The TownhallBusinessPolitics

How the World Bank and IMF fuel water privatization in Africa

By Gugulethu Hughes

Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV. 

“Water has an economic value in all its competing uses and should be recognized as an economic good. Within this principle, it is vital to first recognize the basic right of all human beings to have access to clean water and sanitation at an affordable price. Past failure to recognize the economic value of water has led to wasteful and environmentally damaging uses of the resource. Managing water as an economic good is an important way of achieving efficient and equitable use, and of encouraging conservation and protection of water resources.” 

This is one of the six principles relating to water adopted at the International Conference on Water and Environment held in Dublin in 1992. These outcomes were presented at the UN Conference on Environment and Development in 1992, attended by a huge contingent of heads of state, and led to sustainability issues being put on the global spotlight. For African countries, the principle of water as an economic good marked the beginning of privatization of water resources, supply, sanitation, and wastewater treatments. 

Economics Help defines an “economic good” as a good or service that has a benefit or utility to society. Economic goods have a degree of scarcity and present opportunities for profiteering. Therefore, the Dublin Conference resolved that for clean water to be made more widely available, it would need to have a price tag so that only those with capital could afford it. The mere suggestion that a basic human right needed to be recognized as an economic good smacked of patronization. The Dublin Resolution was unanimously adopted in Rio De Janeiro, marking the beginning of commodification of water in Africa. The World Bank was one of the first organizations to welcome the Dublin Resolution.  

In 1993, the Board of the World Bank endorsed a Water Resources Management Policy Paper (WRMPP). In that paper, and in this strategy, water resource management comprises the institutional framework (legal, regulatory and organizational roles), management instruments (regulatory and financial), and the development, maintenance and operation of infrastructure (including water storage structures and conveyance, wastewater treatment, and watershed protection). 

The 1993 policy paper reflected the broad global consensus that was forged during the Rio Earth Summit of 1992. The consensus stated that modern water resource management should be based on three fundamental principles. 

First, the ecological principle argues that independent water management by different water-using sectors is not appropriate, the river basin should be the unit of analysis, land and water need to be managed together, and greater attention needs to be paid to the environment. 

Second is the institutional principle, which argues that water resource management is best done when all stakeholders participate, including the state, the private sector and civil society; that women need to be included; and that resource management should respect the principle of subsidiarity with actions taken at the lowest appropriate level.  

Third is the instrument principle, which argues that water is a scarce resource, and that greater use needs to be made of incentives and economic principles in improving allocation and enhancing quality. 

In the 1993 policy document, the World Bank listed some of its objectives as creation of incentives for private players in what was set to become the water industry. The bank also highlighted decentralization as a key tenet for the commodification of water. The document reads, 

“Because of their limited financial and administrative resources, governments need to be selective in the responsibilities they assume for water resources. The principle is that nothing should be done at a higher level of government that can be done satisfactorily at a lower level. Thus, where local or private capabilities exist and where an appropriate regulatory system can be established, the Bank will support central government efforts to decentralize responsibilities to local governments and to transfer service delivery functions to the private sector, to financially autonomous public corporations, and to community organizations such as water user associations. The privatization of public water service agencies, or their transformation into financially autonomous entities, and the use of management contracts for service delivery will be encouraged. Arrangements for ensuring performance accountability and for putting in place an appropriate regulatory framework to set and enforce environmental protection standards and to prevent inefficient monopoly pricing will be incorporated into Bank-supported activities. These steps should improve incentives for cost recovery and service provision and give users a sense of ownership and participation. In countries where provincial or municipal capabilities are inadequate to manage a complex system of water resources, the Bank will support training and capacity building to improve local management so that decentralization can eventually be achieved.” 

The privatization of water resources and related works in many African countries is a culmination of the 1993 World Bank policy document. The World Bank and the International Monetary Fund, otherwise known as Bretton Woods institutions, represent the imperialist forces of the world who have succeeded in capturing the current global financial system. To achieve the goals of water privatization, the World Bank and IMF work with the United Nations Development Program (UNDP) and United Nations Environment Program (UNEP) as the primary layer and Environmental NGOs and private companies as a secondary layer. 

