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No ‘Plan B' should World Bank fail to approve Eskom loan

6th April 2010

By: Terence Creamer
Creamer Media Editor


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The South African government has indicated that there is no "Plan B" to close funding gaps that could arise at Eskom's 4 800-MW Medupi power station project should the utility fail to secure a contested $3,75-billion World Bank loan, which will be voted upon this week.

In fact, the World Bank is due to vote on the loan approval on April 8, with a so-called "Global Day of Protest" in opposition to the proposed loan planned for Washington, DC, on Wednesday.


Speaking at a media briefing following a consultation session with Business Unity South Africa (Busa), Energy Minister Dipuo Peters and Department of Energy DG Nelisiwe Magubane also said that they had been offered no further visibility on how the bank's 24 voting members would vote.

It was initially indicated that the US might either oppose the loan, or abstain from the vote, while key countries such as the UK, France and Germany were said to be supportive of the loan.


However, the Times of London ran a report on Tuesday, in which it suggested that the British government was considering blocking the loan after coming under intense pressure from green groups in the run-up to the UK election, which would be held on May 6.

The newspaper quoted the Department for International Development as saying that it had not yet decided how to vote. "The UK is in ongoing dialogue with the World Bank and the government of South Africa regarding the loan. We will take a final position on the project when it comes to the World Bank board on April 8."

Engineering News Online could not immediately confirm whether this accurately reflected the position of the UK government with the High Commission in Pretoria, which indicated that they would seek clarity on the matter.

Environmental nongovernmental organisations (NGOs) were opposing the loan, owing to the fact that the bulk of the proceeds would be used to part finance Eskom's R120-billion Medupi coal-fired power station, which is being built in Limpopo province.

Both Busa and government, however, suggest that the loan is necessary to "keep the lights on" in what is currently a power-stressed environment.

Busa deputy CEO Dr Raymond Parsons reiterated the organisation's support for the loan. He also argued that the security of electricity supply should also be seen as part a "pro-poor" developmental mechanism, owing to the fact that economic growth and development, as well as job creation, hinged on a stable supply of power.

However, while Magubane stressed that there was no "Plan B", Peters indicated that an InterMinisterial Committee on electricity, which is chaired by Public Enterprises Minister Barbara Hogan, was still considering the bigger Eskom funding plan and would revise its planning in this regard should the loan not be forthcoming.

She indicated that the National Treasury was playing a central role in the finalisation of the funding plan.

Finance Minister Pravin Gordhan had emerged as a champion of the loan, having recently written an op-ed in the Washington Post in which he outlined why the loan should be granted and how Medupi's carbon emissions, which are estimated at 25-million tons yearly, had already been factored in to South Africa's climate commitments.

Gordhan's most recent remarks signalled that, while government was still optimistic of garnering support for the loan package, South Africa would "cope" without it.

Gordhan again stressed that South Africa, and other developing countries, should be allowed to rely on coal as a primary-energy source, while setting in place mechanisms to cap future carbon dioxide emissions.

He noted, too, that the world's biggest economy, the US, continued to rely on coal for 50% of its power needs.

"The key issue on the World Bank loan, is that this is an opportunity for the World Bank to build a relationship with South Africa.

"We must be absolutely clear that South Africa will not accept any conditionalities of any kind," the Finance Minister said.

He added that it was regrettable that some NGOs, particularly in developed countries, together with a "very small group of NGOs in South Africa" were placing "environmental concerns, which could not be immediately addressed, above the economic needs of South Africa".




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