Social services


Ghanaians contest Bank-backed water privatisation

25 March 2002

Ghanaian organisations have mobilised in recent months to prevent the privatisation of their country’s urban water supply system. They have formed the Coalition Against the Privatisation of Water in Ghana which argues that the privatisation package is a bad deal both technically and financially. It says the reforms are largely imposed by external interests led by the World Bank and the IMF, which have imposed tough conditions.

The Coalition comprises a range of individuals and organisations: workers, managers, researchers, engineers, community leaders, user associations and charities. It claims to “bring to this debate a collective wealth of knowledge and experiences far in excess of what any single institution can command”. It recognises the need to reform public water supply institutions and resolve their severe financial constraints. It suggests, however, that “any reform must be aimed at achieving full protection of the right of all to potable water”. Currently around half of Ghana’s population has no regular, safe water supply.

The official plan is to divide Ghana’s urban water systems into two large concessions to be leased to two different companies. 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. Higher tariffs charged to wealthier households can cross-subsidize systems in low income neighbourhoods.

A comprehensive rebuttal of the privatisation proposal from the Integrated Social Development Centre (ISODEC) 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”. A 5 March IMF document spells out conditions for providing further loans to Ghana. These include implementation of full cost recovery in public utilities and the introduction of an automatic price raising formula for electricity and water.

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; it is expected to raise $500m in the first two to three years following privatisation. This will come from official sources such as the World Bank and African Development Bank. The World Bank’s IDA will fund a new Operating Investment Fund which will provide capital to companies for specific projects.

Likewise the Ghanaian government has responsibility for subsidising the water companies if they raise prices to levels which poorer customers cannot afford. As companies are anyway being awarded monopolies within their business areas, they face 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 nature of the deal can be explained by the choice of consultants which drew it up at a cost of $3 million. “The key studies were commissioned and paid for by the World Bank and bilateral donors such as DFID. None of those studies were tendered in Ghana. The consulting firms all happened to be ideologically favourable to privatisation and had a track record of working for large private water companies”, argues ISODEC. The consultants included Louis Berger and the Adam Smith Institute. The government body overseeing water privatisation – the Water Sector Restructuring Secretariat – is also viewed with suspicion as it is directly funded by the World Bank and bilateral donors.

The World Bank has argued in a number of reports – including its recent Private Sector Development Strategy – that the poorest people are often forced by inadequate state service to obtain their water from private vendors at high rates. Thus a well-organised and regulated privatisation can help obtain a better deal for them. It argues that levying charges on those who can afford to pay for their water will raise revenue for future investment to expand water provision. It also points to its loan of US$25 million to support the Community Water Supply Agency which works in rural areas.

The Coalition Against Privatisation concludes, however, 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.

Privatisation of water not “pro-poor”, NGOs warn, Bretton Woods Update 23

Why we oppose water privatisation (ISODEC)

Coalition Against Privatisation

Christian Aid report

GCI paper

Write to the IMF