Privatisation can be a death sentence

Public Services International

Ghana: Keep water public!

In Ghana, people are mobilising. They want to stop the leasing of their country's water supply to foreign multinationals. The local Coalition Against the Privatisation of Water - CAP of Water - is steadily growing but the enemy is strong: the reforms are largely imposed by external interests led by the World Bank and the International Monetary Fund. The UK government is also at the heart of moves which could see the cost of drinking water rise by up to 300 per cent. Can this be the road to sustainable development in Africa?

It has being going on for some time: the scheme to privatise water in Ghana. There have been hurdles. Two years ago, the World Bank cancelled a $100m water project loan because of corruption concerns and the country was called upon to pay $800,000 for the costs of preparing the defunct project. In turn, Britain's Department for International Development (DFID) cancelled a $30m rural water project. But in April this year, the government announced that water privatisation would start in 2003.

That depends. The Coalition Against the Privatisation of Water in Ghana, which comprises a range of individuals and organisations (including trade unions), argues that the privatisation package is a bad deal both technically and financially.

Everybody seems to recognise the need to reform public water supply institutions and resolve their severe financial constraints but CAP states that "any reform must be aimed at achieving full protection of the right of all to potable water". Currently only around half of Ghana's population has a regular, safe water supply.

Split and sell

Under the reform programme, the provision of water is split between the profitable urban sector and an unprofitable rural sector. The profitable sector would be run by a downsized Ghana Water Company and contracted to private sector corporations. The official plan is to divide the urban water system into two large concessions to be leased to two different companies.

In urban areas, tariff increases will be phased in until full cost recovery is achieved. Then the number of employees at the Ghana Water Company will be reduced to make the company profitable.

The Community Water Supply Agency has already taken over the rural section. This is financed by the Community Water and Sanitation Project, approved last year by the Bank. The Integrated Social Development Centre (ISODEC), part of the CAP, points out that the urban sector has been subsidising the rural sector and that privatisation would mean that this can no longer happen.

Death sentence

The Bretton Woods Update (March-April 2002) quotes a comprehensive rebuttal of the privatisation proposal from ISODEC which complains that "much of the current reform process has been propelled by the World Bank and some bilateral donors using their lending and aid as punitive levers".

Christian Aid, a UK development organisation, is especially upset that DFID has used £10m of aid money to help persuade the government of Ghana to lease parts of its urban water supply to foreign companies. Christian Aid's partner organisation, the Christian Council of Ghana, is involved in the campaign against the public-private partnership plans. In a recent press statement, they said, 'To privatise water is like handing down death sentences to the majority of the urban and rural poor in Ghana because they cannot afford to pay economic rent for such services.'

The trade unions, in a press statement issued on 3 October 2001, draw attention to what the reform programme really means: "The arrangement to change from public monopoly to private monopoly is a clear indication that the arrangement is driven by profit motive with very dangerous consequences, especially for the poor who in fact are in the majority. It is clear to us that the concept of public-private partnership is driven more by ideology than by public interest and that this is likely to satisfy foreign interests to the disadvantage of Ghana and her people."

Christian Aid's head of policy, Mark Curtis, added another angle: 'This is the way the die is cast in developing countries. The WTO insists that such countries are free to choose if, how and when they open up public services to foreign competition, but the same countries are put under huge external pressure to liberalise services by aid-giving governments and international institutions.'

The decision to bring in foreign companies is justified on the basis that they will invest in new infrastructure and deliver services more cheaply and efficiently. But the ISODEC briefing complains: "under the terms of the contract, the foreign companies have no responsibility to raise funds for renewal and expansion investments". The government of Ghana still has responsibility for raising funds: some $500m in the first years following privatisation. This will come from official sources such as the World Bank and the African Development Bank.

Who pays anyway?

The Ghanaian government also has responsibility for subsidising the water companies if they raise prices to levels which poorer customers cannot afford. As companies are being awarded monopolies, they have little incentive to cut prices. It is estimated that water prices may rise up to 300 per cent. Sale of water does not generate foreign exchange so this arrangement will add to pressure on Ghana's balance of payments.

The Ghanaian state also retains responsibility for sewerage and for rural and small town systems. The Coalition argues that existing regional water systems which combine urban and rural areas are more efficient. These can reach poor households through a mix of public distribution, community management and private sector procurement.

The CAP concludes that the proposed water privatisation in Ghana is absolutely not in the interest of their country, let alone its poorest citizens. It argues that it is "the result of very deft political manoeuvrings by a consortium of donor countries committed to promoting the interests of their own corporate citizens". It does not oppose the involvement of the private sector in the delivery of specific services, such as tariff collection or pipe laying. It does, however, oppose "the deliberate crafting of the process to privilege only foreign companies, passing monopoly control of all urban systems to them in very long lease contracts of up to twenty-five years". It is calling for the release of all documentation relating to the proposed privatisation and for a debate about alternative options for improving Ghana's water systems.


This article is reproduced from Focus, a journal published by the Public Services International (PSI) published four times a year in English, French, German, Spanish, Japanese and Swedish. Visit the PSI's website http://www.world-psi.org/psi.nsf/default?openpage


 

Suggested citation
International, Public Services, 'Privatisation can be a death sentence', Evatt Journal, Vol. 2, No. 3, August 2002.<https://evatt.org.au/news/privatisation-can-be-death-sentence.html>