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Longer, analytical article.  Water privatization in Ghana: Still born or born deformed?

Summary & Comment: The issue of water privatization in Ghana has opened debate on the relevance of economic reforms vis-ŕ-vis the provision of basic services by the State. It is the belief of many people across the world that water must be identified primarily as a public good and a human right and not simply as a commodity to be traded in the open market. Analysis by Rudolf Amenga-Etego

Author: Rudolf Amenga-Etego Date Written: 7 July 2003
Primary Category: Western Region Document Origin: Public Agenda (Accra)
Secondary Category: Economic Justice Source URL: http://www.ghanaweb.com/public_agenda/article.php?ID=1548
Key Words: Ghana, water privatization, multinational corporations, prepaid meters


Printable Version

Water privatization in Ghana: Still born or born deformed?

Status Report

In 1998, a group of British and American consultants worked on the business framework for private sector participation and issued a report recommending that the government should lease the water systems to two private operators. Then, the Ghana Water Company Limited , a parastatal, would be downsized and restructured to play the role of nominal asset holder. At stake are 74 systems distributed through out the country.

So far, five multinational corporations have been pre-qualified and bidding is underway, though not without problems. Under the arrangements, each successful bidder is expected to invest $70 million in rehabilitation, renewal and improvement of the water systems. However, due to the outpouring of resistance against the privatization and the desire of the corporations to minimize risks in the face of the resistance, the five pre-qualified corporations have expressed their unwillingness to invest at the $70 million level.

As a result, a new bid document was circulated among the donors and creditors with the intention of reaching agreement on the document by the end of 2002. This document is, in fact, the third draft. The private companies rejected a second document in June 2002 because it required a level of investment that they were unwilling to make, given the terms of the deal. In February 2003 the government of Ghana [G o G] presented the revised draft to the pre-qualified corporations after it had been circulated among donors and creditors for their comments.

The revised bid document drastically scaled down the level of investments expected from the corporations. The G o G has had to bend backwards to meet the demands of the water corporations largely out of cajolement from the World Bank, which insists that disbursement will only begin when there is clear evidence of a commitment to private sector participation.

As the World Bank [WB] and the Government of Ghana were forced to backtrack on their propaganda about how they would attract billions of dollars in private investments, word started leaking that, in fact the revised bidding arrangements would require that the two winning corporations contribute only $ 30 million dollars each instead of the original target of $70 million each expected from them.

This is contrasted with the level of about $1.2 billion expected from the government of Ghana to be obtained through WB and bilateral loans. With mounting resistance the government is increasingly uncertain about its own position. An astronomical rise in fuel prices and a growing resistance to the divestiture of Africa’s premier commercial bank, the GHANA COMMERCIAL BANK, have compounded this of late. With the elections around the corner, it is not likely that the deal will be concluded in the year 2003 as originally envisaged. At this writing, the word is out 1 that the bidders are not willing to invest a penny and that the government is considering canceling the PSP altogether.

Information gathered indicate that government may have genuine need to abandon the process, but the world Bank is adamant and is insisting on privatization in one form or the other as the condition for disbursing any monies at all. In fulfillment of this objective, the bank has appointed Mr. Mats Carlson, a public relations specialist as the new Country Director for Ghana. He is expected to thaw the frozen relations between the civil society and the GoG and smooth talk the labour movement, which is in the forefront of the fight against water privatization into accepting the bank’s sponsored new business plan, which now favours a management service contract as against the earlier deal that proposed a 10 to 25 years lease.

The World Bank Washington desk officer in charge of urban water privatization in Ghana, David Henley, who is viewed as conciliatory towards anti-water privatization activists has also been removed in favour of Alexander McPhail who is also known to have a public relations background and has been successful in pushing through some privatizations in the Middle East. The strategy now appears to be directed at the hearts and minds of the Ghanaian population having lost round 1 to the anti water privatization activists, partly through sheer arrogance and insensitivity to the cultural and religious values and norms governing the ownership and use of water in Ghana.

