ID WRITES TO WORLD BANK PRESIDENT DR ROBERT ZOELLICK ABOUT ESKOM LOAN

‘Make R29b Eskom loan conditional on Chancellor House's withdrawal,' says Greyling

Lance Greyling, the ID Spokesperson for Public Enterprises, has written to World Bank President Robert Zoellick urging him to make the R29b loan Eskom has applied for conditional upon Chancellor House's divestment from Hitachi Power Africa.

[The letter follows below...]

The ANC, whose front company has a 25% share in Hitachi Power Africa, which received the tender to build the Medupi and Kusile coal-fired power stations, stands to financially benefit directly from massive electricity tariff increases imposed on ordinary South Africans.

‘The Independent Democrats will exhaust all avenues open to us in our efforts to get the ANC to be true to the word of its Treasurer-General, Mathews Phosa, two years ago,' Mr Greyling says.

‘For Phosa to have told South Africa that the ANC would divest its shares in Chancellor House and then to go back on his word is unacceptable.

‘This issue is of paramount importance if we are to protect our democracy and promote good governance principles in South Africa,' says Greyling.

Dr Robert Zoellick
President of the World Bank
The World Bank 1818 H Street
NW Washington
DC 20433

9 March 2010

Dear Dr Zoellick

Re: Serious governance concerns over World Bank loan to South Africa

I am writing this letter as a concerned Parliamentarian from South Africa who is trying to prevent a major conflict of interest occurring in my country's electricity sector. This conflict of interest will be exacerbated by the World Bank agreeing to grant the requested loan to the South African Government to build the Medupi coal-fired power station.

This conflict of interest arises from the fact that the ruling political party in South Africa, the African National Congress (ANC), currently owns, through their front company Chancellor House, a 25% share in Hitachi Power Africa.

Hitachi Power Africa has been awarded the Government tender to build the boilers for both the Medupi and the proposed Kusile coal-fired power stations. This contract is worth in excess of R30 billion, or $4 billion. The ruling party's share in this contract is therefore worth in excess of R5 billion or $800 million. These facts are well-known and have been widely reported in the media in South Africa. It has also been confirmed to me through a parliamentary question that I asked of our Public Enterprises Minister, Barbara Hogan, where a written response from her indicated that Chancellor House still possesses a 25% share in Hitachi Power Africa.

At present there are no laws in South Africa that deem such a blatant conflict of interest as being illegal. The reason why there are currently no laws is that the ruling party has not promulgated any, despite numerous assurances over the past six years that they would do so.

I would also like to draw your attention to the fact that the ANC's own Treasurer-General, Mathews Phosa assured the media and the public in February 2008 that the ANC would divest itself from the deal in a "transparent" fashion, but the party has still not done so. Phosa said at the time that Chancellor House would appoint bankers to advise it on how to exit the deal.

"There will be no deals in the corner. It will be very transparent. It will be handled by a reputable bank," Phosa said.

He added that the decision to exit the deal was reached because "governance is an issue and there is public focus on this."

I am sure you will agree with me that such a glaring conflict of interest, in which the ruling party of a country stands to financially benefit to the tune of almost a billion dollars from a major public infrastructure build programme, flies in the face of the kind of good governance ethics the World Bank is attempting to nurture.

I would therefore request that such a loan is not granted to South Africa unless it is conclusively verified that the ANC, through Chancellor House, has divested all of its shares in Hitachi Power Africa, and that it will not in any way benefit financially from this Government contract.

I write this letter in defence of good governance and our young democracy. It would be a fatal setback for both these ideals if the ruling party of our country exploited the current lack of legislation governing political party funding to benefit financially from what should be a completely independent public build programme.

I realize that I am putting you in an invidious position by asking you to intervene in what is essentially a domestic governance issue. Given the size of the loan being requested, however, and the dire implications that this will have for our democracy and our efforts at rooting out corruption and conflicts of interest at all levels of our public institutions, I believe that it is in your best interests for me to bring this matter to your attention. I also firmly believe that it would not be out of the ambit of your position to insist that the money that the World Bank loans a member country is not used to further a major conflict of interest, or in promotion of bad governance.

I therefore trust that you will give this issue all the attention that it deserves and that you will take the appropriate action. If you require any further information or clarification on this issue please do not hesitate to contact me.

I look forward to reading your response and hopefully witnessing strong action to prevent a major breach in good governance occurring in my country.

Kind Regards

Lance Greyling, MP
Chief Whip
Independent Democrats

Statement issued by Lance Greyling, MP, Independent Democrats Chief Whip, March 9 2010

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