Water privatisation in South Africa

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Water privatisation in South Africa is an extremely contentious issue based on historical trends of denial of access to water and current economic needs. About a third of the South African population has no access to clean water, which has lead to disease that has hindered further economic growth. Water is a very scarce resource. Of the 70% of the surface of the earth that is comprised of water, only 1% is drinkable. Today, one billion people do not have adequate access to clean water and sanitation. Organizations like the United Nations, the World Bank, and the International Monetary Fund (IMF) have made it one of their goals to promote universal water access to all. In the early 1990s, the World Bank and the IMF began actively promoting public utility privatisation. In 1990, private water firms operated in 12 countries. As of 2007, that figure has expanded to over 60 nations with private water enterprise. There are three major players in the private water utility industry: Suez, Veolia Environment, and TWE. Suez and Veolia are French firms with contracts in South Africa. They serve approximately 250 million people with water worldwide and collect annual revenues of €66 Bn combined. The majority of the water utility industry is still municipally owned, creating massive growth potential for private water firms. The industry is valued at $500 Billion and is expected to grow to $3 Trillion in the next decade.

In the developing world, the World Bank or the International Monetary fund generally paves the way for privatisation by providing “conditional” loans to developing nations. The conditions of the loan often include a requirement to privatise government owned utilities under a philosophy of “full cost recovery.” Under full cost recovery, 100% of all costs of production are transplanted to the consumer. Everyone pays the same price and the use of subsidies is prohibited as it promotes the overuse and waste of water, an already scarce resource. In the last 15 years, 60% of World Bank loans have contained this kind of condition. After the country accepts the loan, they hold an auction to sell the water utility to the lowest bidder. These auctions are often not well organized and lead to massive price hikes on the part of the private firm that wins the bid. The loan is often used for infrastructure improvements which indirectly benefit the private firm as they will be profiting from the use of those infrastructure improvements.

[edit] Pre 1994 elections

Water has been an issue of great concern throughout South Africa's history. As its economy is based on water-intensive industries, the secure and permanent access and distribution of water to industries was always a focus of the government. This included regulating access to well water in the 17th century in the Cape Colony to standardised water prices for miners during the Witwatersrand Gold Rush. However, the most complete legislation over water access in South Africa was passed during the apartheid era in 1965. The Water Act of 1965, as the Act came to be known, granted riparian rights to farmers, mines, and forestry industries for water on, under, or adjacent to their properties. It also provided for below cost water subsidies from the state, who also delivered the water for no cost.

Almost all white communities in South Africa had permanent delivery of clean water, while very few townships had water access. Water access was mostly provided by ad-hoc wells dug my township residents.

[edit] Post-apartheid

When South Africa emerged from decades of apartheid rule in 1994, there were great expectations from previously disadvataged groups that the ruling African National Congress (ANC) would immediately begin extending government services. As a part of their platform for the first multi-racial general election in South African history, the ANC promised to ensure that all South Africans had permanent access to clean water by 2010. This movement was crystalised in the National Water Act of 1999, which described water access as a fundamental human right. However, the Act also permitted municipalities to privatise their water boards to private companies, which has proved extremely controversial as companies have been accused of price gauging and speculation.

Due to substantial government investment and privatisation schemes, access to drinking water has been improved over the past decade. According to Statistics South Africa, over 86% of the population had access to improved water services in 2000. But such improvements have come at a high price as the government has relied on full cost recovery privatisation to deliver water. In otherwords, for every Rand it costs to deliver water, it must be paid back in full before more water will be delivered. As a result of this policy, over 10 million households had their water access cut in 2001 — which is more households than the government has connected to the main water system in the previous six years. Concurrently a three year cholera epidemic affecting over 100,000 people broke out in 20002 after decades without this preventable disease. The same year, the government embarked on an internationally praised project sponsored by the World Bank that was designed to provide free water for people. In fact, this program provides only eight kilolitres of water to each household, disadvantaging the poorest large households without access to piped water. According to the World Health Organisation, eight kilolitres of water would provide for the very basic needs for a family of eight, but not sufficient for long term survival or a dignified life. Furthermore, the policy has awarded free water to only the most advantaged municipalities leaving the poor municipalities with a heavier burden. In order to receive sufficient quantities for dignified living poor households spend up to one fourth of their available income on water.

[edit] References

• Postel, Sandra et al. “Dehydrating Conflict.” Foreign Policy. October 2001.
• Budds, Jessica et al. “Are the debates on water privatization missing the point? Experiences from Africa, Asia, and Latin America.” Environment and Urbanization Vol 15 No 2. October 2003