Thursday, April 17, 2014

The twisted tale of Inga 3

The twisted tale of Inga 3
By Michael Igoe, Paul Stephens17 April 2014

An aerial view of the existing semi-functional Inga dam on the Congo River. A new dam, the Grand Inga Dam, is being proposed and is currently the world's largest hydropower scheme. Photo by: International Rivers. Photo by: International Rivers / CC BY-NC-SA
In the lush southwest corner of the Democratic Republic of Congo, a massive dam project on one of Africa's largest rivers has created a twisted tale of political maneuvering and heated debates on the tradeoffs of economic development that has tripped up foreign aid leaders in Washington as they decide whether to support a project that is hailed as a solution to Africa's "energy poverty."

World Bank President Jim Kim says the project, known as the Inga 3 base chute, the next step in what would become the largest hydropower complex in history, is exactly the type of "bold" initiative a revamped and reenergized World Bank ought to support, and he is vying for U.S. support.

The debate about whether the U.S. government — the world's largest bilateral aid donor — should support the project has mostly been waged behind closed doors. But as Kim, who was nominated for his current job by President Barack Obama, tries to negotiate U.S. support for the controversial project, he has set off fierce debates and met strong resistance from the halls of Congress.

The lack of a clear U.S. policy on the dam and other energy projects raises tough questions about how thoroughly the Obama administration has thought through its Power Africa strategy, which aims to double access to electricity in sub-Saharan Africa.

Despite the concerns, the World Bank's board of directors approved last month a $73 million loan for a project to provide the initial technical assistance to plan the construction of Inga 3.

That project would eventually cost between $9 billion and $12 billion to build and would be an important step toward construction of the Grand Inga Dam, a massive hydropower project that would cost roughly $80 billion. Its potential 40,000 megawatts of output would dwarf that of China's Three Gorges Dam and double the African continent's energy output.

"We need this power desperately in Africa," Kim said at the Council on Foreign Relations earlier this month. "Today, the combined energy usage of the billion people who live in the entire continent of Africa equals what Belgium offers to its 11 million residents. This is a form of energy apartheid that we must tackle if we are serious about helping African countries grow and create opportunities for all Africans."

"No choice" to support Inga?

The idea for a giant dam across the section of the lower Congo River known as Inga Falls — a section of rapids spanning 9 miles — is hardly new. It was first dreamt up in the early 20th century and has captured the imaginations of engineers, government officials and foreign power companies for decades.

More recently, the plan has become the focus of attention for development officials like Kim who see the possibility, with a single project, of making a huge leap toward alleviating Africa's energy poverty, a cause célèbre for development agencies and advocates — including Bono, the U2 frontman and humanitarian — which has managed to attract bipartisan support in the U.S. Congress, partially due to an emphasis on including U.S. businesses in African energy solutions.

Kim told reporters that, given the reality of climate change and the energy needs in Africa, the World Bank has "no choice" but to seriously consider supporting a plan for Inga.

Not everyone sees the Inga scheme as such a no-brainer. Many of the hurdles to such a large construction project, and concerns about whether it would actually benefit locals, remain. And if the political wrangling over the project in the United States is any indication, mega-dams like Inga are going to be at the center of the debate about the role international development institutions should play to deliver electricity to poor people around the world.

In late December, Rajiv Shah, administrator of the U.S. Agency for International Development, tweeted a photo of himself with a smiling crowd of World Bank, U.S. and Congolese officials in front of the Inga 3 site at the end of a "great day" touring the area. Other top USAID officials — including Power Africa Coordinator Andy Herscowitz — followed suit with their own Twitter enthusiasm.

Rajiv Shah tweets about the Inga 3 site.
During the visit, Shah told a Bloomberg reporter USAID would consider contributing to the construction of the dam. The announcement raised eyebrows given USAID's avoidance of large hydropower projects elsewhere on the continent, and the fact that the DRC is not one of the countries included in the Obama administration's legacy-building Power Africa initiative.

But the massive potential of the Grand Inga scheme had obviously captured the administrator's imagination at a time when alleviating energy poverty in Africa has risen to the fore of U.S. development policy.

If the U.S. government plays a role in facilitating the successful construction of the Grand Inga dam complex, it would mean helping to generate enough megawattage in a single project for President Obama's Power Africa initiative to reach its goal.

