Earthlife says Eskom WB loan a ‘disaster’

2010-03-25 13:13

THE government has been using cheap tricks to ensure that

electricity parastatal Eskom gets a R28?billion loan from the World Bank,

environmental group Earthlife Africa Jhb said today.

Part of the loan would be used for the completion of the coal-fired

Medupi power station, it added in a statement.

Earthlife Africa Jhb said that Public Enterprises Minister Barbara

Hogan had warned that without power in the system, SA could say goodbye to the

economy and to the country.

“However, taking the loan could be more disastrous for the country

both in terms of the economy as well as greenhouse gas emissions.

“It is a fact that the conditions that are imposed with a World

Bank loan have often resulted in policy restrictions and worsening of poverty,”

Earthlife Africa Jhb said.

It added that in many developing countries, debt servicing had

diverted scarce resources needed to improve health, education and nutritional

services to the poor.

The financial danger of a World Bank loan was that the SA currency

would crash – as it had five times since 1996 – hence making repayment much more

expensive since the loans were not repaid in rands but in dollars,” the

organisation said.

In addition, the World Bank loan would sink South Africa into much

deeper ’Climate Debt’ to Africa, Earthlife Africa Jhb said.

According to the organisation, the World Bank’s loans within the

energy sector did not support developing countries’ transitions towards a

low-carbon development path.

“In fact, it seems as if the World Bank fossil fuel lending is on

the rise with very little being done to incentivise for a reduction in financing

for fossil fuels.”

Earthlife Africa Jhb said that instead of expanding its coal

facilities, Eskom should engage in serious demand side management, beginning by

phasing out electricity to smelters that had little linkage with the South

African economy and that were capital rather than jobs-intensive.

“Concrete plans should be made for a just transition, so as to

provide alternative, well-paid green jobs.

“At the same time, the special purchase agreements should be

disclosed to the public and opened for renegotiation.”

Earthlife Africa Jhb added that the freed up energy should be

redistributed to provide for a much larger lifeline supply of universal free

basic electricity with a rising block tariff to encourage conservation.

This would improve spinning margins, which would buy time for a

switch into renewable energy technologies.

“Finally, there should be a greater focus on renewable energy

technologies rather than coal-fired power stations, as the optimal development

path for Southern economies, creating more jobs, building local manufacturing

capacity, and avoiding the environmental mistakes of Northern countries,” the

organisation added.

It said the World Bank’s loan would commit SA to fossil fuel based

energy for the next 20 to 40 years.

“As such, when developing countries eventually take on greenhouse

gas emissions reduction targets, the World Bank’s current approach to energy

will make meeting these targets more difficult and costly for these


According to Earthlife Africa Jhb, it was time that the World Bank

was held accountable for funding environmentally harmful coal power and the

unrealistic loan conditions placed upon developing countries.

The World Bank was expected to make a decision on the loan to South

Africa next month.


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