The new business plan to be outdoored by Mats Karlson and Alexander McPhail by proxy on July 7 calls for a $150 million annual management contract (probably to Ondeo Services of Suez Lyonnaise). This is in contrast to the 30 million annual investment in infrastructural renewal and expansion to be implemented by the GoG through another concessionary loan from the World Bank to be disbursed beginning in 2004.

The population at large is again ignorant of this new business plan. Neither the Government of Ghana nor the World Bank has been forthcoming in revealing the details of this arrangement to the people of Ghana. It is the same old policy manipulation and arms twisting played all over again.

At this writing I can predict that this arrangement will be the main public relations challenge that the upcoming Stakeholders’ Consultation in Accra slated for the 7th and 8th of July 2003 in Accra and sponsored by the World Bank will face. There is already evidence that the stakeholders meeting will be packed with government agencies, donors and pro psp NGOs such as Water Aid. The huge coalition, which emerged to challenge the water privatization agenda, is completely ignored. A memorandum sent by the coalition to the government of Ghana with alternative propositions in favour of community management and control of water delivery in partnership with the Ghana Water Company limited has been treated with contempt by the Ministry of Works and Housing under the advice of the WB financed "Water Sector Restructuring Secretariat"

The WB public relations "taskforce" Spearheaded by Alexander McPhail, Mats Karlson and Kofi Tsikata are already touting the management service contract as a reversal of the "government’s position" on privatization and a guarantee of public ownership. This is the hoax of the decade!! It is worse than throwing dust into the eyes of the people. It is more like throwing powdered pepper into their eyes! The bank is not only trying to pass the bug, but it is desperately trying to white wash its dirty public image by appearing to be articulating the demands of the people.

Some reports have suggested that a management contract is even a worse arrangement than a lease or divestiture where the private sector’s reward is necessarily tied to performance and where it constantly faces loss of invested capital and profits if it fails to perform. In the new management contract scheme the government bears all the risks while the contractor enjoys guaranteed payments regardless of outcomes.

But the World Bank and other water conglomerates will be stopped yet again, unless they resort to brutalisation of protestors by police and jailing of leaders as they did in Bolivia. We doubt our government will go that far for them. As Alhaji Sanusi of the Sukura Local Action Committee2 against water privatization said at a recent meeting of water activists " the management contract is a 419 double slap. If the private operators are that confident about their performance why don’t they borrow the money themselves and pay from their profits, instead of us borrowing and handing it to them?"

The usurpation of policy making in Ghana

Donor and creditor agencies have been highly influential in the processes of privatization, liberalization and de-regulation in Ghana. In general, the privatization initiatives are the legacy of the structural adjustment policies adopted and implemented by successive governments under the aegis of the World Bank and the International Monetary Fund (IMF) . The available information suggests that current reforms aimed at privatizing water and electricity have been designed to meet reform schedules agreed with the World Bank and the IMF. For instance under the terms of the 1999 Enhanced Structural Adjustment Facility (ESAF ), the government was required to proceed with privatization of a number of state corporations, including the Ghana Water Company .3

Furthermore, bilateral and multilateral loans and grants, including HIPC and Paris Club debt cancellations have been made conditional upon the privatization of essential public services such as water, railways, electricity and banking.

Structural adjustment has meant trade and economic liberalization, which entails the deregulation of economic activities and privatization, which the Bank and the Fund have deemed appropriate, market-driven reforms for Ghana. Thus the government has had to liberalize exchange rates, decontrol prices, reduce tariffs on imports, relax rules and regulations on investment and privatize state enterprises. With the emergence of a WTO agreement, the threat to the survival of essential public services is quite ominous. The WTO’s General Agreement on Trade in Services (GATS) will "lock in" privatization and make it practically irreversible while, at the same time, constraining the capacity of the government to regulate the market in the public interest.

It does not require a Harvard brewed researcher to see that current attempts at reforming public utilities in Ghana are not driven by national priorities nor aimed at universal access. Multilateral donor interest in, and influence over, the privatization process is demonstrated by the World Bank’s commitment of substantial financial resources towards the water sector restructuring process. The water sector reform program has attracted well over a hundred million US dollars ($100 million) in funding.

