World Bank should review loan to Eskom

The ANC and its allies historically distrusted the World Bank ideologically until 2008, when the government asked the institution for a loan of $3.75bn to finance Eskom’s new coal-fired power stations. The World Bank found all the reasons why this was an excellent idea.

Neither the confidential 2005 settlement between Hitachi and the US Securities and Exchange Commission for an “inaccurately recorded improper payment” to Chancellor House, nor its relationship with the ANC could damp its appetite.

In 1996, when the then minister of finance Trevor Manuel was negotiating a loan of $46m with the World Bank for the Industrial Competitiveness and Job Creation Project, the ANC, its allies and other organisations opposed to borrowing from the World Bank and the IMF were on the streets to demand answers. In 2008, they all stayed indoors.

The World Bank was perceived to be an architect of poverty through its structural adjustment programmes that inflicted harm in several developing countries in the 1980s. The ANC and its allies becoming converts should have been a warning sign that the Eskom build programme would bring challenges to the emerging democracy.

It was under Malusi Gigaba as minister of public enterprises that democratic SA negotiated its first project loan with the World Bank of about $3.75bn. The institution entered into the agreement by coating its investment with a renewables programme to offset its earlier commitment of reducing its exposure in coal-powered generators to reduce its carbon footprint.

Recent developments in SA, including the repurposing of the state for private accumulation and the leaked Gupta e-mails that show the depth of corruption at Eskom, have provided a platform for action by the World Bank, given that SA is in a worse economic position than it was when the bank lent money to the country. Many South Africans are voicing their discontent in Parliament, on the streets, in the media, courts and universities. The World Bank’s silence is deafening. Perhaps it is talking behind closed doors through diplomatic channels.

The World Bank should take a leaf from the books of some lenders — public, private and institutional — that have refused to roll over some of the maturing debt at compromised parastatals, particularly at South African Airways. Others have threatened to call in their loans if action is not taken against those alleged to have been involved in corrupt activities, such as the suspended financial director of Eskom.

In its defence, the World Bank instituted checks and balances to safeguard its investment and ensure it could account for all its pennies that went into Eskom. Despite significant teething problems, and a perception at Eskom that the World Bank’s procurement processes are cumbersome, the bank has not wavered.

We now know that Eskom’s impression that the bank’s standard bidding documents were exceedingly laborious to develop and that its turnaround time was too slow was influenced by some who wanted to eat.

The World Bank needs to go further in SA by engaging with all stakeholders beyond its comfort zone. By not working with all stakeholders, keeping mum on state capture — despite the leverage of its loan, which has not ensured energy security nor achieved the intended universal access — the bank risks being seen as complicit in the repurposing of Eskom and covertly laying fertile ground to implement a structural adjustment programme of the kind last seen in the 1980s.