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South Africa: Coal-Fired Denialism
AfricaFocus Bulletin
Mar 23, 2010 (100323)
(Reposted from sources cited below)
Editor's Note
With a request for a $3.75 billion World Bank loan for a new coalfired
power plant, South African political leaders seem determined
to entrench a policy on climate change that disregards clear
evidence of catastrophic consequences, echoing the earlier
disastrous policies of former President Thabo Mbeki on AIDS. But
opposition is mounting to the current plan, which would consolidate
South Africa's Eskom as the continent's leading producer of
greenhouse gases.
South African Finance Minister Pravin Gordhan defended the plan in
a March 22 op-ed article in the Washington Post, contending that
alternate energy sources were not practical to meet the country's
power needs. But critics say that the power is primarily intended
to benefit large multinational companies, rather than South African
consumers, and that Eskom has an abysmal record of mismanagement
and indifference to public needs. Critics of the loan include not
only a large South African civil society coalition, but also
international groups and even the U.S. Treasury.
This AfricaFocus Bulletin contains the February 16 statement by
over 200 South African and other African organizations opposing the
loan, and two recent background articles, one by Lori Pottinger,
Africa specialist for the International Rivers Network and the
other by Patrick Bond, director of the Centre for Civil Society in
Durban, South Africa.
Opposition to the loan in South Africa is being coordinated by
Groundwork South Africa (http://www.groundwork.org.za).
Africa Action is among U.S. groups that have joined the campaign to
stop this World Bank loan. For more information on options for
action, visit http://www.africaaction.org/no-coal-loan.html
The Sierra Club is also working on this issue, in coordination
with their campaign to stop government funding of coal power in the
United States (http://www.sierraclub.org/coal).
For the Washington Post op-ed "Why Coal is the Best Way to Power
South Africa's Growth," by Finance Minister Pravin Gordhan, see
http://tinyurl.com/y96ku3m
The Center for American Progress (http://www.americanprogress.org)
has a new report on ensuring that multilateral development banks
prioritize investment in clean energy rather than fossil fuel
projects. See http://www.americanprogress.org/issues/2010/03/world_bank.html
For a report from the World Resources Institute on the project, see
http://www.wri.org / direct link: http://tinyurl.com/yjy56j8
For previous AfricaFocus Bulletins on climate, the environment,
and related issues, visit http://www.africafocus.org/envexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Statement from South African and Africa Civil Society on Eskom's
Proposed $3.75 Billion World Bank Loan
Statement released February 16, 2010
Endorsements: To endorse the statement which can be found at:
http://www.groundwork.org.za
Please respond to: worldbankeskom@groundwork.org.za
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.
1. 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).
2. 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.
3. 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.
4. 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.
5. 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.
6. 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).
7. 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.
World Bank Gives South Africa Lumps of Coal
Lori Pottinger
International Rivers, Editor of World Rivers Review and Africa
Campaigner
http://www.huffingtonpost.com/lori-pottinger
March 9, 2010
In case you didn't catch it, the World Bank's top official for
Africa just thumbed her nose at the dozens of renewable energy
companies lining up to build clean energy in Africa's dirtiest
economy.
Obiageli Ezekwesili, the Bank's Vice President for Africa, defended
a controversial $3.75-billion loan to build a massive coal plant in
South Africa with this head-in-the-sand statement: "There is no
viable alternative to safeguard South Africa's energy security at
this particular time."
The quote came in an article titled (without irony) "Africa Ready
for Energy Transformation." With that kind of transformation, the
continent can look forward to many more decades of playing catch-up
with the rest of the world.
Maybe Ms. Ezekwesili missed the news that South Africa could get
10-20% of its electricity from wind power in the short term (and up
to 70% over time), by harvesting some of its 50,000 MW of potential
(it currently has just one 5MW commercial wind farm in place). Or
that the sunny nation also has huge potential for solar (one study
shows 547 gigawatts in potential for grid-based concentrating solar
plants, not to mention equally impressive potential for solar water
heating and solar PV).
Writes a local columnist, "Research shows that in conjunction with
energy efficiency measures, 75% of our electricity could be
generated by exploiting renewable energy sources by 2050, slashing
our CO2 emissions by 54% below 1990 levels and making massive
strides towards avoiding catastrophic climate change." But the
national utility, Eskom, has been despairingly slow to move away
from coal to embrace a green energy future.
Says South African professor Patrick Bond: "South Africa's
five-fold increase in CO2 emissions since 1950 and 20% increase
during the 1990s, can largely be blamed upon the attempt by state
electricity company Eskom, the mining houses (led by Anglo
American) and huge metals smelters (especially BHP Billiton) to
brag of the world's cheapest electricity. Emitting 20 times the
carbon tonnage per unit of economic output per person than even the
United States, South African capital's reliance upon fossil fuels
is scandalous."
Says extractive-industries activist Bobby Peek, of the South
African group groundWork: "The South African government cannot
continue to give away electricity below cost, to fire smelters
which have little linkage to the South African economy. If the
World Bank loan goes through, poor South Africans will have to bear
the burden of Eskom's debt, and climate change will intensify."
