World Bank decision is crucial for South Africa's economic future

The World Bank’s decision, due on Thursday this week, whether to give Eskom a $3.75-billion loan - the bulk of which will be used to complete its 4 800MW Medupi coal-fired power station in Limpopo, with the balance to be invested in wind and concentrated solar power projects - could have a telling influence on the country’s economic development in the immediate years to come. If activist environmental groups have their way, disputed global long-term environmental benefits will get preference over domestic short- to medium-term economic necessity.

The background facts are that the present-day South African economy is two-thirds larger than it was a decade and a half ago on the back of substantially increased electricity needs, to which supply has not kept up. To achieve the growth rates going forward, which are required to ensure social stability, sustained job creation and poverty alleviation, increased generating capacity is needed urgently.

With the development of alternative renewable electricity still some years away from affordability and sustainability, coal seems to be South Africa’s only hope to keep the economy going during the bridging period until alternatives come on stream in any meaningful way. Fact is that for now, coal remains South Africa’s most abundant and affordable energy source.

The Medupi plant is a first of its kind which will be using the most efficient and lowest emission coal-fired technology available.

Minister of Finance Pravin Gordhan, in a recent article, wrote: “If there were any other way to meet our power needs as quickly or as affordably as our present circumstances demand, or on the required scale, we would prefer technologies that leave little or no carbon footprint. But we do not have that luxury if we are to meet our obligations to our people and to our broader region. South Africa generates more than 60% of electricity produced in sub-Saharan Africa.”

Activists still say “no”

To the environmental lobby groups, these arguments are not good enough. Staging a protest in front of the World Bank’s Pretoria offices 10 days ago, environmental watchdog Earthlife said the loan would be unhealthy for people in the vicinity of the proposed Medupi power station. It also would impact negatively on the country’s carbon footprint.

Earthlife organiser Makoma Lekalakala said that for environmental and social reasons, the World Bank must not grant the loan to Eskom.

“If the World Bank grants the loan, that means greenhouse [gas] emissions are going to increase and at the moment, South Africa is the highest greenhouse emitter in Africa. In that way, we will be doubling our emissions,” said Lekalakala.

Coal is not the future of generating energy in South Africa, which has abundant renewable power resources. Demonstrators also sarcastically awarded Eskom the Fossil Fool Award for even having considered the loan.

The narrow focus of activist groups, however, does not always achieve the most desired results in the long run. In the Untied States, today the world’s largest economy, still relies for more than 50% of its power needs on coal-generated electricity, with a massive negative impact on the global environment.

This picture, however, could have been dramatically different if it were not for the 'successes' of the activist lobby against nuclear power in the 1970s, which stunted the development to its full potential of that much 'cleaner' electricity option.

The fact that South Africa has plans in place to reduce the expansion of its carbon footprint over time and start reducing it before the middle of this century, again brings to the fore the question of why it should be expected now of developing countries effectively to pick up the tab of the past carbon overindulgence of the developed world.

Political complications

In the interim, Eskom’s loan application further is politically complicated by the involvement of the ANC as a player in the electricity sector.

Opposition leader Helen Zille of the Democratic Alliance (DA) has chosen the fact that the ANC’s investment arm has a 25% stake in Hitachi Power Africa - a main supplier to the Medupi power station - as a front to do political battle with the government.

She has written to the World Bank, asking whether a finding by the public protector, that former Eskom chairperson Vallie Moosa acted improperly in awarding a R38.5-billion Medupi contract to the Hitachi consortium, would influence the loan application.

Referring to calculations that the ANC is set to gain at least R1bn from the contract, she wrote in her weekly newsletter to supporters that “it is no exaggeration to say that if the loan is granted and the deal goes through, no opposition party may ever be in a postion to compete fairly with the ANC again. The ANC will entrench its single-party dominance and, in doing so, gravely weaken our democracy."

She also indicated that the DA would be meeting with the World Bank’s local chief Ruth Kagia and would lobby board members ahead of Thursday’s decision. She wanted Eskom to get the loan, but only on condition: that Chancellor House (the ANC’s investment arm) pulls out of the consortium which is building the power station.