Privatisation of water supplies: Does it work?

The minister of public utilities, Ivan Collendavelloo stated in Parliament on Tuesday that the privatisation of CWA is on the agenda. “Privatisation is not to be restricted to an outright sale of CWA assets and operations to a private firm or individual. As I understand it, the term ‘privatisation’ includes all forms of private sector participation,” he said. His preferred choice is for a private partnership. Technical assistance from the World Bank for privatising the CWA has been sought and their recommendations will be available by May 2016. A public debate will be launched. According to Collendavelloo, the only solution to efficiency is “private sector participation.” Reorganisation of CWA has failed, he adds. “We will never progress.” According to him, there are two extremes of privatisation. “One is well-tailored reorganisation. The other extreme is that we take the whole lot; we sell to the private sector. That is also not on.” This announcement has once more fuelled debates on the need for privatisation of water supply. Around the world, the trend in countries which have privatised their water supplies is for “re-nationalisation” or “re-municipalisation” following their bad experience. According to economist Vishal Ragoobur, there are a series of questions which we must ask regarding this issue. “Are we speaking about water distribution? Will there be only one private distributor or many companies involved in the distribution? This brings us to the competition aspect. Will we be moving from a monopoly to a competitive one? If we are going towards a private monopoly we need regulators to ensure that the activities are beneficial for the population.” Vishal Ragoobur explains that foreign expertise is often involved in privatisation talks. “The CWA will perhaps get access to expertise it lacks as well the know-how and technologies. So this can be beneficial as will more efficiency, efficacies and more customer service. However, we must bare in mind that it will not necessarily happen.” According to the economist, it is also important to see how necessary the project of privatisation of water is. “Can’t the CWA restore itself and offer further services to consumers? Does the CWA not have enough financing?” “Through experiences around the world, we see that privatisation as such is not the only thing which can guarantee better water management or consumer services. We need a series of measures as well as structural reforms. We must not also forget employees’ fear of losing their jobs. There can be dismissals.”

[[{"type":"media","view_mode":"media_large","fid":"14156","attributes":{"class":"media-image wp-image-23529 alignleft","typeof":"foaf:Image","style":"","width":"180","height":"196","alt":"Jack Bizlall"}}]]Jack Bizlall: “Being a State entity CWA cannot be privatised”

Political observer Jack Bizlall recalls that it is not the first time we are having this debate. “Around ten years back, the same project was announced but it was not implemented as people protested against it. Besides, being a public entity, the CWA cannot be privatised,” he says. Jack Bizlall maintains that since its inception, the CWA has always satisfied its consumers. “The CWA has fulfilled 95% of its responsibility. All of Mauritius has access to water. Today, we want a water supply 24/7 without any cuts. One criticism towards CWA is frequent cuts in some regions. We are lucky to be in a country where we are getting good quality water. So, there is no reason to privatise our water.” For the political observer, if water is privatised it will be a mere business. “Just like air, water also cannot be commercialised. Water is a basic human right and, the population should benefit from a quantity of water free of cost.” As proposed by Jack Bizlall, there are various other ways where water can be preserved and minimised cuts. “Hotels should be encouraged to use desalinated water for its usage. Each hotel can invest this type of water. Underground water can also be used. With climate change, there are often torrential rains, so we need to collect this water. The country needs a strategy to conserve water than to privatise it.”

