The Age of Commodity

Water Privatization in Southern Africa

David McDonald, Greg Ruiters

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136555039
• Edition: 1
• Topic: Diritto
• Subtopic: Diritto ambientale

As globalization and market liberalization march forward unabated the global commons continue to be commodified and privatized at a rapid pace. In this global process, the ownership, sale and supply of water is increasingly a flashpoint for debates and conflict over privatization, and nowhere is the debate more advanced or acute than in Southern Africa. The Age of Commodity provides an overview of the debates over water in the region including a conceptual overview of water 'privatization', how it relates to human rights, macro-economic policy and GATS. The book then presents case studies of important water privatization initiatives in the region, drawing out crucial themes common to water privatization debates around the world including corruption, gender equity and donor conditionalities. This book is powerful and necessary reading in our new age of commodity.

Part 1

Theory and Practice

Chapter 1

Theorizing Water Privatization in Southern Africa

David A. McDonald and Greg Ruiters

Water promises to be to the 21st century what oil was to the 20th century: the precious commodity that determines the wealth of nations (Fortune Magazine 15 May 2000).

That smooth-faced gentleman, tickling Commodity, Commodity, the bias of the world (Shakespeare, from King John).

What is water privatization, to what extent is it taking place in Southern Africa and why is it happening? These are the central questions we ask in this chapter, along with a brief discussion of growing opposition to water privatization in the region. In answering these questions we hope to provide a conceptual framework for the empirical sections of this book and lay the ground for a critical theoretical perspective on the driving forces of privatization.

One of the biggest conceptual hurdles in this debate, particularly for firsttime observers, is the definition of the term. We therefore start with this question of definition and argue that privatization must be seen as a social intensification of capitalism and a shift in state–society relationships, rather than a mere collection of particular corporations taking over, or partnering in, water delivery. We look at the growing emphasis on public–private partnerships (PPPs) but also at the larger trend towards the commercialization of water, and how these concepts relate to one another. The conceptual apparatus used to pull this discussion together is that of commodification – a process integral to capitalist expansion and central to the marketization of all aspects of life, water included.

We then examine the extent to which water has actually been privatized/ commercialized in the region – legislatively and in practice – followed by a discussion of who is promoting it and why. The central argument here is that water marketization is both widespread and influential and is being driven primarily by the structural demands of local and international capital and the continuing fiscal crisis of the state.

But this is a partial transformation – one that has been uneven across space and time in the region and one that continues to be riddled with legislative, discursive and practical tensions. Nevertheless, the trend is clearly towards increasing privatization and commercialization, particularly in the form of public sector corporatization where publicly owned and operated water systems are managed like private businesses, leading to harsh cost recovery measures such as repossessing houses, water cutoffs, prepaid meters and dripvalves that restrict water supply to the poor; all of which have spurred widespread civil insurgency and citizen disengagement.

WHAT IS WATER PRIVATIZATION?

In its narrowest sense, privatization happens when the state sells its assets to a private company, along with all of the maintenance, planning and operational responsibilities that these assets entail. Over the past 30 years states have divested themselves of airlines, railroads, telephone services, health facilities and other services, thereby unlocking a new phase of capitalist expansion and innovation. Divestiture, as this form of privatization is formally known, was the model of water privatization adopted in the UK under Margaret Thatcher in the late 1980s, with entire water systems (from water collection, to reticulation, to sewage treatment) being sold to private firms (Ernst 1994; Schofield and Shaol 1997; Bakker 2003). Monitoring and regulatory oversight in this model of privatization remain a responsibility of the state, however, or a parastatal regulatory body.

The privatization of water services in other parts of the world does not generally follow the UK model though. Most municipal privatization schemes today do not involve any transfer of state assets, focusing instead on the transfer of operational and managerial functions to private companies (e.g. meter reading, personnel management, strategic planning, maintenance). Infrastructure and equipment typically remain in public hands – or are transferred back to public ownership after a specified period – and there may be joint responsibilities between the state and a private firm in managing operational functions. This model is used across the world by leading water and construction firms such as Suez and Vivendi who operate this way in over 12,000 towns and cities (Goubert 1986; Hanke 1987; Lorrain 1991; Kerf 1998).

More properly known as ‘private sector partnerships’ (PSPs) or, as will be used in this book, ‘public–private partnerships’ (PPPs), these institutional arrangements are nevertheless a form of privatization. There is a clear transfer of crucial decision making responsibilities from the public to the private sector and an effective transfer of power over assets to a private company, with qualitatively and quantitatively different rules and regulations guiding the decisions that are made and how citizens are able to access information. This broader definition of privatization is also accepted by leading international agencies such as the World Bank, the World Health Organization, the Water Supply and Sanitation Collaborative Council and various United Nationsrelated agencies who have actively promoted PPPs in water services in the South, such as the United Nations Development Programme, UN-HABITAT and UNICEF (see, for example, World Bank 1994, 1997, 2003; Lorrain and Stoker 1997; Kerf 1998; UNDP-World Bank 1998; WHO and UNICEF 2000).

It is also important to note that PPPs can range from small operations, such as one-person contractors who repair pipes in an informal urban settlement, to a large multinational company hired to manage the provision of bulk water and sanitation for an entire city. The size and types of contract can vary as well, from short-term, fee-for-service contracts, to 30-year licences. Although large water service multinationals like Suez, Vivendi, RWE Thames, and Bechtel tend to attract the most attention when it comes to water privatization debates, small firms and ‘entrepreneurs’ represent a large part of the privatization thrust, with these micro-enterprise deals often going unnoticed by the public. This smaller, ‘creeping’ form of privatization is as much a topic of interest in this book as the large multinational efforts to take over entire water systems.

