16 February 2010
Communities, environmental groups, academics and NGOs today call on the World Bank to cease and desist from a proposed loan of R29 billion ($3.75 bn) to Eskom. If this loan – which may come up for a Board vote in March or April – goes through, poor South Africans will have to bear the burden of Eskom’s debt and the World Bank’s cost recovery programme, and climate change will intensify. A world campaign begins now.
For Immediate Release
Today, community groups from Durban are protesting outside Eskom’s offices in Westville against an increase in tariffs, and are joined by more than 50 organisations from South Africa and the rest of Africa, all endorsing a call for the World Bank to halt the proposed loan. The loan, which funds Eskom’s ill-advised construction of coal-fired power plants – while the state-owned firm gives the largest metals/mining companies the world’s cheapest electricity yet demands annual 35% increases from ordinary South Africans - will result in:
- energy poverty and environmental destruction;
- burdening the poor of South Africa with a dollar-based debt;
- increased ‘Climate Debt’ to Africa (SA already makes up more than 40% of the African CO2 with only 6% of its population, a worse ratio than even the USA to the world); and
- the World Bank’s ongoing rejection of advice from its own independent advisory panel’s recommendations - the 2004 World Bank Extractive Industries Review - which called on the Bank to phase out fossil fuel projects such as those Eskom proposes.
The Bank financed Eskom from 1951-67, and during that period, electricity became cheaper for large corporations and white households – and was completely unavailable to black people. This could be history repeating itself. The Bank, like all corporations investing in South Africa during apartheid – against the demands of the liberation movements that they disinvest – owe reparations to victims of racism. Paying back its social debt should be Job One for the Bank, as it will become for many other firms now being sued under the US Alien Tort Claims Act by Khulumani, Jubilee SA and thousands of other South Africans.
Community groups endorsing the demand that the World Bank cease and desist its fossil fuel lending to Eskom range from activists in the polluted Vaal Triangle where people burn coal for heating and cooking because electricity is unaffordable, to the Pan African Climate Justice Alliance, which helped define climate injustice in Copenhagen by showing how the Copenhagen Accord – signed by Jacob Zuma – condemns Africa to a hellish future.
South Africans are also building solidarity alliances with citizens groups across the world, demanding that all Executive Directors of the Bank reject the loan. The most powerful bloc of directors with the most votes are from Europe and the US. Hence the groups protesting Eskom are building solidarity in Brussels and Washington, DC. For example, the United States Treasury has recently opposed the Bank’s coal financing in a ‘guidance note’, and African groups join with citizens in the US to demand that Washington not only cease and desist from financing the World Bank’s coal loan portfolio (and hence veto this loan to Eskom), but also heed the calls of communities and environmentalists who oppose US coal, especially West Virginia mountain-top removals.
The solution to the present South African energy crisis is to transform our electricity generation, consumption and financing. Renewable energy is the optimal development path for South Africa, given our vast capacities of sunlight, wind and tidal power. This path will create more Green Jobs, build local manufacturing capacity and avoid the environmental mistakes already made by the Northern economies. It is widely recognised that South Africa’s ‘Minerals Energy Complex’ is our Achilles Heel. It makes South Africa extremely energy-intensive and hence subject to future climate-related sanctions; extremely capital-intensive (the smelters that consume so much electricity all have fewer than 1000 workers); extremely dependent upon the whims of Foreign Direct Investment at a time of sharp decline (30% less in 2009 than 2008); and extremely export-oriented during a time of global economic stagnation, in which minerals and metals prices have slumped dramatically.
The groups argue that it simply doesn’t make sense to use South African coal to generate electricity at the cheapest rates in the world, to zap imported bauxite, to increase profits of corporations headquartered in London, Melbourne, Luxembourg and Zurich, which worsens South Africa’s already precarious balance of payments deficit, and for which vast new coal-fired powerplants must be built, financed by World Bank loans and privatised shares (49% projected for Kusile), and then by huge tariff increases for poor people, whose development, health and gender equity needs are ignored.
The South African government cannot continue to give away electricity below cost, to fire smelters which have little linkage to the South African economy. It is critical that demand side management occurs and that transparency and contract renegotiations begin for the dubious ‘special purchase agreements’ made during the late apartheid era, which give the world’s cheapest electricity to large foreign corporates. A ‘Just Transition’ for our economy and energy sector is needed.
Eskom should not be given the World Bank loan, and won’t be as a result of this campaign.
On February 17, Nersa should tell Eskom’s overpaid executives to go back to the drawing board and recalculate tariffs that include more Free Basic Electricity to South Africa’s households, to promote development, health and gender equity from below. Nersa should tell Eskom to recalculate tariffs by imposing cross-subsidies so that the large corporations pay much more and ordinary people pay less. Nersa should tell Eskom to provide alternative, well-paid Green Jobs - such as construction of the fabled million thermal-solar geysers for every house, where workers who are employed at the smelters can be re-employed. And Nersa should tell Eskom to forget about the World Bank loan, and rely upon local resources instead.
