South Africa: Momentum against climate-destroying World Bank loan grows
By Patrick Bond, Durban
March 16, 2010 -- In an indication that the climate justice movement is broadening, deepening and going local, there is now intense opposition to a climate-destroying energy loan for South Africa. The campaign is led by community activists in black townships allied with environmentalists, trade unionists and international climate activists.
The World Bank is trying to lend nearly US$4 billion to the Johannesburg-based state-owned electricity utility Eskom, the world’s fourth-largest power company and Africa’s largest carbon emitter (with 40% of South Africa's total emissions). The loan is mainly for constructing the world-s fourth most CO2-intensive coal-fired power plant, Medupi, in the ecologically sensitive Waterberg area north of the capital of Pretoria.
The World Bank also aims to finance privatised power generation, notwithstanding the abject failure of public-private partnerships in South African infrastructure, including in electricity and water. More than 200 organisations have signed up in protest.
The loan would fly in the face of the World Bank's attempt to portray itself as a climate-friendly financer, and will generate a vast, unnecessary debt -– both a financial debt to South Africa's poor and also an expanded climate debt owed by South Africa to the rest of Africa, for overusing its fair proportion of the continent's CO2 carrying capacity.
For communities near the coalfields (40 new mines are requested by Eskom to supply its new generators) and coal-fired stations, the externalised costs imposed by Eskom are extremely high, including the complete degradation of water sources, air pollution, a frightening rise in mercury associated with coal and other health burdens.
Poor pay for multinationals' cheap power
The loan is being pursued at a time of intense controversy surrounding Eskom mismanagement. In its last annual reporting period, the company lost R9.7 billion (US$1.3 bn), mainly due to miscalculations associated with hedging aluminium prices and the South African currency. Both the chair and chief executive office lost their jobs late last year amidst unprecedented acrimony.
Meanwhile, Eskom continues its giveaway prices to several large export-oriented metals/mining multinational corporations, headquartered abroad -- offering the world’s cheapest electricity, heavily subsidised by all other -- mainly poor -- users in South Africa. The two main beneficiaries are BHP Billiton of Melbourne, which runs aluminium smelters, and the notorious Anglo American Corporation, which shifted its financial headquarters to London a decade ago.
Thus mining/metals profits flow abroad, exacerbating South Africa's dangerously high international payments deficit.
Activists argue that the scandalous late-apartheid era, multidecade "special pricing agreements" deals with BHP Billiton and Anglo American should be rejected as "odious". In early 2008, repeated national blackouts finally led to cuts in supply to some of these firms, showing that the deals could legitimately be violated. Moreover, the crash of metals and minerals prices dramatically lowered demand.
Demand-side management -– a tried and tested alternative which the World Bank claims to endorse (but hasn't considered in this case) -- would mitigate the need for new power plants. Moreover, South Africa's massive renewable energy potential has not even begun to be tapped. Eskom was given responsibility for rolling out more than a million solar-powered hot-water heaters over three years, and after two years, can claim only 1000.
Price increases for poor
Having lost the vast majority of South Africans' trust, Eskom began raising prices by more than triple the inflation rate in 2008. From 2007 to 2012, the price of a month's normal electricity use in an "average township household" is anticipated to rise 127% in real terms, according to Eskom. These price increases will have an extreme adverse impact, leading to a major increase in disconnections (and illegal reconnections, hence electrocutions) of poor households, that can best be described as "underdevelopment".
Ironically, World Bank staff insist that the proposed Eskom loan will have a "developmental" impact. The civil society coalition vigorously object.
The World Bank is in an untenable position, as it soon releases a new energy policy and also campaigns to take on additional responsibilities for channeling finance related to climate change. The proposed Eskom loan should disqualify the World Bank from any further role in climate-related activities.
Critics insist that if the World Bank intends to raise $180 billion in new capital from member groups prior to the World Bank/International Monetary Fund Spring meetings in late April, it will have to shelve this loan, because the world's citizens will object that this represents business as usual financing at a time energy transformation is increasingly urgent.
Opposition is gaining momentum:
- Communities and environmentalists have begun to protest the Eskom loan, including at the firm’s Durban headquarters on February 16.
