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Publication Details

Reference
Bond, Patrick  (2010) The bank loan that could break SA's back
The Mercury (Eye on Civil Society) : -.

Summary

The World Bank's poisoned 'gift' of $3.75bn to Eskom spells disaster for
the climate, the poor and our fragile democracy

HOW dangerous is the World Bank and its neo-conservative president,
Robert Zoellick?

Notwithstanding South Africa's existing $75 billion (about R560bn)
foreign debt, last Thursday the bank added a $3.75bn loan to Eskom for
the primary purpose of building the world's fourth-largest coal-fired
power plant, at Medupi, which will spew 25 million tons of the climate
pollutant carbon dioxide each year.

As taxpayers, Eskom customers, municipal ratepayers and world citizens,
how worried should we be?

Finance Minister Pravin Gordhan repeatedly said that this is the bank's
first post-apartheid loan, yet its 1999 and 2008 Country Assistance
Strategy documents show conclusively that Medupi is the 15th credit
since 1994.

Gordhan also claimed the loan will now help South Africa build a
relationship with the bank.

He forgets the bank co-authored the 1996 Growth, Employment and
Redistribution (Gear) programme, which led us to overtake Brazil as the
world's most unequal major country, as black incomes fell below 1994
levels and white incomes grew by 24 percent, according to official
statistics.

Gordhan neglects that the bank itself regularly brags about its
knowledge bank role here. In 1999, for example, after World Bank
economist John Roome suggested to then water minister Kader Asmal that
the government impose a credible threat of cutting service to people
who cannot afford water, the bank's Country Assistance Strategy reported
that its market-related pricing advice was instrumental in
facilitating a radical revision in South Africa's approach.

As a result, the cholera epidemic the following year - catalysed by
water disconnections near Richards Bay - killed hundreds.

Misery
Similar misery will follow the Eskom loan. Medupi will be built in a
water-scarce area where communities are already confronting extreme
mining pollution. Forty new Limpopo and Mpumalanga coal mines will be
opened to provide inputs to Medupi and its successor, Kusile.

More worryingly, power- plant construction plans include a pay-off of
R1bn profit for the ANC, whose investment arm owns a quarter of Hitachi,
which received a R38bn Eskom contract.

So blatant is the conflict of interest that the government's public
protector last month judged Valli Moosa - then chair of Eskom and an ANC
finance committee member - to have acted improperly.

Official embarrassment is acute, especially since the bank issued a
major report, Quiet Corruption, just weeks ago. This is a prime case.

The announced sale of the ANC's share in Hitachi within the next six
weeks doesn't really mitigate matters, given Medupi's huge cost
escalations (from R40bn to R120bn) and the increased value of Hitachi's
shares thanks to the improper, corrupt contract.

Five dozen civic, environmental, church, academic and labour
organisations began a campaign against the World Bank loan in February.

They are concerned not only that catastrophic climate change will be
hastened, along with privatisation of electricity generation, but worse,
Medupi's main beneficiary will be the world's largest metals and mining
corporations, which already receive the world's cheapest electricity
thanks to multi-decade deals.

In early April, a small modification was made to one apartheid-era
sweetheart special pricing agreement - but it was to BHP Billiton's
advantage, the Melbourne-based company reported.

Medupi's vast costs will mainly be passed on to people who cannot afford
to pay the loan, through a 127 percent electricity price increase over
four years. Dissent against service delivery deficits make South Africa
among the world's most protest-rich countries and Cosatu is threatening
a national strike against Eskom that may well last into the World Cup.

South African civic groups and their 140 international allies now say
they will start financial punishment of the institution, harking back to
the World Bank bonds boycott launched by the late poet-activist Dennis
Brutus exactly a decade ago.

In response to Brutus's call, the city of San Francisco and other
municipalities pledged not to buy bank bonds. Scores of major financial
institutions and endowment funds followed suit, including the world's
largest pension fund, TIAA-CREF, whose annual meetings Brutus visited on
three occasions.

With the focus now broadening to include climate, San Francisco
supervisor Ross Mirkarimi reacted angrily to the Eskom financing: The
loan provides sobering proof that the World Bank's recent talk about its
commitment to climate finance was nothing but a bunch of hot air. We
will renew our commitment to keep our clean money from being tarnished
by investment in the bank's coal-dirtied bonds.

Risk
To understand why the bank took this huge risk - with major shareholders
like the US and European countries abstaining from voting - requires
insights into its leader, Zoellick.

A major player in the war on terror, Zoellick served as number two at
George W Bush's State Department and then in 2007 replaced World Bank
president Paul Wolfowitz, who was fired by the bank board for arranging
a plush State Department job for his girlfriend.

Like Wolfowitz, Zoellick was at the outset a proud member of the
neo-conservative think tank, the Project for a New American Century, and
as early as January 1998 went on record arguing that Iraq should be
illegally overthrown. In the same period, Zoellick also worked for
Fannie Mae, Enron and Alliance Capital, all of which effectively went
bankrupt.

From 2001-05, Zoellick was the US trade minister, and his bumbling at
the 2003 Cancun ministerial summit confirmed the World Trade
Organisation's subsequent demise.

And just prior to becoming World Bank president, Zoellick was a top
executive at Goldman Sachs, widely blamed for amplifying the 2008-09
global financial crisis.

Zoellick's efforts promoting the bank as lead climate financier at the
December 2009 UN Copenhagen climate summit were equally unsuccessful,
and the bank's backing of carbon markets has now now widely been decried
as a lost cause.

Zoellick has broken many things in his career, and having now granted
Eskom the R29bn loan, he can add to his belt some new notches: the
budgets of poor and working South Africans who will suffer unaffordable
price increases, the Limpopo ecology, South African democracy and the
climate.
http://www.themercury.co.za/index.php?fArticleId=5426736

Patrick Bond directs the Centre for Civil Society in Durban.




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