It's not just activists who are up in arms: the Cape Town Chamber
of Commerce is calling for a national investigation into Eskom's
"sweetheart deals" for big industrial energy users at the expense
of everyone else. Unions, too, have recently joined a coalition
calling on the World Bank to drop the project.
The World Bank, whose job is to fund poverty alleviation, not cheap
power for aluminum smelters, talks of Africa's energy sector
"transforming" itself the way the telecoms industry did - a truly
transformative sector-wide change that brought affordable mobile
phone service across the continent. But the energy sector cannot
transform itself if it looks only to megaprojects for salvation.
The telecoms industry was a bottom-up transformation, one that
bypassed big bureaucracies to create decentralized service one
could buy in small packages, as needed. As long as Eskom and other
African utilities are focusing more on mega-industries' needs, and
giving them subsidized rates to keep them happy, there will be no
transformation, nor a significant change in the ranks of the
unconnected. Africa definitely needs an energy revolution, but it
needs to focus on people power first.
Meanwhile, renewable energy developers are waiting in the wings for
Eskom to show them the money in the form of power purchase
agreements. Wind power developer Eddie O'Connor told Engineering
News that South Africa was "pregnant with potential".
I guess the World Bank won't be the one to deliver that baby.
Eskom faces additional resistance to loan
by Patrick Bond, 3/16/2010
http://links.org.au/node/1570
In an indication that the climate justice movement is broadening,
deepening and going local, there is now intense opposition to a
climate-destroying energy loan for South Africa. The campaign is
led by community activists in black townships allied with
environmentalists, trade unionists and international climate
activists. The World Bank is trying to lend nearly US$4 billion to
the Johannesburg-based state-owned electricity utility Eskom, the
world's fourth-largest power company and Africa's largest carbon
emitter (with 40% of South Africa's total emissions).
The loan is mainly for constructing 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
World Bank also aims to finance privatised power generation,
notwithstanding the abject failure of public-private partnerships
in South African infrastructure, including in electricity and
water. More than 200 organisations have signed up in protest. The
loan would fly in the face of the World Bank's attempt to portray
itself as a climate-friendly financer, and will generate a vast,
unnecessary debt - both a financial debt to South Africa's poor and
also 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. For communities near the coalfields (40 new
mines are requested by Eskom to supply its new generators) 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 associated
with coal and other health burdens.
Poor pay for multinationals' cheap power
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 (US$1.3 bn), mainly due to
miscalculations associated with hedging aluminium prices and the
South African currency. Both the chair and chief executive office
lost their jobs late last year amidst unprecedented acrimony.
Meanwhile, Eskom continues its giveaway prices to several large
export-oriented metals/mining multinational corporations,
headquartered abroad - offering the world's cheapest electricity,
heavily subsidised by all other - mainly poor - users in South
Africa. The two main beneficiaries are BHP Billiton of Melbourne,
which runs aluminium smelters, and the notorious Anglo American
Corporation, which shifted its financial headquarters to London a
decade ago.
Thus mining/metals profits flow abroad, exacerbating South Africa's
dangerously high international payments deficit. Activists argue
that the scandalous late-apartheid era, multi-decade "special
pricing agreements" deals with BHP Billiton and Anglo American
should be rejected as "odious". 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. Moreover,
the crash of metals and minerals prices dramatically lowered
demand. Demand-side management - a tried and tested alternative
which the World Bank claims to endorse (but hasn't considered in
this case) - would mitigate the need for new power plants.
Moreover, South Africa'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 1000.
Price increases for poor
Having lost the vast majority of South Africans' trust, Eskom began
raising 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 to rise 127% in real
terms, according to Eskom. These price increases will have an
extreme adverse impact, leading to a major increase in
disconnections (and illegal reconnections, hence electrocutions) of
poor households, that can best be described as "underdevelopment".
Ironically, World Bank staff insist that the proposed Eskom loan
will have a "developmental" impact. The civil society coalition
vigorously object. The World Bank is in an untenable position, as
it soon releases 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 World
Bank from any further role in climate-related activities. Critics
insist that if the World Bank intends to raise $180 billion in new
capital from member groups prior to the World Bank/International
Monetary Fund Spring 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 energy
transformation is increasingly urgent.
Opposition is gaining momentum:
Communities and environmentalists have begun to protest the Eskom
loan, including at the firm's Durban headquarters on February 16.
The main manufacturing trade union in South Africa, the National
Union of Metalworkers of South Africa, announced its opposition to
the loan on February 18. Other trade unions have 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
endorsed the no-loan demand, on grounds of environmental damage.
The South African Council of Churches, which played a key role in
criticising the World Bank due to its apartheid financing, has also
expressed opposition to the loan. Eskom is suffering an upsurge of
illegal electricity connections in communities, as prices become
prohibitive.
In sum, this is a company that can be fairly described as a poor
credit risk. Dozens of organisations 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 World Bank's recapitalisation efforts,
the critics are ready to take even more vigorous action against the
bank itself - including revival of the "World Bank Boycott" which
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 World 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.
Please send messages opposing the World Bank loan to:
Executive director, Mr. James Hagan, Australian representative to
the World Bank Telephone: USA 202-458-1015 Fax: USA 202-477-2007
Email: jhagan@worldbank.org
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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