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Africa: Water Privatization
Africa: Water Privatization
Date distributed (ymd) 010313
Document reposted by APIC
Issue Areas: +political/rights+ +economy/development+
This posting contains two background documents on privatization of
water services in Africa, one with data from the Globalization
Challenge Initiative on IMF loan policies imposiing water
privatization or full cost recovery, and the other a statement from
the South African Municipal Workers Union on the sale of
Johannesburg water supply services to French multinational
A related posting today calls for organizational signatories
opposing new World Trade Organization negotiations that aim to
intensify pressure for privatization of public services.
IMF forces African countries to privatise water
Article by Rainer Chr. Hennig, afrol.com May be reproduced freely
with source reference to http://www.afrol.com
afrol.com, 8 February - A review of IMF loan policies in forty
random countries reveals that, during 2000, IMF loan agreements in
12 countries included conditions imposing water privatization or
full cost recovery. In general, it is African countries, and the
smallest, poorest and most debt-ridden countries that are being
subjected to IMF conditions on water privatization and full cost
Ironically, the majority of these loans were negotiated under the
IMF's new Poverty Reduction and Growth Facility (PRGF), says Sara
Grusky from the Globalization Challenge Initiative
http://www.challengeglobalization.org]. The reform was announced
with great fanfare in 1999 when IMF officials claimed that the new
loan facility would re-focus the IMF's controversial structural
adjustment measures on activities that borrowing government's would
identify as leading to poverty reduction.
An example is tiny Sao Tome and Principe. The island government has
been put under pressure to pursue the implementation of a public
enterprise reform through privatization and liquidation of
nonperforming public enterprises for which buyers cannot be found.
Nine public enterprises will be privatised, including the water and
electricity utility and the national airline (Air Sâo Tomé). The
objective is said to be "to increase access to safe drinking water
through rehabilitation of the waterworks system," according to the
IMF. Some 20 percent of the population does not have access to safe
water at present, but this number could rise if market prices are
set on the service.
Rather than contributing to poverty reduction, water privatization
and greater cost recovery make water less accessible and less
affordable to the low income communities that make up the majority
of the population in developing countries. The alternative is to
revert to unsafe water sources or more distant sources.
The most immediate impact of reducing the accessibility and
affordability of water falls on women and children. Worldwide, more
than five million people, most of them children, die every year
from illnesses caused from drinking poor quality water. "When water
become more expensive and less accessible, women and children, who
bear most of the burden of daily household chores, must travel
farther and work harder to collect water - often resorting to water
from polluted streams and rivers," says Sara Grusky.
This is confirmed by Ghanaian activist, Rudolf Amenga-Etego of the
non-governmental Integrated Social Development Centre (ISODEC), who
was in Washington recently highlighting the implications of having
the poor pay "market rate tariffs" for water in Ghana. The World
Bank has been pushing decentralisation in Ghana since 1988 and
Ghana's Water Sector Restructuring Project is expected to be
approved by the Bank's Board of Directors this year. "Where
cost-recovery becomes the underlying policy, water will become
unaffordable for many poor people in Ghana," Amenga-Etego told the
news agency IPS.
The significance of finding such a high number of conditions
relating to water privatization and water cost recovery in IMF
loans is twofold. First, in the hierarchy of international
financial institutions the IMF is at the top. Compliance with IMF
conditions enables governments to receive the "seal of approval"
that permits access to other international creditors and investors.
Thus IMF conditions weigh especially heavily upon borrowing
Second, it is quite common that World Bank loans have, as their
first condition, compliance with certain IMF conditions. This is
known as "cross conditionality." In the division of labor between
the two institutions, it is the World Bank that has primary
responsibility for "structural" issues such as the privatization of
Therefore, it can be presumed that in every country where IMF
loan conditions include water privatization or full cost recovery,
there are corresponding World Bank loan conditions and water
projects that are implementing the financial, managerial, and
engineering details required for such 'restructurings', says Sara
In Ghana, civil society has announced its intention to resist the
privatisation pushed for by the World Bank. Figures from the
Government of Ghana have shown that only 36 percent of the rural
population have access to safe water and 11 percent have adequate
sanitation within the existing system. Water is also scarce in the
capital, Accra. In typical working class areas of Accra such as
Medina, it would cost a family 3,000 cedis to use 10 buckets of
water a day if prises were to follow market rate tarrifs. Yet, the
minimum wage per day is 7,000 cedis.
Also in South Africa, protest is spreading. The South African
Anti-Privatisation Forum, a collective of community based
organisations and labour unions, has mobilised against the
privatisation of local government services, including water.
Various strikes over social issues have marked the last year. The
recent spread of cholera in South Africa is directly linked to the
poor water quality in many working class areas. More expensive
water could exclude even more people from clean and safe water.
The table below identifies 8 African countries and paraphrases the
specific IMF loan conditions relating to water privatization or
water cost recovery, as mapped by the Globalization Challenge
Initiative. In most of the countries, the IMF conditions require
some form of privatization, and in several countries the conditions
require both privatization and greater cost recovery.
TABLE: Countries with IMF-imposed water privatization and cost
ANGOLA Staff-monitored program
Structural benchmark: Adjust electricity and water tariffs in
accordance with formulas agreed with the World Bank. Reduce
accounts receivables of the water and electricity companies to one
month of sales revenue Adjust water tariffs periodically to recover
costs, including a reasonable return on capital.
