Johannesburg — THE World Bank has defended its proposed 3,75bn (R29bn) loan to Eskom amid growing criticism from environmental groups and nongovernmental organisations (NGOs).

The loan - set to come up for discussion and approval at the bank's board meeting either later this month or next month - is a crucial component of Eskom's borrowing programme. Eskom must intensify its borrowings if it is to keep its R385bn capital expansion programme on track.

Last month, the National Energy Regulator of SA (Nersa) granted Eskom a tariff increase of 25%-26% for each of the next three years, which is significantly less than the 35% that Eskom had asked for.

Eskom finance director Paul O'Flaherty said last week Eskom had already factored the World Bank loan into the funding plan it submitted to Nersa as part of its application for tariff increases.

The NGOs, Climate Justice Now, groundWork and the Federation for a Sustainable Environment, have criticised the loan, supported by the National Union of Metalworkers of SA and the South African Council of Churches. They said if it was approved, the poor would bear the burden of Eskom debt.

But Pretoria-based World Bank spokesman Sarwat Hussain said: "The campaign (by the NGOs) is based on half-truths accusing the bank of a range of issues. The challenge is about the economic growth imperatives of SA, especially in the post-recession phase. Nearly one in four South Africans does not have access to energy."

Hussain said a World Bank loan was the cheapest money available for financing large-scale projects.

O'Flaherty said the proposed funding would be "an economically attractive option" for SA. "Thanks to decades of macroeconomic stability and prudent fiscal management, SA has the lightest debt burden of any African country. This is the first energy sector investment being made since the fall of apartheid. Electricity demand has grown by 60%."

Hussain said the loan would lead to the biggest investment in renewable energy in SA: 260m of the loan is for renewable energy, while 485m has been earmarked for low- carbon energy components.

"The overall objective is to achieve energy security and adopt a low carbon trajectory. The loan will lead to the biggest investment in renewable energy. Government views this as a strategic national priority and has urged the World Bank to do all it can to expedite support to Eskom. The cost of inaction will be very high," Hussain said.

O'Flaherty said the Bank's funding would "jump-start" SA's switch to a lower carbon footprint.

Last week, Business Unity SA also threw its weight behind the loan application. It said the loan was appropriate for a developing country like SA "which is both underborrowed internationally and anxious to build necessary infrastructure capacity. Failure to borrow sensibly for Eskom's needs will either mean yet higher electricity tariffs or the risk of load shedding if Medupi (a planned power station) is not completed in time".