World Bank loan to South Africa?
By Laura | April 6, 2010
There is continuing controversy over the proposed loan of $3.75 billion from the World Bank to Eskom, the South African’s government state owned energy supplier. $3.05 billion of the loan is toward the cost of significantly increasing capacity of coal fired power stations with $485 million toward energy efficiency and $260 million for renewable wind and solar power.
The decision on the loan is expected around the 8 April.
A considerable number of South African and international civil society groups including the National Union of Metalworkers of South Africa are opposing the loan, some on environmental grounds; some object to South Africa seeking a loan from the World Bank. There is dispute about whether the loan will lead to higher energy prices and privatisation or ensure energy supply and lower prices.
South Africa has an energy problem. Demand for energy has increased by 60% since the end of apartheid but there has been no major investment in increasing energy supply whatever the means. There have been power cuts, and price rises. South Africa is also a major energy provider to Botswana, Lesotho, Namibia, Swaziland and Zimbabwe.
The argument is how South Africa best meet its energy requirements now and over the next 10 to 15 years. The government of South Africa says that in the short term it has no option but to increase energy supply through using coal. If it does not it claims this will mean much lower economic growth and hit at the ability to reduce poverty and create jobs. It says World Bank support is important but only a small part of the total cost and the World Bank will have no say in South Africa’s economic policy and priorities. Groups opposing the loan think that South Africa should move from its reliance on coal now (it has the 4th largest reserves in the world) and are concerned that the involvement of the World Bank could mean higher electricity prices and privatisation with job losses and worse pay and conditions.
The South Africa government’s plan is to reduce its greenhouse gas emissions by 34% by 2020 and 42% by 2024 dependent on finance, technology and capacity. In the short term if the scheme to increase energy from coal power goes ahead South Africa will increase its greenhouse gas emissions and the development of wind and solar power although significant-(the solar power scheme proposed in the World Bank application is the largest of any developing nation) will not come anywhere matching the increased emissions from the coal fired power stations.
To some the debate and differences highlights the tension between environmental and developmental priorities.
The World Bank appointed a panel of “independent experts” of 3 people including the Vice Chair of Inter Governmental Panel on Climate Change to consider and comment on the loan application. It said the debate largely focussed two options; agree or reject the loan. They argue for what they term a third option. Agree the loan but as part of transitional strategy of supporting South Africa and southern Africa away from energy from coal toward energy from renewable sources.
Topics: News | No Comments »