20100412
BUSINESS DAY

Johannesburg — THERE are obviously some important "positives" in the fact that the World Bank has agreed to SA's request for a $3,75bn loan to help Eskom build its power stations. There were powerful environmental doubts expressed - by the US and UK and Netherlands because the new Eskom plants are to be coal-fired - so the fact that the loan has been granted is a relief, in a way.

It is not that the money for the Medupi plant now under construction could not have been found some other way (as Finance Minister Pravin Gordhan said recently). But it would have come at higher cost, to taxpayers or electricity consumers or both. There's a limit to how much Eskom can borrow on the market in any one year (and it is planning to borrow up to R40bn annually). So without the World Bank loan it is possible the government would have had to do the borrowing instead - in which case taxpayers would have paid in higher taxes or higher borrowing costs.

Or perhaps Eskom could have borrowed more - but at higher interest rates and less attractive repayment terms. And of course even with the loans and recent tariff increase there is still a funding gap on the power stations which Eskom and the government must make a plan to close.

We wish Eskom and the government well. We opposed the World Bank loan not because we don't want the electricity, but because we want it to be politically clean power when it comes on stream. Sadly, the loan helps virtually to guarantee a huge financial reward to the ruling African National Congress (ANC), through its ownership of an investment trust called Chancellor House which, in turn, owns 25% of Hitachi Power Africa, which has a R38bn contract to supply boilers to Medupi. A profit margin of a mere 13% for Hitachi on the Medupi project would steer more than a thousand million rand into the ANC's bank accounts.

That would make it one of the richest political parties in the world and make the job of creating a genuine multi party democracy here almost impossible. The World Bank had an opportunity to make its loan on condition that Chancellor House pulled out of Hitachi but it chose not to. It was and is a shameful decision, and the ANC is in an untenable situation while it stands to benefit from the Hitachi link.

That does not mean, sadly, that it will not press ahead and defend its holding. There have already been all sorts of attempts to justify it. Hitachi won the contract while a member of the ANC finance committee, Mohammed Valli Moosa, was chairman of Eskom, but he insists that audits have shown the contract was clean.

But that's just it! The ANC funds itself (starting with the arms deal) by leeching off government contracts over which it has undue influence. This time though, no actual cheating was necessary. All Hitachi had to do was win the contract fair and square and Chancellor House, through its insightful investment decision, would make a fortune. It is impossible to put that win down to chance, given the circumstances. That may be one of tragedies of the ANC's involvement. It will sully everything it touches.

The affair will do little for SA's growing reputation as a corrupt country and the ANC should quickly dismantle Chancellor House (as its treasurer Mathews Phosa promised more than two years ago) or get Chancellor House out of Hitachi. There were reports at the weekend that this would now be done, hints that the World Bank had made its loan on a sort of unwritten understanding that the ANC would not pocket the money.

We will not hold our breath. There's clearly an argument inside the ANC about whether to take the money or not. Secretary-general Gwede Mantashe sandbags the issue every time he is asked about it. He can't see the problem.

But the problem is clear. The ANC made much, at the Polokwane conference that felled Thabo Mbeki , of the fact that the party was "taking back" control of the government. It cannot claim now that it has that control and not take responsibility for the decisions it takes - including the awarding of a contract to Hitachi from which it will benefit.

If the ANC does not do the right thing and get out of Hitachi, the inheritors of the Medupi billions when they are paid in four or five years' time will be the current leadership of the ANC Youth League. Perhaps someone should send World Bank boss Robert Zoellick some video clips illustrating the leadership qualities of Julius Malema and let him chew on what he has done.

Secretary-general Gwede Mantashe sandbags the issue every time he is asked about it. He can't see the problem.