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South Africa’s largest state-owned company, the utility Eskom, is currently in a financial crisis that threatens the broader economy. According to a former high-ranking government official, the crisis stems mainly from two of the world's largest coal plants financed nearly a decade ago that have dramatically underperformed expectations and now threaten billions of dollars in losses.

The Eskom power plant in Hendrina, South Africa. Photo: Marco Longari/AFP via Getty Images

What they're saying: In an opinion piece published earlier this week, Eskom non-executive director Rod Crompton admitted the plants are behind schedule, over budget and dysfunctional, calling them "probably the single largest disaster in South Africa’s economic history.”

Why it matters: These plants, funded in large part by foreign financiers including the World Bank, U.S. Export-Import Bank and China Development Bank, were justified primarily on development grounds after a controversial battle with environmental opponents.

  • They were approved despite environmental concerns because coal was considered the cheapest option at the time of construction for achieving energy access and powering the economy.
  • Instead, the plants have contributed to blackouts, debt crises and now systemic financial risk after becoming stranded assets.

The big picture: Researchers at Oxford's Smith School are increasingly concerned that other developing countries beyond South Africa are putting their economies at risk by supporting coal plants that could become stranded assets down the road.

  • Developing countries still often require foreign finance, but they have grown more wary of the potential risks, including balance of payment crises.
  • This fear is perhaps most alive in Southeast Asia, where China is financing a string of new coal plants under its Belt and Road Initiative.

What to watch: Just as they did a decade ago, analysts and advocates are warning that these coal plants could inflict major economic damage. The question now is whether the financial crisis brewing in South Africa will be a big enough deterrent to dissuade Southeast Asian governments from falling victim to economic crises of their own.

Justin Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.

Go deeper

Mike Allen, author of AM
6 hours ago - Politics & Policy

Biden adviser Cedric Richmond sees first-term progress on reparations

Illustration: "Axios on HBO"

White House senior adviser Cedric Richmond told "Axios on HBO" that it's "doable" for President Biden to make first-term progress on breaking down barriers for people of color, while Congress studies reparations for slavery.

Why it matters: Biden said on the campaign trail that he supports creation of a commission to study and develop proposals for reparations — direct payments for African-Americans.

Cyber CEO: Next war will hit regular Americans online

Any future real-world conflict between the United States and an adversary like China or Russia will have direct impacts on regular Americans because of the risk of cyber attack, Kevin Mandia, CEO of cybersecurity company FireEye, tells "Axios on HBO."

What they're saying: "The next conflict where the gloves come off in cyber, the American citizen will be dragged into it, whether they want to be or not. Period."

Cedric Richmond: We won't wait on GOP for "insufficient" stimulus

Top Biden adviser Cedric Richmond told "Axios on HBO" the White House believes it has bipartisan support for a stimulus bill outside the Beltway.

  • "If our choice is to wait and go bipartisan with an insufficient package, we are not going to do that."

The big picture: The bill will likely undergo an overhaul in the Senate after House Democrats narrowly passed a stimulus bill this weekend, reports Axios' Kadia Goba.