Officially, Standard Bank is still awaiting the results of its internal review of an independent environmental and social consultant’s findings before deciding whether to finance the 900-mile heated crude oil pipeline between Uganda and Tanzania. However, an interview with CEO Sim Tshabalala left no doubt about his preference as he pushed the social benefits of the East African Crude Oil Pipeline (EACOP).
As one of two top sponsors (alongside diamond miner Debswana) of the Corporate Council on Africa event, the bank enjoyed prime real estate at the summit and access to US and African attendees. Fresh from a visit to Uganda, Tshabalala took out his phone during an interview with The Africa Report at the bank’s deluxe booth to show photos of Ugandan villagers still living in mud and grass huts.
“We are being asked to make a choice: Don’t do the project, and let those poor Africans continue to live like this,” he said. “I choose to give them dignity.”
No good options
The $5bn pipeline is a lightning rod for activists who bemoan the environmental cost of oil extraction, coupled with its pathway through the seismically active Rift Valley and the freshwater basin of Lake Victoria.
The pipeline would pump enough oil to add up to 34.3mt of carbon dioxide – about seven times the emissions of Uganda and Tanzania combined – into the atmosphere each year, according to South African shareholder activist group Just Share.
The pressure has left Standard Bank as one of the only financing options after domestic competitors ABSA, Nedbank and Investec all distanced themselves from the project, along with the African Development Bank.
Tshabalala however called the project “one of the most efficient in terms of oil production, because people have learnt lessons”. He touted its “huge economic benefits” and poverty alleviation potential.
The bank chief acknowledged the downsides, but pointed out that providing electricity to poor Africans would mean less biomass loss as people stop cutting down trees for cooking. Already, he said, project partners have been building homes for people in the area so “kids can eat cooked food, they can go to a clean toilet, and they’ve got solar-powered heaters”.
We’ve said, okay, there are trade-offs. If we do this, there’s some things we cannot do.
The benefits will be considerable, he said, with conservative estimates showing 25% GDP growth for Uganda and Tanzania under the project.
“They will therefore be able to build roads, bridges, etc. that will make them able to adapt in a similar way to Europe and other parts of the world to the environmental degradation that they’re confronted with,” Tshabalala said. “Those are the reasons for doing this transaction.”
Even without Standard’s involvement, he added, the project will go forward as most of the funding is provided by its sponsors.
Standard’s internal processes require the bank to be “satisfied with the environmental and social impact of the project” before it can move forward, Tshabalala said.
That includes evaluating whether claims that impacted communities are being adequately consulted and compensated when required to relocate. Netherlands-based NGO BankTrack, a leading critic of the project, has reported that displaced communities have come under threat when they ask for more compensation.
Even if it gets the green light from the bank’s credit and risk management processes, Tshabalala said that Standard will have to cut other projects. The bank has a goal of reaching net-zero carbon emissions by 2050.
“We’ve said, okay, there are trade-offs,” Tshabalala said. “If we do this, there’s some things we cannot do.”
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