André Pienaar – Founder and CEO at C5 Capital on how the Scorpions came into being, nuclear’s future in SA and the US, and how to solve SA’s energy crisis.
RYK VAN NIEKERK: André Pienaar is on the line. He is the founder and CEO of international venture capital firm C5 [Capital], and based in London.
One of C5’s subsidiaries is X-energy, which is busy developing and building a small nuclear reactor in America which, when complete, will provide electricity to Washington State and will be the first of its kind in the world.
A great many of the scientists working on the project are from South Africa and were involved in the local pebble-bed reactor project before it was stopped in 2010. The chief scientist of X-energy, for example, is Dr Eben Mulder; he formerly held a similar position at the pebble-bed project here.
Civil rights organisation AfriForum recently announced that, in partnership with X-energy, it might bring the technology to South Africa to help solve our electricity crisis.
André, welcome to the programme and thank you very much for your time. Before we chat about the nuclear project, I would like to have some context about your career, because it’s a very interesting one. You grew up in the Cape and you are a noted specialist in cybersecurity. You also played a part in the intelligence community in South Africa. Tell us how life steered you into such interesting industries.
ANDRÉ PIENAAR: I grew up along the Cape coast. I was born in Oudshoorn. My father was a minister in the Dutch Reformed Church and I grew up all along the coastline, all the way from Hartenbos to Gqeberha. Growing up in South Africa, with its rich history and people and big challenges is a wonderful adventure. As Ernest Hemingway said, ‘When you wake up in Africa every morning you know something is going to happen’. I think that also applies to growing up in South Africa. Every day something happens. It was a wonderful adventure and I think South Africans inherently have a pioneering spirit that makes us curious about what lies over the next horizon. That also formed my professional career. I grew up hugely curious about what lay beyond the next horizon. As Wellington said, ‘One must always know what’s on the other side of the mountain’. I think that was a great driving force in my career.
As a result, I started studying law at Port Elizabeth University (now called Nelson Mandela University). At that time, of course, South Africa was busy with its [handover after Apartheid] and legal studies and jurisprudence, the importance of the law and human rights were very important at the time. That spurred my interest in international relations and I went to study overseas.
One of my professors invited me to come and work with him. I worked in the field of counter-terrorism. I was then hired by a big consultancy Kroll, and it gave me many opportunities. [Its founder Jules] Kroll was dynamic and a remarkable leader for the investigative industry… He brought professional standards to the investigative industry, and one of the big matters we took up was to help democracy in South Africa by building capacity to fight organised crime and terrorism.
President [Nelson] Mandela, together with then-President [Thabo] Mbeki, gave me the wonderful opportunity to drive this programme.
RYK VAN NIEKERK: I think many people don’t know that – your being an international venture capitalist and also having been involved in such an important process in South Africa. That’s very interesting.
Exactly what did you, together with President Mandela, do to improve intelligence and crime-fighting skills?
ANDRÉ PIENAAR: That was around 1995. The new democracy was taking shape and one of President Mandela and his then cabinet’s big concerns was that organised crime would threaten the new democracy. Focusing on this was very farsighted on the part of President Mandela and Vice-President Mbeki and the then cabinet. Many syndicates wanted to exploit South Africa’s outstanding financial and logistics infrastructure, to which they were attracted because we are geographically remote from the rest of the world. So, on the one hand you have an outstanding infrastructure and on the other you are far from the rest of the world. That drew all sorts of syndicates to South Africa, creating a very serious threat to the country.
Unfortunately in the ANC there were very few people with experience in combating organised crime and who had had training in fighting it. And there were very few ANC members with training in how to conduct complex investigations in a state of law. So the capacitating programme focused on these two matters – how to combat organised crime and specifically international syndicates in a state of law, and secondly how to conduct complex investigations and deliver testimonies and evidence for combating and fighting organised crime within the rule of law. We had two capacitating programmes – one for people at the middle management level, and a second for people at a senior level. And Jules Kroll’s network and with the good name of the business we … involved the best people in the world in the training programme.
President Mandela made it crystal clear that he wanted the very best people in the world because he felt that the new democracy deserved the very best, and he wanted that immediately. He felt an urgency regarding the training programme.
So we got people from all the Western agencies, Scotland Yard, the FBI, the ** Agency in the US, the then Hong Kong Police, and also some of the intelligence communities of the CIA, MI6 and the like.
The other critical thing was that there was no secrecy about the programme. President Mandela put it on the front page of the Financial Times in London, on the front page of the Sunday Times in South Africa, and he made it quite clear that he was inviting the people from these agencies to South Africa. The Sunday Times had a headline ‘Mandela invites CIA chief to South Africa to help combat organised crime’. I think at the time it earned the confidence of the investor community in the country, that the country was transparent, and thus to work together and build capacity.