Global trend: Re-nationalisation 

[[{"type":"media","view_mode":"media_large","fid":"14159","attributes":{"class":"media-image aligncenter size-full wp-image-23532","typeof":"foaf:Image","style":"","width":"640","height":"380","alt":"map"}}]] Research shows that the tide of water privatisation has now turned. Many cities that rushed to sign 20-year or longer concessions with water companies in expectation of clean water at a socially acceptable cost have chosen to terminate agreements and return urban water provision to public control. A report by the Transnational Institute (TNI), Public Services International Research Unit and the Multinational Observatory suggests that 180 cities and communities in 35 countries, including Buenos Aires, Johannesburg, Paris, Accra, Berlin, La Paz, Maputo and Kuala Lumpur, have all “re-municipalised” their water systems in the past decade. More than 100 of the “returnees” were in the US and France, 14 in Africa and 12 in Latin America. Those in developing countries tended to be bigger cities than those in richer countries. Source: The Guardian

[[{"type":"media","view_mode":"media_large","fid":"14158","attributes":{"class":"media-image wp-image-23531 alignleft","typeof":"foaf:Image","style":"","width":"180","height":"166","alt":"Ram Seegobin"}}]]Ram Seegobin: “More of an ideological than an economic measure”

The member of left wing political party Lalit explains that talks of privatising the water supply started in the 1990s, and Lalit opposed the idea. “We believe that water is an essential service. It is not a business. We do not see any necessity to privatise the CWA. However, we believe that there are lots of changes which should be brought because the CWA is not able to respond to the basic necessities of the population,” says Ram Seegobin. The trade unionist strongly believes that privatisation is not the solution. “Around 37 countries which privatised their water supplies have faced dire consequences. Most of the countries had to go back to nationalising it as it was not satisfactory. The Public Service International published a document on that.” Ram Seegobin trusts that the measure is more of an ideological one than an economic one. “Privatisation of water would have same results as what happened with Mauritius Telecom. At that time, they said that they would expand towards Africa but in reality it expanded without involving Mauritius Telecom. It is taking 40% profit without investing. If we take this as example, we definitely see that privatisation would not be beneficial.” Ram Seegobin points out that when privatising strategic sectors “we in a sense lose our sovereignty.” What would be the impacts of such project on the population? “Definitely the water tariff would know significant increase. I do not see any local company that would invest in another company which is not making any profit. This will be quite catastrophic for the greater number. The privatisation project would not be beneficial for both the consumers and the CWA employees,” he argues.

[[{"type":"media","view_mode":"media_large","fid":"14155","attributes":{"class":"media-image wp-image-23528 alignleft","typeof":"foaf:Image","style":"","width":"164","height":"174","alt":"Harry Booluck"}}]]Harry Booluck: “Dangerous to privatise our water”

Former director of CWA Harry Booluck stated that privatisation is unacceptable. He questions the rationale behind this decision. “The minister could seek expertise and let CWA implement it. There is no need to sell.” According to him, in the past, Mauritius Telecom was sold and it has been a regretful decision. “Nothing was done. The same will happen if the CWA is privatised. There will not be any better administration. Many African countries had opted for privatisation and then regretted it. For the first and second year, everything might go on smoothly but after that consumers tend to suffer,” he says. Harry Booluck argues that it is a danger to privatise our water supply. “The cost will eventually keep on increasing. Initially, the government wants to increase the tariff but might be unable to do so, so they are trying cover up with the help of a private organisations. This decision will be at the expense of the population.” The population wants water supply on a 24/7 basis but at an affordable price. “With privatisation, there is no guarantee that the population will have water 24/7 at an affordable price. Besides, we cannot ignore what conditions the company will impose. Even if we go for privatisation and find ourselves in difficulty, how will we get our entity back,” he adds.

[[{"type":"media","view_mode":"media_large","fid":"14157","attributes":{"class":"media-image wp-image-23530 alignleft","typeof":"foaf:Image","style":"","width":"165","height":"175","alt":"Jayen chellum"}}]]Jayen Chellum: “Privatisation will have several impacts”

The general secretary of ACIM Jayen Chellum affirms that it is preferable and desirable to keep the State monopoly rather than privatising the water supply. “Several cities have rushed to sign agreements and concessions spread over 20 years with private companies in expectation of clean water is a socially affordable but had to terminate their contracts and restart water supply under public control.” He made reference to the Transnational Institute (TNI) report whereby it is stated that 180 cities and communities in 35 countries including, Johannesburg, Paris, Accra, Berlin, La Paz, Maputo and Kuala Lumpur was taken back under the control of the municipality.

