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Last Updated: Friday, 10 December, 2004, 11:58 GMT
Water privatisation: Ask the experts
Trevor Ngwane and Michael Klein
You put your questions on water privatisation to Trevor Ngwane of the Anti-Privatisation Forum in Johannesburg, and Michael Klein, vice president for private sector development at the World Bank, in a LIVE interactive forum.




World leaders at the Evian Summit have called for the number of people without access to safe drinking water or proper sanitation to be halved by 2015.

But critics are worried that the UN-set targets amount to a push for privatisation in the water sector.

They argue that private companies have no incentive to provide water to poor and rural communities.

The pro-privatisation camp, on the other hand, argues that the poor already pay more than the rich for water in many countries because the state has failed them. They say only the private sector can make the necessary investment.

What do you think? Is privatisation an effective solution, or does it lack credibility in the Third World, where water shortages are most acute? What role should multinationals play in the provision of water?

Read more from our experts:


Transcript:

Mike Wooldridge:
Hello I'm Mike Wooldridge and welcome to the second of our forums on water. This week the leaders of the industrialised world renewed their commitment to halve the numbers of people without access to safe water or proper sanitation by 2015. But what's the best way to do this? Through governments or through private companies? To take your questions on how best to manage water and the pros and cons of privatisation we have Michael Klein, vice president for private sector development at the World Bank in Washington and Trevor Ngwane of the Anti Privatisation Forum in Johannesburg.

Can I begin by asking both of you to outline your case on the issue of water privatisation in just a minute or so. Michael Klein first.

Michael Klein:
Yes thank you. I think that a lot of the debate is cast in terms of public versus private and I think this is pretty much beside the issue. The real issue is what gets greater access to water to people all over the world and fundamentally here after lots of decades of trying to improve water systems we come to the realisation which is pretty obvious in the first place that somebody has to pay for the water, it's either consumers through user fees or it's governments through subsidies. But governments all over the world have either found it politically impossible to raise consumer tariffs or fiscally impossible to provide subsidies. And neither the public sector nor the private sector can invest when nobody pays at the end of the day. So the solution lies more in getting to grips with the user fee problem or the subsidies than with privatisation. The next question is then whether public providers or private providers in any particular case are better suited to do so and that's a case-by-case decision.

Mike Wooldridge:
Thank you very much indeed Michael Klein. Now Trevor Ngwane you presumably do not think that private providers are the best people to supply water?

Trevor Ngwane:
Yes Mike, we believe that water is life, everyone should have access to water. Without water there is disease, hardship, misery. It is in the public interest for everyone to have access to water and it is better if the state provides water on the basis of need. Now with privatisation private companies come in and provide water on the basis of profit. So it's a clash between need and profit and I think in this case, with water, we should prioritise need, therefore we should have the government make means to provide every citizen with water.

Mike Wooldridge:
Trevor Ngwane thank you very much indeed. Now we have on the line Charles Moore from Edinburgh in Scotland. You've a point I think you particular want to put to Michael Klein.

Charles Moore:
Yes please. It's in the form of a question really. What I'd like to know is can you give any concrete examples of third world countries that have benefited from privatisation in the sense of clean water being made available universally without there being massive - and I mean big - increases in charges?

Mike Wooldridge:
So Michael Klein there's the challenge - are there any examples?

Michael Klein:
There are - first most of the cases that have been analysed where private participation came into water systems in the 1990s, which is when this mostly started, have had good physical success, in the sense that they have increased connections, have improved reliability of water supply, duration of water supply, etc. And the cases that have been looked at are in Ivory Coast, Guinea, in several Colombian cities, in several Argentine cities, in two Bolivian cities etc. So I would think on the - in Manila as well - on technical grounds the private sector has performed in a number of cases where previously public sector companies had problems. Does that lead to universal service connections? In many cases we're so far away from universal service that it has not moved there yet but neither had before the public sector. Now has this happened without price increases? On average in the developing world prices in the beginning of the '90s were at about 30% of the cost of water systems. So either prices have to rise to make these investments possible or governments have to provide subsidies. Now in a number of cases de facto governments have in various ways provided subsidies so in cases like originally Manila, Buenos Aries etc. the way the subsidies had provided overall price levels initially stayed low, in some cases have later gone up again but over time I think in most places prices will have to rise regardless of whether it's public or private.