- The main manufacturing trade union in South Africa, the National Union of Metalworkers of South Africa, announced its opposition to the loan on February 18. Other trade unions have threatened strikes against the price hikes and Eskom's labour practices.
- The Pan African Climate Justice Alliance, which had the highest African profile at the December 2009 Copenhagen Climate Summit, has endorsed the no-loan demand, on grounds of environmental damage.
- The South African Council of Churches, which played a key role in criticising the World Bank due to its apartheid financing, has also expressed opposition to the loan.
- Eskom is suffering an upsurge of illegal electricity connections in communities, as prices become prohibitive.
In sum, this is a company that can be fairly described as a poor credit risk.
Dozens of organisations across the world have committed to oppose the World Bank's proposed Eskom loan. They are contacting the executive directors of the World Bank from each country –- including Australia’s representative, James Hagan, who was visited by South Africans earlier this week –- to demand a "no coal loan" vote at the April 6 meeting at which the loan will be tabled.
In advance of the World Bank’s recapitalisation efforts, the critics are ready to take even more vigorous action against the bank itself -- including revival of the "World Bank Boycott" which cost the bank support from many major bondholders over the past decade (including the world’s largest pension fund, the city of San Francisco, the Calvert Group and university and church endowment funds).
For the sake of environmental justice, the surrounding communities, the citizenry, the workers, Eskom customers and the continent of Africa (and all other sites affected by climate change), the World Bank will have no choice but to withdraw this loan. Eskom will then have no other choice but to negotiate an appropriate energy mix and financing strategy with constituencies they have so far ignored.
Please send messages opposing the World Bank loan to:
Executive director, Mr. James Hagan, Australian representative to the World Bank
Telephone: USA 202-458-1015
Fax: USA 202-477-2007
Date posted: 18 March 2010
View this article online here: http://sacsis.org.za/site/article/446.1
Those responsible for formulating the policies required to solve our national energy crisis are clearly floundering, all at sea, while the great white sharks of international capital circle for the kill.
Our national energy policies are a mess. We have signally failed to formulate a comprehensive long-term energy policy since democracy in 1994, instead relying on ad hoc responses by both Eskom and politicians.
The incestuous Tweedledum and Tweedledee relationship between Eskom and the state undermines public participation in formulating energy policy. The excessive provision of energy capacity by the technocratic central planners of the Apartheid state enabled the new South Africa to ride on the shirttails of its predecessors. However this capacity was rapidly absorbed, primarily through controversial deals with major energy consuming industries.
The sweetheart deal between Eskom and Billiton to exploit our cheap and dirty power to transform Australian bauxite into aluminium and then export the profits is both an outrageous abuse of a national resource and a cautionary tale. It is a relationship that costs us all dearly. We lose electricity capacity to corporate predators. The public effectively subsidises this cut-rate power effectively sold to Billiton below cost. This is effectively redistribution from the poor to the rich.
Aluminium, with its massive power requirements, has been called solidified electricity. Eskom is instrumental in maintaining Billiton as one of the worlds six biggest aluminium companies. Billiton is also one of 138 Eskom customers, which receive electricity at between nine and 35 cents a Kilowatt hour (kWh) -- at a rate that averages 17 cents per kWh, for almost 40% of Eskom's total output.
This is more than three times less than the 59 cents per kWh paid by most South African consumers, which is set to rise to around R1 per kWh when the full National Electricity Regulator (Nersa) approved increase has been implemented over the next three years. The poor and middle classes, together with smaller businesses are effectively subsidising Billiton and 137 other favoured and already wealthy entities.
Earthlife Africa recently showed how poor consumers who rely on prepaid meters already pay around 72 cents per kW/h; four times more than the average discounted Eskom rate.
Billiton is apparently one of two companies with a special long-term discount power contract with Eskom and gains its profit at our collective expense. Do we, as a nation, owe privately held corporations a profit, especially if this is at cross-purposes to both our individual and national interests? Surely Billiton and other wealthy, privileged entities should simply pay the same as everyone else?
The preferential tariff rate granted by Eskom to these companies is by its very nature anti-competitive, across the board. This unfair discount, which arose through the government wishing to project an atmosphere of business friendliness, severely disadvantages smaller companies.
