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ENERGY: Eskom Loan “Will Help” South Africa’s Poor Neighbours

LONDON, Apr 27 2010 (IPS) - The 3.75 billion dollar World Bank loan for a new coal-fired power station in South Africa is essential for economic growth in neighbouring low income countries, according to Dr Mohamed Abdelrahman, energy advisor for the New Partnership for Africa’s Development (NEPAD), a programme of the African Union.

The controversial loan, awarded earlier this month to South Africa’s state-owned power utility Eskom, will part-fund the Medupi coal plant. Located in the country’s northern Limpopo province, the plant will add 10 percent to the country’s dwindling power supplies and emit 25 million tons of CO2 per year.

The loan has been opposed by several charities, environmental groups and non-governmental organisations (NGOs) on account of its impact on the climate and on local residents in Limpopo.

Earthlife Africa and groundWork, two South African NGOs, predict Limpopo residents will suffer “considerable” public health problems.

But, in an interview with IPS, Abdelrahman argued that the World Bank was right to fund Medupi because of the potential impact of energy shortages in surrounding low income countries.

“Eskom is pivotal in southern Africa because of the considerable electricity trade between South Africa and the neighbouring countries. Power shortages mean blackouts throughout the region, which cause disturbance of industry, lost profits and harm to public services.”

Eskom generates 95 percent of the electricity used in South Africa and over half that is used in Africa, and is the main producer and buyer in the Southern African Power Pool (SAPP), a 12-nation energy union.

Years of underinvestment have led to growing power shortages affecting all countries in the SAPP, with widespread blackouts in 2008.

“Lesotho and Swaziland, as well as Namibia and Botswana, are very dependent on Eskom, as they have very little energy production of their own,” according to Hans-Arild Bredesen, managing director of Nord Pool Consulting, advisers to the SAPP.

Doctors at Lesotho’s Queen Elizabeth II Hospital postponed surgical operations after the Eskom cuts, because of fears of future shortages. When supplies resumed, it was too low to meet the country’s needs, stated Mzimkhulu Sitheto, advocacy officer of the Transformation Resource Centre, an ecumenical group in Lesotho.

She told IPS: “Demand could only be met during the night hours.”

Two years on, Basotho salesperson Motanyane Makara struggles to keep up with the escalating tariffs: “Money has lost value. Even if I put aside 100 Maloti (13 dollars), it is not enough given the rate at which tariffs have increased. For someone who has five dependents, it is hard to maintain a stable livelihood.”

The mining sector in southern Africa – which provides almost a quarter of the region’s output and 13 percent of employment – was heavily affected by the January 2008 cuts too.

Konkola Copper Mine in Zambia, one of the largest in that country, shut down temporarily and Zambia’s energy company Zesco reduced supplies to Zimbabwe.

Mining companies in uranium-rich Namibia, a country relying on Eskom for 80 percent of its power, were asked to reduce power use. BHP Billiton, the resources company, temporarily closed down operations at its Mozambique smelter.

“Whether you have a small shop or business, or a factory making plastics or glass, blackouts incur physical loss and forfeited profits. Supporting energy supplies will support industry and job creation,” explained Abdelrahman.

But critics of the loan do not believe low income countries in the region will benefit from the Medupi loan.

“Eskom is driving energy policy in a way that favours extractive industries and heavy energy users over providing energy for the poor, which is one of the region’s pressing problems,” declared Lori Pottinger, who works on African energy issues at International Rivers, a California-based advocacy group.

“Providing low-cost electricity to mines and smelters while three-quarters of the regional population has no electricity is an unsustainable and unjust model of development,” she added.

Several mines and smelters have access to cheap energy because South Africa in previous decades had abundant power, which the government offered to companies at a low cost to attract value-added industries.

Some present contracts reflect the historical agreements, and demand from these companies is now “overwhelming” South Africa’s electricity system, said Eliot Whittington, senior adviser of the Climate Justice Initiative at Christian Aid. Christian Aid is an international development charity working to eradicate poverty.

But NordPool Consulting’s Bredesen expressed concern that, if Eskom falls too far behind, tariffs will spiral in surrounding countries.

“South Africa has the best economic resources to pay for electricity as well as being the largest market in the region, so if Eskom cannot keep up with demand it will buy more power from other producing countries in the SAPP region, pushing up prices for their consumers,” he argued.

Regarding renewable energy, while South Africa has considerable potential for wind, solar and marine energy, in the short term the sector can only play a “limited” role, explained Professor Wikus van Niekerk, director of the Centre for Renewable and Sustainable Energy Studies at Stellenbosch University near Cape Town, South Africa.

This is due mainly to regulatory problems in South Africa,

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