Mike Wooldridge:
Trevor Ngwane if I can just bring you in from Johannesburg. Do you accept that those would be examples of success, the ones just cited there by Michael Klein?

Trevor Ngwane:
No, not at all. I mean in Bolivia, in Cochabamba, there was virtual civil war when privatisation led to hundreds of thousands losing their access to water. Here in South Africa since our government made moves to privatise water - note it moves to privatise, it's not yet fully privatised - already there is social conflict, the trade unions are unhappy, people are getting cut off from water. Two years ago we had an outbreak of cholera - a waterborne disease - because people who ironically had been getting free water under the apartheid regime now found themselves without water under the democratic government because of privatisation. As a result more than 200 people died from the cholera outbreak. I would say in Africa, especially the third world countries, privatising water is not good. I think too for first world countries.

Mike Wooldridge:
Okay, we have on the line now a caller who I think particularly wants to put a question to you, Trevor Ngwane, Neal Lang from Florida in the United States. Go ahead please.

Neal Lang:
Hi Trevor. My question is how much oil do you think would be available without any private sector involvement in its distribution?

Trevor Ngwane:
How much water would be available without private ..?

Neal Lang:
Oil. Oil as a commodity is very much like water in the way it's found - it's a natural resource, in most cases it has to be lifted from beneath the surface, it requires processing and it requires a logistic system for delivering it to the consumer. Now my question is how much oil would be available if it were free and there were no private sector involvement in the distribution, the logistics associated with the distribution of oil.

Mike Wooldridge:
You work actually for a water company don't you Mr Lang?

Neal Lang:
I work for a company that manufactures water pumps yes.

Trevor Ngwane:
Okay let's not mix water and oil because they don't mix at all and we don't drink oil and people can live without oil but just a day without water I think you'd find it very hard to survive. I think that water should not be handled like oil, I think that water is a basic need and I think that in South Africa at least and in most of Africa people were getting water, of course not up to maximum what we want - optimum but since the privatisation came in we see people going without water, in cities and places where the infrastructure is there - they cut of your individual household water because you are too poor to pay. In South Africa with an unemployment rate of 40%, 70% of the workforce don't get a living wage, as a result many people are not in a position to afford privatised water.

Mike Wooldridge:
Neal Lang do you accept that - what Trevor Ngwane's essentially saying there is that it simply doesn't work in terms of getting water particularly to the very poorest?

Neal Lang:
Okay I have a follow up then for Trevor. What would happen to the distribution of food, arguably that's just as important as water for people's existence, what would happen if you didn't pay the farmers for growing the food?

Trevor Ngwane:
I think you are getting closer to the point now because we do have a problem of hunger and famine in the world because food is provided on the basis of profit. So I think even with food we should have more state intervention, not just food aid programmes but governments of the world joining hands and committing themselves to ensure that no child sleeps on an empty stomach. So I think food is a good example of where we need vigorous state intervention in favour and to the advantage of the poor.

Neal Lang:
Are you suggesting that the government should take over the growing of food like it did in Russia with collectives - did you see the results there? I mean that's a terrible idea.

Trevor Ngwane:
I think that we're not yet talking about socialising all the Stalinist system which happened in Russia, the Soviet Union, we're talking about a capitalist system which is near liberal. Only 20 years ago it was common knowledge and common sense that the state provides water, the state runs the roads and then with Margaret Thatcher, Ronald Reagan, the new liberal offensive we called this attack on the state, now people are telling us that the state is good for nothing. I think it's just an ideology and a change in capitalism. So I'm not talking about socialism, not yet anyway.

Mike Wooldridge:
Thank you for your points Neal Lang. If I can just pursue with you Michael Klein if I may in more detail this question of the pricing of water through privatisation, we've had quite a number of e-mails which reflect a division of opinion on the whole issue generally but several of them have to do with pricing. Let me just quote you a couple. One from Paul Matthews in the Hague in the Netherlands: "What action can be taken to ensure that the cost of water will not rise above affordable levels in the third world?" And similarly from Rose in Australia: "What's to stop water companies from hiking up the prices?"