Any energy reliant start up enterprise is automatically compromised by the massive advantages these Eskom subsidies provide. There is clearly a role for the competition tribunal to play in this sordid saga.
The names and the exact rate that each of these privileged companies pays must be legally interrogated and revealed. Eskom is a public entity. South Africans have a vested interest in the fairness and transparency of how this public utility is run and its discriminatory behaviour is patently unfair.
Public utilities should not be permitted to hide behind the cloak of corporate confidentiality. The fact is that the state, as Eskom's sole shareholder, has failed to adhere to the corporate governance principles that the private sector is required to. Eskom does not fulfil its requirements of stakeholder participation and transparency as set out in the King 3 report (Chapter 8), which states that the critical role of stakeholders - which in this case includes all South Africans - cannot be ignored.
The Eskom board has proven itself incapable of projecting or formulating a meaningful energy policy and has failed in its charter role of serving the people of South Africa. The manner in which Eskom, through its inordinate influence on Nersa, has forced through inflationary energy policies while capping alternative energy supply, can only lead to the conclusion that those at the helm of Eskom have lost the plot and are operating beyond their mandate.
We should recall however that Eskom did approach the government in the late '90s to highlight that it was rapidly approaching operational capacity, and was rebuffed. Instead pseudo-solutions like the Pebble Bed Modular Reactor were promised. The state has utterly failed to pursue, let alone achieve, proclaimed energy targets, particularly in renewable energy.
In 2003 we set a 10,000 gWh renewable energy target, to be achieved by 2013; to date we have installed less than one percent of that goal. Yet Public Enterprises Minister Barbara Hogan blindly insists we will meet this target! What hope have we against such bombastic hubris?
While a renewable energy feed-in tariff was recently cemented after years of dithering by Nersa, it is too little too late. Had we met proclaimed renewable targets we would need to build neither Kusile nor Medupi power stations. Nersa's dithering has been compounded by Eskom’s consistent anti-competitive bias.
Now the government has insisted that renewable energy supply must be capped at unrealistic levels and put out to tender. Surely any agency that can competitively supply power should be permitted to enter the market? This starkly illustrates the contradiction of the state being Eskom’s sole shareholder, and then in turn using the authority of the state to stifle competition.
Our energy policy lacks considered planning. Career politicians like Alec Erwin utterly failed to develop meaningful policies, instead engaging in counter-productive pro-nuclear daydreaming. Yesterday’s sweetheart, Barbara Hogan's shift from Health to the Department of Public Enterprises has repeatedly demonstrated that she too has succumbed to a nuclear-induced dwaal.
Hogan’s recent proclamations that we must embrace the nuclear option are both premature and untested. She ignores that nuclear power will cost nearly twice the amount Eskom wishes to charge us in three years time. The nuclear power plant being built in Finland by Areva, identical to the units it wishes to build here, is twice over budget and schedule and will be lucky to produce power at less than R2 per kWh. The alternative, US sourced systems, are equally problematic.
Last year we rejected the nuclear option as being too expensive. Now Hogan expounds on its viability. What has changed in six months? This indicates staggering incompetence and a lack of consistent policy. Lance Greyling of the Independent Democrats, who is one of the few politicians with a decent grasp of energy policy, has pointed out that it is not Hogan’s place to make such proclamations before any consultative process has occurred.
Furthermore, Hogan insists Eskom no longer is a power monopoly. She makes this absurd claim because companies like Sasol (which also benefit from Eskom’s special rating dispensation) are now permitted to sell minuscule amounts of excess energy onto the grid! Barbara is clearly in wonderland.
Hogan is also panicking about the acute pressure being brought to bear by a broadly representative civil society coalition against a World Bank loan, sought to fund Eskom’s Medupi coal fuelled power station. This loan is in direct contravention to proposed World Bank lending criteria. This loan will also subsidise “tenderpreneurs” associated with the ANC linked Chancellor House, which in turn has accrued interests in the Hitachi Corporation that is contracted to provide generation equipment for the coal power plants.
