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The World Bank’s Board of Executive Directors has approved a
$3.75 billion loan to help South Africa achieve a reliable electricity supply
while also financing some of the biggest solar and wind power plants in the
developing world.

The loan which was approved on Thursday – 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.

Access is essential

Obiageli Ezekwesili, World Bank Vice President for the Africa
Region, in a statement, said “Without an increased energy supply, South
Africans will face hardship for the poor and limited economic growth.”

According to her, “Access to energy is essential for fighting
poverty and catalysing 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 loan is provided to South Africa’s power utility, Eskom, and
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.

Other projects

The Eskom Investment Support Project (EISP) will co-finance the
following blend of energy technologies: $3.05 billion for completing the 4,800
Mega Watt (MW) Medupi coal-fired power station, using for the first time on the
African continent the efficient supercritical technology used in the
Organisation for Economic Co-operation and Development (OECD) countries; $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; $485 million
for low-carbon energy efficiency components, including a railway to transport
coal with fewer greenhouse gas emissions.

According to the statement, in approving the project, the World
Bank noted South Africa’s achievement in increasing energy access from around
30 per cent of citizens to more than 80 per cent 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 per cent 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.

Ruth Kagia, World Bank Country Director for South Africa, said,
“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.”

“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,” said 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.”

Government backing

The project has received strong support, both from South Africa
and other parts of the world.

In a letter to World Bank Group 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.”

Mr. 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.”