Michael Klein:
I think I would start off by pointing out that the big debate and the big issue is not about the pricing of water to those who have already access to water but it's providing access who don't have good modern water systems. And those people who don't have access, about a billion people in the world, they pay a lot more per cubic metre of water, let's say, than those who are connected because they either have to spend lots of time walking, they have to drill wells, they may have to pay private water vendors who sell in buckets or tank trucks and that costs typically at least ten times as much per unit of water than those people who are connected. Now therefore if you extend service to those people with better investment, better operations and maintenance their prices will fall, they will have the ability to get better water at lower prices and that directly affects affordability in a positive way.

Then there's the question of those people who are already connected and ultimately also those where regardless of excess investments and so on they're just too poor to be able to afford, that's a question then on how much subsidy is available to help bring the costs down - bring the price down for those because the costs after all are there and cannot be avoided. And here is the question of what kind of subsidy systems can actually work in practice and there are two questions, number one, do governments have the money to provide the subsidies and number two, can we target them so that actually the poor get them. The experience over the last 40, 50 years with government run subsidy programmes in most of the developing world has been, unfortunately, that on average subsidies tended to go to the better off rather than the poor. And so we need to focus very much on where the money comes from for these subsidies and how to target this.

Mike Wooldridge:
So a long way to go in other words to get it right you would consider. Let me just put to you another e-mail that we've had which suggests that there are contradictions in the whole business, this from Gertrude Lyatuu in Dar es Salaam Tanzania, where you indeed at the World Bank have a project. Gertrude says: "The government of Tanzania has privatised water here in Dar es Salaam, at the same time the Government entered it into a credit agreement with the World Bank for the Dar es Salaam water supply and sanitation project. Who benefits from such initiatives?"

Michael Klein:
Most of the so-called privatisations, particularly in the lower income countries and particularly in Africa, are not full privatisations. The private sector tends to be brought in to either just - under a management contract to run a system but the investments are still borne by the state or sometimes the private sector comes in under a so-called leasing system where the private sector also takes on responsibility for billing and collection and those are typically systems which are always government financed partially in this particular case, as you mentioned, maybe with the World Bank credit. So the question here is the private sector in these cases doesn't bring finance, the private sector in these cases only makes sense if it has a management and technical capability to bring to the project that improves on operations. So that's an issue quite independent from pricing and financing.

Mike Wooldridge:
Okay I'm going to bring another caller in now, Belinda Calaguas who works with Wateraid - a development organisation that's very much focused on all these matters based here in London. Belinda I think you have questions for both Michael Klein and also for Trevor Ngwane.

Belinda Calaguas:
My question to Michael is that experience shows already that the international private sector is actually not interested in the least developed countries, in the poorest countries, nor are they interested in the poorer sections of even the middle income countries, hasn't the World Bank actually oversold private sector participation and instead what it should be doing is really to support public utilities to improve their services and make them more efficient?

Michael Klein:
I would agree with you that some of us, as well as others, have oversold the switch from public to private as the main step and that's why I also agree acting against casting the bait in terms of public versus private. The real issue is who pays at the end of the day. In those concession arrangements and so-called privatisation arrangements, it's never full privatisation, where adequate incentives have been built in and contractual obligations have been given to private sector companies there have been significant expansion of service, for example in La Paz in Bolivia in the [name] neighbourhood several hundreds thousand people are being connected extra, in Manila there are special programmes, in Buenos Aries there are special programmes to connect poor neighbourhoods. It always depends on whether there's somebody there who pays for it, either a subsidy scheme like exists in Chile or some internal subsidy system embedded in the concessions. So the private sector is serving poor communities when it has an incentive to do so but they don't do it for free. Nor can the government do it - government's water company do it for free, the taxpayer at the end of the day has to pay that subsidy.