Hogan’s counter that this World Bank loan provides 7% (R1.95 bn.) for renewables simply illustrates the green-wash behind this entire policy fiasco. Her claim blithely ignores the fact that this is 8% less than the established government policy of the 15% renewable mix required in any new energy generation capacity.
This all glosses over the fact that the government has thrown away at least R15 billion on the hare-brained Pebble Bed Modular Reactor, which actually cost far more in lost opportunities as it diverted power policy attention from alternative supply options. The kickbacks from the coal and nuclear expansion will eclipse the arms scandal by degrees of magnitude, while simultaneously exacerbating our power woes.
We require an urgent national debate about what is required to extricate ourselves from our policy chaos. Our solar water heating policy is unworkable. Our waste to energy policy is rubbish. Our renewable energy policy is ignored. Our proposed spending on supercritical coal fired power stations is excessive. Our proposals to engage in ‘carbon capture and storage’ are not grounded in reality. Eskom and national governments' interference in allowing the open market to establish renewable energy generation plants is unacceptable. The lack of transparency underlying Eskom's price structures is disgraceful.
There no single area of our national energy policy that is not problematic. The cabinet and relevant ministries have shown themselves incapable of solving this problem.
Unless there is an urgent review of this whole sorry saga we are positioning South Africa to financially compromise its good standing, simply because we cannot adequately or competitively power our economy. We are being set up for a failure that opens our doors to the sharks and vultures of the developed world - the World Bank, the International Monetary Fund and the rest of the Washington consensus - which will put us collectively in hock for generations to come, to be paid off with our abundant resources and by the sweat of our brows.
The heat being generated by the hands gleefully rubbing together in Washington is almost palpable, as they look south...
[Ashton is a writer and researcher working in civil society. Some of his work can be viewed at www.ekogaia.org. Read more articles by Glenn Ashton.]Please attribute The South African Civil Society Information Service (www.sacsis.org.za) as the source of this article.
A few weeks ago, while our team was planning
out exciting new campaigns for 2010, we heard something and we couldn't
quite believe our ears: The World Bank has proposed to give a US$3.75
billion (R29 billion) loan to Eskom to build a number of new dirty
coal-fired and nuclear power plants . And at the same time, Eskom
plans to raise electricity rates 25% over the next three years . Big
polluters are getting cut-rate electricity - the world's cheapest -
while the poorest will face the highest rates in the country.
Dozens of South African environmental, community, church, labour, academic and women's organizations have mobilized, but we need your help sending a message to the World Bank that we won't accept a dirty loan.
Click here to say NO to the dirty World Bank loan to Eskom http://action.350.org/p/dia/action/public/?action_KEY=2439
Coal is the dirtiest of all energy sources, from mining to transport to burning, releasing toxics into our waterways and contributing potent greenhouse gases to the atmosphere. Recent reports show that by the time we build our next coal-fired power station, the electricity it produces will be more expensive that if we use renewable energy to produce it. We need to get to work implementing those solutions that will solve the climate crisis, put us on the path to 350, and help poor communities develop in a sustainable way.
To make sure the World Bank hears us, we will take this petition and deliver it directly to the Board of Directors at their offices in Washington D.C. - if we can get a few of them to vote no it's much more likely that the loan request will be rejected. We won't stand for unjust solutions and dirty energy - we're getting to work in our communities, and we expect our leaders to do the same.
Many thanks in advance,
Samantha Bailey, 350.org, South Africa
P.S. - Please share this far and wide. Forward it on to friends, tweet it http://twitter.com/login and share on facebook
1 World Bank to Consider $4 Billion Loan Application From Eskom
2 SAfrica grants Eskom 24.8 pct price rise for 2010/11
For the update “South Africa: Momentum against climate-destroying World Bank loan grows” by Patrick Bond, Durban, please go to http://links.org.au/node/1570
If you prefer to send your own personalized messages opposing the World Bank loan please write to:
Mr. James Hagan
Australian representative to the World Bank
Telephone: USA 202-458-1015
Fax: USA 202-477-2007
By Zachary Shahan
April 10, 2010 -- Ecopolitology -- The World Bank has approved a controversial loan for a 4,800-MW coal-fired power plant in South Africa that will emit more CO2 than 135 of 212 countries.