Initially, the Bank provided $800,000.00 from its Project Preparation Facility . It has also earmarked a $100 million concessionaire loan for the development of water supply and distribution to urban areas, specifically the Accra- Tema Metropolitan Area Water Expansion Program . Among other things, These Loans are predicated upon the acceptance of privatization, full cost recovery principles and the withdrawal of subsidies.

The bilateral donors are also pressuring Ghana to open up the utilities sector, especially water and electricity, to private companies from their countries. Both the Department for International Development (DFID) of the United Kingdom and the United States Agency for International Development (USAID) have been active financiers of the reform process with a view to influencing the process in favour of multinational water services companies from their countries.

For instance, the companies pre-qualified include well-known French, British and Dutch companies such as Vivendi, Sues Lyonnaise, Saur, Biwater and Nuon n.v. A fifth company, Bechtel is American.4 Consultancy services provided under the water reform program have been awarded exclusively to British and American firms well known for their free market preferences. No wonder all the studies concluded that the model of privatization being proposed by the World Bank, their direct agent in essence, is the best one for Ghana.

To marginalize local influence, the World Bank funds the office promoting privatization on behalf of the government of Ghana, the Water Sector Restructuring Secretariat (WSRS), which is staffed by individuals who are remunerated at private, not public, sector salary scales via numerous consultancy contracts. Bilateral donors such as DFID have also been involved in bankrolling the Secretariat. It goes without sayings that, under such an arrangement, the neutrality of this body as a technical rather than a propaganda unit will be deeply compromised. The Secretariat is bound to play the tune called by the World Bank and the bilateral donors.

The Policy Framework: whose framework?

The government of Ghana does not appear to have any coherent water sector policy of its own. Basically, it has relied on the World Bank for policy direction. Two important World Bank-backed policies have been key to setting the stage for the privatization of water in Ghana: decentralization and separation.

Decentralization

In 1988, the Government of Ghana began to implement this policy in order to devolve certain fiscal, administrative and development responsibilities from the central government to the district assemblies. Most rural districts have since indicated severe distress, largely due to difficulties in raising sufficient revenue to address poverty in these areas. The expectation that these rural communities will provide substantial back-up funds for decentralized water projects has proved unrealistic. While decentralization can increase participation, accountability and transparency, World Bank-prescribed decentralization, at least in the case of Ghana, is driven primarily by fiscal concerns – that is, the desire to reduce central government expenditures and increase the revenue generation responsibilities at the district level. The fundamental concern of the World Bank is to reduce the government’s deficits and improve the government’s ability to pay back its loans.5

Segregation of rural and urban water services

In the 1993/4 fiscal years, the Government began to implement a World Bank-backed policy to segregate the potentially profitable urban water supply systems from the unprofitable rural water systems. The same policy also shifted responsibility for sanitation and wastewater management to the impoverished local governments.

The World Bank prescribed the policy of segregation [unbundling] in order to create a segment of the water sector that would be attractive to, and profitable for, foreign private investors. This process is sometimes called "cherry picking" or "cream skimming." Prior to the segregation policy, there existed an integrated water and sewerage system, which ensured that drinking water and sanitation were managed together. It also facilitated cross subsidies. The relatively better resourced metropolitan and urban communities together with industry paid a small levy to support government delivery of water to the relatively poorer rural communities. The segregation policy has destroyed all that. The result is that less endowed local governments are unable to meet the water and sanitation needs of their people.

Also, the segregation of rural water from urban water ensures that the majority of the people who live in the rural areas will not benefit from the expected "efficiency miracles" expected from the proposed management service contract. Moreover, the imposition by the IMF of an automatic water rate adjustment mechanism on the State regulator, the Public Utilities Regulatory Commission (PURC), is part of a package of conditionalities that ensures that water rates adjust automatically as the local currency appreciates or depreciates against the US dollar. For quite obvious reasons the rates have only been adjusting upwards since the process began. Therefore, it is unlikely that the profit motives of the private operators, literally protected by IMF/WB conditionalities and anchored by the principles of full cost recovery, will be consistent with the policy objectives of the Government to supply the poor.