Belinda Calaguas:
I think that in the first instance that the real issue here is how do you improve the capacity of the public sector, of governments, to act to regulate where they bring in the private sector, I'm not talking about the international private sector. There are countless domestic local private operators in every country that provides some level of service but the governments are not in any position, at this point in time, to regulate them, improve their standards and all of that. I think that that is where the investment should be going in relation to the private sector but also in terms of getting the public sector up to speed in terms of how to set up its regulation.

Mike Wooldridge:
Okay, and what was the question that you wanted to put to Trevor Ngwane of the Anti Privatisation Forum?

Belinda Calaguas:
For Trevor I think that there has been some successful struggle against cutting off people in South Africa and these are extra legal means of trying to make sure that people continue to have access to water. But my question is on two counts, first is what is the positive agenda, what is the constructive agenda, the campaign in South Africa is bringing to government, who is after all trying to provide services, after all they put up the free basic water service and all of that? The second point is about the pricing of water, I think that our colleagues in South Africa need to understand that water cannot be provided for free, it has to come from somewhere - taxation or from consumers actually paying service or from core subsidies from other consumers. I want to be able to hear from Trevor what the constructive agenda is.

Mike Wooldridge:
So there's a challenge there Trevor if you like from another campaigning organisation, you're not being sufficiently constructive.

Trevor Ngwane:
We do have our proposals, we really hope that the government and the World Bank, IMF, will listen to us. In South Africa our proposal is that water should follow the line of our constitution and Bill of Rights and be regarded as every citizens right, that's what our Bill of Rights says. So our government has to learn to respect that. Secondly, to achieve that we recommend exactly what Belinda says - cross subsidisation from high volume users, which is mostly companies, industry, to low volume users, which is mostly domestic users and the poor. So we'd like that, we should have a pricing system - we call it block tariff system. So for the first say 200 litres, you get that for free, and then after that it starts going up and the more water you use in terms of volume the more you pay per unit because water is a scarce resource. We cannot use water and price it as if you were pricing pairs of shoes, so that the guy with money can save and use more water, the result in South Africa is wastage - people use water for their swimming pools, Jacuzzi, cleaning their cars, whereas their next door neighbours are living without water to drink. So we recommend cross subsidisation. We also recommend that the state should be a major player, a vigorous player, in the provision of water, we don't want this responsibility to be abrogated and be handed over to the private sector. That is our position.

Mike Wooldridge:
Let me just put two e-mails to you. One that's come in since we began from John McDaniel in the United States who says: "Isn't privatisation of water just a signal that the local governments can't control corruption - how do you stop this corruption in Africa?" And from Kwame in the United States as well who said to Trevor and all who are against privatisation: "How long should the remotest regions of developing countries wait to get clean water - is a 50 year wait okay for you?" Now before we do turn to Michael Klein on that let me get your response Trevor on both of those points made in e-mails.

Trevor Ngwane:
Okay usually in Africa it's privatisation which brings corruption because that is when multinational corporations find a need to bribe politicians, put my tender on top, shortlist me and this and that. So usually corruption is made worse by privatisation. On remote areas waiting a long time, it is true that one major argument for privatisation has been that the multinational corporations will lay out - it's called rolling out remote areas. But in our experience this has not really happened because basically what happens is they cherry pick, they choose the juiciest, most profitable areas which usually are the cities with the certain middle class and then they are not interested in remote rural areas where they know they're unlikely to get a return because people are too poor to pay.

Mike Wooldridge:
Michael Klein just the corruption issue perhaps, what's your view on that and of course if it is a big issue in terms of water supplies and improving sanitation then it can apply of course in the private sector as in the public?

