Global Policy Forum

By Wole Akande

Water privatization is a big issue in many African countries. Investors say it brings efficiency. Opponents say it hurts the poor. Whatever one believes, the poor have no say in the matter. In Tanzania, privatizing the Dar es Salaam Water and Sewerage Authority (DAWASA) was one of the conditions given if the country was to receive the HIPC debt relief. Recently, the government raised a credit to fund the $145 (US) million upgrade of DAWASA, needed to sell off the company at a lower price, effectively increasing the national debt it seeks to reduce. Accordingly there are concerns that the privatization will produce higher water bills or even become another corruption trap.

The African Development Bank (ADB) on May 31st sent out a release saying it had signed an agreement with Tanzanian Deputy Minister for Finance, Alhaji Adbisalaam Issa Khatibu, for a loan of approximately $47 million. The loan was to partially finance the "Dar-es-Salaam water supply and sanitation project." The shortfall of $98 million will be borrowed from the World Bank, and, more surprisingly, from the European Investment Bank and Agence Franí§aise de Développement.

According to ADB, the "project" consists of improving "in terms of accessibility, quality, reliability and affordability [the water] services to the population." Further, the project would "contribute to poverty reduction and improve the economic and social well-being of the people of Tanzania by providing them with a better access to clean water, thereby, reducing the incidence of water borne diseases among the vulnerable groups."

The concept sounds promising, but critics don't agree that "poverty reduction" is the real aim of ADB's Dar es Salaam project. The project's aim, they hold, is merely to make it possible to find a buyer for DAWASA. Ominously the company, owned by the Tanzanian Ministry of Water, will need to significantly increase its value due to the new investment in infrastructure and billing. In view of a recent privatization scandal many skeptics fear the project only will enrich the Tanzania's president's family.

The scandalous privatization of the Tanzania Electricity Supply Company (Tanesco) shocked Tanzanians. The small South African engineering firm NET Group Solutions on 2 April 2002 beat several foreign companies to sign a lucrative contract to run Tanesco.

During April, it turned out that NET Group Solution was "a very small firm" with inadequate capacity to handle Tanzania's national electricity grid. Then it became known that the firm's Tanzanian partner was a company owned by President Benjamin Mkapa's brother-in-law. "Most shocking was the fact that the directorship of the local firm includes primary schoolchildren," wrote the Nairobi-based "East African" in an editorial. After the scandal was out, the government rejected a parliamentary demand to reveal the details of Tanesco's management contract. The privatization process now continues secretly.

In the last five years, the International Monetary Fund (IMF) has been insisting on privatizing DAWASA, as a condition to include Tanzania in the enhanced Heavily Indebted Poor Countries (HIPC) initiative. HIPC inclusion provides Tanzania with a significant debt service relief, theoretically worth billions of dollars. Unfortunately, conditional structural reforms, including water supply privatization, however often are a high price to pay.

This is not an IMF demand that is unique to its Tanzania policy. The fund is promoting water supply privatization all over the African continent, often causing protests from civil society and international anti-globalization groups. Although African state-owned water suppliers mostly are ineffective and run-down, they at least have provided many urban poor people with cheap or free water. Protesters claim these international takeovers are excluding the poor from an affordable clean water supply.

In all fairness, the water supply and sanitation of Dar es Salaam indeed doesn't have the best of reputations. According to the DAWASA's "owner" Festus Libu, Tanzanian Minister of Water, "infrastructure built in the 1970s is deteriorating rapidly." It is estimated that 50 percent of the water is lost through leakage and illegal links to the system. Minister Libu insists DAWASA is suffering "from poor billing and revenue collection and inadequate water sources both in terms of quality and quantity." Naturally after privatizing over 300 state-owned enterprises, the Tanzanian government agrees to the IMF cure of privatizing DAWASA.

Every day 30,000 children in the Third World die of preventable causes. Many of them could be saved if they had access to safe water. The World Bank argues that governments in impoverished countries have to privatize their water supply and distribution systems if they are to get the efficient delivery of water that is needed.

On the face of it, the argument makes sense. The adequate supply of water and other public services is too often frustrated by inadequate funding, inefficient bureaucracy or lack of political will. Promoters of private ownership say it brings investment and cost-effective service.

Experience and common sense say otherwise. Private investors aren't attracted by poor and rural communities. Any improvements that might come with private ownership are in areas that generate profit. Private water, telecommunications and electricity companies tend to focus on efficiency in collecting tariffs, but not on improving service. Costs usually leap up quickly, annoying middle class and wealthy customers but leaving the poor without service at all.

According to the Congress of South Africa Trade Unions, privatization has cost 200,000 people their jobs. In poor Soweto neighborhoods, up to 20,000 homes a month are disconnected from electric service for nonpayment.

People in affected communities don't have a voice in how or if they want their services privatized. People in impoverished countries want efficient service. In some, privatization may be the way to go. They need to be allowed to choose if it is appropriate for them.

A May 2001 report by Kate Bayliss, a Research Fellow at the University of Greenwich, Britain, titled "Water privatisation in Africa: lessons from three case studies" concluded that "high prices and disconnections must mean that the poorest segments of society are likely to be the main losers from the privatisation process. Where this increases use of unsafe water sources, the consequences will be disastrous for public health."

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.