The World Bank defines itself as an institution invested in the development of economies and alleviation of poverty, hence most of its clients are governments in the so-called developing world. As the issuers of different financing instruments, the Bretton Woods institutions use their position to influence United Nations Development Program and Environment Program policies. The buy-in of member countries and other stakeholders gets secured in the UN conferences. In most cases, representatives of African countries are just happy to enjoy the luxury life that comes with attending these UN conferences and do not have it in them to develop their own agenda. 

Once member countries have adopted and signed off UNDP and UNEP policies, it becomes their duty to commit to their achievement. African governments have been trained to know that they are poor and do not have the financial and resource capabilities to implement whatever policies they would have agreed to. This is where the World Bank and IMF come in as funding partners. The unwritten rule is that African countries must seek funding from the Bretton Woods institutions to achieve their developmental goals. But the IMF and World Bank funds come with conditions, and one of them is privatization of water resources. African governments end up getting entangled in a cycle of implementing policies that align with World Bank and IMF loan conditions more than those that serve the interests of the population. Countries that do not adhere to the loan conditions end up getting sanctioned by the main principles of the World Bank and IMF. It does not help that the African Development Bank gets lots of its funding from the IMF and has the USA, France, and Japan as its shareholders. 

As a result of the 1992 Dublin Conference, the 1992 Rio Earth Summit, and the 1993 World Bank policy document, a significant number of African countries have privatized parts of their water and sanitation mechanisms. In 2001, French multinational company Suez Lyonnaise, together with its local subsidiary Water and Sanitation Services South Africa, signed a five-year contract with Johannesburg. The management contract, consisting of water and wastewater services, billing and customer services, training, and capital expenditure programs brought together the city’s municipal water and wastewater structures into a single utility organization which came to be known as Johannesburg Water. 

The contract received lots of criticism from activists including South African Municipal Workers Union secretary Roger Ronnie. He argued that Suez Lyonnaise had a history of unethical practice in other countries like Argentina where it secured a 30-year privatization deal to run the water and sewerage network. In justifying the Johannesburg Deal, Suez Lyonnaise representative Jameel Chand argued that the company brought down water prices in Buenos Aires by 30%. The truth, according to Dr. David McDonald and Alex Loftus from the Municipal Services Project at Queens University in Canada, was different. 

“In the run-up to privatizing the water of Buenos Aires in May 1993,” they wrote, “the government increased water tariffs drastically. Prices shot up by 25% in February 1991 and then by another 29% in April 1991. A year later a special tax of 18% was added to water bills. A few months prior to privatization another 8% increase was granted. The effect of these increases was to allow the company in 1993 to offer what seemed to be a 27% decrease in costs. It was a manufactured reduction”. This pricing and manipulation strategy is a product of the World Bank Water Resources Policy Document. On incentives, the World Bank policy document states that, “Many of the problems encountered in providing water services are due to the lack of incentives both for performance by providers and for efficiency by users. A key component of the reforms to be supported by the Bank will thus be greater reliance on incentives for efficiency and financial discipline. The Bank will highlight the importance of pricing and financial accountability by using estimated opportunity costs as a guide in setting water charges. In practice, immediate adoption of opportunity cost pricing may be politically difficult. Thus, given the low level of current cost recovery and the importance of finances in the sustainability of operations, pricing to ensure financial autonomy will be a good starting point.” 

Upon its expiry in 2006, the Suez-City of Johannesburg contract was not renewed. However, this has not stopped the South African government in recent years from inviting private entities to administer water services. In a media statement in January, the Department of Water and Sanitation maintained its commitment to foster public-private partnerships in order to develop mega water and sanitation infrastructure projects in the country. This declaration came on the heels of the loans the government of Cyril Ramaphosa secured from the World Bank and IMF. The former Minister of Water and Environmental Affairs, Edna Molewa, had in 2011 partnered with the World Economic Forum to formulate the Strategic Water Partners Network which sought to ensure that private players become the citadel of water resource management.  