BENIN Poverty Reduction and Growth Facility (PRGF)
Other measure: After the revision of regulatory framework, the
government expects to complete the privatization before the end of
the third quarter of 2001 Privatize the water and electric power
distribution company (SBEE)
GUINEA-BISSAU Emergency Post-Conflict policy
Structural benchmark: Transfer of electricity and water management
to private company Transfer of electricity and water management to
NIGER Poverty Reduction and Growth Facility (PRGF)
Other measure:Divestment of key public enterprises, including the
water company, SNE. Privatization of the four largest government
enterprises (water, telecommunication, electricity & petroleum)
have been agreed with the World Bank with the proceeds going
directly to pay Niger's debt.
RWANDA Poverty Reduction and Growth Facility (PRGF)
Structural benchmark: Put the water and electricity company
(Electrogaz) under private management by June 2001. The water and
electricity company (Electrogaz) will be put under private
management as a prelude to its privatization.
SAO TOME AND PRINCIPE Poverty Reduction and Growth Facility (PRGF)
Structural benchmark: The new adjustment mechanism for public water
and electricity rates will be brought into operation by decree. The
price structure will cover all production and distribution costs as
well as the margin of the water and electricity company. The
accounts will balance consumption and resources without recourse to
government subsidies. In May 2000, the government conducted a study
of alternatives for the future of the water and electricity company
(restructuring, leasing, concession or full privatization), with
assistance from the World Bank. By December 2000, it will select
one of the options and adopt a financial restructuring plan, and
strengthen the revenue collection procedures.
SENEGAL Poverty Reduction and Growth Facility (PRGF)
Other measure: Regulatory agency for the urban water sector will be
created by end-2000. Transfer the recurrent costs of water pumping
and distribution equipment to the communities. Increase the
involvement of private sector operators. Encourage the involvement
of private sector operators in the water sector. Assess the
possibility of private sector operation and financing of the
infrastructure required to meet Dakar's long-term water needs.
TANZANIA Poverty Reduction and Growth Facility (PRGF)
Condition for HIPC debt relief: Assign the assets of Dar es Salaam
Water and Sewage Authority (DAWASA) to private management
Source (table): Letters of Intent and Memoranda of Economic and
Financial Policies prepared by government authorities with the
staffs of the International Monetary Fund and World Bank. Table
prepared by Sara Grusky.
South African Municipal Workers Union (SAMWU)
SAMWU Press Statement Wednesday 14th February 2001
Joburg privatises water to world's worst multinational
The South African Municipal Workers Union condemns today's public
launch of Johannesburg Water Pty Ltd, which privatised the city's
water to one of the world's worst multinational companies,
Suez-Lyonnaise. This took place at a time when Alexandra residents
have been forcibly removed from the Jukskei river to areas where
there are no services rather than getting the clean water they
thought they were voting for.
Suez-Lyonnaise/Johannesburg Water must share the blame for the
violence, injuries and trauma that Alex residents were subjected
to yesterday. The company's only response to the threat of cholera
in Alexandra was to check up on the few chemical toilets in the
area. The company showed no sign that they would install even
basic taps needed by Jukskei residents in order to escape cholera.
Neither council nor the company have released any detailed plans
for extending water to the poor of Johannesburg. It seemed that
the company won the contract on the basis of their vague promise
to "improve services rendered" to customers.
The track record of Suez-Lyonnaise across the world is abominable.
They have drastically increased water charges in every city or
town where they have a contract. In Paris, France water is
privatised to a 'partnership' between the city of Paris and
Suez-Lyonnaise. Auditors have now been brought in to investigate
excessive water prices. The auditors have reported so far that
"the administrative, legal and financial arrangements are
characterised by an absence of financial transparency". The report
estimates that the company's "true profit margin is two and a half
times the officially reported figure".
The council's smokescreen set up of the privatisation as a public
utility is also not likely to deter Suez-Lyonnaise from making a
massive profit. EMOS, the water company in Santiago, Chile, was
privatised in 1999 to Suez-Lyonnaise, which appoints 4 out of 7
directors of the board, giving it a guaranteed management control,
despite only holding 42% of the shares. And the state is
guaranteeing EMOS a profit margin of 33%.
In Grenoble, France in 1996, a former mayor and a senior executive
of Lyonnaise des Eaux (now Suez-Lyonnaise) both received prison
sentences for receiving and giving bribes to award the water
contract. Rostock in eastern Germany privatised its water and
sewage systems for 25 years to Eurawasser, (owned 50% by Lyonnaise
des Eaux). Two years later water charges in Rostock were increased
by 24%, and sewage levies by 30%.
The union believes that all these experiences are likely to be
repeated here. SAMWU is highly suspicious that former Council
spokesperson, Jameel Chand, has now been employed at Johannesburg
Water. This means that there could have been an improper
relationship between council staff and the company when it was
still one of several prospective bidders.
SAMWU has been blocked from seeing any of the contract documents.
The experience in Fort Beaufort, Eastern Cape, with
Suez-Lyonnaise's subsidiary in South Africa, WSSA, is that a
secrecy clause has been built into the contract which prevents any
member of the public from seeing the contract without the explicit
approval of Lyonnaise des Eaux'. "2.2.2: Confidentiality: the
documentation contained herein has been developed exclusively by
the operator (WSSA) and shall not be disclosed to third parties
without the written approval of the operator." The union believes
this is unconstitutional and not in the interests of the public or
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC provides
accessible information and analysis in order to promote U.S.
and international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.