SA Government: if World Bank denies Eskom loan – poof, there goes the economy
- Branko Brkic
- 12 Mar 2010 02:08 (South Africa)
An internationalised campaign against the World Bank lending Eskom $3.75 billion has already cost South Africa the United States’ vote. And though two cabinet ministers on Friday stressed that the loan will absolutely definitely undoubtedly go through, they are clearly worried that the environmental lobby isn’t yet done.
If the World Bank in April decides to not grant Eskom a $3.75 billion loan to build new power stations, the consequences will be dire, the government says. How dire? “If we do not have that power in our system, then we can say goodbye to our economy and to our country,” said public enterprise minister Barbara Hogan.
That was only one of the apocalyptic pronouncements by Hogan and energy minister Dipuo Peters. They raised the spectre of the lights going out in an endless wave of blackouts. They stressed that the impact would be felt right across the southern part of Africa. They predicted that consumers would see increases in electricity prices that would make the proposed tripling over three years seem like small change.
Not that there is any reason to worry. None whatsoever. The minister said that they had the support of the World Bank itself, and of France, and the United Kingdom. Although the United States was apparently cowed by sustained domestic lobbying, it has agreed to abstain from the vote rather than vote against the loan. It is a done deal. It’s gonna be great. Everything will be okay.
Then why put two cabinet ministers into a room with a bunch of journalists? Because clearly the environmental lobby, and particularly the foreign organisations that were roped in by local non-governmental organisations, have enough influence to deeply worry the government.
Peters and Hogan went to great lengths to stress that South Africa is deeply committed to reducing carbon emissions, to rolling out renewable energy projects, to reduce energy intensity, to use carbon sequestration techniques, and so on and so forth. After this batch of power stations the next generation will almost certainly be nuclear, they said. And the stations being built right now are hyper-efficient, they said.
All of which means that everybody, and especially South Africans, should get their priorities straight and support the World Bank loan application. To our great disappointment the words “traitors” and “treasonous” never came up, but the implication was certainly there.
It is clear that environmental concerns are the chief impediment to the loan being granted, at least in the mind of the South African government. Peters said the issue of a conflict of interest (with the ANC being an indirect beneficiary of the loan) never came up in the application process and won’t influence the outcome. Hogan says the strings attached to the loan are ones the government can absolutely live with, such as making the new coal-fired plants ready for carbon capture and sequestration, even though that can’t be implemented because no sites have yet been identified where carbon can be interred.
The loan really is critically important; it will provide capital at a rate that no group of private institutions would match. The National Energy Regulator (Nersa) assumed that the money would be available at that low rate when it calculated that Eskom can survive with tariff increases of around 25% year-on-year for the next three years – and said it may conceivably have to grant further increases if the loan is denied.
Which doesn’t leave voting countries with much room to manoeuvre. Abstaining, as the USA is expected to do, sends a message of environmental concern. Voting against the loan, on the other hand, would be seen as a cavalier disregard of the needs of a developing country and an effective brake on African growth. Not a label many governments would be comfortable with.
Update: The American embassy in Pretoria released a statement on Friday afternoon which strongly implies that Hogan was speaking out of turn, but doesn't say so. And neither confirms nor denies that America will abstain from the vote – but does confirm that there is serious lobbying going on. Here is the text in full and unedited.
The U.S. Treasury is leading the U.S. government's review of the Eskom proposal currently before the World Bank and the development of a position that is consistent with Administration policy and with the facts surrounding the project.
The U.S. government has heard from several civil society groups, in both South Africa and Washington, who have raised concerns about this project as well as from Eskom and South African government representatives who have argued its merits.
The Eskom loan proposal will go before the World Bank's Board of Executive Directors - where the U.S. is one of 24 members.
By Phillip de Wet
Photo: The Daily Maverick