U.S. Position on the South Africa - Eskom Investment Support Project and the Country 

Partnership Strategy Progress Report 

4/8/10 

The United States recognizes the exceptional nature of the Eskom Investment Support project, 

which has come to the World Bank as a result of the global financial crisis and would otherwise 

have been funded privately. The United States also recognizes the extraordinary energy needs 

faced by South Africa, where the economic recovery could be hampered by periodic blackouts in 

the absence of new capacity, and a significant portion of the poor still lack access to power. This 

project has implications for the region’s economic growth, stability, and ability to address 

challenges of health, education, and poverty. 

The United States notes South Africa’s active participation in the Copenhagen climate 

negotiations, its subsequent signing onto the Copenhagen Accord, and its efforts to develop a 

vision for a low carbon development path. South Africa’s plan for expanding reliance on 

renewable energy, its energy efficiency program, its reforms to regulatory and tariff structures, 

and its plans to shut down inefficient coal power projects as new capacity is added are all 

commendable. 

The Eskom Investment Support Project, however, presents a challenge for the World Bank and 

for the United States. Providing below-market financing for a 4800 MW coal plant undercuts the 

World Bank’s strategy of helping countries pursue economic growth and poverty reduction in 

ways that are environmentally sustainable. The World Bank has expressed a clear desire to place 

global collective action and climate change at the center of its work; however, its support for this 

project without commensurate support to reduce South Africa’s energy-related emissions is 

difficult to reconcile with the Bank’s desire to be a leader in climate change mitigation and 

adaptation Helping countries define development trajectories consistent with low carbon 

intensity must become a core part of the Bank’s work. We must integrate into all of our work the 

stark fact that our planet faces severe risks of catastrophic climate change, with the greatest risks 

to low income countries. Business as usual solutions are no longer acceptable. 

In light of the project’s substantial greenhouse gas emissions, uncertainty about future mitigation 

efforts associated with the project and local pollution controls, weaknesses in environmental 

impact assessments, and procurement deficiencies, the United States wishes to be recorded as 

abstaining on this project. 

The United States recognizes that South Africa’s energy strategy , at least in the near term, will 

include coal for baseload power generation, and that this plant is important for South Africa’s 

economic growth and poverty alleviation efforts. However, the United States has serious 

concerns that the World Bank is proposing to finance a new coal-fired power project that will be 

among the largest sources of CO2 emissions in the world at the same time that the Bank is 

seeking to take on a central role in the global climate agenda. In addition, the United States has 

reservations about the inconsistencies with the Bank’s Procurement Guidelines, weaknesses in 

the environmental assessments, and uncertainty about the installation and operation of local 

pollution controls. 

Turning to each of these issues: 
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First, the asymmetry between the enormous source of emissions from a 4800 MW power plant 

and 200 MW of renewables cannot be ignored. This asymmetry is why the World Bank’ Expert 

Panel concluded that the project is inconsistent with the spirit of the World Bank’s strategic 

framework for development and climate change, and why we and the Panel recommend that the 

World Bank and South Africa commit to a transition partnership to reduce overall energy-related 

emissions. As a demonstration of this commitment, the United States welcomes the South 

African government’s commitment for scaling up renewable energy. The project includes a 

package of investments for IBRD funding – $260 million for renewable energy investments and 

$440 million for energy efficiency investments. The United States also welcomes the Clean 

Technology Fund’s proposed co-financing of the renewable energy components. Finally, the 

United States welcomes the South African government’s recent public statement on its 

commitment to using $1.25 billion of the remaining IBRD resource envelope for emission 

mitigation, to include carbon capture and storage readiness in the development and design of the 

Kusile plant, and to consider accelerating the shutdown of inefficient coal facilities in the future. 

Second, on procurement, while the United States appreciates that the Bank has secured 

agreements that all of the contracts it finances will be subject to the Bank’s fraud and corruption 

provisions, there are multiple inconsistencies between Eskom’s procurement process and the 

World Bank Procurement and Consultant Guidelines. The United States urges the World Bank 

to work with Eskom to improve its international procurement practices, and to ensure that the 

procurement that has yet to take place on this project, and on any subsequent World Bankfinanced project, fully conforms to the World Bank’s Procurement and Consultant Guidelines. 

Third, we believe that the project’s environmental impact assessment (EIA) is deficient. The 

EIA should have assessed two key associated facilities that are needed for the project to operate: 

(1) the planned construction of a water transfer system needed to supply half of the water needs 

for the power plant (Crocodile West Transfer Water Scheme), and (2) the expansion of the 

Grootegeluk coal mine being used to supply the Medupi power plant. Because these facilities are 

essential for the project to operate and they will have significant environmental impacts, they 

should have been subject to a full environmental impact assessment and included in the World 

Bank’s posted environmental assessments. In addition, the cumulative impact assessment is 

weak because it does not appear to cover all of the planned developments in the area. 

Fourth, the United States is concerned about the adequacy of efforts to mitigate local air 

pollution and water scarcity issues. We hope that the operation of environmental controls for 

Medupi will be clarified, and that the Bank will provide assistance as needed to reduce local 

pollutants and carbon emissions from other plants. 

In closing, the United States wishes to make it clear that, despite its abstention on the overall 

Eskom operation as it has been packaged for the Board, the United States welcomes its 

renewable energy and efficiency components. The United States also expects that the World 

Bank will adhere to both the letter and spirit of its development and climate change strategic 

framework in the future. Finally, the United States expects that the World Bank will not bring 

forward any other new coal-fired power projects that: (a) fail to provide more evidence of serious 

upstream engagement by the Bank to find alternatives, or (b) in middle income countries, are not 

accompanied by actions that, in the aggregate, when implemented will offset the plants’ 

emissions. In addition, the United States sincerely hopes to see a growing pipeline of clean 

energy investments throughout sub-Saharan Africa.