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DAM-L Re: SA: Too poor to pay for water/LS (fwd)
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Date: Mon, 16 Oct 2000 09:21:44 -0800
To: irn-safrica@netvista.net
From: lori@irn.org (Lori Pottinger)
Subject: Re: SA: Too poor to pay for water/LS
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Oct. 13, 2000
Mail and Guardian (SA)
***
More government confusion on privatisation?
by Patrick Bond
Is privatisation bogged down again? In the wake of the
state asset restructuring policy issued by state
enterprises minister Jeff Radebe in August, the recent
Stats SA announcement of worsening income inequality,
and last week's Black Economic Empowerment Commission
report, social development priorities may be on the
front burner again.
Both the Constitutional Court's Grootboom decision on
municipal shelter/services responsibilities and the ANC
Local Government Election Manifesto can be read as
promoting a "rights-based" municipal services strategy,
instead of the existing approach: cost-recovery pricing
augmented by an ineffectual "indigence" grant.
But how will big business react, once the adverse
implications for municipal privatisation become clear?
So far, perhaps in view of the country's unconscionable
inequalities, opposition has been muted, even though
Business South Africa fought extremely hard in the
National Economic Development and Labour Council during
1996-97 against precisely such cross-subsidisation on
municipal services.
Business SA promoted the 1994 World Bank strategy--which
became the Department of Provincial and Local
Government's "Municipal Infrastructure Investment
Framework"--through which an inadequate "equitable
share" grant was made available so that municipalities
could provide relief to those who qualify as "poor." But
a tiny proportion received such benefits.
The new, wider-ranging approach appears to be based on
universal rights, redistribution and cross-
subsidisation.
"ANC-led local government," the Manifesto promises,
"will provide all residents with a free basic amount of
water, electricity and other municipal services, so as
to help the poor. Those who use more than the basic
amounts will pay for the extra they use."
The Manifesto reaffirms an oft-forgotten 1998 promise to
the municipal workers union: "The public sector is the
preferred option to provide services." Although the
Manifesto concedes that "strictly regulated"
partnerships with the private sector are still feasible,
the question now is whether they are desirable.
Who would want to invest in a South African city's water
supply, where a large proportion of people cannot afford
to pay, yet will potentially demand their legitimate
constitutional right to consume, in the wake of
Grootboom?
When World Bank economist John Roome advised then-water
minister Kader Asmal in 1995 against cross-
subsidisation, he argued that it "may limit options with
respect to tertiary providers--in particular private
concessions [will be] much harder to establish."
Correctly, Roome reasoned, attempting to compel a
private company to charge smaller numbers of high-volume
bulk users more for each unit of water notwithstanding
economies of scale that make it cheaper to supply, and
providing numerous small users with free water for their
basic consumption, cuts squarely against the grain of
the profit motive.
Roome later claimed, in the 1999 Bank Country Assistance
Strategy, that his advice was "instrumental in
facilitating a radical revision in South Africa's
approach to bulk water management."
Until now, orthodoxy reigned. The policy definition of
a "lifeline" water price, drawn up by national
bureaucrats in 1994, required payment for "operating and
maintenance costs," i.e., full marginal cost-recovery.
Such views still prevail in a March 2000 World Bank
document (Sourcebook on Community Driven Development in
the Africa Region): "Work is still needed with political
leaders in some national governments [in Africa] to move
away from the concept of free water for all." As for
communities, the Bank's objective is to "ensure 100%
recovery of operation and maintenance costs."
But when major delivery NGOs like Mvula Trust and the
Independent Development Trust tried this several years
ago, they discovered that it led to systematic project
breakdown. National government's water projects only
achieved around 1% cost-recovery, and most of the taps
Asmal unveiled from 1995-99 ran dry.
The same problem awaits any water privatiser. A year
ago, finance minister Trevor Manuel told the US-South
Africa Business and Finance Forum, "Foreign investment
in state-owned enterprises allows for access to cutting-
edge technologies and increases the effectiveness with
which these entities can deliver on the rollout of
essential services."
But without enforcement of full cost-recovery, the
incentive under privatisation is for a company to
"cherry-pick" the good customers, and avoid serving the
impoverished masses.
And if long-delayed constitutional socio-economic rights
really do come into effect, the cherry-picking practice-
-as exhibited in Eastern Cape water privatisation pilot
projects since the mid-1990s--may be challenged, not by
state regulation but by people's power and in the
courts.
Thus, even if it sets back privatisation, the
conventional approach is being reversed, and just in the
nick of time for the poor.
Ironically, tragedies like the 1 600 new cholera cases
in KwaZulu-Natal--of which nearly two dozen have been
fatal--and an ongoing diarrhoea epidemic in Springs have
also brought to the public's attention the need for
policy change.
Although water minister Ronnie Kasrils claims the
diseases result from poverty, that's not necessarily
true: they are occurring in areas already poverty-
stricken but not plague-ridden, for a simpler reason:
civil servants cut off water supplies to thousands of
poor people because of renewed cost-recovery
enforcement, even in the run-up to municipal elections
for which other town councils are desperately
reconnecting services.
"There is a very serious contradiction between
politician promises and the behaviour of bureaucrats, as
witnessed by the cholera and privatisation," says Abie
Ditlhake, secretary of the SA Non-Governmental
Organisation.
Moreover, president Thabo Mbeki's commitment to Cosatu's
congress that 6 000 litres of water per month will be
given free is just half the amount demanded by advocacy
groups like the SA Municipal Workers Union and Rural
Development Services Network.
Privatisation plans are still being steamrollered, say
critics in most of South Africa's big cities, and
national-local funding transfers may not be sufficient
to pay for the ANC Manifesto's services offer in most
towns that lack a wealthy population from which to
redistribute.
But it seems evident that recent events add pressure on
municipalities not to privatise, and instead intensify
redistribution so as to provide all residents with
services.
***
Patrick Bond is co-director of the Municipal Services
Project based at Wits (http://www.queensu.ca/msp).
Patrick Bond (pbond@wn.apc.org)
home: 51 Somerset Road, Kensington 2094 South Africa
phone: (2711) 614-8088
work: University of the Witwatersrand
Graduate School of Public and Development Management
PO Box 601, Wits 2050, South Africa
work email: bond.p@pdm.wits.ac.za
work phone: (2711) 717-3917
work fax: (2711) 484-2729
cellphone: (27) 83-633-5548
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
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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