Top 10

Why water privatisation fails

For the past fifteen years, the World Bank and IMF have argued that privatisation is a solution. That private companies would bring finance and efficiency gains to improve public water systems. But time and time again, these privatisation schemes have failed. Here are 10 reasons why: 1. Higher water bills In Côte d’Ivoire, Guinea, Senegal, Bolivia, the Philippines and many other countries, corporations have consistently increased water bills often making water unaffordable to the poor. 2. Disconnections If poor families cannot afford to pay their water bills, they may run the risk of being disconnected from the system. 3. Profits leave communities Corporations are free to transfer their profits out of communities and into the pockets of distant shareholders and corporate executives, instead of reinvesting money into the water system. 4. Corruption breeds, accountability diminishes Privatisation contracts can be linked to poor transparency and weak accountability. In Ghana, the World Bank and the Water Ministry are battling over the cancellation of a $30 million contract, citing breach of procurement law. 5. Cherry picking Private companies prefer to serve middle-class populations where pipes already exist and where they can guarantee their profits. In Dar es Salaam, the water privatisation contract ‘cherry-picked’ the profitable areas which already received dependable water supplies, while poor areas were excluded. 6. Africa ignored Sub-Saharan Africa contains 25 per cent of the people globally needing a connection to water, yet has received less than one per cent of private companies’ promises of investment. 7. Financing costs more Unlike public financing, loans to companies have higher interest rates. These higher rates are passed on to users who then have to pay more for repairs, upgrades and other maintenance. 8. Jobs are lost Water privatisation is associated with job cuts and/ or cuts in employee benefits. In Ghana, hundreds of workers have been laid-off in the run-up to a private management water contract. 9. Imposed from outside Water privatisation is often made a condition of debt relief or aid from the World Bank and IMF. In Tanzania, water privatisation was made a condition of debt relief and cheap loans. 10. Reversal is difficult Withdrawing from the deal can be very difficult. In Tanzania, water multinationals are now suing the government for millions of dollars, after the contract was cancelled.

Why public water succeeds

Public water can and does work. Over 90 per cent of the world’s piped water is in public hands. Here are 10 reasons why: 1. Fair water bills Successful public water providers, such as Porto Alegre in Brazil, set fair water bills, which mean that richer users pay more for the water they consume, allowing them to subsidise poorer users. 2. No disconnections In Phnom Penh, Cambodia, there is a policy not to disconnect any user, especially those from the poorest communities. 3. New connections In Botswana, the national utility has substantially increased the proportion of the population with access to safe water from 1970 and 1998, increasing from 30,000 to 330,000. 4. Recycling profits back into utility In Uganda, the reformed public utility boosted service coverage from 48% in 1998 to 70% in 2006. The utility has gone from producing a loss to tripling its turnover and producing a profit. 5. Transparency grows, accountability strengthens Workers in the reformed public utility in Tamil Nadu, India have shifted from thinking of themselves as purely engineers, to thinking about the people using the system. 6. Very poorest helped In Uganda, each household in poor community areas is encouraged to connect a yard tap and pay at reduced rates. 7. Cheaper financing Even low income developing country governments can access finance at favourable terms from development banks, meaning better value-for-money for tax-payers and water bill-payers. 8. Better job satisfaction The very successful, reformed public water provider in Phnom Penh, Cambodia ensures that all staff receive the training they require. Salaries are ten-times higher than before. 9. Homegrown solutions In Savelugu, Ghana a system has been established where water is bought in bulk from the state utility and then the community manages the distribution, maintenance, tariff-setting and collection. Access to potable water has been increased to 74%. 10. Scaling-up successes The national Ugandan public water company is working with utilities in Tanzania and Zambia. The successful Indian provider from Tamil Nadu state is working in partnership with utilities in other Indian states. Source: www.waterjustice.org