The World Bank had a big decision to make this week — send South Africa a $3.75 billion loan and support for the fourth largest coal power plant in the world or listen to an international coalition of grassroots, environmental and church activists and deny the request.
In the end, after plenty of discussion and clear but not firm opposition from numerous world leaders, the World Bank decided on April 9 to approve the loan. 20 of the 24 Board directors representing 186 countries voted to approve the loan and the other 4 Board directors abstained from voting in an act of dissent.
The bulk of the loan ($3.05 billion) is going to the Medupi station, a power plant operated by South Africa’s state-owned electric company, Eskom, and will produce roughly 25 million tons of carbon dioxide a year.
Earlier in the week, there were some indications that Britain would heed the advice of environmental groups opposing the World Bank loan and work to block the loan. But rather than block the loan, the U.S., Britain, the Netherlands and Italy showed their “opposition” to the loan, by abstaining from voting on the issue.
As is the case in UN proceedings, abstaining from a vote is common method of dissent on the World Bank board (which works on consensus). However, environmental activists say it was not a courageous or effective decision and the action fell short of their hopes.
“I am not going to give them points for abstaining. This was totally the easy way out,” said Karen Ornstein of Friends of the Earth. “If the US were to follow its own clean coal guidance for multilateral development banks it would have had to vote no on this loan.”
Activists may not have gotten the decision they thought was needed, but perhaps the controversy will help shape future World Bank activity. “We expect that the World Bank will not bring forward similar coal projects from middle-income countries in the future without a plan to ensure there is no net increase in carbon emissions,” said the US Treasury Department.
‘Not an easy decision’
Countries expressing opposition to the loan emphasized growing international need to address climate change, but others from the World Bank said these remarks didn’t represent the complexity of the issue or the true atmosphere of the internal decision-making process.
“It was not an easy decision,” a World Bank official said. “Everybody recognised the concerns about climate change, but this was a balancing act.”
The World Bank claims that it is not in the habit of funding fossil fuel projects these days. In its last fiscal year, it reports that it financed over $8.2 billion in energy projects and less than three percent of that was for coal-related investments. On the other hand, 40% went towards energy efficiency and renewable energy projects and programs. Nonetheless, if its energy budget for this year is of the same size, nearly 40% of it is going towards this single coal-fired power plant.
Additionally, independent analysis of World Bank funding for energy projects showed 2008 was a dreadful year in that respect, with a 102% increase in fossil fuel spending and an 11% increase in renewable energy funding. So, the World Bank’s commitment to addressing climate change seems to still be up in the air.
In their defense, roughly $700 million of the loan will fund what the World Bank says are “some of the biggest solar and wind power plants in the developing world,” including a 100-MW wind power project in Sere and a 100-MW concentrated solar power project with storage in Upington. Another $485 million is earmarked for low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions.
Will South Africans see the economic benefits?
Although the argument is that South Africa needs this coal power plant to grow and prosper, the question is: Will short-term economic benefit doom long-term environmental and economic sustainability? In the long-term, South Africa is expected to be especially sensitive to the negative effects of climate change.
Amazingly, if it were a country, the 4,800-MW Medupi Station would rank 77th out of 212 countries in CO2 emissions, making South Africa’s pledge to help address climate change practically meaningless.
Climate change is not the only concern here, but whether or not the power plant will really help poor South Africans is also an issue. Opponents in South Africa and Britain have argued that only a fraction of the 4,800MW of electricity generated at Medupi will go to ordinary South Africans, but rather, to large multi-national mining and metals corporations that dominate the region’s industrial sector.
“This loan will put South Africa deep into debt, damage the environment and drive the climate impacts already affecting poor South Africans,” said Bobby Peek, director of Groundwork Friends of the Earth, arguing that the power station will amplify South Africa’s climate and poverty crises.
“It is not electricity for the millions of people who live in deep rural areas who still have no electricity. It’s for big industry which uses more than 80% of South African electricity,” said Peek.
Michael Stulman of the group, Africa Action, considers the project a misguided attempt to help South Africa and would result in little benefit for poor South Africans.
“This is one of those stereotypical development disaster stories,” he said.