Michael Klein:
Yes once again the issue is not public versus private, it's the governing systems in the particular place. As we well know in public sector systems in all sorts of countries, not only in developing countries, there tends to be a certain amount of corruption when it comes to the supply of equipment or civil works in public sector run infrastructure systems. So the argument that by privatising the operations of the system as well the corruption is going to be bigger I don't buy and we have decades of experience that public sector systems have not performed. After all most of the world tried, as Trevor pointed out, for many, many years to work with public sector systems and in a number of cases it hasn't worked well. So when you bring private sector companies in it doesn't mean that incentives or possibilities for corruption disappear, what can happen, if it's reasonably well designed, is that there's a better arm's length relationship, if, like Linda says, you strengthen the regulatory authorities there's more transparency, more arms length relationships, in fact in many ways privatisation attracts more criticism and it's a good thing, that's precisely what it is supposed to do because people, particularly in the government, find it easier to complain about private companies. And one example to close with, in Buenos Aries when we visited areas in slums of Buenos Aries people said we have been waiting for water for decades, now that we have a private company we have some leverage because complaints about private companies are politically much better than complaints about state owned companies.

Mike Wooldridge:
It's clear from many who have contacted the forum that the issue is essentially about pricing and particularly I think for people who contacted us from Africa, Eddie Lee, for example, originally from Liberia though now living in the United States sent an e-mail asking: "How are poor people living in Africa going to pay for water? More specifically how are my brothers and sisters who are living in rural Liberia who are already poverty stricken going to pay for water?"

Michael Klein:
Well at the moment most people in Africa do not have access to modern water systems and they get their water either from rivers by walking hours etc. etc. or by paying private water vendors. And once again the price they pay either through their effort or in cash is actually much higher per unit of water consumption than in the relatively modern systems in those few areas that actually have access to them. And so the question - the big challenge is providing greater access to more areas throughout the country. How is that going to happen? Public sector companies had universal service targets forever in their charters and haven't been able to deliver in many of the developing countries, now does that mean the private sector will automatically do it? No only the pricing problem is solved. So what are the intermediate solutions? I think somebody made the remark that domestic private companies have got more of a role to play and I would think we see that in Cambodia and Paraguay and Mauritania and a number of places where governments are allowing local small private water companies, community development systems etc. to provide water. In these systems the community pays in one form or another, either by putting in effort in kind or by having payment systems in cash in the system and that's the most - domestic private companies are the most likely candidates to expand water access in remote areas.

Mike Wooldridge:
Trevor Ngwane that e-mail that we had there, as I was saying, was about Africa in particular, the question was about Liberia, I think that you feel there's a big cultural issue, don't you, I believe you have said that in Africa you simply don't have water for sale, is it as simple as that?

Trevor Ngwane:
Well if you go back through African history and most societies before capitalism, before the commoditization of everything, where everything now has got a price - from water, food, sex, I don't know even going in to pay the priest. I think we have quite a different value system, for example African hospitality is that you have to help your neighbour and when someone visits you, even if it's a stranger, you give them something to eat, which I think is something which is done even in the West. But if we have nothing the least you can give them is water. Now we find ourselves in a situation where we can't even afford the water which we always took for granted, in fact at the moment our government is busy with these multinational corporations installing prepaid water meters, which means that people must buy a card for 50 rand before they can get water. I've heard that in Britain prepaid water meters are illegal, so I don't know why something which is illegal in Britain - buy water - the British multinational corporation wants to do in Africa.

Mike Wooldridge:
We have a caller on the line from Africa, Tony Adams calling from Accra in Ghana, what question did you want to put?

Tony Adams:
How can the poor in Africa afford privatised expensive water because anybody coming to take part in any privatisation is interested in profits, that means that at the end of the day the water that is being produced will be very expensive? I think that Africa has got to a point where we have to privatise everything, privatisation is a good thing but if anything should be privatised at all I think water should be the last because it must remain a government responsibility.

Mike Wooldridge:
Are you saying we're at the point of last resort, that the record does suggest that it needs to be privatised or it should remain in the hands of the state even with all the difficulties?

Tony Adams:
I think it should remain in the hands of the state because if you look in Africa the state has a very big role in making sure that certain social responsibilities are fulfilled and such social responsibilities include the provision of water, plain water and safe water.

Mike Wooldridge:
Okay, just before I put that point to you Michael Klein can I also just read an e-mail we've had in from Spain from David Tabar who says: "Who will police the water companies and what penalties will apply for the environmental damage caused by the pursuit of profits?" What would you say in answer both to Tony Adams who was on the line there and also to that particular point in the e-mail?

