South Africa secures World Bank loan

9 April 2010

The World Bank has granted South African state power company Eskom a US$3.75-billion loan to help it complete the 4 800 MW Medupi coal-fired power station, as well as to finance “some of the biggest solar and wind power plants in the developing world”.

Announcing its approval for the loan on Thursday, the World Bank said the loan – its first major lending engagement with South Africa since the end of apartheid in 1994 – was made in order to help South Africa achieve a reliable electricity supply.

Coal, wind, solar

In a statement, the Washington-based institution’s board of directors said the loan would be used to co-finance the following blend of energy technologies:

• “US$3.05-billion for completing the 4 800 MW Medupi coal-fired power station, using for the first time on the African continent the same proven, efficient supercritical technology used in OECD countries;

• “US$260-million for piloting a utility-scale 100 MW wind power project in Sere and a 100 MW concentrated solar power project with storage in Upington; and

• “US$485-million for low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions.”

‘Unique circumstances’

The loan was granted despite opposition from a number of countries, including the US and the UK, because most of it is be used for environmentally unfriendly coal-fired technology.

The Bank said the loan was warranted by unique circumstances, including an energy shortage brought about in part by the rapid growth of South Africa’s economy, compounded by the global financial crisis that had “exposed the country’s vulnerability to an energy shock and severe economic consequences.”

Obiageli Ezekwesili, the World Bank’s vice-president for the Africa region, said that, without an increased energy supply, South Africans would face “hardship for the poor and limited economic growth … Access to energy is essential for fighting poverty and catalyzing growth, both in South Africa and the wider sub-region.

“Our support to Eskom combines much-needed investments to boost generation capacity for growing small and large businesses, creating jobs, and helping lay the foundations for a clean energy future through investments in solar and wind power.”

Removing barriers to energy efficiency

South Africa’s government said in a statement on Thursday that work to address “market or policy barriers delaying energy efficiency and renewable programmes, as well as future actions needed to achieve mitigation objectives, was already under way with the Bank.

Besides pushing for greater energy efficiency in the country, as well as increased use of alternative energy sources, Eskom would be upgrading the environmental technology at its other power plants.

The government would also explore the acceleration of the de-commissioning of older power plants in the medium term, taking into account the country’s energy requirements.

SAinfo reporter