South Africa: Campaign Against New Coal Mines Gathers Momentum

The World Bank is trying to lend nearly US$4 billion to the Johannesburg-based parastatal (quasi-government-run) Eskom. The power company is the world’s fourth largest and Africa’s largest carbon emitter (responsible for 40% of South Africa’s total emissions).

The loan is mainly for building the world’s fourth most CO2-intensive coal-fired power plant, Medupi, in the ecologically sensitive Waterberg area north of the capital of Pretoria.

The Bank also aims to finance privatised power generation, notwithstanding the abject failure of public-private partnerships in South African infrastructure, including for electricity and water.

More than 200 organisations have signed up in protest.

The loan would fly in the face of the Bank’s attempt to portray itself as a climate-friendly financer, and will generate a vast, unnecessary debt.

This will be a financial debt to South Africa’s poor and an expanded climate debt owed by South Africa to the rest of Africa for overusing its fair proportion of the continent’s CO2 carrying capacity.

Forty new mines are requested by Eskom to supply its new generators. For communities near the coal fields and coal-fired stations, the externalised costs imposed by Eskom are extremely high, including the complete degradation of water sources, air pollution, a frightening rise in mercury levels associated with coal use, and other health burdens.

The loan is being pursued at a time of intense controversy surrounding Eskom mismanagement. In its last annual reporting period, the company lost R9.7 billion ($1.3 billion) mainly due to miscalculations associated with hedging aluminium prices and the SA currency.

Both the chairperson and chief executive office lost their jobs late last year amid unprecedented acrimony.

Eskom continues its giveaway prices – the world’s cheapest electricity, heavily subsidised by all other users – to several large export-oriented multinational corporations, headquartered abroad. The two main beneficiaries are Melbounre-based BHP Billiton, which runs aluminum smelters, and the notorious London-based Anglo American Corporation.

Thus profits flow abroad, exacerbating SA’s dangerously high international payments deficit.

Activists argue that the scandalous late-apartheid-era, multi-decade “Special Pricing Agreement” deals with BHP and Anglo should be rejected.

In early 2008, repeated national blackouts finally led to cuts in supply to some of these firms, showing that the deals could legitimately be violated. The crash of metals and minerals prices has also dramatically lowered demand.

Demand-side management – a tried and tested alternative that the World Bank claims to endorse (but hasn’t considered in this case) – would lesson the need for new power plants.

Also, SA’s massive renewable energy potential has not even begun to be tapped. Eskom was given responsibility for rolling out more than a million solar-powered hot water heaters over three years, and after two years, can claim only a thousand.

Having lost the vast majority of South Africans’ trust, Eskom raised prices by more than triple the inflation rate in 2008. From 2007 to 2012, the price of a month’s normal electricity use in an “average township household” is anticipated by Eskom to rise 127% in real terms.

These price increases will have an extreme adverse impact, leading to a major increase in power disconnections (and illegal reconnections, hence electrocutions) of poor households.

Ironically, World Bank staff insist the proposed Eskom loan will have a “developmental” impact.

The Bank is in an untenable position. It will soon release a new energy policy and also campaigns to take on additional responsibilities for channeling finance related to climate change.

The proposed Eskom loan should disqualify the Bank from any further role in climate-related activities.

Critics insist that if the Bank intends to raise $180 billion in new capital from member groups prior to the World Bank/International Monetary Fund meetings in late April, it will have to shelve this loan, because the world’s citizens will object that this represents business as usual financing at a time when energy transformation is increasingly urgent.

Critics are gaining momentum. Communities and environmentalists have begun to protest the Eskom loan, including at the firm’s Durban headquarters on February 16.

The National Union of Metalworkers of South Africa announced its opposition to the loan on February 18. Other unions threatened strikes against the price hikes and Eskom’s labour practices.

The Pan African Climate Justice Alliance, which had the highest African profile at the December 2009 Copenhagen Climate Summit, has also endorsed the no-loan demand on grounds of environmental damage.

Opposition to the loan has also been expressed by the South African Council of Churches, which played a key role in criticising the World Bank in the past due to its apartheid financing.

Eskom is also suffering an upsurge of illegal electricity connections in communities, as its prices become prohibitive.

In sum, this company can be fairly described as a poor credit risk.

Dozens of groups across the world have committed to oppose the World Bank’s proposed Eskom loan. They are contacting the executive directors of the World Bank from each country – including Australia’s representative, James Hagan, who was visited by South Africans earlier this week – to demand a “no coal loan” vote at the April 6 meeting at which the loan will be tabled.

In advance of the Bank’s recapitalisation efforts, critics are ready to take even more vigorous action against the Bank itself.

This includes a revival of the “World Bank boycott” that cost the Bank support from many major bondholders over the past decade (including the world’s largest pension fund, the city of San Francisco, the Calvert Group, and university and church endowment funds).

For the sake of environmental justice, the surrounding communities, the citizenry, the workers, Eskom customers and the continent of Africa (and all other sites affected by climate change), the Bank will have no choice but to withdraw this loan.

Eskom will then have no other choice but to negotiate an appropriate energy mix and financing strategy with constituencies they have so far ignored.