Water, power & privatisation

Through certain mechanisms, African countries are encouraged, perhaps pressured, to interact with international institutions and investors in a certain way. Questions surrounding the autonomy of recipient governments, sovereignty, and the might of international organisations such as the World Bank are unavoidable.

 

The World Bank was involved in the Dar es Salaam privatisation scheme from the beginning. To qualify as a Heavily Indebted Poor Country (HIPC), a classification that would be worth up to $3bn in debt relief over time, Tanzania was asked to privatise its water supply. With ‘debt stock in 2000/01 standing at two and half times its annual revenue’ (Action Aid, 3), the Tanzanian government was not in a position to turn down financial assistance of that magnitude. As an increasingly ‘donor dependant’ country, donor agencies had the power to push for substantial policy change (Action Aid, 3), imposing policies on national governments, while remaining democratically unaccountable. This is part of a trend whereby ‘Africa continues to pay an unsustainable risk premium… costing Africa more to borrow than it should’ (Adesina, 2020), pulling some countries further into debt, weakening their ability to negotiate with international institutions. Governments are now accountable to a second constitution, a constitution of creditors, feeling increasing pressure to appease investors, rather than focus on the needs of their own citizens (Streeck, 2014). Difficult questions surround the Tanzanian government’s autonomy in the face of donor conditionality, and its willingness, or otherwise, to prioritise donor pressure over the needs of its own people.

 

So, how do these power dynamics impact water governance?

 

The World Bank played a ‘dominant role’ in Dar es Salaam (Action Aid), and was at the ‘forefront of shaping, designing and imposing policy reform packages’ (Action Aid) because of its international clout, and the perceived incompetence of the Tanzanian public sector. With the United States owning almost 20% of voting rights, and 47 sub-Saharan African counties owning just 7%, the obvious power imbalances mean that economic liberalism, and neoliberal policies, founded in the US, and popular with American politicians, have frequently been central to World Bank development policy, despite criticism from NGOs (e.g. Action Aid, Water Aid) and development scholars (e. g. Escobar). Rather than an ‘evidence-based endeavour’, the roots of privatisation are more political than epistemological (Bakker, 2009). Obfuscating the politics of development policy depends on its presentation as a ‘detached centre of rationality and intelligence’ (Mitchell, 1991:33), despite the complexity of geopolitical relationships that come into play.

The World Bank is a central figure in international development

 

The World Bank, acting as a ‘investment financier’ and ‘policy advisor’, helps to coordinate the supply of ‘soft loans and subsidies’ described as ‘unavoidable’ by the CEO of Saur International, a leading company in African water privatisation (Talbot, 2002). He argues the private sector needs state subsidies in order to reach adequate investment levels and reduce risk. Because of this, the risk is still held by the public sector. In fact, “far from bringing in private capital and sharing risk, City Water, the private company now running the water system, is contributing only a fraction of the money needed to repair it,” only $8.5million out of the $164.5million project (Action Aid). Companies are wary about investment unless the ‘profits are available and the risks are controlled’ (Hall, 2006: 777), otherwise they will be ‘forced to stay at home’ (Talbot, 2002). We have a situation where privatisation is conditional on debt relief, and private companies are aware of this. Backed by the World Bank, in the name of development, companies feel comfortable demanding subsidisation,  to ensure optimal return on the capital employed. Relying on local community labour, and charitable volunteering, also reduces costs and the economic burden felt by the company (Hall, 2006:777). Arguably, ‘political objectives are intrinsically irrelevant… but organisations with political objectives may be used to capture markets from incumbents and help the firm reduce risks and increase profitability’ (Hall, 2007: 776). In other words, the political reasoning behind privatisation is largely irrelevant. Despite claims of increased efficiency and competition, state subsidies and voluntary labour show the public sector remains essential. But, adopting these as political objectives, allows companies to demand more control and simultaneously reduce risk.

 

The dominating presence of the World Bank continued even after the contract had been terminated. City Water sued for £10m in damages via the International Centre for the Settlement of Investment of Disputes (ICSID), an international arbitration institution funded by the World Bank itself. Even though the ICSID awarded no damages, they did find that the Tanzanian government had violated the bilateral investment treaty, and legal costs for both parties ran into the millions.

 

It is clear many contradictions exist within the politics of private sector management. There have been successful privatisation schemes in sub-Saharan Africa, but there have also been a number of notable failures. The power dynamics, namely the relationship between the Tanzanian government, the World Bank, and private companies, created a situation where genuine free market ideals of competition and efficiency were not able to flourish. Water is a natural monopoly. This, coupled with very little risk being held by the private sector, creates a situation where minimal investment and maximal profit are prioritised. And, as discussed last week, it’s the poorest communities who suffer most as a result.