Counting the cost of Medupi

As the World Bank approved a controversial $3-billion loan for the Medupi coal-fired power plant in South Africa on Thursday, both the details and the broader impacts of the loan continue to be criticised by community and environmental groups.

The United States, Britain, The Netherlands, Norway and Italy abstained from voting on the loan, thus showing their opposition without taking the stronger, less-diplomatic action of voting “no”.

Their concerns were largely environment or climate-related, but there are also numerous criticisms of the possible effect of the plant on local communities and its lack of effect in bringing more reliable electricity to the population.

“Energy insecurity and climate change are two of the most significant development challenges of our time,” Sarwat Hussein, senior spokesperson for the World Bank’s Africa region, said in South Africa, pointing out that only one in four Africans have access to energy.

“This project is an attempt to achieve energy security and lay the foundations for a greener future.”

But whether the plant, being built by Eskom in Limpopo, will achieve either of those goals has been called into serious question.

“The project generally has been purported as a project that will help poor people, and will it? No,” says Michael Stulman of Africa Action.

In a statement announcing the loan’s approval, the World Bank stressed how the loan “aims to benefit the poor directly, through jobs created and through additional power capacity to expand access to electricity”.

Burden on the poor
But, said Stulman: “The decision really shifts the burden on to the poor communities”.

This burden would come in the form of pollution, reliance on greenhouse gases and the costs of paying back the loans, he said.

This loan, like most of the bank’s actions, is aimed at decreasing poverty through development. “We know that industrial development does not necessarily mean employment because we have seen jobs drop as we have large capital development projects in the country,” said Bobby Peek, director of the South African environmental justice and development organisation groundWork.

Critics also point out that Medupi is already having detrimental effects on the health of those living in the area.

Peek reports illegal coal mining is already under way there and that large amounts of water are going to be — and are being — extracted from rivers.

Many of those rivers will face contamination from mercury and other toxicants, as will the air from sulphur and carbon dioxide.

Limpopo Residents filed a complaint on Tuesday highlighting these and other concerns with the World Bank’s independent complaint body, the Inspection Panel.

A protest was also organised for Wednesday, in which about 60 people converged outside World Bank headquarters in Washington.

But with Thursday’s vote already on the calendar, opponents faced an impossible battle. Once a loan proposal comes before the bank’s board of executive directors, its approval is virtually a
foregone conclusion.

This has not stopped many of the contentious details of the proposal from gaining greater scrutiny over the past couple of days, however.

Hitachi Africa
In one, the African National Congress has investments in Hitachi Africa, which has been contracted to build a boiler for the Medupi project. Since those contracts predate the bank’s loan — which forms only a fraction of the over $17-billion needed to complete the project — the bank and Hitachi say it can be ensured that no bank money goes to that component, and thus potentially to the political party.

“The Hitachi component is not part of what we are financing. We were not party to awarding a contract, and we are not a party to its payment,” Hussein said.

In another, the fact that the loan is in dollars could make it more difficult to repay.

Climate debt
“This means we have to get foreign currency in dollars,” said Peek, explaining that if the rand weakens to the dollar the size of the loan will increase and that the country will have to depend more on exporting and exporting at cheaper prices.

“It won’t only be a financial debt but a climate debt,” said Stulman.

Climate change is expected to hit developing countries, especially those in places like Southern Africa particularly hard.

Coal emits more carbon dioxide per unit of energy produced than any other fossil fuel and the Medupi plant is expected to emit 25 to 30-million tonnes per year.

“Simply put, we are very disappointed by the decision by the US and other executive directors,” said Stulman.

The US Treasury Department issued a guidance memo in December directing US representatives on the boards of multilateral development banks — such as the World Bank — to encourage building demand in developing countries for no- or low-carbon energy sources.

Africa Action and other organisations had hoped this would translate into a vote opposing the loan, rather than an abstention.

“The coal lending guidelines are a good start — but now the bank should adopt them and Treasury must show, at a minimum, that it is willing to act on them,” said Peter Goldmark, director of the climate and air program at the US-based Environmental Defence Fund.

The coal-fired Medupi plant — which many say is one of the most contentious loan proposals in recent history — notwithstanding, the World Bank is also funding numerous efforts to address the effects of climate change and provide support for low carbon projects, largely through the Climate Investment Funds which the bank approved in 2008.

In addition to the $3,05-billion for Medupi, the loan approved on Thursday includes $260-million for wind and solar projects and $485-million ”for low-carbon energy efficiency components, including a railway to transport coal with fewer
greenhouse gas emissions”.

Hussein calls these ”important steps to support South Africa’s long term plans to mainstream renewable energy technologies”.

When the external costs on health, communities and the climate are factored in, though, the cost of using coal power will be much higher than that which could be provided by a plan that features a more reliable grid and renewable sources of energy, contends Stulman. – IPS

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