RYK VAN NIEKERK: That led to the creation of the Scorpions.
ANDRÉ PIENAAR: At the end of the programme President Mandela and Vice-President Mbeki asked what we would do with the people that we trained, and we had an opportunity to make a presentation and show the film ‘The Untouchables’ with Kevin Costner and Sean Connery. At the end of the presentation President Mandela said ‘That’s what I want. I want an elite unit that will fight organised crime with clean hands, and be feared by our enemies, and one which is loved by our people.’ That was the beginning of the Scorpions.
The Scorpions were a unique organisation, because all the other existing South African agencies, the South African Police, the Department of Justice, Department of Foreign Affairs, the Intelligence ministry, all those departments, six in total, supported the formation of the new agency. It’s quite exceptional to see existing democracies help to build a new democracy. That is really unusual. And of course the Scorpions were set up by a unanimously passed act of parliament. That was the start of one of the best and most effective law and order organisations not only in South Africa, but also in Africa and perhaps in the world, and one that took up some of the world’s biggest and most dangerous cases.
RYK VAN NIEKERK: Before it was dissolved around 2008 – and look what happened thereafter.
ANDRÉ PIENAAR: I would just like to make one further comment about the Scorpions. The Scorpions were a model of what we can get right in South Africa. South Africans can do exceptional things. They can work together in the interest of the country.
South Africans of every community and every generation can work together and help one another and support one another, and the Scorpions are a very good model of what we can get right in South Africa,
…if we put our heads together and deliver the success story that South Africa could produce, to not only inspire ourselves but inspire the rest of the world as well.
Even though President [Jacob] Zuma disbanded the Scorpions because the Scorpions were investigating his involvement in corruption and organised crime, the spirit of the Scorpions is still alive in South Africa. The Scorpions’ spirit lives on in South Africans because no politician can quash that natural instinct of helping one other, supporting one another.
RYK VAN NIEKERK: Just quickly – do you think we could again build a unit as effective as the Scorpions were?
ANDRÉ PIENAAR: Yes, certainly. Civil society and the business community have meanwhile gone forward, and it was in fact cooperation between civil society, very brave journalists and the business community that enabled South Africa to put a stop to and disband the international money-laundering machine that the Guptas tried to build.
The spirit of the Scorpions lives on, and I think we can create models for combating organised crime where South Africans work together, solve problems and build and develop the country. I believe the spirit of the Scorpions lives on.
RYK VAN NIEKERK: Have you received a call from President Cyril Ramaphosa?
ANDRÉ PIENAAR: No, the president hasn’t called me. But I think the leadership of the National Prosecuting Authority is doing good work under difficult circumstances and with very limited resources, and we need to do everything we can to support them. And within the system there are many dedicated, honest and exceptional people who are still doing everything they can to protect the citizens of South Africa. We must embrace those people and help them and, most importantly, do everything we can to protect our judges.
South Africa’s judges play a key role in maintaining our democracy, our legal status, and protecting the Constitution. Our judges are under huge pressure, and they frequently receive death threats. We have to do everything in our power to protect our judges.
C5 and X-energy: aerospace and cyber security
RYK VAN NIEKERK: Let’s talk about C5 and in particular your investment in X-energy, because South Africa of course has its problems not only with crime and corruption, but also tremendous electricity problems.
When did C5 invest in X-energy and why? It’s very much an unknown business operating in a very small industry, and doing tremendously important research. Tell us about the decision to invest in them.
ANDRÉ PIENAAR: I’d just like to put it on record that X-energy is not in direct discussion with AfriForum, because on the C5 side I had a very early exploratory discussion with Kallie Kriel of AfriForum and Solidarity around the important role that advanced nuclear power can play in helping resolve South Africa’s energy problems in the long run. There have been no direct discussions between X-energy and AfriForum.
We have invested in X-energy – in fact as a result of the entrepreneur that founded it together with Dr Eben Mulder and Dr Martin van Staden, a man named Kam Ghaffarian. Ghaffarian is one of the pioneers in the space industry in the US. For many years he supported Nasa with one of Nasa’s most important engineering companies, and subsequently started a company called Axiom Space.
Axiom Space is busy building the next space station as well as operating it, and we are piloting the space station in 2024. So we have an existing space station that has for around 20 years been in orbit around Earth. Some 250 astronauts have stayed and worked on the station, but the station is now reaching the end of its life and it’s important to launch a new station.