Less easy to classify are forms of water privatization that involve the downloading of service responsibilities to individuals, communities and nongovernmental organizations (e.g. the digging of pit latrines or the repairing of water pumps by a community group). Represented in the neoliberal literature as ‘active citizenship’ (Burrows and Loader 1994) and ‘community empowerment’ – a counter to welfare dependency (Wolch and Dear 1989) – this transfer of water service decision making and responsibility also constitutes a move from the public (i.e. the state) to the private (in this case an individual or community). Although not necessarily acting with the same institutional or economic incentives and frameworks as a private company, the transfer of decision making power to individuals and communities nevertheless constitutes an abdication of responsibilities on the part of the state.

Table 1.1 provides a typology of privatization arrangements. Most water service agreements are hybrids of these categories, of course, tailored to suit the specific situation of individual governments and companies, but it should be clear from the table that all water privatization schemes involve some form of public and private sector participation.

Table 1.1 Different forms of water services ‘privatization’

Full divestiture	Divestiture refers to a situation where a water and/or sanitation utility has been fully privatized. Ownership of the utility rests with the private operator. The private operator is responsible for operation and maintenance, investments and tariff collection. The private utilities operate under the supervision of an independent public regulatory authority.
Service contract	This is the least risky of all partnership types. The public authority retains responsibility for operation and maintenance of the service, but specific components of the service (for example operating water treatment works or billing) are contracted out to the private sector. Service contracts usually have a duration of one to two years, due to the fact that the problems they address may be unique and short-lived. The local authority does not relinquish any managerial functions.
Management contract	The management contractor operates and maintains the service or parts of the service and may also undertake to reshape the system. The public authority monitors the private agent, but remains responsible for new investment. Management contracts tend to cover a time-span of two to ten years.
Lease or affermage	The lessor rents the facility from the public authority, which transfers complete managerial responsibility for operating and maintaining the system to a private company. Such contracts generally have a duration in excess of ten years. The contract specifies reporting requirements and service standards. Payments are split into fixed and volume-related amounts. (Affermage is the French term for ‘farming out’.)
Concession	In this investment-linked contract the concessionaire has overall responsibility for the services, including operation, maintenance, and management as well as capital investments during the concession period. The concessionaire is also responsible for tariff collection and ‘customer management’. The ownership of fixed assets is assigned to the local authority at the end of the contract. The contract, usually signed after competitive bidding, covers a period of 25 to 30 years. Regulation is by contract.
BOOT	Build, Own, Operate and Transfer contracts are generally used to construct new parts of a service system such as water treatment plants, dams and wastewater treatment plants, but can also be used for small water developments as well. The private operator builds the plant and assumes responsibility for operation and maintenance. After a predetermined time the facility is transferred to the public authority. The length of a BOOT contract is typically 25 years.
Community/NGO provision	Community and nongovernmental organization (NGO) provision – an often neglected form of privatization – involves the transfer of some or all of the responsibility for water provision to the end user or a not-for-profit intermediary body. This is particularly common in low income, urban settlements in the South where local governments have asked community members and community organizations to supplement weak or nonexistent water and sanitation facilities/resources with their own labour (e.g. digging wells, laying or repairing pipes). Women tend to carry the burden of this form of privatization. NGOs play a key role as well, often taking on management and water allocation responsibilities.

Privatization, in other words, is not an either/or situation (either the state owns and runs a service or the private/community sector does). Water privatization must be seen as a continuum of public and private mixes, with varying degrees of involvement and exposure to risks by the two sectors (see Starr 1988). It is a conceptual and political mistake to pose the market (private) and the state (public) as binary opposites on this issue.

Moreover, as Bakker (2003, pp4, 36) has argued in the case of the UK, even the outright divestiture of state assets can, ironically, mean greater state involvement in water services, prompting her to employ the term ‘re-regulation’ rather than ‘deregulation’ with regard to legislative changes that allow for greater private sector involvement in water services: ‘a process in which the state has reconfigured its role, and in some instances expanded its powers and administrative reach . . . the state does not necessarily withdraw, but rather changes the nature of its interaction with citizens and corporations’.

The term privatization is therefore used in this book as a generic expression for a range of private sector involvements in service delivery rather than a single state of being. This is done in part because the term privatization is widely recognized in popular discourse (as opposed to ‘public–private partnerships’) and in part because it highlights the fact that assets and/or decision making responsibilities have passed from public to private hands.

But we cannot limit our discussion of privatization to direct private sector participation and control. Equally important is the question of private sector operating principles and mechanisms. The ‘commercialization’ of water services in the formally designated public sector is critical to our understanding of water delivery reforms in Southern Africa. This next section describes commercialization (and its most common institutional variant, ‘corporatization’) and discusses its links – mechanically and conceptually – to privatization.

THE COMMERCIALIZATION/CORPORATIZATION OF WATER

The commercialization of water refers to a process by which market mechanisms and market practices are introduced into the operational decision making of a water service: for example, profit maximization, cost recovery, competitive bidding, cost-benefit analysis, performance targeted salaries, ringfenced decision making, demand-driven investments, etc. (Stoker 1989; Pendl...