World Bank probe of Eskom's loan

World Bank probe of Eskom's loan

The World Bank has started an investigation into its $3,75bn loan to Eskom after a complaint by two local environmental groups on behalf of the Lephalale community, where the Medupi power station is to be built.

Siseko Njobeni

Business Day

4 August 2010

THE World Bank has started an investigation into its $3,75bn loan to Eskom after a complaint by two local environmental groups on behalf of the Lephalale community, where the Medupi power station is to be built.

Although the investigation is not expected to affect the granting of the loan, it could influence the way some of the money is spent.

Roberto Lenton, chairman of the World Bank's inspection panel - the body leading the probe - yesterday said the investigation related to allegations of violations of the bank's operational policies and procedures.

The inspection panel is an independent body that monitors the bank's accountability and compliance with its social and environmental policies. It is a forum for parties aggrieved by bank policies and procedures.

Tristen Taylor, Earthlife Africa energy policy officer, yesterday said the Lephalale community was concerned about carbon and sulphur emissions from the 4800MW Medupi power station which the loan will fund.

Mr Lenton recently led a team on an "eligibility" visit to SA to investigate the Lephalale community's concerns. In a statement to the bank's board, Mr Lenton said he was "struck" by the level of concern about the project.

The panel decided on an investigation because the complaint by Earthlife Africa and Groundwork "raises issues of compliance and harm that can be addressed in the context of an investigation".

Mr Lenton said his panel did not have the mandate to question board decisions, indicating that the loan would not be affected.

He said the panel would also not investigate SA and Eskom as the borrower. The panel could, however, make recommendations to the World Bank board "about project implementation, including the disbursement of funds for the project".

In a statement yesterday, the World Bank office in Pretoria said that previous findings of the inspection panel had been taken into account in improving the design and implementation of projects.

However, the bank's local officials declined to comment on the investigation. "The inspection panel is beginning its investigation and World Bank staff cannot comment on the specifics of ongoing investigations," it said.

In its current form, the bulk of the loan - more than 3bn - would be used to build the power station, while $485m would go towards investment in low-carbon efficiency components and $260m has been earmarked for investment in renewable energy. Eskom wants to build a 100MW wind power project and a 100MW solar power plant in the Northern Cape. The low-carbon energy efficiency portion of the loan will be used to fund, among other things, the construction of a rail and transmission line in Mpumalanga.

Eskom yesterday said it was aware of the request for an investigation into alleged policy violations . It said it was also aware of Mr Lenton's statement to the bank's board. "However, since this is an internal World Bank matter, it will be inappropriate for Eskom to make any comments on the investigation by the inspection panel," it said.

Mr Taylor said the two organisations were helping the community of Lephalale "because they have legitimate concerns".

Lephalale is in the coal-rich Waterberg area and he said the community was concerned about big coal-based projects. Petrochemicals group Sasol is investigating the development of an 80000-barrel-a-day coal-to-liquids facility . The planned power station is 5km from Eskom's Matimba power station.

"This whole area is being sacrificed environmentally. Our action is about protecting the constitution," Mr Taylor said.