restated 2012 2011 Restated 2010 Restated

Consolidated Statement of Comprehensive Income

R'000 R'000 R'000 R'000 R'000 R'000

Revenue 1,643,370 1,612,035 1,520,941 854,753 806,732 710,123

Cost of Sales (647,517) (705,740) (642,086) (191,482) (196,646) (202,439)

Gross Profit 995,853 906,295 878,855 663,271 610,086 507,684

Other Income 50,121 77,519 23,566 32,931 26,821 34,748

Opex and Admin expenses (947,283) (827,573) (734,625) (791,072) (709,432) (643,967)

Investment revenue and finance costs 29,250 42,119 45,404 48,440 62,754 75,206

Tax (55,127) (68,920) (46,394) - 1,296 23,983

Profit/(Loss) after tax for the year 72,814 129,440 166,806 (46,430) (8,475) (2,346)

Other comprehensive income / (loss for the year net of taxation

(34,148) 21,367 325,037 (28,659) 11,184 306,429

Total comprehensive income / (loss) 38,666 150,807 491,843 (75,089) 2,709 304,083

Attributable to owners of the parent 31,255 148,822 490,451 (75,089) 2,709 304,083

Attributable to non-controlling interest 7,411 1,985 1,392 - - -

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Statement of Cash Flows

Necsa NECSA GROUP Necsa Corporate

31-Mar-12 20122011

Restated2010

Restated2012

2011 Restated

2010 Restated

Consolidated Statement of Cash Flows

R'000 R'000 R'000 R'000 R'000 R'000

Net cash from operating activities 193,745 275,468 230,560 65,969 68,074 62,675

Net cash from investing activities (199,281) (105,325) (124,081) (96,609) (38,591) (44,747)

Net cash from financing activities (14,715) (25,225) (3,474) (2,834) (22,993) -

Total cash movement for the year (20,251) 144,918 103,005 (33,474) 6,490 17,928

Cash at the beginning of the year 470,622 325,704 222,699 109,896 103,406 85,477

Total cash at the end o the year 450,371 470,622 325,704 76,422 109,896 103,405

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Overview of Revenue Generators of the Necsa

Group

NTP Group

NTP was established as a wholly owned subsidiary of Necsa in 2003 and

operates as a commercial subsidiary of Necsa.

NTP routinely serves customers in 60 countries on six continents with a

range of radiation-based products and services and is one of the world’s

leading producers of radiochemicals, radiopharmaceuticals and other

radiation technology-based products

NTP Group mainly generates the Necsa Group’s external revenue and

achieved sales of R 842 million during the 2011/12 financial year, in the face

of challenging global market conditions.

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Pelchem SOC Ltd (Pelchem)

Pelchem was established as a wholly owned subsidiary of Necsa in April 2007.

It has a proud record of more than 25 years experience in locally produced fluorspar beneficiation,

Pelchem maintains a portfolio of fluorochemical business activities that serve local and international markets while playing a leading role in the SA Fluorochemical Expansion Initiative (FEI)

Pelchem is the only company in the Southern Hemisphere which produces fluorochemicals from fluorspar.

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Continues…

South Africa has the largest global reserves of fluorspar, but currently supplies less than 10% of the global fluorspar demand, while earning less than 0.5% of the $16 billion annual global turnover. Downstream value adding manufacturing is therefore a strategic focus for Pelchem

Pelchem achieved sales of R186.0 million during the 2011/12 financial year

Pelchem SOC Ltd (Pelchem)

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Nuclear Manufacturing Centre (NMC) NMC is a Necsa commercial business unit with vast experience and

specialised capabilities in manufacturing.

NMC can fabricate high quality products and plant components from a wide

range of metals and exotic alloys and is certified to do manufacturing that

complies with the following codes and standards:

– ISO 9001/2008

– ISO 3834

– OHSAS 18001

– ASME VIII U Stamp

– ASME III (only company in Africa with this certification)

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Continues…

ASME III certification is critically important for Necsa’s nuclear

manufacturing capabilities in providing a platform for leveraging localisation

opportunities that will arise from the nuclear power reactor new-build

programme for the fabrication of high level nuclear reactor equipment.

