The struggle over water

Gyekye Tanoh; Kathy Cusack
Third World Network (TWN)-Africa

The plan to privatise the urban water supply system by March 2003 has become a defining battlefield. For the poor, the commercialisation of water, combined with lack of investment in the sector and regressive socio-economic distribution, is a key factor in their poverty-striken situation. At the heart of the issue are questions of need versus profit, and whether water is a right or a commodity.

TheGhanaian government’s plan to privatise the country’s urban water supplysystem by March 2003 has become a decisive battlefield regarding thelong-running influence of the Bretton Woods Institutions, bilateral fundingagencies and transnational companies over Ghana’s economic policies. Publicmobilisation against the policy has provoked intolerant pronouncements by agovernment that proclaims itself the guardian of Ghanaian traditions of liberaldemocracy. At the international level, on the other hand, the anti-privatisationcampaign has thrust Ghana back into the centre of activism against the policiesof the World Bank and the International Monetary Fund.

Theplanned privatisation of the urban water supply is part of a larger programmethat could eventually sell off core public enterprises—ranging from a highlyprofitable cocoa factory to the troubled Ghana Airways. It is part of therapidly intensifying process of transferring key aspects of essential socialservices from the public to the private sector. In addition to water,specifically targeted services include electric power generation anddistribution. At the heart of the issue are questions of need versus profit, andwhether water is a right or a commodity.

Thegovernment of Ghana estimates that about 66% of urban residents and only 37% ofrural dwellers have access to potable, piped water. However 78% of the urbanpoor do not have regular access to potable water because they lack connections.This majority of urban residents buy their daily supplies from water merchantsat an average cost of USD 0.34 (at August 2002 prices), or 54% of the minimumdaily wage. In contrast, the more affluent urban minority who are connected tothe public system spend a daily average of about USD 0.05, or about 8% of thedaily minimum wage. In other words, the daily expenditure on water for the urbanpoor is on average seven times the expenditure of upper class urban households.

Notsurprisingly, Ghanaians perceive the parastatal, monopolistic Ghana WaterCompany (GWC) as inefficient, corrupt and unreliable. This criticism is due tomultiple factors: years of under-investment in maintenance and expansion offacilities, poor management, operational inefficiency and opportunisticpolitical meddling by governments, especially with tariff levels. These factorshave eroded public patience and sympathy for the utility and strengthened thegovernment’s case for privatising water. It argues that the sector’sproblems stem from public ownership, and that privatisation will deliver morewater to more people, cheaply, efficiently, reliably, and without corruption.[1]

Privatisation:a creeping but radical programme

Inaddition to politicians, top water executives in the public sector stronglysupport the privatisation process. The government department undertaking theday-to-day work of privatisation, the Water Sector Restructuring Secretariat, isfunded by global pro-privatisation institutions such as the World Bank, theUK’s Department for International Development and Japan’s OverseasEconomic Cooperation Fund.

Hailedfor many years as a model for the successful implementation of neo-liberaleconomic policies, Ghana joined the Heavily Indebted Poor Countries scheme earlyin 2002 and is now even more beholden to the World Bank and IMF. The currentWorld Bank Country Assistance Strategy (CAS) for Ghana classifies ‘privatesector involvement’ in the provision, operation and management of public andsocial infrastructure as a key institutional reform whose implementation willtrigger varying levels of Bank support (or punitive action if conditions are notmet).[2]

Acreeping but radical change has been taking place in Ghana’s water policy. Inthe mid-1980s and again in the early 1990s, rationalisation of the water sectormeant a combination of mass layoffs (36% of Ghana Water Company workers), tariffincreases and the withdrawal of government subsidies for water. More tariffrises are planned before March 2003. Furthermore, rural and small urban watersupply systems have been separated and placed under the management of aCommunity Water and Sanitation Agency (CWAS). There was also somere-capitalisation through government borrowing and Official DevelopmentAssistance support (estimated to amount to 8% of water investment needs) andforeign ‘technical assistance’ which took the form of rudimentary linemanagement, replicating inside GWC the very ‘loss of sovereignty’ that hascharacterised the broader adjustment process.

Untilit came to power two years ago the ruling New Patriotic Party (NPP) vehementlyopposed the privatisation policy.[3]The chosen institutional mechanism for the NPP’s privatisation policy is a“private-public partnership” or private sector participation (PSP). Theprimary mechanisms to ensure the institutional and entrepreneurialindependence—as well as financial viability—of water services, includeself-financing, better effectiveness through private investment and profitincentives, and the greater efficiency of consumers’ water use through pricemechanisms.