How the stalled privatization has already affected the poor and the Vulnerable.

The process of allowing private sector participation in the provision of water has generated concerns and debate about the wisdom of privatizing a vital public utility such as the Ghana Water Company. Concerns range from the obvious lack of transparency in the process to that of the impact of privatization on the poor and marginalized segments of Ghanaian society.

A recent survey by the Integrated Social Development Center (Accra) demonstrates that poor households in 5 communities in Accra – namely Madina, Sukura, Mamobi, Nima and Ashaiman — spend anything between 18 to 25% of their incomes on water alone. In essence, this means that poor socio-economic groups would be spending more, in real terms, on water than would non-poor groups.

In the rural areas, particularly the Northern region and some parts of the Volta and Central regions, the imposition of demand-driven policies have resulted in a dramatic increase in cases of guinea worm.

These policies require that communities not only contribute to the installation of capital equipment, but also bear all recurrent costs, including for repair and maintenance. Due to poverty, they are unable to meet the costs and, therefore, they are deprived of safe water. Over 70% of the people in the Northern region live below the national poverty line6 . Ghana now has the highest incidence of guinea worm in the world second only to Sudan.

The case of the Sudan is understandable given the fact there is civil war raging there. Ghana is a simple case of wrong policies and misplaced priorities. According to the World Commission on Water, some 1.2 billion people in the peri-urban communities in the developing countries pay an average 12 times more for water than their better-off compatriots in the affluent areas in the cities. If we go by the statistics given out by the World Commission on Water, then it is simply callous to impose demand-driven policies on rural water

Given the family care system in Ghana, where a worker does not only take care of his nuclear family, but also his less fortunate relations, the rising costs of water and electricity could just as well be sentencing several more people to poverty and early death.

Official governmental recognition of the right to water and sanitation, as an integral component of the body of human rights that have already been internationally recognized, would basically require states to give greater attention to the water supply problems of the most disadvantaged members of society. It is especially important in the Ghanaian context to protect wells and the sources of drinking water of persons who are not connected to the water supply system. Water wells in highly populated areas like Madina, Ashalley Botwe, Nima, Mamobi, Teshie, etc. must benefit from quality control measures currently limited only to piped water. This will improve the availability of drinking water by making these wells safe sources of drinking water.

The direct impact on the workers of the Ghana Water Company Limited [GWCL] is no less traumatizing. Many have lost their jobs since the privatization began in the mid ‘90s. Information filtering in from Bank sources suggests that about 2900 workers will be laid off under the current management service contract deal. Discussions over severance packages have been ongoing for several years. The stalling of the process has meant that deals concluded had to be re-opened. There is uncertainty surrounding the fate of the workers though some of them have received severance notice. The promises of lucrative severance pay cheques have done little to calm these fears. As an official of the PUBLIC UTILITIES WORKERS UNION [PUWU], put it recently at a public forum in Kumasi "we have been promised handsome layoff packages, but the exact figure is not yet ascertained.

The specter of pre-paid water meters

Prepaid meters are a violation of Human Rights. It may be efficient in enhancing revenue collection but it is socially insensitive and exclusive. In anticipation of privatization, a British company is installing prepaid meters on a pilot basis in some parts of Tema city. This experimentation should end immediately and the practice outlawed given the experience in Britain and South Africa, which have amply demonstrated that the meters often limit the access of the poor to adequate safe water. Poor people may not have enough money to prepay for an adequate supply of water. Most people in affluent societies live on credit and not even the rich prepay for their trinkets. Should the poorest of the poor prepay for water to feed the greed of a handful of shareholders?

Printable Version

Disclaimer: Opinions expressed in this article are those of the writer(s) and not do necessarily reflect the views of the AfricaFiles' editors and network members. They are included in our material as a reflection of a diversity of views and a variety of issues. Material written specifically for AfricaFiles may be edited for length, clarity or inaccuracies.

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