The World Bank Funds Dirty Energy in South Africa

Monday, 19 April 2010 08:38 By Joshua Frank, t r u t h o u t | Report | name.

The World Bank Funds Dirty Energy in South Africa
(Image: Lance Page / t r u t h o u t; Adapted: DanieVDM, Gunnar Bangsmoen)

The World Bank's rap sheet seems to be ever expanding. On April 8, the organization voted to approve a whopping $3.75 billion dollar loan to build an enormous coal-fired power plant in South Africa. A portion of those funds, fewer than 20 percent, will be allocated to solar and wind construction.

Eskom, the recipient of the loan, is the world's fourth-largest power company and the continent of Africa's single largest contributor to global warming, producing 40 percent of South Africa's carbon dioxide emissions. Climate activists across the globe amassed to oppose the loan, stating that the World Bank's alleged reputation as a "climate-friendly" financier would be irreparably tarnished.

In late February, during the run-up to the vote, a coalition of organizations launched a campaign against the World Bank’s proposed loan to Eskom. Climate Justice Now, groundWork and the Federation for a Sustainable Environment were behind the initiative.

"For communities near the coalfields and coal-fired stations, the externalized 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," noted Professor Patrick Bond, director of the Centre for Civil Society at the University of KwaZulu-Natal in South Africa.

Once completed, Eskom's plant will be one of the largest and most environmentally devastating anywhere in the world. The facility is to be constructed in the ecologically sensitive area known as Waterberg, near the country's capital of Pretoria. In all, the plant will require up to 40 new coal mines near the plant.

Despite the World Bank's approval of the loan, which the institution believes will provide much needed power to many impoverished South Africans, the United States, UK, Netherlands and Italy all abstained from the vote.

The US Treasury Department issued a press release about the World Bank's loan to Eskom prior to the decision, stating they would not vote because of "concerns about the climate impact of the project and its incompatibility with the World Bank's commitment to be a leader in climate change mitigation and adaptation."

Nonetheless, the US would not take a hard stand on the issue by voting against the loan instead of abstaining. The tactic drew criticism from environmentalists that believe the World Bank's loan will prove extremely detrimental in the long run.

In effect, the World Bank is putting private interests above the public good, opponents said. Financing private power generation, despite the fact that the Bank has such a poor record of public-private partnerships across the globe, drew opposition from over 200 organizations, a sign that the climate change movement has grown in recent years.

The loan was also granted during a period of fiscal uncertainty for Eskom, which lost $1.3 billion after miscalculating hedge bets on the country's aluminum prices. As such, the company's mismanagement has drawn immense controversy in the country among investors as well as ratepayers.

"Demand-side management - a tried and tested alternative which the World Bank claims to endorse - would mitigate the need for new power plants," said Bond, a vocal opponent of the loan. "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."

The notion that the power plant will help the more impoverished South Africans is also hotly contested by critics. In 2008, the company was responsible for raising utility rates three times the country's inflation rate. During the period of 2007-2010, Eskom estimates that monthly electricity rates for a normal household could rise as much as 127 percent. These huge spikes, opponents believe, will likely lead to poor South Africans being left without electrical power.

"I think it's pretty clear the World Bank is telling the people of South Africa that they're not taking their commitments to alleviating poverty and climate change seriously," said Mark Kresowik of the Sierra Club's "Beyond Coal" campaign. 

Joshua Frank

Joshua Frank is the author of Left Out! How Liberals Helped Reelect George W. Bush (Common Courage Press, 2005), and along with Jeffrey St. Clair, the editor of Red State Rebels: Tales of Grassroots Resistance in the Heartland (AK Press, 2008). Frank is also the co-author with St. Clair of the forthcoming Green Scare: The New War on Environmentalism (Haymarket Books, 2010)

Last modified on Wednesday, 21 April 2010 21:44