NMC is thus aligned with the Government’s policies and objectives as

outlined in the Industrial Policy Action Plan 2 (IPAP2).

NMC achieved sales of R 44.0 million during the 2011/12 financial year

Nuclear Manufacturing Centre (NMC)

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Analytical and Calibration Services (ACS)

ACS is a Necsa business unit that supports Necsa’s compliance with

Nuclear, safety, health and environmental regulatory and license

requirements, including compliance to process and/or product

specifications.

ACS’s services comply with the strict nuclear industry requirements.

Since most ACS services are not available from any other laboratories in

South Africa, these services are offered commercially to industries in South

Africa & SADC countries as well.

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Continues…

ACS’s client base includes:

– Nuclear industry

– Mining industry

– Energy sector

– Government environmental monitoring programmes

– Environmental consultants and safety managers

ACS achieved sales of R 26.7 m for the 2011/12 financial year.

Analytical and Calibration Services (ACS)

24Continues…

Nuclear Liabilities Management (NLM)

NLM is a Necsa business unit that provides radioactive waste management

services

These professional and cost effective Radioactive Waste Management and

Radiation Protection services are also offered to external clients.

NLM has been authorised by Government (Departments of Energy and

Department of Health) to accept radioactive waste from external generators

and small users for further management and eventual disposal

NLM achieved sales of R 15.0 m for the 2011/12 financial year.

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Challenges Experienced by Revenue Generators

All commercial revenue generators are under financial pressure due to:

– Market pressures

– Global economy

– Economies of scale

– Ageing infrastructure

– Competitive medical isotope market

– Strain on achievement of targets

– Austerity measures are also being implemented, however these are not

medium to long-term solutions as they stifle growth

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Progress on Necsa Skills Training Programmes

Index

Human Resources Development Priorities

Study Assistance Scheme [218]

Mentoring and Coaching [23]

Necsa Graduate Support Programme (NGSP) [45]

Internships [36]

Apprenticeships [398] and Learnerships [10]

Adult Basic Education and Training (ABET) [68]

Decentralised Trade Test Centre (DTTC) [428]

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Internal Key Drivers

The shortage of skilled people in core business.

Creation of indigenous experts.

The existing workforce is aging and thus the knowledge base is shrinking

due to natural attrition.

The need to invest in big projects to attract young professionals and sustain

knowledge transfer from the ageing workforce to young professionals.

The demand for nuclear skills is limited to specific skills sets.

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Human Resource Development Priorities

Increase the ratio’s of technical staff in regard to support staff.

Increase the number of researchers with Masters and PHD degrees.

Increase the number of Previously Disadvantaged Individuals (PDI)

technical staff.

Establish a Necsa Learning Academy:

– Increase capacity of manufacturing skills (NSD, NNMC and DTTC)

– Radiation Safety

– Leadership, management and supervisory training

– Transversal skills

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Study Assistance Scheme

The programme assists Necsa employees to develop their skills by

obtaining further educational qualifications at various institutes of higher

learning throughout South Africa.

From April 2011 to March 2012, 218 employees were assisted through this

program.

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Mentoring and Coaching

The program was established to accelerate the transfer of skills and

experience, especially in core skills areas, to young graduates who are

progressively entering the organization.

In 2011/12, 18 mentors and 23 mentees participated in the program.

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Necsa Graduate Support Program (NGSP)

This program consists of the Graduate-in-Training Scheme (GiTS),

Undergraduates Bursary Scheme (UBS) and Postgraduate Bursary Scheme

(PBS).

It was established to ensure the creation of a sustainable pool of critical

skills.

There were 19 GiTS, 16 undergraduate bursars and 10 postgraduate

bursars in 2011/12, mainly in the fields of engineering, physics and

chemistry.

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Necsa Internships

In continued support of the National Skills Development Strategy Necsa

hosted the training of 36 interns and learners that were funded and

supported by CHIETA (Chemical Industries Education and Training

Authority), DST (Department of Science and Technology) and DoE

(Department of Energy) during 2011/12.