Michael Klein: First of all the notion that private water - water provided by private providers is somehow more expensive than state water provided that in many cases is not true, there are some cases in the world the state owned water companies that are very efficient in many other cases there are private water companies that are very efficient, so once again it's case-by-case. State owned companies also need profits to finance their investment, so there's no fundamental difference there. It comes back to the pricing issue and I think as Trevor outlined before the block tariff approach, the lifeline subsidies and so on is something that we probably all agree on as an approach to that. Then when it comes to - if the pricing solutions are found that are acceptable to those concerned in the system then the question is who provides the water? And here is then the question it should remain in the hands of the state was said, in many cases those hands are empty and remain empty and the issue for most people in the countries we have to look at the coverage of water in Lagos, for example, in Nigeria some 6% of the total city and it's after all the major city in the country have actual water access in their houses from the public sector water company, most people get their water from private water vendors. So the private sector is the domestic small private sector is de facto the provider of water to the vast majority of people all over Africa and in the rest of the poor countries. And the issue is how to get access to better and more modern systems to all of those who pay a lot? And that may involve in a number of cases using private parties, in other cases it may use public parties, or community development organisations, local private sector, whatever the appropriate solution in a particular case is.

Mike Wooldridge:
And just a quick question to both of you, Michael Klein and also Trevor Ngwane, this in a e-mail from G. Ngan in Halle, Germany: "What do you think about the public sector owning 51% and the rest being owned by the private sector, what would be the advantages and disadvantages of such an arrangement?" Trevor Ngwane.

Trevor Ngwane:
We have found that as soon as you have the idea of public/private partnerships then you get the government, the state's federal system all mixed up. Instead of the state having the priority of looking after its citizens, the wellbeing of the citizens, the state starts to think like a business enterprise. So you get, what we call, commercialisation can take the form of corporation but basically government behaving and conducting its business as if it was the private sector. So just back to Mr Klein, I don't think it's a case-by-case issue but it's a question of principle, all must have water, that is the problem, not how to make people pay for water because if all have water then we won't have problem of disease. Secondly, the question of inequalities are increasing in the world, the rich are getting richer, the poor are getting poorer, who is getting richer? It is the big multinational corporations. Now Klein is trying to fudge the difference between a big company like Bechtel, By Water, Suez and a small African informal trader who carries water on their donkey's back. I think these two are different.

Mike Wooldridge:
Trevor Ngwane thank you very much. Michael Klein?

Michael Klein: I would have thought that de facto when you look at what is touted under the label of privatisation you have de facto already a whole range of mixed ownership structures. Trevor's quoted the case of South Africa as pretty much all public sector and the issue is one of pricing. Then when you look at the public/private partnerships in poor countries in Africa almost none of them have majority private ownership, most of them have government majority ownership many times, hundred per cent government ownership with the private sector only taking management responsibility, sometimes a little bit of investment responsibility etc. So I think it's a number of combinations can make a sense, it's a question of who happens to be a competent operator, who is a good provider of finance etc. etc. So I think very much in the spirit of the caller who asked for the 51/49% share, we need to be flexible about what the model is. With Trevor I would agree the principle that all people should have access to water, that is the principle, the principle is not whether it's state or public or private or small or large.

Mike Wooldridge:
And just before we end a statistic to underline that was calculated this week by one aid agency that during the three days of the G8 summit at Evian in France more than 170,000 people will have died of diseases triggered by the lack of safe drinking water. Well that's all we have time for today, I'd like to thank you all for joining the forum and also thanks to our two guests - Michael Klein and Trevor Ngwane. Don't forget to take part in our online vote on privatisation, you can find that and the transcript of this forum on our special water site at www.bbc.co.uk/haveyoursay. Goodbye.




VOTE RESULTS
How should water be provided?
Publicly
 87.14% 
Commercially
 12.86% 
2318 Votes Cast
Results are indicative and may not reflect public opinion


Factfile: The big picture

SEE ALSO:
Water privatisation: The case against
03 Jun 03 |  Have Your Say



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