Eskom’s World Bank loan under investigation

[] –THE World Bank’s Inspection Panel has confirmed that it is investigating the awarding of the bank’s $3.75bn loan to South African power utility Eskom.

In a statement to the World Bank board, Inspection Panel chairman Reberto Lenton clarified that the investigation related to “allegations of violations of World Bank operational policies and procedures”.

The loan, which was awarded in April, was the World Bank’s first major lending engagement with South Africa since the fall of apartheid 16 years ago.

The bulk of the loan – $3.05bn – was allocated for the construction of Eskom’s Medupi coal-fired power station in the Limpopo province while $260m was earmarked for investment in renewable energy and $485m was set aside for investment in low-carbon efficiency components, such as road to rail coal transportation.

According to the bank, the loan aimed to benefit the poor directly, through jobs created as the economy bounces back from the global financial crisis and through additional power capacity to expand access to electricity.

Ironically, it was the people the loan was aimed at benefiting that called for the investigation.

Lenton said requests were received from community members living in the project area of Lephalale in the Limpopo Province through groundWork and Earthlife Africa, two non-governmental organisations.

Since, an Inspection Panel team has visited South Africa to ascertain the validity of the request for an investigation.

“During this visit, the panel was struck by the widespread level of concern among requesters and other local residents about the potential impacts of the project, especially local social and environmental impacts,” Lenton said in the statement.

He added that the community indicated that it was not against development in the area but was worried about the project’s potential impacts on their lives and livelihoods.

“Based on its review of the relevant documentation and its field visit, and taking into account the sharply different views of the requesters and management, the panel considered that the request raises important issues of compliance and harm that can be addressed only in the context of an investigation,” Lenton said.

The panel has therefore recommended that an investigation be carried out on the issues raised by the request that relate to allegations of violations of World Bank operational policies and procedures.

“The panel’s investigation will also report on any steps and actions taken by management during the course of the investigation to address the issues of compliance and the concerns raised by the requesters,” the report carrying the recommendation read.