Thenational urban water system will be divided into two discrete business units, tobe run by two companies, each of which will enjoy a monopoly in itsmarket/service area. For an undisclosed fee, private sector operators will leaseeach of the two urban water systems for ten years. During that time they will beresponsible for ‘rehabilitation, renewal and operation’ of the water supply,billing and collection, and management and disbursement of water revenues.

Together,the two private companies will contribute USD 130 million—one tenth of therequired investment for rehabilitation and expansion over ten years,according to Government and water industry figures. The private companiesare not responsible for directly providing or raising funds. The Government willfund and underwrite an Operational Investment Fund from which private companieswill borrow at 1% interest, while prevailing interest rates in Ghana run between29% and 50%. All other investment is to be provided directly by the Government.

Accordingly,the Government has cut the water investment programme from USD 1.3 billion toUSD 530 million (of which the Government directly provides USD 400 million andprovides or guarantees the remainder of USD 130 million for private‘investors’). In other words, the economic criteria for private sectorprofitability in water service rehabilitation, maintenance and management will restrict water systemexpansion and overall public investment. Crucially, the public sector is stuckwith the deficit-creating aspects of the water system—sewerage, rural waterand sanitation, system expansion and capital investments—by an arrangementthat ensures that major revenue from billing goes to the private sector.

Minimumprofit rates for private water companies are guaranteed and protected frommarket conditions by IMF-imposed full cost recovery and automatic tariffadjustment mechanisms. Long-term exchange rate depreciation has already taken aheavy toll on the financial viability of the existing public utility. In 1998,losses due to currency exchange rate depreciation, dependence on foreign importsand external financing (e.g. interest on loans) made up 93% of the operationallosses of the water company. Since only foreign multinational companies arebidding for the water privatisation contract, the reliance on foreign inputs(and labour) will certainly increase distortions created by exchange ratedepreciation. With privatisation, the automatic tariff adjustment formulaensures that these will be passed on to the consumer.

Thespecific performance targets under ‘level of service criteria’ include fullmetering, billing and collection and the reduction of unaccounted-for or‘non-revenue’ water (NRW) from its current level of around 50% to 25% withinthe 10 years. NRW reduction depends on financial resources to repair and replacedefective infrastructure, as well as improved administration. Efficient revenuemanagement and a reduction in NRW are enhanced, among other things, by cuttingoff water supply to users who are unable to pay.

Whileprofitability and financial viability of the provider are central priorities ofthe Government’s water policy, social demand is marginalized. Ghana’s waterprivatisation policy explicitly exempts private water companies from providingservices to urban low-income communities that are not already connected to thepublic system. Private company service obligations also exclude all small urbanand the entire rural population (grouped under the CWAS), namely the majority ofthe country, which does not represent an attractive market. These make up the70% of the population who live on less than USD 1 a day and for whom access towater is determined by policies based on a “demand-driven approach, with[community] self-selection and clear commitment to enhance sustainability by[communities] contributing 5-7% of [water] investment cost.”[4]

Inthis policy, ‘coverage’, in the context of ‘self-selection’ based oneconomic demand, is constantly re-defined to scale down the service level andreduce the per capita demand from 45 to 20 litres per day.[5]Yet even when defined at this lower level, the national drinking water supply[in non-municipal areas] dwindled from supplying 46% of the population in 1992to 30% in 1998.

Antagonismof civil society into the breach

Thelong incubation within Ghanaian society of the widespread scepticism,disaffection and outright opposition to neo-liberal policies has become an openstruggle with the creation of the Coalition Against Privatisation of Water(CAP-W). Originally initiated by a local NGO, the Integrated Social DevelopmentCentre (ISODEC), CAP-W has now grown to become a mass civil society campaign ledby the Ghana Trade Unions Congress (TUC), the largest labour organisation in thecountry.

CAP-Wdefines itself as a broad-based coalition of individuals and civil societyorganisations united around six activities:

·       A mass civilsociety campaign of public debate, education and mobilisation to stop thetransfer of water supply to foreign monopolistic control.

·       Direct citizeninvolvement in decisions about the alternatives for reforms in the water sector.

·       The inclusionof a public sector option in water supply and restructuring, to be drafted andpublicised by GWC, the existing public sector supplier.

·       Full publicdisclosure of all documents and details of transaction proposals, bids andnegotiations involving all parties involved in the so-called PSP.

·       Full publicfunding and public sector community management for all rural and non-municipalCWAS systems.

·       Access to waterfor all Ghanaians, backed by a statutory right to water, by 2008.

CAP-Wmaintains that water privatisation is a major threat to public accountability,democratisation, equitable social development and the realisation of povertyreduction goals. It has been engaged in a range of activities includingresearch, advocacy and networking, signature campaigns, teach-ins, and localaction committee work. These organised networks also aim to become grassrootsinstruments for ensuring the accountability of a socially responsible publicwater utility and water policy.

