Our Burning Planet

Eskom’s coal addiction, Medupi way, brought to you by the World Bank

By Kevin Bloom 26 February 2019

Medupi power station in Marapong, South Africa. (Photo by Gallo Images / Sowetan / Sandile Ndlovu)

In April 2010, the World Bank voted to loan South Africa $3.75-billion to build Medupi in a deal that overlooked the Chancellor House scam, exposed the Global North’s climate change hypocrisies, and — most important — helped to derail a renewables drive that should have begun in earnest after Eskom’s rolling blackout crisis of 2008. Should we #paybackthemoney?

I. Broken eggs

Coal is a difficult issue,” said Jim Yong Kim, then-president of the World Bank, at a press conference in Pretoria in September 2012. “There was a very strong sense that this clean coal project was the way to go.”

By which the Korean-American banker meant Medupi, a venture well on its way to becoming the world’s fourth largest coal-fired power plant, at a cost that was already barrelling towards R150-billion — a price tag that would make it the most expensive piece of infrastructure of its type on earth.

Kim, who was just nine weeks into his job, had been touring South Africa to do some campaigning at the small businesses funded by the local office of the International Finance Corporation, but mostly he was here to visit the people to whom the bank had just awarded its biggest-ever project loan.

Those people, led by President Jacob Zuma and his finance minister Pravin Gordhan, had some campaigning to do themselves, especially given that $3.75-billion was a sizeable ask of the South African taxpayer. The yarn Kim spun for the press gallery in Pretoria seemed custom-designed to help.

Clean coal? His authority notwithstanding, it must’ve taken a lot of nerve for Kim to say the phrase out loud.

As we knew even then, with Medupi promising to spew 25 million tons of carbon dioxide into the atmosphere every year — a figure that has since been upped to 32 million tons per annum, which, according to the Global Carbon Atlas, beats the emission totals of 143 countries — the concept had zero purchase on reality.

No matter what technologies were brought to bear, the mining and processing of the stuff would still dump noxious dust particles onto the surrounding communities, clogging windpipes and damaging lungs. The acid mine drainage would still pollute aquifers, dams and rivers, bringing more scarcity and thirst to the already denuded Waterberg. And Section 24 of the Constitution, which enshrines the right of every South African to an environment free of ecological degradation, would still be totally and irredeemably breached.

In response to such inconvenient truths, the groundswell of local opposition to the deal had gone quickly global, with a protest in Washington DC joining tens of thousands of activists around the planet, all calling on the World Bank to “reject the dirty loan, and to prevent catastrophic climate change while ensuring decent lives for the poor of South Africa”. Gordhan, meanwhile, had written an op-ed in the Washington Post, about why coal was “the best way to power South Africa’s growth.”

Of course, by late 2012, although cost overruns on Medupi and its sister plant Kusile were sounding alarm bells across the industry, the fix was as good as in — the ANC, through its investment arm Chancellor House, had proven itself less interested in power generation than the trappings of power itself.

While Japanese conglomerate Hitachi had insisted back in April 2010 that its R38.5-billion tender to build the boilers at the plants had been certified “fair” by accountants, this had not altered the fact that Chancellor House owned a 25 percent stake in Hitachi Power Africa, the conglomerate’s local subsidiary. Neither had it altered the fact that the Eskom tender committee was chaired by Valli Moosa, who at the time was on the national executive committee of the ANC.

All of which is to say that Kim had inherited a basket of broken eggs from his predecessor, Robert Zoellick. Kim’s attempt to make an omelette, which explained the clean coal thing, was dictated in the main by the gaucherie of Zoellick, who’d served as President George W. Bush’s deputy secretary of state before taking on the World Bank role in July 2007. Given that South Africa’s finest journalists had been covering the tender irregularities since late 2007, Zoellick was presumably in the know when it came to Chancellor House — if it was just a fluke that Hitachi timed their “fair process” statement to coincide with the granting of the loan, he had kept shtum (there had been no mention of the link between Hitachi and Chancellor House in the original World Bank loan document, either).

