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dam-l LHWP corruption editorial/LS
The following is from Business Day, 17 August 1999. Because the author
wrote us to say that he felt some important points had been cut in the
version the newspaper printed, I have reinstated these paragraphs and put
them in brackets.
Corruption must be fought in north and south
The privatisation of utilities is an invitation to bribery and graft,
argues George Dor
BUSINESS Day's exposure of bribery on the Lesotho Highlands Water Project
is a pointer to the degree to which the practice of corruption is
increasingly becoming the norm in substantial sectors of big business.
It should also serve as a wake-up call to government in its seemingly
uncritical faith in the private sector, in particular international
corporations, as the vehicle for the development of SA and the region.
The initial focus of the Lesotho scandal was on the water project official
who took the bribes, but Business Day was quick to point out that it "takes
two to tango". [In fact, those that offered the bribes were fighting each
other for the dance. ] It seems the 12 transnational corporations or
consortiums of companies were even fighting one another for a place in the
R12m dance.
These included major dam construction corporations, notably Impregilio,
the construction subsidiary of the Italian company Fiat, and the French
companies Spie Batignoles, Sogreah and Dumez International, the
Swedish-Swiss ABB and the German Lahmeyer Consulting Engineers.
All of these companies have been associated with allegations of bribery
of top officials in dam projects in various countries.
The Highlands Water Venture consortium, alleged to have made the largest
of the 12 bribes and the subject of various investigations into corruption
and political payoffs, includes SA firms Concor and Group Five and the
French firm Bouygues. SAUR, the other half of SAUR-Bouygues, won the
Dolphin Coast tender for the privatisation of its water services recently.
[ SAUR/Bouygues is the subject of various investigations into corruption
and political payoffs, the chairman has previously been arrested and former
vice-president imprisoned.]
Then there are seven or eight corporations that dominate the market in the
local government services sector. They also have tainted track records.
The British company Biwater, which won the tender for privatised delivery
of water services to Nelspruit in April, is party to the Panama
water privatisation project which is under investigation for corruption.
It is ironic that while, in the wake of the 1970s Lockheed scandal
involving bribery of Japanese officials, the US developed legislation to
take harsh measures against companies guilty of corruption, many countries,
including those in the developing world, do not have adequate measures and
as such invite corrupt practices.
The response of Water and Forestry Affairs Minister Ronnie Kasrils to the
corruption on the Lesotho project may have sounded tough but was entirely
inadequate.
While he promised to recover the money he is simply relying
on"international conventions and guidelines" to address the groups
concerned. However, he assured us that "despite the court case, the project
is on target and on budget".
In other words the corporations' punishment for making bribes is to be
reassured that they can continue to profit as successful tenderers on the
project.
But there is more to the issue than those making and taking the bribes.
The role of government and its advisers in creating the environment for
private sector corruption also needs to be scrutinised.
In the Lesotho case there was a significant lobby against Phase 1B of the
highlands water project, the construction of the Mohale Dam. This included
groups as diverse as unions, civic, consumer and other nongovernmental
organisations, Rand Water and even the water affairs and forestry
department along with then Minister Kader Asmal's own advisers.
There was no coherent scientific evidence as to whether and when Gauteng
needed water from Phase 1B. The World Bank, in its Project Appraisal
Document of April last year, acknowledges this and concedesthat there is
"lower future demand" for water in Gauteng than anticipated at the time of
the signing of the initial treaty.
The document states that the department "has made a firm commitment that
no new investment decisions beyond Phase 1B will be made until this new
information (on water demand patterns) is available and has been analysed".
Yet the dam-builder element in the department and the World Bank staff
assigned to the project lobbied intensely for Phase 1B to be given the
green light, primarily on the basis that if we should one day need the dam
it will be financially better to build it soon.
This argument hinges on the presence in Lesotho of the contractors that
built the Katse Dam and tunnel: "(Phase) 1A contractors already have
incurred many fixed set up costs that they do not need to repeat. If the
project was delayed for more than a very short period of time (one to two
years), the benefits of existing bidders would disappear as staff and
equipment were deployed elsewhere."
Leaving aside the weaknesses in the document's argument, the point is that
water affairs officials knew of the bribery allegations for at least two
years and, according to Business Day, the department "has been closely
involved in the investigation from the outset".
[In short, DWAF officials were pushing for Phase 1B, in the absence of
scientific studies and in the face of criticism of the project, on the
basis that companies under investigation for bribery were at hand to
do more work.]
All of this raises a number of questions. Did [Kader] Asmal and the World
Bank staff know of the investigation? If Asmal was unaware of the
allegations, how is Kasrils going to tackle his officials for withholding
this information and can we expect a definitive statement from him? If the
bribery charges are upheld, should government continue to honour the
contracts of the companies to complete a dam that may not be needed?
However, the lax attitude towards the potential for corruption in the
privatisation process is not confined to the highlands project or the water
department.
To give but two other examples: a top-ranking official in
the department of constitutional development simply dismissed the concerns
of the SA Municipal Workers' Union in the Nelspruit water privatisation
case as the union resorting to corruption as a "stock" argument against
privatisation. And, in Johannesburg, former transport director-general
Khetso Ghordan was given the task of privatising as many aspects of the
council's functions as possible with his remuneration package being linked
to the speed with which he implemented the process and the value of assets
sold off.
The Lesotho case highlights the need to recognise the very real dangers
inherent in a reliance on the private sector to deliver.
It calls for a re-evaluation of the notions of the public sector as
inefficient and the private sector as the preferred vehicle for delivery.
This amounts to an urgent need to re-open the debate on privatisation in SA.
*Dor is a researcher at the Alternative Information and
Development
Centre in Johannesburg.
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Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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