The World Bank is finalising talks with the government on a loan to finance the shutdown and “greening” of Eskom’s old coal-fired Komati power station, as the bank builds on the $1.2bn in loans it has extended to SA over the past year and promises more budgetary support for SA if the government requests it.
The bank’s Komati project loan is separate from the $8.5bn that has been committed by the Just Energy Transition (JET) partnership comprising the UK, US, Germany, France and the EU. But it comes as SA is busy finalising its climate investment plan, which is due to be announced at the climate change COP27 conference in Egypt in November.
World Bank vice-president for East and Southern Africa Victoria Kwakwa said the bank had been asked to help finance the decommissioning of the Komati power plant.
“We were asked to do this not because of the financing we bring but also because we can support in the repurposing for renewables and we can help do it in a way that really puts the social issues front and centre ... in a process like this where you really want to make sure that the dislocation of workers and communities are taken care of, I think we bring some value to the table,” Kwakwa said in an interview on Thursday.
She did not disclose the size or terms of the Komati loan, which she expects will be announced in October ahead of the COP27 meeting. Energy industry sources say it will be a loan to Eskom, rather than to the government, though it will be guaranteed by the Treasury.
Komati, in Mpumalanga, is one of Eskom’s oldest power stations and its units are being gradually shut down as they reach the end of their useful lives. The last one is due to shut next year.
Eskom plans to pilot it as a model for decommissioning old coal-fired stations and repurposing them to run on renewable energy or natural gas, in ways that reduce the effect of the transition on employees and local communities. The power utility has made it clear it will need concessional finance to enable this.
The World Bank has lent money to Eskom before, granting a controversial $3.75bn loan in 2010 to help finance the building of Medupi and of two renewable energy projects (one of which was never built).
Better terms
But it was only during the Covid-19 pandemic in 2020 that the government itself turned to the bank and other international financial institutions, including the IMF, for the first time, borrowing from them at cheaper rates and better terms than it can obtain on global capital markets.
The World Bank approved a $750m development policy loan to SA’s government in January, which was for general budgetary support, and a further $480m loan in June for SA’s Covid-19 emergency response, which helped retroactively to fund SA’s vaccine rollout.
The $1.2bn lent to SA during its fiscal year to end-June was a small part of the World Bank’s $33bn of lending to Sub-Saharan Africa as a whole, Kwakwa said, and it did not displace lending to other, poorer countries.
Kwakwa, who was speaking in an interview at the end of a visit to SA to meet government and other stakeholders, said the World Bank is willing to respond to further requests from the government for budgetary support, and is also doing a lot of “knowledge work”, funding research and analysis on request from the government in areas such as energy and ports.
It had also facilitated grants to projects in battery storage and carbon capture and is completing a detailed Country Climate and Development Report for SA, as well as for other countries such as India, for release ahead of COP27.
Speaking to SA media this week, the British high commissioner to SA, Antony Phillipson, said the JET partners are working closely with the SA government to develop an investment plan, with the aim of publishing it at COP27.
Bloomberg reports that John Kerry, the US special presidential envoy for climate, said progress on the $8.5bn financing deal to help SA shift to cleaner energy is dependent on President Cyril Ramaphosa. “We’re waiting for the SA government to put some things on the table,” he said at an environmental conference in Dakar, Senegal.
Under the agreement, SA would use the money to decommission coal-fired plants, partially replace them with cleaner energy, expand its transmission grid and compensate coal-dependent communities, Bloomberg reports.
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