World Bank approves Eskom loan

Johannesburg - The World Bank has approved the granting of a $3.75bn loan to electricity parastatal Eskom.

In a statement late on Thursday night, the World Bank said its board of executive directors had approved the loan "to help South Africa achieve a reliable electricity supply while also financing some of the biggest solar and wind power plants in the developing world."

It added that the loan was the Bank's first major lending engagement with South Africa since the fall of apartheid 16 years ago.

"The loan is provided to South Africa's power utility, Eskom, and was brought about by unique circumstances including South Africa's energy crisis of 2007 and early 2008, and the global financial crisis that exposed the country's vulnerability to an energy shock and severe economic consequences," the Bank added.

The loan will assist Eskom with its development of a coal-fired power station at Medupi in northern Limpopo.

While $3bn of the loan would fund the bulk of the construction of Medupi, the remainder of the funds would go toward renewable energy.

Over the past weeks, the loan proposal raised objections from both political parties and environmental groups.

However, both government and the power utility stressed that there was no alternative but to develop Medupi to "keep the lights on."

The opposition Democratic Alliance insisted that the Medupi deal would enrich the ANC by about R1bn.

This was due to the ruling party's involvement in the building of Medupi via its 25% stake in Hitachi Africa, the company awarded a boiler contract for the power station.

Meanwhile environmental groups such as Earthlife Africa Jhb argued that the coal-fired Medupi power station violated World Bank policies and posed threats of air pollution and high sulphur dioxide levels to communities living nearby.

- Sapa