- The World Bank has approved a US$ 3.75 billion loan to help South Africa achieve a reliable electricity supply, despite some protest from environmentalists for the country to shift to greener energy sources.
However, the bank has said it is also financing some of the biggest solar and wind power plants in the developing world.
"The loan - the Bank's first major lending engagement with South Africa since the fall of apartheid 16 years ago - aims 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," the World Bank said in a statement.
The loan which is provided to South Africa's power utility, Eskom, the bank justified, 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.
"Without an increased energy supply, South Africans will face hardship for the poor and limited economic growth," said Obiageli K. Ezekwesili, World Bank Vice President for the Africa Region. "Access to energy is essential for fighting poverty and catalyzing growth, both in South Africa and the wider sub-region. Our support to Eskom combines much-needed investments to boost generation capacity for growing small and large businesses, creating jobs, and helping lay the foundations for a clean energy future through investments in solar and wind power."
The Eskom Investment Support Project (EISP) is to co-finance the following blend of energy technologies: US$ 3.05 billion for completing the 4800 MW Medupi coal-fired power station, using for the first time on the African continent the same proven, efficient supercritical technology used in OECD countries; US$ 260 million for piloting a utility-scale 100 MW wind power project in Sere and a 100 MW concentrated solar power project with storage in Upington; and US$ 485 million for low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions.
In approving the project, the World Bank noted South Africa's achievement in increasing energy access from around 30 percent of citizens to more than 80 percent since the fall of apartheid in 1994 and noted its Free Basic Electricity policy that provides 50 kilowatt hours (KWh) of free electricity per month to poor families.
The Bank also noted South Africa's pivotal role as generator of 60 percent of all electricity consumed on the African continent and the importance of a functioning electricity sector for job creation, economic progress, human welfare, and poverty reduction.
"The Eskom project offers a unique opportunity for the World Bank Group to strengthen its partnership with the government of South Africa, Eskom, and other financiers and help South Africa chart a path toward meeting its commitment on climate change while meeting people's urgent energy needs," said Ruth Kagia, World Bank Country Director for South Africa.
"As part of the project, Eskom will pilot 100 megawatts of solar power with storage and wind power, the biggest grid-connected renewable energy venture in any developing country," added Vijay Iyer, World Bank Energy Sector Manager for Africa. "We are optimistic that the lessons learned from these projects will facilitate the scale-up of the renewable energy industry across Africa."
The project has received strong support, both from South Africa and other parts of the world. In a letter to World Bank President, Robert Zoellick, South African President Jacob Zuma stated that the energy sector in South Africa is of "strategic national importance" and "achieving energy security will be a critical factor for restoring economic growth, both in South Africa, and the wider southern Africa sub-region."
President Zuma has also stated that his government is "committed to reducing the country's carbon footprint and broadening its energy sources in line with our cabinet-endorsed Long-Term Mitigation Scenarios" and expressed appreciation that the EISP includes "investments in cutting-edge, supercritical technology being installed for the first time on the African continent as well as substantial investments in renewable energy."
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