What Zoellick hadn’t been able to ignore, however, were the misgivings of the US Congress. As Brooks Spector reported for Daily Maverick on 7 April 2010, three high-ranking congressmen — all heads of committees with crucial oversight on US relations with the World Bank — had opposed the project loan for Medupi. Here’s how the New York Times opened its report the week the World Bank was due to vote:

The Obama administration, caught in an awkward bind between its own ambitions on climate change and Africa’s pressing energy needs, is facing the first test of its new guidelines discouraging coal-fired power projects in developing nations.”

II. The Danish text

Hindsight has taught us this much: like the World Bank, the Obama administration failed. At the Copenhagen Climate Change Conference, which was held just four months before the vote that pushed the Medupi loan through, the G77 bloc of developing nations was lamenting the double-speak of the former leader of the free world.

What is Obama going to tell his daughters?” Lumumba Stanislaus-Kaw Di-Aping, the South Sudanese national who led negotiations on behalf of the bloc, asked the African delegates.

That their [Kenyan] relatives’ lives are not worth anything? It is unfortunate that after 500 years-plus of interaction with the West, we are still considered disposables.”

The date was 8 December 2009, and it was a couple of hours after the leak of a document called the “Danish text” — a proposal secretly drawn up by the US, UK and Denmark to keep the average global temperature rise to 2°C above pre-industrial levels; a sub rosa agreement that not only ignored two years of delicate north-south negotiations, but would condemn much of sub-Saharan Africa to a rise of almost 4°C. The Danish text, it turned out, included a clause that proposed to placate poor country signatories with a check of $10 billion a year for what was labelled “early action” and “mitigation readiness”.

I would rather die with my dignity than sign a deal that will channel my people into a furnace,” Di Aping had responded from the African breakaway room, before noting that the industrialised nations were wilfully disregarding their own historical emissions — and thus looking to prolong their carbon-heavy consumption patterns at the expense of Africa’s poor. His heartfelt emotion and familiar references to the hard facts of climate science had succeeded in galvanising his audience. The delegates flooded out into the hall, chanting, “Two degrees is suicide!” and “One Africa, one degree!”

Almost a decade later the planet has sailed past that 1°C threshold, with 1.5°C of warming, at current emission rates, looking likely by 2040. A severe drought in the interior of southern Africa, lasting from 2015 to 2017 — and brought on by the combined effects of El Niño and global warming — has already rendered 29 million Africans food insecure. But the truly terrifying statistic, the statistic that literally brought Di Aping to tears, is the runaway rate at which Africa is heating up.

At 4°C of warming down here, which is 2°C in the Global North, the effects will be devastating: a rise in sea levels of as much as a metre; a collapse of agricultural systems; unprecedented rates of under-nutrition and famine; a rapid increase in rural-urban migration; a heightened spread of infectious diseases; an explosion in civil conflict; plus “other impacts which are little understood”.

Most of the recent reports, including the big one out of South Africa’s Department of Environmental Affairs, predict that the 4°C threshold will be reached “before the end of the century”. Given the apocalyptic scenarios, such conservatism is understandable — because, at a rate of 0.2°C warming per decade, which is the official figure at current emissions out of the Intergovernmental Panel on Climate Change, 4°C is on the cards for southern Africa by around 2065 (a date reached by doubling the global average of 1.9°C, which we’re on target for by 2060).

So what’s to be done? If the Danish text and the Medupi debacle prove anything, it’s that this question needs to be shoved down the gullets of international institutions such as the United Nations’ Conference of the Parties and the World Bank. To be fair, Jim Yong Kim did announce at the One Planet Summit in December 2017 that, come 2020, the World Bank would no longer be financing “upstream” oil and gas extraction.

