Eskom loan blackens the World Bank’s name

16 April 2010 | Guest comment

By Bobby Peek, groundWork, Friends of the Earth, South Africa

The World Bank, Business Unity South Africa and the African National Congress (ANC) got their way with a major loan for Eskom, the national power authority, despite broad based opposition from local people, the poor, community organisations, the churches, unions, and environmental and social justice NGOs locally and globally. Why was business in bed with the ANC on this? It is because the likes of mining company BHP Billiton receive more then five per cent of South Africa’s electricity at below cost through apartheid-era special pricing agreements.

Not only did progressive civil society organisations oppose this loan, but opposition political parties as well. The governments of Norway, Italy, the United Kingdom, the Netherlands and the United States also did not vote in favour. But still the World Bank prevailed.

no regard for the state of the world's climate and environment

By making this decision, the Bank has shown, quite clearly, that it has no regard for the state of the world’s climate and environment, the future of South Africa, and economic principles of transparency and corruption.

While the project was pitched as addressing poverty reduction, the reality is that it was seen through the eyes of the market and increasing ‘economic’ production. However 20 per cent of South Africa’s population is still not on the grid which is not addressed by the loan. Already more than 10 million people have been cut off from electricity because of lack of affordability These people and others will suffer the same fate when prices escalate as a result of the loan.

The World Bank granting this loan was not unexpected, but challenging the Bank and the government was a critical first step to developing a base of mobilisation in South Africa and globally to start questioning the hypocrisy and public spin of the South African government and big business in relation to energy. It was also vital to start supporting the local resistance in the Waterberg area, which Eskom and Sasol (a South African energy multinational) – who is planning to build coal-to-liquid facilities – plan to make South Africa’s new ‘sacrifice zone’. Alarmingly, but not unexpectedly, the Department of Environmental Affairs in South Africa has acknowledged that this is going to be a ‘non-attainment’ area, in other words, heavily polluted.

Local people are already concerned about illegal sand mining for Medupi’s coal plant development which is altering water courses. Multinational companies are opening mines adjacent to farms. Acid mine drainage, which contaminates groundwater by exposing it to mined minerals, is the bleak future in this water scarce part of South Africa. There is an environmental justice crisis of national proportion already in South Africa. What does the future hold for South Africa, when water for these developments is going to be taken from South Africa’s three major sources, the Vaal, Limpopo and Orange rivers? The impact of these developments will be felt by people thousands of kilometres from the Waterberg. Air pollution standards on sulphur dioxide and particulate matter have already been exceeded in the neighbourhoods adjacent to Eskom’s present coal-fired power station, Matimba, in the Lephelale area. Mercury pollution from coal burning is given scant regard, as there is no mercury abatement equipment in existing Eskom plants. This is even before Medupi had begun to be built.

Internationally, no matter how the World Bank spins its lending figures trying to make it seem a climate-friendly bank, the reality is that it is not. This loan will increase South Africa’s carbon intensity and not service the poor. Eskom is now on the path to tripling its CO2 emissions in the next eight years.

Pravin Gordhan, the minister of finance, said that the government would not accept ‘conditionalities’, yet most of the loan must be repaid in US dollars. This will mean opening our markets and increasing exports to get foreign reserves. The only way to increase exports is by making them cheap, and one of the ways of making them cheap is making the rand weak. I thought South Africa said no to conditionalities and that structural adjustment programmes were a thing of the past.

The World Bank could not save Africa from poverty in the 70s and 80s and it will most certainly not save the world from climate change in the second decade of the 21st century. We have a local and global struggle on our hands, of which the base has been built.