Nasa decided to launch and operate the new station in partnership with a private company, Axion Space, which is based in Texas. Dr Ghaffarian started this company together with a senior former Nasa official, Mike Suffredini. Space is very important for cybersecurity. Much of our digital infrastructure is placed around the lowest orbit. Elon Musk’s Starlink is a good example.
So we have taken cybersecurity into space, we have invested in Dr Ghaffarian’s space station company, and now we support the building of the next space station.
ANDRÉ PIENAAR: When we started to invest in space we immediately learnt that there are only two sources of energy in space – solar and nuclear power – and the importance of nuclear power for everything we do in space, the construction of the next space colony being planned for the surface of the moon during this decade, and then Mars. Nuclear energy is also critical for travelling faster in space. It is very important for industrial applications in space.
Dr Ghaffarian introduced us to X-energy, as well as Dr Eben Mulder and Dr Martin van Staden. We are terribly excited about the expertise and knowledge that the South African nuclear energy engineers are applying to combat climate change, not only in the US but internationally. I’m hugely proud of the South African nuclear power engineers from the pebble-bed programme who are working for X-energy, as well as those I frequently come across in the industry as a whole, who are introducing their expertise to the international community.
Then of course there are the … nuclear power experts and engineers and leaders who came from from the pebble-bed programme and are still busy in South Africa keeping the nuclear energy business alive, and attempting to apply the expertise in the context of Africa. We are also looking at how we can support and work with them.
RYK VAN NIEKERK: You are busy with a commercial project to build a type of pebble-bed reactor in America. Tell us about that reactor and its precise purpose.
ANDRÉ PIENAAR: In the US nuclear power provides between 25% and 30% of the country’s energy needs, but more than 50% of the country’s clean energy. So the nuclear energy industry plays a very important role in the context of the US’s industrialisation, and cutting-edge nuclear energy is the next phase of nuclear power innovation.
We have had coal for almost 300 years, we have had oil and gas for about 120 years, and nuclear power is the newest source of energy at our disposal. We are just at the start of developing the amazing ability of nuclear to stay ‘always on’, and to provide electricity for industrial development and for applications such as the space industry.
Nuclear power has completely changed. One often has the perception of the big old nuclear power stations that are such an eyesore and which cost millions – and which can melt down and be a threat, like Chernobyl. That was the first generation of nuclear power stations. We have learnt a great deal since the first civil power station was built in the early fifties, and the new nuclear power stations are small, mobile, totally clean, and switch themselves off automatically if there are problems, just as the computer changed from the old massive mainframe computers to the desktop computer, the laptop, and to the computers now in our cellphones and watches.
Nuclear reactors are becoming small and more mobile. That gives us many more applications for them.
It also makes it possible to reduce the broad scope of regulation we had to apply to the first generation of nuclear reactors, and get the private sector much more involved in financing and advancement of modern nuclear power reactors.
So nuclear power will be the energy source for the 21st century and South Africa’s experts play a leading role in its application, and I think the future is very exciting.
RYK VAN NIEKERK: And this particular power station that you are currently building? How far are you from commercialising it?
ANDRÉ PIENAAR: X-energy has a contract with the US Department of Energy, with a funding allocation of around $1.8 billion in terms of the Department of Energy’s advanced reactor programme. We are planning to switch it on around the end of 2027 and the beginning of 2028. The nuclear reactor will generate about 320 megawatts.
The other small but well-advanced nuclear power programme is that of Bill Gates. His company’s name is TerraPower. We are building in Washington State, and he is building in Wyoming, so we have two small nuclear power reactors on the horizon in the US.
RYK VAN NIEKERK: How does this type of technology and research differ from something like the nuclear power reactor used in submarines and other military equipment? Because those types of reactors have been with us for several decades. Why can we not, for example, use that technology to generate electricity?
ANDRÉ PIENAAR: You are quite correct, Ryk. We have been using small nuclear reactors for decades in submarines and aircraft ships, and we have managed to do it completely safely. The nuclear power in the reactors used by the navy are all third-generation reactors, so huge advancements have been made in the safety of these reactors, and some small nuclear power companies are busy building third-generation reactors. So, for example in the UK, Rolls Royce’s small nuclear power reactor is a third-generation reactor used in the submarine programme.
X-energy is building a fourth-generation reactor that is even more advanced than the small nuclear power reactors historically used in submarines and airships, and the fourth-generation reactor has even more safety functions and is more advanced with even more innovation than the third-generation reactors.
