One of the biggest challenges facing South African industry when it comes to participating in the country's planned programme to build new nuclear power plants (NPPs) concerns financial guarantees and performance bonds. So warned Nuclear Industries Association of South Africa president Dr Rob Adam at the Atomex Africa forum in Johannesburg on Monday.

Companies have to provide financial guarantees and bonds when they bid for new build contracts. This necessity cascades down the entire supply chain. "Guarantees and bonds are important," he stressed. "Guarantees typically amount to 30% of the project value, performance bonds typically 10%."

With a project worth R150-billion, assuming 40% localisation, the guarantees and bonds would come to R24-billion. The market capitalisation of the entire South African construction industry is less then R50-billion.

"This is a financial issue that needs to be looked at," he affirmed. Local industry will need to talk with the government about reducing the guarantee and bond requirements.

"South African industry has already spent several hundred million rands since 2007 preparing for the new nuclear build," he highlighted. "Its been a bit like preparing for the Olympics without knowing the date of the Olympics."

Local industry has a proven capacity to engage both in high-technology and large-scale projects, he noted. The country's high-tech capabilities are, for example, in evidence in the defence industry (with products like the Denel Rooivalk attack helicopter) and major science projects such as the Square Kilometre Array radio telescope, which South Africans are helping to design. Large-scale projects include the construction of stadiums for the 2010 FIFA World Cup and the current Medupi and Kusile coal-fired power station programmes.

In the nuclear field in particular, South African companies were involved in the construction of the Koeberg NPP near Cape Town in the 1980s. The country also successfully developed a uranium enrichment programme and manufactured nuclear fuel. Today, the South African Nuclear Energy Corporation (Necsa) is a world-leading producer of radio isotopes.

"But we don't hold nuclear certification on a wide basis yet," stated Adam. "Necsa is the only company with ASME III certification." (The ASME Section III code covers quality control in pressure vessels for NPPs.) "The issue is not capacity, it's the quality systems we have to put into place."

Local industry does not have the capacity to build the really heavy components of an NPP, such as the turbines. And it would not be worthwhile to do so unless the country awarded "really massive" NPP contracts in the future. But localisation could range between 30% and 60%.

Atomex Africa was organized by Russian nuclear group Rosatom.