On the other hand, Suez has not backtracked on increasing its footprint in Africa. On its website, the company states that it has built 500 water treatment plants on the continent. More than 80% of capital cities in Africa are supplied by a Suez Group plant. More so, the group is currently building a dozen water plants in Kenya, Senegal, Angola, Uganda, and Algeria. In Senegal, the Group is active in water services through the leasing contract for the production and distribution of drinking water in urban and peri-urban areas. The company also has contracts for the operation and maintenance of the largest wastewater treatment plants in Cairo and Alexandria, Egypt. In Morocco, the company is a leader in industrial waste management, while in 2022 it acquired South Africa’s largest waste management company Enviroserve. That same year after its acquisition, EnviroServe was awarded an $89 million waste management contract by French multinational Total Energies in Uganda’s Tilenga oil project where the latter is the main contractor. 

A document from the University of Pennsylvania – African Studies Center published in 2001 detailed a number of African countries that received loans from the World Bank and IMF with water privatization conditions attached to it. The document stated, “The significance of finding such a high number of conditions relating to water privatization and water cost recovery in IMF loans is twofold. First, in the hierarchy of international financial institutions the IMF is at the top. Compliance with IMF conditions enables governments to receive the ‘seal of approval’ that permits access to other international creditors and investors. Thus, IMF conditions weigh especially heavily upon borrowing governments.  

Second, it is quite common that World Bank loans have, as their first condition, compliance with certain IMF conditions. This is known as ‘cross conditionality.’ In the division of labor between the two institutions, it is the World Bank that has primary responsibility for ‘structural’ issues such as the privatization of state-owned companies. Therefore, it can be presumed that in every country where IMF loan conditions include water privatization or full cost recovery, there are corresponding World Bank loan conditions and water projects that are implementing the financial, managerial, and engineering details required for such ‘restructurings.’” 

Through the Angola Staff Monitored Program, the IMF set its structural benchmark as the adjustment of electricity and water tariffs in accordance with formulas agreed with the World Bank. Under the Poverty Reduction and Growth Facility, Benin was instructed to privatize its water and electricity distribution company. In Guinea-Bissau’s IMF funded Emergency Post Conflict Policy, the structural benchmark was the transfer of electricity and water management to a private company. In Niger’s Poverty Reduction and Growth Facility, the IMF condition was the divestment and privatization of the four largest government enterprises which included water, electricity, telecommunications, and petroleum. Under Rwanda’s Poverty Reduction and Growth Facility, the country was directed to transfer its water and electricity company, Electrogaz, into private management. Luckily, the country managed to get the company back and it is currently being run as a state-owned entity. 

Sao Tome and Principe, Senegal, and Tanzania were the other beneficiaries of the Poverty Reduction and Growth Facility from IMF with conditions being the adjustment of water and electricity rates brought into operation by a decree while the World Bank managed the process of restructuring, leasing, concession, and full privatization of the water and electricity entities. Among other conditions, Senegal was instructed to create fertile conditions for private players to participate in the water market. The condition for Tanzania’s HIPC debt relief was the assignment of Dar es Salaam’s Water and Sewage Authority to private management companies. 

With Africa currently having its worst leadership crisis in history, the threat of industrial scale water privatization is too big to ignore. African citizens must participate in organizations fighting against privatization of this precious resource. 

Organizations like Our Water-Our Right Africa Coalition have been engaging in protests against the IMF and World Bank’s cunning ways. Civil society groups and trade unions in Nigeria mobilized against the World Bank-promoted water bill which seeks to mandate public-private partnerships in water management. As recent as March 2023, the UN Water Conference had a panel on water investments for Africa. The panel consisted of Senegalese President Macky Sall, Namibian President Hage Geingob, Former Tanzanian President Jakaya Kikwete, and Netherland Prime Minister Mark Rutte who would micromanage the apparatchiks. The panel’s task was to produce a report that would inform the Africa water investment plan that will be developed for launch during the 78th UN General Assembly in September 2023. 

It is obvious that the IMF and World Bank will lead those investments into the further privatization of Africa’s water resources with 2030 being the target for imperial wholesomeness. All Africans have a duty to prevent this impending catastrophe from driving us into extinction.

Subscribe to get early access to podcasts, events, and more!

Gugulethu Hughes


Gugulethu Hughes is the ScoonTV Africa correspondent

Tags: , , , , , , ,
Previous Post
The critics are wrong; the EACOP will benefit East Africa
Next Post
New Weapons for a New War

Related Articles

Tags: , , , , , , ,