So that’s a next step forward in the development of nuclear power fission. So nuclear power fission is getting smaller and smaller and so much safer. People forget that we used uranium in the first heart pacemakers in the previous century. If one wants to learn more about small nuclear power reactors, the film ‘Iron Man’ is a really good example, because the whole story about Tony Stark is about how his family built a small nuclear power reactor and Tony Stark then used the same technology to build Iron Man a small nuclear power reactor for his heart and his energy source. That’s a vision of the future. Nuclear power is becoming smaller and more mobile and safer, and that’s why it will be such an important source of energy for the 21st century.
In South Africa it’s extremely important that we get long-term solutions. Nuclear power already makes a very important contribution to the country’s energy needs. Koeberg provides about 10% of the country’s requirements. It is the most reliable source of energy for industrial applications in South Africa. It’s a source of energy that is very stable, always ‘on’ and the most cost-effective on the Eskom network.
It is most important that South Africa keeps Koeberg going, because it’s the crown jewel in our nuclear power ecosystem. And it is the Koeberg station’s outstanding record that enables us to move to advanced nuclear power in South Africa.
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We should have a combination of the existing expertise we have retained in this country and bring back to this country the talent that went offshore. And bring back to our country some of those companies that were developed overseas, to go on to the next phase of developing advanced nuclear power.
The government must give the private sector the opportunity to finance and develop it, and so far as possible give the leadership and take the initiative….
Because Eskom is totally broken. It has serious funding problems, it’s in the grip of crime syndicates, it has a corruption problem and it will be very difficult to introduce advanced nuclear power in a context like that. Corruption and crime kill innovation, and sometimes kill off innovators.
The attack on André de Ruyter is a prime example of how good leaders get threatened in an organisation held in the grip of crime syndicates.
RYK VAN NIEKERK: Yes. I think the reason we are now having such heavy load shedding is because Koeberg cannot deliver electricity. It’s undergoing maintenance.
But how do you foresee a future for nuclear power? How do you imagine it will work in practice should some of these smaller reactors come to our country?
ANDRÉ PIENAAR: One of the good fruits of SA’s pebble-bed programme was that South Africa had already made very good progress in adapting its pebble-bed regulations for advanced nuclear power. One of the tragic key points of advanced nuclear power in Western countries is that we are still busy adapting regulations to make provision for advanced nuclear power.
The earlier reaction was to over-regulate after the Chernobyl incident and so building a nuclear power reactor in the US today, in the UK or France, is subject to a whole sea of regulations put together to manage the challenges of the first generation of reactors. Meanwhile we have solved many of the engineering problems, the safety problems, the problems of waste – but the regulations remain the same.
So one of the reasons we will have the X-energy small nuclear power reactor ready only at the end of 2027, for switching on in 2028, is because of this sea of regulations that are actually applicable to the old reactors and not the new ones.
On the other hand, at the time the pebble-bed programme was active in South Africa, really good progress was made in adapting the regulations in the country for the new technology. It should therefor be possible to put in place a small nuclear power reactor much sooner than Western industrialised countries can.
If government creates space for the private sector to finance such a nuclear power reactor, we should be able to switch a small nuclear power reactor on in South Africa within the same time frame as some of the Western countries. And if that is done in partnership with the private sector, one would be able to generate energy for a particular number of industrial factories, mines, making energy available on the grid for ordinary people, ordinary citizens, for everyday use. That’s one possibility.
Another possibility is that a city like Cape Town can fund and build a small nuclear power reactor – should government make it possible – for its own energy requirements and to complement the sources of energy created by renewable energy like solar, wind and hydroelectric power.
RYK VAN NIEKERK: Is there any indication of what a reactor like that would cost, and the cost of generating electricity? At the moment we are in a situation where electricity prices in South Africa basically increase by double-digit figures. In Eskom’s new financial year electricity prices will rise by more than 18%. Is there also a cost benefit attached to nuclear power?
ANDRÉ PIENAAR: The cost benefit is long term; one always has to consider the development of nuclear power in the long term. A small nuclear power reactor like this has a 40-year life, so there is huge price sensitivity over the long term. We see that with Koeberg which is today one of the most effective and affordable sources of energy for the country. So in the long term it can hold tremendous benefits.
And as for the cost of building a small nuclear power reactor, I think it’s important that the first reactor be financed by the private sector. I think there is also international finance available for a project like this, which can help the private sector to build new partnerships in getting the first nuclear power reactor operational in South Africa.
RYK VAN NIEKERK: In South Africa we have a huge energy problem, and any solution gets people very excited, especially if it comes from the private sector. Is there interest, or many people seeking this technology in other countries? Is the excitement global, or is it perhaps exaggerated here in South Africa?
