Setbacks to privatisations across Africa

13 June 2005

The collapse of a flagship water privatisation in Tanzania, and opposition to both a planned privatisation of the state cotton board and the completed privatisation of the state railway in Mali, highlight the continuing struggle over pressure from the Bretton Woods institutions to privatise in Africa.

In late May, the Tanzanian government pulled the plug on a deal with British company Biwater, which had been contracted in 2003 to bring water to the capital region. Privatisation of the capital’s water system was a condition of both IMF support to Tanzania and for getting debt relief under the Heavily Indebted Poor Countries initiative.

Tanzanian water minister, Edward Lowassa, said the company had “failed to produce the goods”, claiming that no new domestic pipework had been installed and that the company had invested less than half of the promised $8.5 million which it had agreed. Larry Magor, chief executive of Biwater, conceded that the project had fallen behind schedule, but claimed that information provided to Biwater was “not only incomplete but also inaccurate”. In a strange twist to the story, three executives of Biwater’s Tanzanian subsidiary were temporarily detained and then deported in early June. A new institution, Dar es Salaam Water and Sewage Corporation, Dawasco, is being formed to replace the failed firm.

one official fresh out of college has more power than all our civil servants put together

British campaigners from World Development Movement (WDM) are highlighting the role of the UK’s Department for International Development (DFID) in the failed privatisation. DFID paid Adam Smith International, a right-wing thinktank, more than £500,000 to provide advice to the Tanzanian government on reform of the country’s water system. DFID has admitted paying more than £36 million in the past seven years to Adam Smith International and Price Waterhouse Coopers to advise countries on privatising utilities.

Biwater’s difficulties in Tanzania were likely at the root of its decision to withdraw from the bidding process for a controversial water privatisation in Ghana (see Comment, Update 43). Rudolf Amenga-Etego, head of Ghana’s National Coalition Against the Privatisation of Water, has urged “other companies who are still thinking of bidding for this contract to do the same as Biwater”. The World Bank approved a $103 million loan for the privatisation of Ghana’s urban water system in August 2004. Bidding for the contract is currently underway.

Bank enforces US cotton subsidies

Concerns over Mali’s impending privatisation of the cotton industry are growing amongst cotton producers, civil society groups and in some quarters of the government. The World Bank has been pressuring Mali for several years to privatise CMDT, a parastatal company responsible for the commercialisation and development of Mali’s cotton production. The government recently managed to delay privatisation until 2008.

While most Malians agree that CMDT is poorly run, there is widespread concern from producers about the impact of full-blown privatisation on prices paid for inputs and those received for their crops. In 2004, the World Bank pressured CMDT to pay producers a ‘world market price’. The price was below that previously-agreed between CMDT and farmers – a price upon which the farmers had made their investment decisions. The government ultimately refused to drop the price and the Bank was forced to back down, but only on the condition that CMDT did not create a gap in subsequent years between the world cotton price and the price paid to producers. Many trade analysts question the legitimacy of a ‘world market price’ which is a product of enormous US subsidies to its cotton farmers. One government advisor interviewed by UK NGO Christian Aid complained that “the World Bank office in Bamako has just one official for the cotton sector – fresh out of college – who has more power than all our civil servants put together.”

The World Bank recently conducted a poverty and social impact assessment of cotton privatisation in Mali, but this is not yet in the public domain. Brussels-based NGO EURODAD has conducted an independent assessment which will be released shortly, pending release of the World Bank study.

Bank-backed rail privatisation a “disaster”

Frustration with the Bank in Mali is compounded by the impacts of a Bank-enforced privatisation of the state railway in 2003. Tiécoura Traoré, head of a national citizen’s campaign “for the return of the rail to the people of Mali” has called the privatisation a “disaster”. Traoré is a railway engineer and former director of the African Railway Institute in Brazzaville. He cites the loss of 600 jobs, the closure of two-thirds of the station stops and precipitous decline in passenger traffic. This has threatened the livelihoods of thousands who live along the route of the railway who depended on it both for the customers which it brought and as a means of getting their goods to market.

In return for voicing opposition to the privatisation, Traoré was sacked by the new owners of the rail line, Transrail SA, a Canadian-French consortium. Supporters are calling for his reinstatement and raising financial support for Traoré in the months that he has been without employment. Traoré’s case before the labour tribunal could last for several months.

Last March, IDA approved a $48.7 million loan to support a four-year “transport corridors improvement project”. Part of the project will finance a social compensation plan to “mitigate the impact of the concessioning of rail services to a private operator”.