Upstream is an industry term that refers to the exploration of oil and natural gas fields,” the bank clarified in a statement to coincide with the event. The same statement promised that the bank would be placing a “shadow price on carbon” in high-emitting sectors. The undertaking, which amounted to an average of $1-billion a year that would no longer be available to the fossil fuel industry, was welcomed as a triumph by activists. But it was nowhere near the full story.

The pledge includes an exception for the bank’s project lending to low-income International Development Association (IDA) countries,” noted the Brettonwoods Project, an organisation whose sole function is to expose the hype in World Bank and IMF policy statements, “which allows the bank to fund upstream gas projects if they are judged to have an energy access component and be part of a low-carbon transition strategy. This raises questions about how stringently this exception will be interpreted when it comes into force in 2020. Moreover, upstream lending is only about one-third of the bank’s fossil fuel-project lending portfolio.”

And so, while the world’s top climate scientists are yelling themselves hoarse that we need to cut emissions in half by 2030 — or condemn ourselves to hell-scapes like the one described above — business continues to boom for the oil giants. As per a report in The Economist, ExxonMobil has just announced that it’s “on track for ambitious growth” in the decisive decade ahead: by 2025, the planet’s largest publicly traded oil company expects production to be 25% up on 2017.

Another distressing reality, aside from the news that Total is about to go head-to-head with ExxonMobil by extracting at least a billion barrels of gas from the sea floor off the Garden Route coast, is that the World Bank has left its imprint on the South African body politic. Inherent in the fact that the Medupi deal counts among the bank’s greatest failures is the attendant fact that its policies have stuck to the ANC like epoxy.

A standout example is the inclination to lie about clean coal.

III. Magical thinking

Given the need to increase energy supply in a globally carbon-constrained environment,” said energy minister Jeff Radebe, on 6 February 2019, to an audience of white men in suits at the Cape Town mining indaba, “South Africa is investing in the development of clean coal technologies.”

The minister then rattled off a list, starting with “carbon capture and storage”, a negative emissions strategy that the elite scientists at Nature magazine had recently dismissed as “magical thinking,” and ending with the non-existent “ultra-supercritical” technique.

Five days later, the lights went out.

Radebe’s words to the gathered investors were a good indication as to why.

South Africa’s abundant coal resources, he promised, were underpinned by “availability, accessibility, reliability and affordability”. As Daily Maverick unwittingly pointed out the morning after the shutdown, this was a fabrication on all four fronts.

Since apartheid days and the supposedly unimpeachable reign of Ian McRae, who had overseen Eskom from 1985 to 1994 and had been praised by the labour unions for piloting the utility through the storms of transformation, the coal-supply contracts had been integral to the patronage sinecures doled out by the government. By the time Radebe was shilling for the investment dollar earlier in February, the quality coal close to the power plants had been all but used up. Also, much of it had been getting wet. Also, if the minister was going to talk about “affordability”, the cost to future generations couldn’t be deleted from his ledger.

Over in the United States, there was a high-ranking name that seemed to get how the World Bank was implicated in the deceit. In November 2017, at a hearing entitled “Administration Priorities for the International Financial Institutions” held by the US House Committee on Financial Services, David Malpass, undersecretary for international affairs in the treasury department — the very same man, incredibly, who happens to be President Donald Trump’s pick for next chief of the bank — had said the following about the global lending bodies:

They’re often corrupt in their lending practices, and they don’t get the benefit to the actual people in the countries. They get the benefit to the people who fly in on a first-class airplane ticket to give advice to the government officials in the country. That flow of money is large, but not so much the actual benefit to normal people within poor countries, and that’s what I’d like to see change.” 

“Do you have an example of that?” his interlocutor on the committee, Congresswoman Maxine Waters, had asked.

“Well,” Malpass had responded, “for example, we have countries such as South Africa that are deteriorating rapidly as their government is unable to provide efficiency and effectiveness… South Africa is heavily indebted and not making progress and is not being well served by its relationships with international financial institutions.”

