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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.


Africa: Water Privatization

Africa: Water Privatization
Date distributed (ymd) 010313
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +political/rights+ +economy/development+

Summary Contents:

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 Suez-Lyonnaise.

A related posting today calls for organizational signatories opposing new World Trade Organization negotiations that aim to intensify pressure for privatization of public services.

+++++++++++++++++end profile++++++++++++++++++++++++++++++

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 recovery.

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 So Tom). 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 governments.

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 state-owned companies.

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 Grusky.

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 ecovery policies

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 private company

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 companies.

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

http://www.cosatu.org.za/samwu/14feb2001.htm

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 of workers.


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.


URL for this file: http://www.africafocus.org/docs01/wat0103.php