Battle over water privatisation

Water has become a political issue in most of Africa as the multilaterals have sought to force through the privatisation of water utilities. Most Africans do not have access to water and sewerage networks, while state-owned companies have failed to improve the situation in recent years but resistance to water privatisation is growing, reports Neil Ford.

The process of state withdrawal from the water utilities sector is moving very slowly, despite World Bank and IMF insistence that water sector loans and aid should be linked to privatisation. Most progress has been made in the Sahelian countries of West Africa, where the French utility giants are taking over.

IMF water privatisation and cost recovery policies are being implemented in Angola, Benin, Guinea-Bissau, Kenya, Mozambique, Niger, Rwanda, Sao Tome and Principe, Senegal and Tanzania, mostly very poor countries where such policies are least likely to bring about the desired results. But in the more attractive economies of Ghana and Nigeria, opposition to water tariffs rises is stalling privatisation.

One of first privatisation processes to reach completion is also one of the most unheralded. In 1999, the Saur Internationalled Aguas de Mocambique consortium won the contract to manage water supply in seven towns in Mozambique: Beira, Dondo, Matola, Maputo, Nampula, Pemba, and Quelimane. The contract runs for 15 years in Maputo and Matola and five years in the other towns.

Backers including the World Bank, African Development Bank and European Union offered $117m to fund the improvement of the country's water and waste-water systems on condition that the services were privatised. Of the funding, $92m is being used to overhaul and expand services, while $25m has been set aside to run the existing systems. Saur holds a 38.5% stake in the consortium, while Portugal's IPE-Aguas de Portugal owns 31.5% equity and a variety of Mozambican public and private organisations hold the remaining 30% stake.

Although it is too soon to assess the success of the consortium's operations, initial indications are that an increasing number of people have access to clean water and that tariffs have not increased excessively. However, the water sector in Mozambique was crippled during the civil war and it was unlikely that it could deteriorate following privatisation. In addition, the level of investment from donors has been able restrain tariff increases.

Tanzania is a typical case of faltering progress towards a public-private partnership (PPP). Private companies have been offered the opportunity to bid for a 10 year contract to operate and manage the water supply and sewerage systems in the towns of Dar es Salaam and Bagamoyo. Dar es Salaam has a population of around four million, although less than 20% receive piped water.

The plan is for the state-owned Dar es Salaam Water & Sewerage Authority (DAWASA) to be split into two halves: a private operator and a public granting authority (PGA). The private partner would then lease DAWASA's assets from the PGA. The $136m contract was expected to have been awarded in June 2001, and although a new date of January 2002 has been set, the deadline looks unlikely to be met. The delay may centre on the difficulty that any private operator would have in making any money out of the deal, even under very favourable financial terms.

The unpopularity of higher tariffs is discouraging the Kenyan government from pursuing the privatisation option. The Ministry of Finance seemed eager to contract out water services during the first half of 2001 but local politicians were not so keen. In June, Nairobi city council awarded a contract to examine the future of the city's water and sewerage systems to a consortium led by the British Halcrow Group.

The study concluded that any private operator would need to introduce a 40%lo tariff price hike in order to make any progress. The government's investment secretary, Esther Koimett, announced the results of the report, adding that such rises would not be politically advisable.

The privatisation agenda of aid donors can put politicians in a difficult situation. Kisumu Municipal Council, on the shores of Lake Victoria in Kenya, spent so long debating an offer of massive financial support from the Japanese government to build a new water network that the offer was withdrawn.

South Africa most attractive

South Africa is by far the most attractive destination for water sector investment. This is emphasised by the number of companies which have already made their presence felt. A number of smaller contracts were signed during 1998 and 1999 before Suez, in the form of Northumbrian Water, made the breakthrough with the signing in January 2001 of a contract to manage water and sewerage services in Johannesburg.

Northumbrian already supplied water to over two million South Africans in conjunction with the Water and Sanitation Services of South Africa, and so had practical experience of the country. In its new venture, the company will be expected to provide services to low income households and work closely with empowerment partners. The terms of the deal indicate that Northumbrian will not make a fortune out of the contract but the agreement gives the company a major foothold in the South African market