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The IFP challenges the ANC to do the right thing and subject the World Bank
loan to the review and approval of the parliamentary Portfolio Committee on
Public Enterprises. At least if so approved someone will bear the political
responsibility for this outrageous corruption.

Parliament and the South African people have been duped again. In his fiscal
policy framework presentation to Parliament, Finance Minister Pravin Gordhan
never disclosed that the State would bear the ultimate financial liability
for the $3.75 billion loan to Eskom to build the new power plants. On the
contrary, he and Minister of Public Enterprises Barbara Hogan went to great
lengths to justify the outrageous tariff increases as necessary to
strengthen Eskom's future cash flow to enable it to raise a construction
loan on its own balance sheet and on a commercial basis. Instead the South
African Government went to the lender of last resort. Decades of South
African experience prove that a government guarantee soon becomes a license
to overspend and waste money, well knowing the sugar-daddy State will pay
the bill with no questions asked. Few government guarantees have ever gone
unpaid. Yet Parliament has no say in the matter.

IFP MP Mario GR Oriani-Ambrosini met with the World Bank in Washington DC on
Monday April 12. It was agreed that the contents of such meeting would
remain off the record. There is no reason to resort to the World Bank which
merely borrows the money internationally and on-loan to South Africa. The
Treasury could have and should have issued its own bonds for this loan. It
did not, to avoid parliamentary scrutiny and a public outcry. In so doing, a
huge loan which could have been Rand denominated has become Dollar
denominated at a time in which the government is calling for the devaluation
of the Rand. This is reckless management of taxpayers' money! Plus, the
World Bank, which had not lent to South Africa since 1962, now has its teeth
in our economy and our people, which is a situation which around the world
and over the past half a century has not proven to be beneficial.

For a year IFP MP Mario GR Oriani-Ambrosini has fought to place a discussion
on Eskom's funding model on the agenda of the Portfolio Committee of Public
Enterprise. Parliament must now be seized with the matter and do the right
thing which is -

1. Cancel the World Bank loan or not draw on it, using it merely as a credit
line facility should the need arise, but subject to parliamentary approval.
According to its protocols, the World Bank should not have considered this
loan because it will directly benefit a political party. The World Bank
broke its own rules to get into South Africa at last. It resorted to the
disingenuous excuse of providing for the financial disentangling of the ANC
by ostensibly funding only a portion of the deal from which the ANC will not
benefit. This is like stating that poisoned water poured at the source of
the river can be separated from what is used for irrigation down valley!

2. Call for an international tender. Foreign electricity generators have
long expressed their interest in financing and operating the new powers
plants. This would be a unique opportunity to bring into the country huge
long-term fixed capital investments. In this economic environment, no other
sector of society offers even near the opportunity for such type of foreign
investment. Plus, this will create healthy and necessary competition in
electricity generation, as is the case anywhere else in the developed world,
which will increase efficiency, reduce tariffs and increase the overall
level of skills and exportable technology in the field.

3. The ANC must cause Chancellor House to liquidate its holdings in Hitachi
Africa at acquisition cost, so that its sale price may not discount the
financial gains of the Eskom contract which have already been discounted in
the present value of the shares. Failing this, for the sake of the survival
of democracy this Parliament must cancel this tender, by law if necessary.
Having investigated the matter, the Public Protector found that there was a
clear conflict of interest, and that the then Eskom Chairman Valli Moosa
acted improperly. If there is an undeclared conflict of interest the
tendering process is usually null and void. If the ANC receives an estimated
billion Rand worth of net profits from this deal, it will be able to fund
its election campaigns for years to come. No other political party will ever
be able to compete with it and democracy may very well be declared dead.

4. This loan or any loan should be granted to a new competing company, an
ESKOM II, so that the new power stations will be owned and operated by a new
company competing with Eskom, so as to transform Eskom's monopoly in
electricity generation into at least a duopoly, as is the case throughout
most of the developed world. This will abate a great deal of the corruption
in the supply chain which Parliament has been investigating, especially in
respect of coal procurement contracts. Because of competition, a duopoly
will also create an incentive to restrain the spiraling electricity tariff
increases, while redressing the present practice of pricing differentiations
which penalizes households over businesses.

5. The special pricing arrangements for aluminum smelters must be revisited
either through negotiation or legislation. Aluminum smelters produce few
jobs but are responsible for a great deal of the energy demand. Yet, because
of sweetheart deals consummated during apartheid, they receive electricity
at ridiculously low rates.