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Time up for Commodification and Privatization of Urban Water Supply in Ghana

There was harmonic convergence this week within my family when the ‘left’ and ‘right’ positions on water privatization agreed that it was long overdue for water to be left for the market. My mum was especially horrified when she saw for the umpteenth time what she described as fungi-looking spirogyra after fetching from the tap.

We pay ?200 (0.02 cents) per bucket (twenty litres) for supposedly treated water while my aunt who lives some six kilometers away pays nearly ?1200 (8 cents) for the same amount because her area is yet to be connected to one of the 96 urban pipe-borne systems.

Ghana?s population has more than quadrupled since independence when 35 urban pipe-borne systems were constructed. Currently 35% of the population is urban. About 58% of urban water supply goes to domestic consumption, 24% to commercial/industrial customers and 18% to government and public institutions. Effective urban water supply coverage keeps decreasing from the 2002 figure of 59% just as the investments needed keep dwindling by the year. Forty-one percent of citizens have either no access to, or get water through some savvy tanker operators and water vendors who charge very unusual rates. This is not due to water scarcity, as 50% of water goes unaccounted for aside of widespread leakages.

Of particular importance to many urban dwellers is the quality of water we drink. The World Health Organization publication in 2000, says 75 % of all diseases in developing countries arose from polluted drinking water. That same year, UNICEF said that the consumption of unsafe water contributes to about 2.2 million deaths annually. The UN World Development Report ?Water for People, Water for Life? shows that the amount of disease and lost man hours due to unclean water is vastly greater than the cost of improving water systems. The report in fact, claims every dollar spent on improving water delivery and sanitation would bring US$34 of benefit.

A World Health Organization inspired research conducted recently in Ghana’s capital city, Accra, reveals that chlorine levels in the water decreased with increases in the presence of faecal matter as one moved further away from the main water headwork West of Accra.

The report states the problem is ‘due to the number of broken pipelines along the course of distribution’. The report recommends, “Residents ought to be sensitised to report as early as possible breakages in their vicinities so as to minimize (emphasis mine) contamination resulting from the introduction of contaminants via broken pipelines.? The report suggests that the largely owned state water company should continue changing old pipelines and inject efficiency in its operations.

Such lame recommendations are what many Oxfam and Christian Aid cronies in Ghana, most notably the Integrated Social Development Centre (ISODEC) and the National Coalition Against Privatization of Water in Ghana (NACAP) encourage. The government appears to be in favour as it succumbs to the public-private sector participation approach. Under this arrangement some foreign government-backed multinationals with ties to the World Bank and IMF urge the Ghanaian water regulator to lease its assets to the multinationals in the belief that it ‘would be a strong leverage for instituting the right pricing policies and hopefully an improved management regime to increase efficiency’. Doubtless this is achievable in a strictly private arrangement. However, the immediate Managing Director of Ghana Water Company Limited (GWCL) believes that ‘donor confidence in the sector would then increase, hopefully leading to more contributions’.

Government is to access loans from the World Bank while the Bank recommends which multinationals should manage the assets and collect tariffs. While this stops short of calling the regulator as inefficient and lacking direction, it is in itself not desirable as privatization without private capital infusion is a con, which I describe as crony capitalism. We must be mindful of what foreign aid has done to our national psyche and institutions; it would be wise not to travel that tortuous path again.

ISODEC and NACAP are right in calling this arrangement a bad deal, given the painful experiences of neighboring countries. But their rejection of the market in the name of ‘protecting Ghana’s sovereignty and life security’ appears to be confused and misplaced as they say in one vein ?in principle, the public realizes the benefits of privatization only when there is competition by many firms within a single market. Consumers benefit when firms are forced to under-price and outperform each other to win customers’ and in another, that ‘while privatization and the market economy are promoted as the answer to poverty reductio’, the privatization of water in Ghana is clearly not an open market transaction in which the hands of government play a minimal regulatory role?

Perhaps ISODEC and the government are unaware that politics is the reason why successive governments have blocked reasonable cost recovery let alone full cost recovery. The Coalition (NACAP) has said they ?favour a rights based approach to water systems development?. They believe that government/public should exclusively own assets and distribute water while wealthier households are charged higher tariffs to support water system development. They say where these measures ?fall short of guaranteeing the right to water, general fiscal transfers must be mobilized?. How bizarre! Where will individuals get the money from in the first place when they are not allowed to plough back their meager earnings as a result of existing exorbitant taxes? Interestingly, ISODEC claims that by their own calculations they have had increased faith the then Ghana Water and Sewerage Corporation as they did a splendid job before part of its shares were offloaded. Like central planners, ISODEC has forgotten that society is dynamic.

Interestingly, the balance sheet of GWCL does not reflect a positive. Non-operational losses alone shot up from US$16.1m in 1999 to US$239,362,000 in 2000. GWCL needs about US$30 million per annum to fund operational losses and US$120 million to fund non-operational losses. Yet GWCL?s turnover from sales of water is in the region of US$35milion per annum, operating below design capacity with some infrastructure parts over half a century old. Strange how impressive ISODEC sees this? Get the media on your side and you can say wonderful things that sometimes defy simple economic logic.

Privatization is key

In the heat of our arguments last Thursday, my visiting aunt said she does not see why water services can?t be totally provided by the private sector since one would be assured of regular water flow and widespread accessibility plus transparency as in her own words ?even when we are paying more for the same quality of water, there is discrimination in water allocation as the few rich in our area are constantly supplied because they give kick backs to the regulator?s field staff?.

Perceived or identified poor areas could be helped by instituting differential pricing in order to ?cross-subsidize? operation cost or standing charges while maintaining per unit of water used. This way their bills are lower. Lower use charges on the initial amount of water considered essential for hygiene and health are applied in Italy, Greece, Portugal and other water-short countries.

Privatizing piped-water would reduce the tax burden thereby freeing up resources that can be spent on private goods in order to encourage entrepreneurial activity and boost economic growth. I mentioned to her that privatization was even happening in many poor places such as rural Chile while quasi-privatization is happening many rural areas in Ghana.

But there is one problem. Good water supply is linked to a planning system in order to enhance efficient delivery. Unfortunately, my country does not operate its basic planning law, let alone enforcing planning procedures there in. The result is haphazard development. This is where the focus should be, not vainglorious agitations for paternalism that was responsible for the very mess we are in now.

Nonetheless as a colleague used to say, ?just as we would not want to breathe in polluted air, we do not want to drink or use contaminated, unhygienic unsafe water. So it is not just access to water, but to safe, potable water that all humanity now claim as a fundamental human right?.

That right is fully guaranteed in the market place where real privatization is achievable.
Franklin Cudjoe is founder of Imani: The Centre for Humane Education. He co-authored an Institute of Economic Affairs-Ghana monograph on water privatization with ISODEC, GWCL, and S.B.Akuffo, an Environmental Consultant in 2002. Many of ISODEC?s quotations are from the monograph, IEA-Ghana No. 4.


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