By Patrick Bond, Durban
April 14, 2010 -- Just how dangerous is the World Bank and its neo-conservative president
Robert Zoellick to South Africa and the global climate? Notwithstanding South Africa's existing US$75 billion foreign debt, on April 8 the bank added a $3.75 billion loan to South Africa's electricty utility Eskom for the primary purpose
of building the world's fourth-largest coal-fired power plant, at
Medupi. It will spew 25 million tons of the climate pollutant carbon
dioxide into the air each year. [For more background go to http://links.org.au/node/1570.]
South Africa's finance minister Pravin Gordhan has repeatedly said that this is theWorld Bank's "first" post-apartheid loan, yet the bank's 1999 and 2008 Country
Assistance Strategy documents show conclusively that Medupi is the 15th
credit since 1994.
Gordhan also claimed the loan will now help South Africa "build a
relationship" with the bank. He forgets the bank co-authored the African National Congress (ANC) government's neoliberal 1996
Growth, Employment and Redistribution (GEAR) program, which led us to
overtake Brazil as the world's most unequal major country, as black people's
incomes fell below 1994 levels and white people's incomes grew by 24 per cent,
according to official statistics.
Gordhan neglects that the World Bank itself regularly brags about its
"knowledge bank" role here. In 1999, for example, after economist John
Roome suggested to then water minister Kader Asmal that the government
impose "a credible threat of cutting service" to people who cannot
afford water, the bank's Country Assistance Strategy reported that its
"market-related pricing" advice was "instrumental in facilitating a
radical revision in South Africa's approach". As a result, the cholera
epidemic the following year -- catalysed by water disconnections -- killed
Similar misery will follow the Eskom loan. Medupi will be built in a
water-scarce area where communities are already confronting extreme
mining pollution. Forty new Limpopo and Mpumalanga coal mines will be
opened to provide inputs to Medupi and its successor, Kusile.
ANC conflict of interest
More worryingly, power-plant construction plans include a pay-off of
$135 million profit for the ANC, whose investment arm owns a quarter of
Hitachi, which received a $5 billion Eskom contract. So blatant is the
conflict of interest that the government's public protector last month
judged Valli Moosa -- then chair of Eskom and an ANC finance committee
member -- to have acted "improperly". Official embarrassment is acute,
especially since the World Bank issued a major report, Quiet Corruption, just
weeks ago. This is a prime case.
The potential sale of the ANC's share in Hitachi within the next six
weeks (announced and then retracted) doesn't really mitigate matters,
given Medupi's huge cost escalations (from $5.5 billion to $18 billion)
and the increased value of Hitachi's shares thanks to the improper,
Five dozen SA civic, environmental, church, academic and labour
organisations began a campaign against the World Bank loan in February.
They are concerned not only that catastrophic climate change will be
hastened, along with privatisation of electricity generation, but worse,
Medupi's main beneficiary will be the world's largest metals and mining
corporations, which already receive the world's cheapest electricity
thanks to multi-decade deals cut in the last years of apartheid. In
early April, a small modification was made to one sweetheart "Special
Pricing Agreement" -- but it was to BHP Billiton's "advantage", the
Melbourne-based company reported.
Medupi's vast costs will mainly be passed on to people who cannot afford
to pay the loan, through a 127 per cent electricity price increase over
four years. Protests against service delivery deficits make South Africa
among the world's most dissent-rich countries and the Congress of South African Trade Unions (COSATU) is threatening
a national strike against Eskom that may well last into the soccer World Cup,
which starts on June 11.
South African civic groups and their 140 international allies now say
they will start financial punishment of the institution, harking back to
the World Bank bonds boycott campaign launched by the late poet-activist Dennis
Brutus exactly a decade ago.
In response to Brutus's call, the city of San Francisco and other
municipalities pledged not to buy World Bank bonds. Scores of major financial
institutions and endowment funds followed suit, including the world's
largest pension fund, TIAA-CREF, whose annual meetings Brutus visited on
With the focus now broadening to include climate, San Francisco
supervisor Ross Mirkarimi reacted angrily to the Eskom financing: "The
loan provides sobering proof that the World Bank's recent talk about its
commitment to climate finance was nothing but a bunch of hot air. We
will renew our commitment to keep our clean money from being tarnished
by investment in the bank's coal-dirtied bonds."
To understand why the bank took this huge risk -- with major shareholders
like the US and European countries abstaining from voting -- requires
insights into its leader, Zoellick. A major player in the "war on
terror", Zoellick served as number two at George W. Bush's State
Department and then in 2007 replaced World Bank president Paul
Wolfowitz, who was fired by the bank board for arranging a plush State
Department job for his girlfriend.
Like Wolfowitz, Zoellick was at the outset a proud member of the
neo-conservative think tank, the Project for a New American Century, and
as early as January 1998 went on record arguing that Iraq should be
illegally overthrown. In the same period, Zoellick also worked for
Fannie Mae, Enron and Alliance Capital, all of which effectively went
From 2001-05, Zoellick was the US trade minister, and his bumbling at
the 2003 Cancun ministerial summit confirmed the World Trade
Organization's subsequent demise. And just prior to becoming World Bank
president, Zoellick was a top executive at Goldman Sachs, widely blamed
for amplifying the 2008-09 global financial crisis.
Zoellick's efforts promoting the World Bank as lead climate financier at the
December 2009 UN Copenhagen climate summit were equally unsuccessful,
and the bank's backing of carbon markets has now now widely been decried
as a lost cause.
Zoellick has broken many things in his career, and having now granted
Eskom the $3.75 billion loan, he can add to his belt some new notches:
the budgets of poor and working South Africans who will suffer the
demise of their electricity budget, local ecology, national democracy
and the climate.
[Patrick Bond directs the University of KwaZulu-Natal Centre for Civil
Society in Durban.]