With official development assistance representing a smaller and smaller piece of total overseas capital flows, Inga 3 — and eventually Grand Inga — is the kind of "transformational project" that opens up opportunities for aid agencies to leverage limited funds to achieve outsized gains on poverty reduction and economic growth. Not engaging on Inga 3 could appear to aid leaders like a lost opportunity to stay relevant in a rapidly changing development landscape.

U.S. officials on the defense

Since the visit, the Power Africa team has grown much quieter about Inga, and about any projects outside of the original six Power Africa countries. That's likely because Shah's comments on the Inga initiative, as vague as they may have been, quickly spurred a backlash from Capitol Hill that surprised even close observers.

That backlash came in the form of a directive, embedded deep in the omnibus spending bill for 2014, that instructed the Treasury to advise the U.S. representatives to the World Bank and other international financial institutions that "it is the policy of the United States to oppose any loan, grant, strategy or policy of such institution to support the construction of any large hydroelectric dam."

These directives, known as mandates, have become a fairly common way for members of Congress to assert their will over multilateral investment banks using the power of the purse. This one came from veteran Democratic Sen. Patrick Leahy, who sees potential U.S. involvement in Inga 3 as a huge mistake.

U.S. foreign assistance agencies, including USAID, rely on Leahy to bankroll their programs. He is one of a few members of Congress who have been vocal in their support of a robust foreign aid budget, and he pulls funding strings as the chair of the Senate appropriations subcommittee on state and foreign operations.

But the senator also uses his leverage as a vital foreign aid advocate to speak out against U.S. development initiatives and programs he feels do not make the grade. When USAID's "Cuban Twitter" program came to light two weeks ago, Leahy was one of its highest-profile critics, calling the idea "dumb, dumb, dumb."

Leahy holds similar views about U.S. government support for Inga 3, according to an aide who spoke with Devex about the senator's concerns.

"The Inga dam … is a classic example in a country where everything that can go wrong often does, and particularly because it could be the first of many similar projects on that river which sustains the livelihoods of millions of people," the aide told Devex, citing the potential environmental and social costs of the project.

"If you add all those factors together," the aide suggested, "it is unwise to use public funds for projects of this scale, particularly in countries where corruption is rampant and where often the electricity is either exported or sold to industry and doesn't benefit the people who need it most."

Leahy is particularly concerned, the aide noted, that the power the Inga dam will produce won't be accessible to rural residents who currently live off the energy grid. Much of the power from Inga 3 is expected to be sold to South African power offtakers or directed to DRC's industrial mining interests, which currently face a power shortage.

The project would also flood Bundi Valley in southern DRC, displacing an estimated 8,000 people, according to a U.S. government cable obtained by Wikileaks.

The mandate tucked into the 2014 omnibus spending bill was "intended to signal that the Congress wants assurance that mega-projects like this make sense in terms of the long-term economic, environmental and social costs before public funds are used."

Despite uncertainty, bank officials charge ahead

After postponing a vote for more than a month, the World Bank's board of directors approved funding on March 20, with the U.S. executive director abstaining. In the official position paper on the U.S. vote, released by the Treasury Department, the U.S. executive director's office explained that "the United States believes that given the enormous challenges associated with Inga 3, the governance and environmental risks required further mitigation as part of this TA (technical assistance) proposal."

While the paper did not cite Leahy's mandate as a reason for the abstention, it seemed to have its intended effect.

But the rest of Congress is hardly lined up behind Leahy, and the mandate the senator inserted in the omnibus bill will expire at the end of the fiscal year. Efforts to shore up future U.S. support for Inga 3 seems to be underway already. Last month, the House Foreign Affairs Committee approved the Electrify Africa Act after inserting language that counters the Senate mandate.

While the bill doesn't mention any other form of energy specifically, it goes out of its way to say that "it is the policy of the United States ... to encourage private sector and international support for construction of hydroelectric dams in sub-Saharan Africa," albeit only ones that are in the "national security interests of the United States" and built following "international best practices" for environmental and social safeguards — another mixed message from the legislative branch.

Scott Morris, a former treasury official who oversaw U.S. relations with the World Bank and other  international financial institutions for the Obama administration, sees the lack of a clear policy on these issues as hugely detrimental to U.S. development interests.

"These are highly complex projects, and that's the very reason you need the multilateral development banks involved," Morris said, adding that backroom maneuvering like Leahy's had become increasingly frustrating.