Thework of CAP-W has been bitterly denounced by government officials, who claim thegroup is made up of unpatriotic privileged persons (and in one instance“terrorists”) with access to clean water who do not care whether theexcluded enjoy the same. However, CAP-W’s work has forced a much higher levelof domestic and international discussion on the water privatisation issue thanhas taken place on any previous Ghanaian privatisation.

Thereport of an April-May 2002 international fact-finding mission to Ghana (FFM),led by British MP Jenny Tonge, and including prominent water engineers, hasbecome a central focus of public debate. During their visit the group metgovernment representatives as well as a broad range of civil society groups andindividuals. The FFM concluded “the current Private Sector Participation (PSP)proposal is not the optimal option for ensuring expanded access to clean andaffordable water for the people of Ghana”. It recommends that “theGovernment of Ghana continue ... open dialogue and consultation with a broadrepresentation of stakeholders regarding alternative approaches to expandingaccess to clean and affordable water”.

WhileCAP-W has hailed the report, the Government has discredited it as “bogus andfraudulent”, and made clear it does not intend to consider the FFM’sfindings and recommendations. To reinforce the government’s stand, theMinistry of Works and Housing launched a campaign in the state-owned mediaattacking both the FFM report and CAP-W, calling them left-wing ideologues andpropagandists.

Scramblingfor a drop: women’s unequal burden

Thereis evidence of increasingdaily household labour, especially health care responsibilities, for womenand girls. The commercialisation of water adds directly to this burden, since asthe Ministry of Health shows, 70% of all diseases treated in outpatient clinicsin Ghana are water-related. Water scarcity also increases household tensionsthat lead to violence against women and children.[6]

Thebrutal cuts and restructuring pursued so far in the process of water sectorreform with a view to “getting the price right” is an appalling example ofthe differential impact of SAP policies.The commercialisationof water, combined with lack of investment in the sector and generallyregressive socio-economic distribution, have led the poor to see water supply asa key factor in their poverty-striken situation.[7]Yet the World Bank extolled the increased market efficiency resulting from thesereforms, citing GWC as a model for reforming public sector companies.[8]

Thisform of privatisation—that of “Public-Private Partnership” or “PrivateSector Participation”—is rationalised as a shift away from exclusive focuson market efficiency to harnessing the dynamism and resources of the privatesector to make it operate for the social good. This rationalisation fits in withthe shift in approach supposedly inherent in the Poverty Reduction StrategyProgrammes. Yet plusça change, plus la même chose. Although one of the PRSP’s ‘novel’ features is the requirement forwidespread social participation, Ghana’s PRSP, and water reform in particular,is drawing widespread criticism from civil society groups because ofshortcomings in its participatory process.


[1] Sir William Halcrow & Partners Ltd., Final Report of Consultancy Services for the Restructuring of the Water Sector, 1995; Stone & Webster Consultants, Information Memorandum – Enhanced Leases for the Operation, Maintenance and Management of Urban Water Supply Systems in Ghana, March 2001; Republic Of Ghana Ministry of Works & Housing, Enhanced Lease Contract, Invitation for Pre-Qualification, May 2002.

[2] See e.g. World Bank, Ghana – Country Assistance Strategy: 2001-2003, June 2000.

[3] Earlier privatisation plans ran aground in 1999 when it was revealed that ‘Azurix’ (the water subsidiary of Enron, the scandal-ridden and now bankrupt utility giant), which won the water privatisation bid, may have paid USD 5 million in bribes to Ghanaian government officials.

[4] Ghana Ministry of Works & Housing, WATER: Comprehensive Development Framework, November 1999.

[5] Ibid.

[6] K. Cusack, research notes on “The Economy and Violence Against Women,” unpublished, Accra 2002. Also: M. Grieco, “Living Infrastructure: The Role of Children In Refuse Disposal and Water Provision in Ghana,” Social Policy Journal, Vol. 1, No. 1, June 2000, pp. 55-68 (CSPS, University Of Ghana, Legon).

[7] See: Appiah, Demery & Laryea-Adjei, Poverty in a Changing Environment, in “Economic Reforms in Ghana: The Miracle and the Mirage,” ed. E. Aryeetey, J. Harrigan & M. Nissanke (James Currey, Oxford 2000), p. 313.

[8] World Bank. Bureaucrats in Business, Washington DC, 1995.

Gyekye Tanoh is the Southern coordinator of CAP-W; Kathy Cusack is coordinator of the Nkyinkyim Anti-Violence Project.