Foreign Aid

More odious debts for the Democratic Republic of Congo if the World Bank gets its way

Brady Yauch

August 19, 2009

World Bank President Robert Zoellick is urging the Democratic Republic of Congo to pursue better governance [PDF] as a way to entice more companies to build dams in the country. In his sights are the rehabilitation of the notoriously dysfunctional Inga 1 and 2 dams.

But if Zoellick has his way in the DRC, a new dam called Inga 3 will also be built, followed by the mother of all dams—the Grand Inga—which together would be constructed to harness the estimated 40,000-50,000 MW of hydro power potential on the Congo River. Proponents dream that the Inga dams complex, along with an equally mega transmission system, will power Africa—with some electricity left over to send to Europe [PDF] .

Inga Complext To kick start this development, the Bank is kicking in around $300-million to rehabilitate the dysfunctional Inga 1 and Inga 2 dams—built in 1972 and 1982 respectively by then-Zaïre’s dictator Mobutu Sese Seko. These notorious ‘white elephants’ are currently operating well under-capacity and have been acting as a drain on the country’s finances for decades. The Bank hopes that their rehabilitation will entice the DRC, and other international funders to finance the next in line—the new and larger dam, Inga 3.

But critics, like Probe International’s Patricia Adams, argue that the Bank’s easy money for state vanity projects like the Inga dams is exactly what has destroyed good governance in countries such as the DRC. More of the same won’t help.

Moreover, the private sector won’t invest in mega dams with out mega-subsidies and pricing regimes that transfer private-sector risks to the public purse—saddling Third World taxpayers and electricity ratepayers with the real costs of these projects. The original Inga dams were, themselves, foreign-financed.

If the past is any indication, the future does not bode well for the citizens of the DRC, as the state power company in charge of the dams, SNEL, is already deep in debt. And while the World Bank itself admits that the DRC’s debt burden “exceeded their policy-based thresholds,” and that the country “has not serviced any of its debt service obligations to Paris Club creditors since July 2006,” the Bank continues to push more debt on the DRC in order to fund massive and uneconomic forms of centralized power.

The tragedy, says Probe’s Patricia Adams, is that the rest of the world is realizing that the future of the power industry is in decentralized smart grids and micropower. “This is just another example of the World Bank pursuing failed policies of the past,” she says, “sinking its client states in debt pursuing uneconomic, environmentally ruinous centralized power systems.”

While the financing of Inga 3 has recently been thrown in doubt, it may still see the light of day if the DRC decides to finance the project itself with the backing of BHP Billiton—a mining giant with plans to build two aluminum smelters in the country, and presumably plans to use this power.

Those plans, though, will be contentious, as groups such as Probe International and International Rivers are arguing the social and environmental costs probably can’t be internalized and covered by the profits from the project. Politically, the plan may also falter.

Much of the electricity from the rehabilitated Inga 1 and 2 and Inga 3 will bypass local citizens and be sold to other African countries and mining companies. This means that 96% of the DRC population currently lacking electricity will continue to be left in the dark [PDF] . And many of the citizens that will be forced from their land may not receive proper compensation.

But the problems facing the rehabilitation and Inga 3 projects will likely pale next to the Grand Inga Dam—a 39,000 MW project that proponents say would be able to power all of African and still have some left over to sell to European utilities. If the plan for the Grand Inga Dam is realized, it would be the world’s largest—dwarfing the 22,000 MW produced by the Three Gorges Dam. According to one news source [PDF] , the final stages of planning are underway for the construction of the $80 billion project.

The problems and costs don’t end, however, with construction of the dams. Transmitting the power would be vulnerable to line interruptions, huge transmission losses and costly. One analyst says that because the power companies will have to build a transmission corridor that is more than 5,000km long to various customers, the price of transmission could be twice that of the electricity itself [PDF].

In the face of gargantuan problems with this gargantuan project, many wonder why the World Bank is pursuing an energy policy that has failed it for the last 60 years?

The answer: carbon credits and the global warming mania.  As an increasing number of banks and companies are realizing the potential profits to be made in the carbon offset market, supposedly ‘clean’ projects such as Inga 3 and the Grand Inga are attracting attention. The World Bank is facilitating this cash grab by promoting hydro dams as clean and renewable—making them eligible to receive lucrative carbon credits.

The World Bank isn’t alone in pursuing hydro dams. Gerald Doucet, secretary general of the World Energy Council think tank said [PDF] “the banks and the City of London see that Grand Inga is serious. The G8 countries are behind it because they can get UN clean development mechanism [CDM] credits to offset their emissions. Chinese, Brazilian and Canadian dam-building companies, as well as the World Bank, are all interested.”

Indeed, the projects in the DRC are also part of a renewed push by the World Bank to pursue hydro development [PDF] . Hydro dams fell out of favor in the 1990s because of strong opposition from environmental groups and Third World debt. Seizing the opportunity provided by the global warming scare, the Bank has trumped up dams as the answer to other forms of power generation, throwing in every other reason but the kitchen sink, including energy security, water security and regional cooperation.

New lending from the bank for hydro power is growing dramatically—from less than $250 million per year from 2002-2004 to $500 million per year from 2005-2007. Last year, new lending for hydro exceeded $1 billion. And the trend is set to continue, as the bank says it has a pipeline of about $2 billion in projects under preparation for the next several years.

But the World Bank’s renewed optimism in hydro power raises concerns that have been voiced for decades. The Bank’s construction of large, centralized sources of power—like dams —has failed to generate electricity reliably and affordably for its customers. The Bank has financed the forced displacement of millions of voiceless citizens who end up impoverished and with wrecked environments.

Worse, the World Bank has empowered bureaucrats with huge budgets and an absence of public oversight that has spawned white elephant projects, corruption and the breakdown of accountable governance in Third World electricity sectors—sinking their citizens in debt and leaving them without the means of production to repay those debts.

Nothing, it appears, has changed at the Bank, which seems unstoppable in its creation of odious debts.

Further Reading:

Probe International opposes World Bank financing for Congo dams

Congo opens bidding for Inga 3 hydro dam investors [PDF]

Banks meet over £40bn plan to harness power of Congo River and double Africa’s electricity [PDF]

Bank plans more infrastructure, mining and forestry projects in DRC

China’s Three Gorges Corporation vying to build world’s largest hydro project in Central Africa

Giant Congo hydroelectric project is a ‘betrayal’

World Bank urges Congo to better energy governance [PDF]

Pumping hydro power from the Democratic Republic of Congo to South Africa may be an environmental dream come true, but there are issues around social justice that are dampening the excitement somewhat. [PDF]

World Bank outlines priorities for sustainable hydro development [PDF]

Grand Inga Dam to light up Africa [PDF]

DR Congo Power Plant Holds Promise for Energy Supply to Millions across Africa [PDF]

Fury at plan to power EU homes from Congo dam [PDF]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s