Nersa is especially important at this moment because of its reputation as a ‘captive regulator.’ It is no accident that the first national energy regulator, Xolani Mkhwanazi, found the revolving door between state and capital, and is now head of BHP Billiton’s South African operations.
In a week when Finance Minister Pravin Gordhan is about to warn us of a vast budget deficit, seeking a loan to increase our debt is ludicrous from the standpoint of national interests. If once again, Nersa and Eskom follow their own self-interests as bureaucratic fat-cats, meeting the needs of foreign capital instead of our local society, economy and environment, the groups will increase protests and build a global campaign to defund Eskom.
For more information:
Bobby Peek, groundWork, Friends of the Earth, South Africa
082 4641383
STATEMENT FROM SA AND AFRICA CIVIL SOCIETY ON ESKOM’S PROPOSED $3.75 BILLION WORLD BANK LOAN
Should the World Bank grant a $3.75 billion (R29 bn) loan to Eskom? No. We South African and African organisations which for years have advocated social and environmental justice here and abroad, oppose Eskom’s proposed Bank loan – and indeed its new construction programme more generally - for several reasons.
- A bad project, contributing to energy poverty and environmental destruction. This particular project is fatally flawed, on grounds that Eskom’s strategy is:
- based primarily on large coal-fired stations (followed by nuclear) and as many as 40 new coal mines, which will add to South Africa’s already extremely high carbon intensity, as well as the air pollution and degradation of scarce water resources;
- designed to continue supplying the world’s cheapest electricity mainly to large energy-intensive industries, including steel and aluminium, whose corporations are headquartered abroad (hence contributing to the profits outflow on South Africa’s balance of payments);
- to be mainly paid for by unaffordable tariff increases imposed on ordinary South Africans, while the beneficiaries – the largest industrial consumers - are exempt from price rises because of multi-decade special purchase agreements offered to them during apartheid and in the 1990’s; and as a result,
- unable to alleviate ‘energy poverty’, but instead entrenches suffering by imposing ‘cost recovery’ on people who cannot afford it, with Eskom already admitting a ‘typical township household’ will face a 2009-2012 monthly price rise from R360 ($48) to R1000 ($130).
- Inappropriate financing. We therefore oppose all funding, foreign and local, for Eskom’s coal/nuclear expansion plans. Were Eskom to engage in a reasonable energy policy based on demand management, with supply shifting to renewable, and the expansion of Free Basic Electricity beyond the current tokenism as well as connections to urban shackdwellers and the rural poor, that would be worthy of support. As for green energy investments that are not import-intensive, local financing would be more appropriate than a World Bank loan - and is readily available, including through state debt and halting subidised electricity contracts to multinationals. The financial danger of a World Bank loan is that the SA currency will crash (as it has five times since 1996), hence making repayment much more expensive (since the loans are not repaid in rand but in dollars), hence adding to the extreme cost burden poor South Africans will face.
- Eskom’s special responsibility to Africa. We must not forget that South Africa consumes more than its fair share of Africa’s environmental space for development (more than 40% of CO2 emissions from just 6% of Africans), mainly because of Eskom, Sasol and other large corporations which emit the vast bulk of greenhouse gases. The World Bank loan will sink Eskom – and South Africa - into not only financial debt to the West, but much deeper ‘Climate Debt’ to Africa. African civil society unites with SA critics of Eskom’s irresponsible climate-denialist projects.
- The World Bank’s special responsibility. Specifically, we oppose World Bank funding for Eskom and call on all governments with Bank voting power to oppose the proposed loan on March 24, when the Board meets. The World Bank has still not offered reparations for its 1951-67 apartheid-empowering loans to Eskom, for which only white people received electricity (but the entire society repaid the loans). Further, the Bank has consistently promoted privatisation and/or commercialisation of state utilities and cost-recovery (resulting in disconnections), which together prevent access to electricity by poor South Africans. We call on the Bank’s member governments and directors to endorse the recommendations of the 2004 World Bank Extractive Industries Review. The Review found that, aside from climate damage, the Bank’s fossil fuel projects had neither the intention nor the effect of alleviating poverty and called for them to be phased out.
- The US government’s special responsibility. We especially call on the US Treasury – which has opposed Bank coal financing in line with a recent ‘Guidance Note’ – to veto the proposed loan, and to also halt US government subsidies to the coal industry so as to avoid the legitimate charge against Washington of hypocrisy. We are delighted about three processes internal to the US, which are a model for our own work in South Africa: Sierra Club legal action has prevented new coal-fired plants from being built; courageous activists in West Virginia are engaged in direct action to halt ‘mountaintop coal removals’; and the US Environmental Protection Agency adopted December 2009 provisions to implement its ‘endangerment finding’ that carbon from coal is a pollutant and must be directly regulated. What must be avoided is the US imposing responsibility for carbon cuts on the South, but without providing funding or technology support for renewable energies as part of the ‘Climate Debt’ that the US owes for taking up so much environmental space. World Bank Executive Directors representing the South have responded to the US Guidance Note making several of these points, and they oppose the use of the Bank as an instrument of US power. This is a fair point, and a long-standing grievance we all share, given Washington’s extremely destructive role at the Bank and in the world economy. Nevertheless, the dissident Executive Directors’ response supports further Bank funding for fossil energy and specifically coal-fired power stations, justifying coal as necessary for poverty alleviation and economic growth in developing countries. In reality, economic growth has been accompanied by growing inequality in South Africa and many other countries that suffer ‘resource curse’. The poor are mostly left worse off than before. Even where their income improves by conventional measures, the gains are lost to services cost recovery (and disconnections), to health costs imposed by pollution, to the loss of nonrenewable resources, to water/land theft associated with coal-fired power, and to the increased cost of access to amenities previously provided as public goods. In addition, it is common cause that the poor are most vulnerable to climate change. In many countries, they are already feeling the costs in intensified droughts and floods and in the loss of land through coastal erosion.
