The quickest way to reduce Eskom’s balance sheet — declare odious debt on Medupi and Kusile

On Friday, activists from Debt for Climate and Extinction Rebellion Gauteng are protesting in Johannesburg against the World Bank this week during the Group’s annual meetings being held in Washington DC. Protests are also happening in Washington DC, in Argentina, Peru, Panama, Indonesia and all across Europe.

For us, the most pressing issue is the damage to Eskom’s balance sheet by the World Bank, dating to 1951, but ramping up in 2010 with the $3.75-billion (R67 -billion) loan that made the Medupi coal-fired power station possible.

Eskom is now currently in debt to the tune of almost R400-billion. The board of Eskom and its only shareholder, the South African government, are looking for ways to address this debt, and since Eskom is already junk-rated, relief won’t come through more borrowing on the open market. 

And new lenders in the misnamed Just Energy Transition-Partnership are doing more harm than good: failing to recognise the $8.5-billion as a down-payment on the North’s climate debt; failing to ensure Eskom halts all new fossil fuel projects including methane gas; lending in hard currency at a time our rand is crashing; and simultaneously requiring repayment of Medupi “odious debt” that in a just world would be cancelled.

Repayment of the full amount is near impossible unless the taxpayer is burdened with a massive amount. There is a substantial lobby in the business sector — e.g. Morgan Stanley bank — suggesting that government do exactly that. They have proposed that Finance Minister Enoch Godongwana adds R250-billion in Eskom liabilities to the 26 October 2022 Medium-Term Budget Framework. 

If this happens, Eskom’s debt will become a noose around the neck of not only the largest state-owned enterprise and its customers, but now the taxpayer — and it will prompt Godongwana to impose even worse austerity on social spending to compensate. Some of Treasury’s most brutal cuts have been to the national-to-municipal ‘Equitable Share’ grants, and these cuts are already creating major outbursts of social unrest (including in places like Tembisa recently), as municipalities in turn cut electricity supplies and charge much higher prices to low-income black residents.

In these ways, the taxpayers, citizenry and electricity consumers of South Africa will be unfairly burdened for years to come by Eskom’s debt, the vast majority of which can be classified as odious debt. 

The largest component of the debt is to pay for two vast coal-fired power plants — Medupi and Kusile (costing well over R300-billion). Those transactions were always tarnished with corruption and accusations of bribery. 

The World Bank president knew of the corruption and at the same time, he ignored the efforts of a major international campaign against Medupi, one of the most widespread and visible in Bank history. The anti-Medupi movement even compelled the US Bank representative to abstain against what was the Bank’s largest-ever project credit. The original loan was for $3.75-billion, nearly all for the 4,750MW coal-fired power plant. 

This bribery was prosecuted in the United States. Hitachi paid a $19-million (R350-million) fine to US authorities in 2015. In South Africa, a 25% share of Hitachi Africa was given to Chancellor House, the ANC’s investment wing, at a time Eskom’s chair Valli Moosa also sat on the ANC Finance Committee in a blatant conflict of interest. 

Strangely this transaction was not investigated by the Commission into State Capture (the Zondo Commission)

In a 2007 report, the UN Conference on Trade and Development (Unctad) addressed odious debt, arguing that within the 1969 Vienna Convention on the Law of Treaties, “Articles 49 and 50 reflect an emerging body of international law in respect of fraud and corruption of a representative of a State.” 

Debt contracts can, in such cases, be questioned. 

Indeed, the Unctad report continues:

“A court may be able to fashion a remedy to allow… a State to avoid debts contracted by a collusive lender and corrupt government officials in the sovereign context. Even if a loan is assigned to a third party who had no knowledge of, for example, corruption or bribery contrary to the United States Foreign Corrupt Practices Act 1977, the law relating to the assignment of contractual rights provides that the borrower can raise the same defences against the assignee… 

“In recent articulations of the concept of odious debt, one of the conditions for the characterisation of debt as odious and eligible for repudiation is that the creditor at the time at which the loan contract was made knew, or should have known, that the debt was odious, i.e. that the funds were intended for a purpose contrary to the interests of the population.”

Critics of the loan in South Africa included environment, community, labour and other civil society groups, the main opposition party and the main business newspaper — all of whom asked the Bank not to lend for Medupi because of corruption by Hitachi or its implications for the climate catastrophe. 

But both Medupi and Kusile were built by Eskom, with Hitachi boilers costing tens of billions of rands, and without the required environmental interventions in place to prevent pollution — whether CO2, SO2, methane or other dangerous emissions — in flagrant disregard for local and global victims. 

Debt cancellation

Inglorious role of the World Bank

• its leading advisory role and subsequent promotion of privatisation and austerity in its 2022 lending; and


• the $2-million investment made with Transnet in 2019, in a proposed Liquefied Natural Gas terminal in Richards Bay, to import “blood methane” from northern Mozambique in spite of methane’s much greater potency as a greenhouse gas (85 times worse than CO2 over the next 20 years).

1. The World Bank should consider Medupi, any other fossil fuel investment and other corrupt financing as odious debt and cancel them;


2. The World Bank Group and IMF must cancel the other financial debt owed by the Global South — as a down payment on the climate debt owed by the Global North;


3. The Biden Administration and other World Bank member states must fire Bank president David Malpass for being a climate denier, as confirmed to the New York Times last month.


4. The World Bank and IMF must be democratised, not just by ending the tradition by which leadership of these institutions is restricted to only Americans or Europeans, but also because elites from any country — including South Africa — need civil society counterbalance so that the likes of the Medupi loan are never again contemplated at the Bank.