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Apprenticeships and Learnerships

Necsa was awarded 398 Apprenticeships by several Seta’s

Necsa was awarded provider accreditation by SASSETA (Safety & Security

Sector Education and Training Authority) for the provision of 10 learnerships

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Adult Basic Education and Training (ABET)

A total of 92 employees enrolled for the program for the period 01 February

2011 to 30 November 2011 with 68 declared competent in the relevant

ABET levels.

During this period 26 learners were declared competent at NQF Level 1 in

both Communications in English and Mathematical Literacy after writing the

IEB (Independent Examination Board) exams.

Employees enroll voluntarily on the program after permission has been

granted by their line managers.

.

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Nuclear Skills Development Centre (NSD)

The NSD continues to grow and fulfill its mandate in terms of the National

Skills Development Strategy.

The quality of training at NSD is of a high standard and is partnered with

several clients externally such as:

– Department of Public Works (100 students)

– Development Bank of South Africa (150 students)

– Alstom (55 students)

– DB Thermal (35 students)

– Others on job creation projects (88 students)

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Decentralised Trade Test Centre (DTTC)

In its Decentralized Trade Test Centre (DTTC), the NSD

– Conducted 120 pre-tests to determine the readiness of candidates for

the final trade tests,

– 280 candidates received trade test preparation required by the SETAS

and

– 245 candidates wrote the artisan trade tests.

– 207 passed (84.5%)

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Progress on Necsa Transformation

Programme

Staff Composition

Necsa Group Staff Composition in Accordance with Internal Band Structure

Job Category Total Black White FemaleDirectors 21 13 8 6Management 149 50 99 37Engineers 64 22 42 13Scientists 113 52 61 32Other Professionals 153 54 99 37Supervisors 100 37 63 11Operators 229 176 53 17Artisans 109 41 68 6Technicians 137 97 40 53Skilled 450 215 235 235Semi-Skilled 305 243 62 101Unskilled 68 62 6 30Contract Staff 199 101 98 60Grand Total 31 March 2012 2097 1163 934 638Grand Total 31 March 2011 2179 1182 997 653

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Group Employment Equity Performance

Occupation

Categories

Total Employee

Strength2012 Targets 2006-2011

Performance Achieved Targets

2006-2011Targets 2011-2015

2012 2011Black

(M & F)

Female

(B & W)

Black

(M & F)

Female

(B & W)

Black

(M & F)

Female

(B & W)

Black

(M & F)

Female

(B & W)

Management 149 139 50 37 50% 45% 33.6% 24.8% 40.0% 25.0%

Engineers 64 69 22 13 51% 23% 34.4% 20.3% 51.0% 25.0%

Scientists 113 115 52 32 40% 30% 46.0% 28.3% 50.0% 35.0%

Other Professionals 153 147 54 37 35% 30% 35.3% 24.2% 35.0% 30.0%

Supervisors 100 99 37 11 25% 15% 37.0% 11.0% 30.0% 15.0%

Operators 229 242 176 17 65% 10% 76.9% 7.4% Target achieved 10.0%

Artisans 109 108 41 6 40% 3% 37.6% 5.5% 40.0% 3.0%

Technicians 137 130 97 53 60% 40% 70.8% 38.7% Target achieved 45.0%

Skilled 450 430 215 235 25% 50% 47.8% 52.2% 50.0% 50.0%

Semi-skilled 305 328 243 101 65% 40% 79.7% 33.1% Target achieved 40.0%

Unskilled 68 38 62 30 80% 25% 91.2% 44.1% Target achieved 40.0%

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Black Professionals and Technical Staff

The decrease in numbers at NSD is due to the new training period of 32 weeks skills training required by

CHIETA as from 2011/12 instead of the 24 weeks skills training that was acceptable in the previous financial

year. The 218 target represents the capacity that the NSD can accommodate.

