Busa backs World Bank loan to Eskom

Business Unity South Africa (Busa) on Monday backed the urgent need for a World Bank loan to Eskom as a part of a larger borrowing programme by the power utility.

In shaping its views on the appropriate funding of Eskom in the recent past, Busa had consistently emphasised the need for a new “mix” of tariff rises, borrowing, and equity financing from government to ensure future security of electricity supply on an affordable basis, Busa said in a statement.

Although business welcomed government’s commitment to a sustainable funding model for Eskom, it was important to note that the latest Eskom tariff hike granted by the National Energy Regulator of SA (Nersa) was decided without the new funding model in place.

“The prospect of a World Bank loan therefore comes at an opportune time as one key component in addressing financial stability issues at Eskom,” it said.

The proposed loan of US3,75-billion would further strengthen Eskom’s financial viability following the R20,7 -billion loan granted by the African Development Bank (ADB) in November 2009.

“In Busa’s view, accessing a World Bank loan is appropriate for a developing country like South Africa which is both under-borrowed internationally and anxious to build necessary infrastructural capacity.

“Failure to borrow sensibly for Eskom’s needs will either mean yet higher electricity tariffs or the risk of load shedding if Medupi [power station] is not completed in time.”

Busa recognised the concerns that had been raised by other stakeholders in respect of a World Bank loan.

However, Busa believed that such concerns could be addressed in negotiations with the World Bank to ensure that the loan conditions were in line with South Africa’s national economic interests.

“In the meantime, Busa calls for an urgent dialogue on the ‘energy mix’ that should be pursued in this country in the decades ahead.

“The extent to which sources other than coal can be used to generate electricity, which is essential for a low carbon growth trajectory, obviously have an impact on the preferred funding model for Eskom,” Busa said.—Sapa