ANDRÉ PIENAAR: No, the excitement is definitely internationally evident. In the US it’s one of the few things about which the democrats and republicans agree – that advanced nuclear power is a key solution to the long-term emission requirements of the US. And every year the Biden administration, like the Trump administration, budgets for advanced nuclear power. The same takes place in the UK. The British government has made it clear that advanced nuclear power is the key to the future and has announced a very broad advanced nuclear power programme. France has done the same. President Macron has also said that France’s future depends on advanced nuclear power. Of course, in Japan, Korea and the Middle East we see similar forward-thinking action.
SA is the pioneer for nuclear power in Africa. We were one of the very first countries worldwide – not only in Africa, but globally – to start a civilian nuclear programme in the fifties during the past century. SA is a pioneer of civilian nuclear power. But today there are many African countries interested in getting advanced nuclear power.
The US and Ghanaian governments announced a partnership at the end of 2022 for starting an advanced nuclear power programme to build a small nuclear power reactor at Accra in Ghana. So we have a great advantage in South Africa. We have a very good ecosystem, one of the best in the world on which to build, but we have to seize the opportunity. It we don’t we will discover that other African countries will become the leaders in advanced nuclear power, and they will be the first to have small nuclear power reactors.
RYK VAN NIEKERK: The agreement that C5 has with AfriForum. AfriForum announced with great fanfare that they are going to establish an energy company in South Africa, and some of these reactors will be used in it. What is the status of that agreement?
ANDRÉ PIENAAR: I have great respect for South African leaders like [AfriForum’s] Kallie Kriel and [Solidarity’s] Flip Buys who are taking the initiative to solve problems and bring people together and take on big and ambitious projects to ensure that we continue developing the country. We had a first exploratory discussion with AfriForum during the Energy Indaba in Cape Town at the end of last year on the role that advanced nuclear power will play within the scope of AfriForum’s plan. I think AfriForum is doing the right thing in establishing and building its own energy company.
South Africans must take the initiative to make a contribution to solving the country’s energy needs.
It’s an ambitious project, and it is the right thing to do for the country. With deregulation government has created the space to make possible more private energy companies.
But at this stage I would describe the situation as an exploratory discussion rather than an agreement. Let’s see what contribution we can make with expertise and capital, and we would like to work together with private energy companies in South Africa.
In this regard we have had the first exploratory discussion with AfriForum on how one can make a contribution, and we are in discussion with many other private sector players.
RYK VAN NIEKERK: Then finally, South Africa currently has electricity problems, real problems and to me it appears that this technology might be available for use in South Africa only in 2028, or some years after. What do you think about short-term solutions here? Something like Karpowership or other types of emergency solutions?
ANDRÉ PIENAAR: The more people put their heads together to find emergency solutions, the better. And the more the private sector takes the initiative to help solve the country’s energy crisis, the better.
Renewable energy sources play an incredibly important role. For most people in their homes solar power is probably their most immediate resource.
One of the exciting things in South Africa and Africa is that someone in a crisis situation can do things faster than they would normally do. I think The Scorpions were a very good example of that. The Scorpions, as a law and order organisation, were put together in record time under Presidents Mandela and Vice-President Mbeki’s leadership. I think South Africa can do the same around the energy crisis.
We can do things faster if we put our heads together and take the initiative with the will and the leadership to do so. I am sure that South Africans have the ability to solve the energy crisis in the country and that new solutions will come out of the crisis, new ideas, new models and innovations that people haven’t previously considered.
By keeping our nuclear power ecosystem going, South Africa has a crown jewel in Koeberg and the regulatory framework is already in place for thousands of jobs for nuclear scientists in the country. Universities have trained nuclear power engineers and all those people will make a very important contribution in future.
On the planet Mars there is a mountain called Japie van Zyl, and Nasa named a mountain on Mars after the astronaut Japie van Zyl who came from Namibia and went to school and university in Stellenbosch.
Every day I think of that mountain on Mars named Japie van Zyl and it reminds me what South Africans can achieve, because Japie van Zyl piloted Nasa’s programme to land all the robots on Mars and played a key role in developing the Mars programme that wants to make the first manned mission to Mars in the next decade.
So South Africans must remember that on Mars there is a mountain called Japie van Zyl. That’s the type of thing that South Africans can do, and I am sure that [our] pioneering spirit, that innovation, that fearlessness will inspire others to solve the country’s energy crisis.
RYK VAN NIEKERK: I hope that happens sooner than later. André, many thanks for your time today and every strength in what you are doing. May that technology quickly come to South Africa so that we can really benefit from the pioneering work that so many South Africans are undertaking.
ANDRÉ PIENAAR: Ryk, thank you very much for this discussion.
RYK VAN NIEKERK: That was André Pienaar, founder and CEO of international venture capital firm C5.