- Towards the transformation of energy, production and financing. We see renewable energy, not coal-fired power stations, as the optimal development path for Southern economies, creating more jobs, building local manufacturing capacity, and avoiding the environmental mistakes of Northern countries. As in South Africa, most World Bank coal power projects are designed to supply industry, not people. They do not necessarily increase per capita access to energy. The industries in turn are mostly geared for export in line with the World Bank’s promotion of export oriented production. The goods are then consumed primarily in developed countries. Further, many industries are established with foreign direct investments. In the process, much of the heavy industry in developed countries has relocated to developing countries in search of cheaper energy and cheaper labour. Yet because their headquarters are in London, Melbourne, New York, Toronto, Zurich and other offshore sites, a substantial portion of profits is returned to rich countries, exacerbating the poor countries’ balance of payments deficit. Because South Africa’s payments deficit is so extreme, due to the outflow of profits and dividends to foreign corporations which benefit from the world’s cheapest electricity, The Economist magazine judged the country as the world’s riskiest emerging market (24 February 2009).
- The demand side management alternative. Instead of expanding its coal/nuclear facilities, Eskom should engage in serious demand side management, beginning by phasing out electricity to smelters that have little linkage with the South African economy and that are capital- rather than jobs-intensive. Concrete plans should be made for a ‘just transition’, so as to provide alternative, well-paid ‘green jobs’ – e.g. in subsidised thermal-solar geysers for every house – to those workers who are employed at the smelters. At the same time, the special purchase agreements should be disclosed to the public and opened for renegotiation. The freed up energy should be redistributed to provide for a much larger ‘lifeline’ supply of universal Free Basic Electricity – with a rising block tariff to encourage conservation to improve spinning margins which will buy time for a switch into renewable energy technologies. By not expanding its coal/nuclear facilities and instead redistributing the electricity capacity it has, and by simultaneously switching to renewable sources, Eskom can survive this crisis. But it can only do so if it is not in the clutches of the world’s leading financier of climate destruction, the World Bank.
ENDORSEMENTS:
To endorse the statement which can be found at: www.groundwork.org.za please respond to
South African Organizations:
Airport Farmers Association; Alternative Information Development Centre; Anti Privatization Forum; Austerville Clinic Committee; Centre for Civil Society Environmental Justice Project; Clairwood Ratepayers Association; Diakonia - Durban; Earthlife Africa Durban; Eastern Cape Environmental Network; Environmental Monitoring Group; groundWork, Friends of the Earth, South Africa; Federation for a Sustainable Environment; Greater Edendale Environmental Network; Isipingo Environmental Committee; Isipingo Ratepayers Association; Joint Action Committee of Isipingo; KwaZulu Natal Subsistence Forum; Merebank Clinic Committee; Merebank Residents Association; Noordhoek Environmental Action Group; Pietermaritzburg Association for Christian Social Awareness; South African Council of Churches; Southern African Faith Communities' Environment Institute; South Durban Community Environmental Alliance; Southern Cape Land Committee; The Workers World Media Production; Timberwatch; Trust for Community Outreach and Education; Umphili waManzi; Vaal Environmental Justice Alliance; Wentworth Development Forum; 350.org
Climate Justice Now! Gauteng representing: Boitshoko Home Based Care; Ceasefire Campaign; Citizens United for Renewable Energy and Sustainability; Displaced Rates Payers Association; Earthlife Africa, Johannesburg; Ecumenical Women’s Prayer in Action; Ecumenical Service for Socio-Economic Transformation; Inner city Resource Centre; Kathorus Concerned Residents; Off the Ground; The Benchmarks Foundation; Tsogang Youth Group; South African Chemical Workers Union (Gauteng); South African Council of Churches (Gauteng); Soweto Concerned Residents; Soweto Electricity Crisis Committee; Springs Eco Friends; Well Worn Theatre; Youth Agriculture Ambassadors; Wildlife and Environmental Society of South Africa (Gauteng)
African Organisations:
Citizens for Justice (Malawi); Environmental Rights Action (Nigeria); Friends of the Earth Ghana (Ghana); Justice Ambiental (Mozambique) Pan African Climate Justice Alliance; Yonge Nawe (Swaziland).