Targets for Appointment of Black Professionals and Technical Staff 2011-2014

DescriptionActual

31/03/2010Actual

31/03/2011 2010/11 2011/12 2012/13 2013/14

Percentage of technical staff in total staff 46.9% 45.80% 46.36% 47.16% 48.16% 49.76%

Black technical staff as percentage of all technical staff 40.1% 41.63% 41.59% 42.39% 43.39% 44.99%

Black technical professionals as percentage of all technical professional staff

31.5% 29.38% 29.17% 29.97% 30.97% 32.57%

Amended NSD Centre training output – Number of full-time semester students trained per annum through NSD

663 487 292 218 218 218

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SAFARI-2 Feasibility Study

SAFARI-1 Today Impressive track record of being a world leader in safe operation and extensive utilisation of a

research reactor of this type.

Since 25 June 2009, the SAFARI-1 reactor has been run continuously on a fully low

enriched (LEU) fuel with a U235 content of less than 20%, conforming with International

Safeguards requirements.

Central to Necsa Group’s business activities (playing a pivotal role in global nuclear medicine)

and execution of Necsa’s nuclear R&D mandate from Nuclear Energy Act. Loss of SAFARI-1

will be detrimental to Necsa and South Africa.

Extensive maintenance programme underway to optimise and extend remaining lifetime within

safety and licensing limits.

Will reach end of its operational life between 2022 and 2030, depending on ageing

management programme. Preferable that alternative is in place by beginning of this period.

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Studies on a Possible Replacement Reactor

During 2010-2011 a feasibility study was performed on a Dedicated Isotope

Production Reactor (DIPR) to follow SAFARI-1, but changes in global market

conditions necessitated a broader approach.

In December 2011 the Necsa Board approved expansion of the scope of the

DIPR study to include feasibility of upgrading from a DIPR to a Multi-Purpose

Reactor (MPR) and to assess the possibility of including such a reactor in the

nuclear new build procurement framework.

Most of the work already undertaken for the DIPR project could be used in

expanded MPR (SAFARI-2) feasibility study that is currently underway.

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Main Benefits of SAFARI-2 Maintain and secure global leadership as an international medical isotope producer based

exclusively on the use of low enriched uranium.

Establish a world-class R&D capability in neutron beam applications and reactor physics (based on SAFARI-1 track record).

Provide material testing capability for qualification of future locally produced power reactor fuel.

Contribute to maintaining RSA’s nuclear leadership in Africa.

Provide opportunity for learning before New Build construction.

Provide launch pad for nuclear skills development and training.

Underpin Necsa’s financial requirements with steady foreign currency income.

An investment in SAFARI-2 will be an investment in jobs, skills, knowledge generation and

industrial growth.

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Retrenchments at Necsa

Necsa Group Employment

The Necsa Group’s staff complement decreased by 4.59%, from 2,179 in

2010/11 to 2,097 at the end of the reporting period. The number of contract

staff decreased from 311 in 2010/11 to 199 in 2011/12, in line with Necsa’s

strategy to co-ordinate and consolidate its workforce to deliver on its strategic

mandate.

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A reduction is baseline allocation from the DoE

High Electricity Tariff increases

High Costs of Running Necsa Site

– Doubling of licence fees

– Reduced Dividends from Subsidiaries compared to income

Sales Targets under challenging market conditions

Reasons for Retrenchments

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High Level Actions Select key priority programmes

Identify and remove programmes, projects and support functions which do not

support priority programmes.

Find strategic / investment partners for NTP, Pelchem and Manufacturing.

Consolidate and expand capacity to:

– Develop Business Opportunities

– Drive Sales

– Access other grant funding

Drive Cost Savings

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Continues…

Implementation of austerity measures

Reduction of employee costs a key imperative to ensure viability

and sustainability

Effective and efficient utilization of existing Staff on mandated

projects

High level Actions

51

Freezing of non-critical vacant posts

Reduction of structure from eight to five divisions

Moratorium on external appointments

Voluntary reduction initiatives – Contractors, Consultants, Retirement & VSP

Compulsory retrenchments as a last resort.

High Level Actions

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Radioactive Waste Management

Delegated Activities

Currently Necsa has Ministerial delegation to carry out the responsibilities of

the National Radio-active Waste Management Institute (NRWMI)

Minimisation of waste

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Thank You!!!

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