The case of city water: privatisation gone wrong
This week we’ll take a deep dive into a privatisation project that took place in Dar es Salaam in 2004. Next week we’ll take a broader look at some structural issues surrounding privatisation and donor conditionality.
First, there are highly contested preconceptions on what ‘privatisation’ means, what it looks like, and who it benefits. The often politicised debate sees disparaging criticism from leftist mainstream media and critical development scholars, countered by zealous support from private companies and right wing think tanks such as the Adam Smith Institute. However, it is important to refrain from thinking that privatisation is categorically good, or categorically bad. Using ‘broad brush strokes’ prevents an exploration of its complex reality.
In 2003, in order for Tanzania to qualify for the Heavily Indebted Poor Countries initiative, the government was asked to privatise Dar es Salaam’s water supply. In exchange, a $143 million loan from the World Bank, the African Development Bank, and the European Investment Bank was offered.
Many different types of water management fall under the privatisation bracket, ranging from a private company being responsible for partial management, to a longer-term lease, to full divestiture. However, even street vendors, otherwise known as Hawkers, can be categorised as private participants, further emphasising that often ‘water privatisation is imprecisely used term to describe a range of private sector interventions’ (Peirce, 2015:121).
In the case of Dar es Salaam, a 10-year lease was organised. City Water, a joint venture between British, German and Tanzanian firms, who took over ‘responsibility for operating the water system, billing, tariff collection and routine maintenance’ (Action Aid: 4), whilst the Dar es Salaam Water and Sewage Authority (DAWASA) retained ownership and responsibility for network expansion.
In 2005, just two years after the commencement of the project, the senior managers of City Water were escorted out of the country, ‘signalling the end of a flagship World Bank privatisation deal’ (Guardian, 2007). Politically, why did this fail? And more importantly, who did this fail?
A primary goal of private businesses is to turn a profit. First and foremost, City Water needed to make money. After the failure of several prolific privatisation schemes in South America, a period of ‘strategic retreat’ had set in as the social and economic viability of for-profit companies was being questioned (Peirce, 2015:123). Fundamentally, at the core of water management, are the conflicting agendas of the private company and the other stake holders involved. Whilst socially, some causes may be just, they are not ‘viable from a private sector point of view’ (Bayliss, 2003: 514). To generate profit, companies are likely to focus on people who can a) pay their bills b) have the ability to continue paying their bills, if water prices increase, working in areas where ‘GDP/ capita is not too low’ (Bayliss, 2003: 528). With that in mind, it is unsurprising that ‘98% of the budget was spent on the richest 20% of the population’. Unplanned settlements, home to 80% Dar es Salaams population, were ‘left to local NGOs’ to deal with ‘under the community water supply and sanitation project’ we discussed last week (Action Aid: 15). This a classic example of community-based management schemes being used to bolster private water management schemes (Page, 2003), allowing private companies to present as pro-poor, without being forced to invest in areas that will be unable to generate profit.
City Water’s efforts plan was designed with the assumption community-led schemes would pick up the slack. Like the British in the 1940s, the company assumed that if the less developed parts of the city managed themselves, it could ensure an optimal return on capital employed. Generating profit and cutting investment costs must have seemed like a win-win solution.
Unfortunately, cities don’t work like that. They are deeply interconnected. Changes in water prices will invariably impact the vast majority of residents, even if they aren’t direct consumers. Despite remaining largely unconnected to the formal water network, water prices for poorer communities increased. Water vendors were forced to increase their prices to accommodate for rising costs (The Guardian). City Water also started metering water, meaning households were unable to pass water to their unconnected neighbours without any extra charge. Clearly, ‘poor people’s needs have not been in any way central to the reform design’ (Action Aid: 18). At best, efforts have been tokenistic, and at worst, they have pushed marginalised people into consuming unsafe, unclean drinking water.
The roots of City Water’s troubles could be found in the 8% billing rate in Tanzania (WaterAid, 2002), and the high leakage levels or the corruption within DAWASA. However, corruption continued as ‘corrupt DAWASA employees [became] corrupt City Water employees’ (Action Aid: 14). Infrastructure was not developed, quality did not improve, and billing rates remained low. The success of privatisation ‘depends on the initial state of enterprise’ as ‘services in crisis before [privatisation] remain in poor shape’ (Bayliss, 2003: 527). In the case of Dar es Salaam, the commodification of water was not possible. The infrastructure was too poor, and the vast majority of the population were unable to pay. This was not an environment that could generate profit. Management schemes needed to be designed with all citizens in mind.
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