Thirsty for Justice: Ghanaian Water Privatization Conflict Rises to a Boil

Vol. 6, No. 2

September, 2003

by Robert Weissman
Essential Action

For almost a decade, the World Bank has been pressuring Ghana to privatize its public water
system, or to enable some form of “private sector participation” in the water system. Ghana is,
of course, not unique in this regard. Over the same period, people throughout the Global South
have witnessed World Bank and corporate schemes to wrest control of now-public water
systems and deliver them into private hands.

Ghana has been one of the hottest flashpoints in the conflict between the people and the Water
Barons. There, the National Coalition Against the Privatization of Water (NCAP of Water) has
aggressively opposed Bank-advocated privatization proposals.

NCAP’s campaign has succeeded in thwarting numerous versions of the Bank's privatization
proposal. Now, a new World Bank country officer and water privatization project manager are
intent on giving new impetus to the privatization project. As they rush through a private sector
participation loan this year, the conflict in Ghana is again rising to a boil.

It was just last year when it appeared the privatization program had been derailed. A proposal
to lease out the urban water system floundered, thanks in large part to an outpouring of
opposition coordinated by NCAP. The proposal also ran out of steam because the
multinational private operators who are interested in running the Ghanaian water system simply
did not want to invest any money in the project.

The premise of the Bank’s lease proposal was that Ghana would attract tens of millions of dollars
in private investment to repair and extend its tattered water delivery system. Even that benefit
was wildly overstated, since the proposal would have guaranteed the lessee a return on its
minimal investment, making it more of a loan than actual investment.

Alex MacPhail, the new project manager notes, times have changed. The private water
companies have had a hard time – and, it should be added, a series of notable failures – and no
longer are interested or able to mobilize funding for “investment” in a country such as Ghana.
Nonetheless, the Bank insists that the multinationals must be involved if the Ghanaian water
system is to be salvaged, and is now proposing a multinational be brought in to manage the
system under a three-to-five year service management contract. The Bank is prepared to make
a $100 - $120 million concessional loan to Ghana if the private sector is brought in to manage
the water system, but will provide only $20 million or so if the system stays under public
management.

All parties to the conflict in Ghana agree the present water delivery system is abysmal.
One-third of urban consumers are not connected to the piped water system. Many of those
who are connected to the pipe system receive sporadic service – as infrequent as once every
two, three or four weeks. But NCAP says that the global experience with water privatization
suggests that the multinationals will fail to provide decent service to the poor or prioritize their
needs. NCAP says the public sector, if reformed, would be able to manage the system more
effectively in the national interest.

The Bank’s present support for a service management contract does represent a climb-down
from its advocacy of a lease arrangement. The government maintains a much more substantial
degree of control under a service management contract, including control over investment
decisions – like the important matter of which pipes should be repaired and extended, which will
determine which communities get access to improved water delivery – than it would under a
lease arrangement.

The Bank also now supports a remedy for one of the most obvious failures of the present water
system. Private water vendors provide water to poor urban communities that are not connected
to the piped system, or receive infrequent service. Although they actually get their water from
the public water authority, they are not regulated, and often charge prices five to ten times higher
than the piped water price. Earlier Bank proposals were silent on or affirmatively opposed
regulating the prices charged by the private water vendors, but the Bank now says it support
such regulation.

Most of the core issues that inspired NCAP's opposition to the water lease arrangement remain
unaddressed. The Ghanaian regulatory authorities now advocates a system of full cost recovery,
in which consumer charges are supposed to cover the entire cost of the water system. (In the
United States, by contrast, general tax revenues supplement water charges.) Full cost recovery
will translate into much higher charges for water. The Bank claims the decision to move to full cost
recovery has been made independently by the regulatory authorities, and is not connected to
private sector involvement. But over the last decade, advocacy for full-cost recovery and
privatization have been intertwined.

NCAP has particular concerns about two elements of the current service management contract
proposal. First, the managing multinational would be expected to meet general guidelines, but
would not be held to the performance targets included in prior proposals. So the company will
not have any clear financial or legal interest to ensure improved service for the poor. Second, the
management contract is likely to include a provision enabling the contract to be converted to a
lease after a set period, if both the government and management company agree. That would
reintroduce the multifaceted problems relating to control over investment that plagued the
previous proposal.

At bottom, NCAP, like colleagues around Africa and elsewhere in the developing world, reject
the market fundamentalist illogic that asserts by definition that private companies operate more
efficiently than the public sector. They insist that drinking water be treated as a right, not a
commodity. Rather than inviting predatory multinationals in to drive up prices, suck up profits,
serve the urban elite, and ignore the poor, they say, the public sector can and must be
reinvigorated to ensure decent delivery of water, one of life's essentials.

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