Blog post: UK campaigners force UK to abstain but World Bank coal loan still goes through

Alex Wood, used to be Campaigns and Policy Assistant

On Thursday 8 April, the World Bank Board approved a $3.75 billion loan to the South African energy giant Eskom. The loan was opposed by an international coalition of 200 civil society groups lead by 65 South African social and environmental organisations. Despite a huge amount of green spin from the World Bank the core element of this loan is $3.05 billion for the completion of the 4800 MW Medupi coal-fired power station which will be the fourth biggest coal power station in the world.

The loan comes at a time when it is imperative that the world cuts its addiction to carbon and especially coal. South African civil society is resisting the loan as it will increase South Africa’s already high level of debt by 5 per cent. This debt is especially problematic as, being in dollars, it leaves South Africa further exposed to the perils of exchange rate fluctuations.

Civil society is also protesting that the loan will further entrench Eskom’s monopoly which has allowed it to provide below cost energy to some of the biggest corporations in the world, while the poor pay around four times as much per unit of energy. There are also serious corruption allegations that the ANC will receive millions of dollars from Hitachi, who are contracted to make the boilers for the power station.

The World Bank has a long history of ignoring South African civil society. For example, during the apartheid era the World Bank provided loans to Eskom even though its electricity was reserved for white businesses and households and despite the liberation movement calling for the World Bank to divest from South Africa.

International pressure, including campaigning by the World Development Movement resulted in the UK abstaining along with the US, Netherlands, Italy and Norway (as a country although it is represented as a group). The US gave its reasoning for abstaining being due to “concerns about the climate impact of the project”. Whilst the UK claimed that it was too controversial an issue for the UK to vote on during the election period.

The fact the UK abstained and used such a poor excuse (the election period is not stopping the UK taking part in a nuclear security conference today) shows that the government was forced to recognise the implications of supporting a loan for coal. It should however be recognised that the UK along with the US, Italy and Netherlands took the easy option of least resistance, safe in the knowledge that the loan would be approved. If the UK was truly concerned by the impacts of the loan then they would have voted against it, being the largest donor to the World Bank and with other countries abstaining a UK vote against would have blocked the loan.

The Eskom episode is further evidence that the World Bank is not fit to be involved in climate finance. As the US treasury states the loan showed “incompatibility with the World Bank's commitment to be a leader in climate change mitigation and adaptation”. Whilst the continued sidelining of civil society, allegations of corruption and willingness to saddle South Africa with further unfair debt shows that the World Bank remains ill-equipped for dealing with development issues in the global south.

Despite the Board decision the campaign goes on with a demonstration outside the World Bank's office in Pretoria planned for tomorrow. WDM will continue campaigning for the UK to pay back its climate debt with grants not loans which are accountable to local people and managed through democratic institutions such as the UN, rather than through the untrustworthy World Bank.