"There's no reason that the mandate in the omnibus couldn't have been more carefully crafted instead of creating a political straight-jacket for the U.S.," he said. "And where are the hearings on these issues where we have a real airing of both sides?"

Who's going to build it?

Many feel that Inga 3 is going to happen one way or another, and that Grand Inga is too valuable a prize to go ignored indefinitely — particularly at a time when the narrative around development in Africa is shifting from one of foreign aid to one characterized by partnership and economic growth potential.

If the U.S. government and U.S. businesses remain on the sidelines of Inga development, Chinese state-supported companies, whose presence in Africa is already widely felt, could take a leading role in financing and constructing the massive dam complex. In fact, a Chinese consortium led by Sinohydro and China Three Gorges Corp. is said to be bidding for the Inga project. Much of the support for the Power Africa initiative in Congress is fueled by a desire to help U.S. companies compete against Chinese interests in Africa.

Additionally, many supporters of the project like Morris — and even some skeptics — feel the United States could play an important watchdog role through its own involvement in Inga's development. U.S. government agencies, their argumentation goes, are more likely to account for and guard against the massive potential social and economic consequences the Inga dam could entail, the types of consequences that are no stranger to those in the path of Chinese hydropower projects.

Even without official U.S. support, the World Bank's technical assistance project will go forward, but the U.S. government's lack of a clear policy on hydropower projects of this kind raises questions that extend beyond Inga's risks and into the overall strategy undergirding President Obama's Power Africa initiative.

A number of observers have raised the concern that Power Africa's leaders may be more interested in attaching the initiative's name to major power generation deals than they are in providing a realistic, operational plan for linking more African people, particularly those living in rural areas, to some kind of reliable power supply. The Inga dam project, and the USAID chief's enthusiasm for it, could reinforce some of that skepticism.

The debate continues

The battle over data on the project is sure to continue.

At a World Bank spring meeting panel last week, Vijay Iyer, a director of the bank's sustainable energy department who previously worked as the bank's task manager for Inga, reminded civil society representatives that energy poverty is hardly just a rural issue, as power generation in cities has merely kept pace with urban population growth. African cities routinely experience rolling blackouts due to energy shortages, and that inconsistent availability is a particular drain on industrial economic output and investment.

"Hydropower is perhaps the one largest source of clean affordable power than can be developed," Iyer said. "We have to see that sometimes, by not putting all the facts on the table, we do a disservice actually to the proliferation of good, cleaner solutions."

At the same event, Peter Bosshard, the president of International Rivers, an NGO, was particularly vocal in his criticism of Inga's development, referring to an Oxford University study that suggests cost valuations of the power generated by mega dams consistently fail to account for the cost and time overruns those dam projects tend to experience.

According to the Oxford study, 96 percent of mega-dam projects have costs overruns and 54 percent are not completed on time. And the potential for the Inga project to be derailed by corruption is a very legitimate concern given the DRC's weak institutions. The fact that a year ago SNC-Lavalin, a partner in one of three pre-qualified consortia that expressed interest in the project, was barred from winning World Bank contracts for 10 years due to alleged corruption in previous projects, has comforted no one.

"If Inga 3 is completed on cost and on time, it is very competitive. If it has average cost and time overruns … it ends up being very expensive," Bosshard said.

Of course giant dam projects aren't new to the World Bank, which financed dozens of large hydropower projects around the world throughout the second half of the 20th century. Those projects often became rallying points against the bank for environmental and human rights activists. Kim, in fact, got his start in international development providing health services to a community of Haitians living in extreme poverty after being displaced by a large dam that was partially financed by the World Bank.

This project would be different, Kim said in response to a question from Devex, because of the social and environmental safeguards the bank has introduced over the past 20 years and the involvement of "many stakeholders," public and private, working together.

"In other words, this will be a very different project than dam projects that have taken place before — one that I lived and worked near in Haiti for many, many years," he said.

Kim will have to hope that as the debate surrounding Inga 3 heats up, his prior experience on the front lines of dam displacement will be seen by policymakers — and residents of the Bundi Valley — as a mark of credibility, not irony.

Want to learn more about Inga or share your thoughts on it? Please leave a comment or question below or tweet @PaulDStephens and @twIgoe.

No comments:

Post a Comment