ESKOM’S PROPOSED $3.75 BILLION WORLD BANK LOAN

Should the World Bank grant a $3.75 billion (R29 bn) loan to Eskom? No. We South African and African organisations which for years have advocated social and environmental justice here and abroad, oppose Eskom’s proposed Bank loan – and indeed its new construction programme more generally - for several reasons.

      1.  based primarily on large coal-fired stations (followed by nuclear) and as many as 40 new coal mines, which will add to South Africa’s already extremely high carbon intensity, as well as the air pollution and degradation of scarce water resources;

·         designed to continue supplying the world’s cheapest electricity mainly to large energy-intensive industries, including steel and aluminium, whose corporations are headquartered abroad (hence contributing to the profits outflow on South Africa’s balance of payments);

·         to be mainly paid for by unaffordable tariff increases imposed on ordinary South Africans, while the beneficiaries – the largest industrial consumers - are exempt from price rises because of multi-decade special purchase agreements offered to them during apartheid and in the 1990’s; and as a result,

·         unable to alleviate ‘energy poverty’, but instead entrenches suffering by imposing ‘cost recovery’ on people who cannot afford it, with Eskom already admitting a ‘typical township household’ will face a 2009-2012 monthly price rise from R360 ($48) to R1000 ($130).

2) Inappropriate financing. We therefore oppose all funding, foreign and local, for Eskom’s coal/nuclear expansion plans. Were Eskom to engage in a reasonable energy policy based on demand management, with supply shifting to renewable, and the expansion of Free Basic Electricity beyond the current tokenism as well as connections to urban shackdwellers and the rural poor, that would be worthy of support. As for green energy investments that are not import-intensive, local financing would be more appropriate than a World Bank loan - and is readily available, including through state debt and halting subidised electricity contracts to multinationals. The financial danger of a World Bank loan is that the SA currency will crash (as it has five times since 1996), hence making repayment much more expensive (since the loans are not repaid in rand but in dollars), hence adding to the extreme cost burden poor South Africans will face.