And so the real tragedy of the World Bank loan was that, by pretending not to notice Chancellor House, it piled hypocrisy upon hypocrisy, conferred legitimacy upon a power generation policy that was fundamentally corrupt, and — most important — helped to derail a renewables drive that should have begun in earnest after the rolling blackout crisis of 2008 (as the South African government indicated at the time, there was “no plan B” to the coal-fired project loan).

To add to the heartbreak, our largest and most powerful labour union might have given such a drive its full and unstinting support.

IV. Wild Hysteria

As far back as August 2011,” explained Karl Cloete, deputy general secretary of the National Union of Metalworkers of South Africa, “Numsa called for a socially owned renewable sector.”

Cloete’s aim in the statement, released in March 2018, was to tell the country why Numsa had just approached the High Court in a late-night interdict to prevent the energy minister from signing contracts with 27 Independent Power Producers (IPPs). The statement is worth reading in full, if only to remind some of us why the “wild hysteria” we were expressing then is the same hysteria we’re expressing now, but the core of the argument can be summed up in the following two paragraphs:

In 2012 Numsa’s highest decision-making body, the National Congress, adopted a resolution on a Socially Owned Renewable Energy Sector in South Africa. Our position was that the country’s energy needs should be met by a mix of different forms of collective ownership including energy parastatals, cooperatives, municipal-owned entities and other forms of community energy enterprises.

We stated that in organisational terms this should involve some level of decentralised ownership and operation integrated into a coherent, national centre. We made it clear that the national grid must be publicly-owned and must remain the backbone of energy provision. We also made it clear that the mandate of Renewable Energy projects must be to achieve service provision, meet universal needs, decommodify energy and provide an equitable dividend to communities and workers directly involved in production and consumption of energy. We stressed that socially-owned RE enterprises should be non-profit entities.”

Question is: was this a sop? Had it always been a sop? Was Numsa’s intention, as the most fearsome labour union on the block, only to flex its Marxist-Leninist muscles?

We’ll never know, because there’s no arguing with the fact, as Cloete put it, that the ANC was likely to view the introduction of those IPPs as a new site of “capital accumulation”.

What we do know, of course, is that Numsa has been fighting the unbundling of Eskom for many moons now. In February 2010, the union joined five dozen organisations from a cross-section that included civic, environmental, church, academic and labour groups to oppose the World Bank loan.

The union’s main gripe, in a statement to then-public enterprises minister Barbara Hogan, was that privatisation — a synonym for “unbundling,” which the bank was at one point demanding as a condition of the loan — had “never worked” in the energy sector.

Which is another salient point. As Sean Sweeney, a New York-based academic and visiting researcher at South Africa’s Alternative Information and Development Centre wrote in mid-February in Business Day, “developed countries that privatised electricity in the 1980s and 1990s are now facing severe problems — among them under-investment and neglect of infrastructure, rising prices, poor customer service, and rising energy poverty”

Privatised electricity systems, Sweeney convincingly argues, tend to price renewables out of the market, because in fully liberalised environments it’s almost impossible for them to compete with fossil fuels. For the same reason — the stranglehold of oil, coal and gas over the free-market — government subsidies for renewable IPPs in the form of power purchase agreements have tended to prove too expensive. Hence the push for “deprivatisation” in Latin America, “renationalisation” in Australia and the UK, and “remunicipalisation” in Germany, where “more than 100 cities have taken their transmission and distribution systems back from private companies”.

In the US, the same realities form the basis of Alexandria Ocasio-Cortez’s Green New Deal, with federal job guarantees in the renewables sector part of the package — not insignificantly, the 29-year-old congresswoman has the backing of Bernie Sanders, who has just announced his candidacy for the 2020 presidential race.

Meanwhile, in South Africa, we continue to pretend that climate change doesn’t exist, that somehow “development” is more important than the rate at which we’re heating up, that if we burn all the coal and drill all the oil we’ll get in under the wire while other nations (rich nations) sort the environment out.

But that’s unlikely to happen, simply because the environment doesn’t care — rich or poor, capitalist or socialist, we’re all on the same clock. DM

Gallery

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