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Water and Cholera (AFRICA ACTION)
AFRICA ACTION
Africa Policy E-Journal
March 17, 2003 (030317)
Africa: Water and Cholera
(Reposted from sources cited below)
This posting contains brief excerpts from The Water Barons, an
extensive report on water privatization around the world, including
South Africa and the United States, from the International
Consortium of Investigative Journalists.
Another posting today contains excerpts from the official press
release announcing the World Water Forum now taking place in Kyoto,
Japan; a longer background article and critique from a civil
society perspective, by Maude Barlow of the Council of Canadians;,
and links for additional sources on issues of water and water
privatization.
+++++++++++++++++end summary/introduction+++++++++++++++++++++++
Center for Public Integrity
International Consortium of Investigative Journalists
Washington, DC
The Water Barons
February, 2003
[brief excerpts from introduction and chapter 1 overview; full text
of chapter 1 and nine additional chapters (on France, South Africa,
Argentina, Philippines, Indonesia, Columbia, United States, Canada,
and Australia) available at http://www.icij.org/dtaweb/water]
The explosive growth of three private water utility companies in
the last 10 years raises fears that mankind may be losing control
of its most vital resource to a handful of monopolistic
corporations. In Europe and North America, analysts predict that
within the next 15 years these companies will control 65 percent to
75 percent of what are now public waterworks. The companies have
worked closely with the World Bank and other international
financial institutions to gain a foothold on every continent. They
aggressively lobby for legislation and trade laws to force cities
to privatize their water and set the agenda for debate on solutions
to the world's increasing water scarcity. The companies argue they
are more efficient and cheaper than public utilities. Critics say
they are predatory capitalists that ultimately plan to control the
world's water resources and drive up prices even as the gap between
rich and poor widens. The fear is that accountability will vanish,
and the world will lose control of its source of life.
Cholera and the Age of the Water Barons
When cholera appeared on South Africa's Dolphin Coast in August
2000, officials first assumed it was just another of the sporadic
outbreaks that have long stricken the country's eastern seaboard.
But as the epidemic spread, it turned out to be a chronicle of
death foretold by blind ideology.
In 1998, local councils had begun taking steps to commercialize
their waterworks by forcing residents to pay the full cost of
drinking water. But many of the millions of people living in the
tin-roof slums of the region couldn't afford the rates. Cut off at
the tap, they were forced to find water in streams, ponds and lakes
polluted with manure and human waste. By January 2002, when the
worst cholera epidemic in South Africa's history ended, it had
infected more than 250,000 people and killed almost 300, spreading
as far as Johannesburg, 300 miles away.
Making people pay the full cost of their water "was the direct
cause of the cholera epidemic," David Hemson, a social scientist
sent by the government to investigate the outbreak, said in an
interview. "There is no doubt about that."
The seeds of the epidemic had been sown long before South Africa
decided to take its deadly road to privatization. They were largely
planted by an aggressive group of utility companies, primarily
European, that are attempting to privatize the world's drinking
water with the help of the World Bank and other international
financial institutions.
The days of a free glass of water are over, in the view of these
companies, which have a public relations campaign to accompany
their sales pitch. On a global scale, and in many developing
nations, water is a scarce and valuable and clearly marketable
commodity. "People who don't pay don't treat water as a very
precious resource," one executive said. "Of course, it is."
A yearlong investigation by the International Consortium of
Investigative Journalists (ICIJ), a project of the Center for
Public Integrity, showed that world's three largest water companies
- France's Suez and Vivendi Environnement, and British-based Thames
Water, owned by Germany's RWE AG - have since 1990 expanded into
every region of the world. Three other companies, Saur of France,
and United Utilities of England working in conjunction with Bechtel
of the United States, have also successfully secured major
international drinking water contracts. But their size pales in
comparison to that of the big three.
The investigation shows that these companies have often worked
closely with the World Bank, lobbying governments and international
trade and standards organizations for changes in legislation and
trade agreements to force the privatization of public waterworks.
While private companies still run only about 5 percent of the
world's waterworks, their growth over the last 12 years has been
enormous. In 1990, about 51 million people got their water from
private companies, according to water analysts. That figure is now
more than 300 million. The ICIJ investigation, which tracked the
operations of the six most globally active water companies over a
12-year period, showed that by 2002, they ran drinking water
distribution networks in at least 56 countries and two territories.
In 1990, they had been active in only about a dozen countries.
Revenue growth, according to corporate annual reports reviewed by
ICIJ, has tracked with the companies' overseas expansion. Vivendi
Universal, the parent of Vivendi Environnement, reported earning
over $5 billion in water-related revenue in 1990; by 2002 that had
increased to over $12 billion. RWE, which moved into the world
water market with its acquisition of Britain's Thames Water,
increased its water revenue a whopping 9,786 percent - from $25
million in 1990 to $2.5 billion in fiscal 2002.
This explosive growth rate has raised concerns that a handful of
private companies could soon control a large chunk of the world' s
most vital resource. While the companies portray the expansion of
private water as the natural response to a growing water shortage
crisis, thoughtful observers point out the self-serving pitfalls of
this approach.
"We must be extremely careful not to impose market forces on water
because there are many more decisions that go into managing water
" there are environmental decisions, social-culture decisions,"
said David Boys of the U.K.-based Public Services International.
"If you commodify water and bring in market forces which will
control it, and sideline any other concern other than profit, you
are going to lose the ability to control it."
So far, privatization has been concentrated in poorer countries
where the World Bank has used its financial leverage to force
governments to privatize their water utilities in exchange for
loans.
In Africa, the ICIJ examination of water company records showed
that they have expanded into at least 10 countries from three in
1990; they are also active in at least 10 Asian countries and eight
Latin American ones, three in North America, two in the Caribbean
plus Puerto Rico, three in the Middle East plus the Gaza Strip,
Australia/New Zealand and in 18 European nations, with most of the
expansion in Eastern Europe. There, the European Bank for
Reconstruction and Development has played a key role in encouraging
countries to privatize in exchange for loans.
Having firmly established themselves in Europe, Africa, Latin
America and Asia, the water companies are expanding into the far
more lucrative market of the United States. In recent years, the
three large European companies have gone on a buying spree of
America's largest private water utility companies, including
USFilter and American Water Works Co. Inc. Peter Spillett, a senior
executive with RWE's water unit Thames, told ICIJ his company
projects that within 10 years it will double its market to 150
million customers primarily because of expansion into the United
States. So far, the Europeans have privatized waterworks in several
mid-sized U.S. cities, including Indianapolis and Camden, N.J., and
are trying to secure contracts in New Orleans. Their expansion,
however, recently ran aground in Atlanta, where the city canceled
its 20-year contract - the largest of its kind in the United States
- with a Suez subsidiary after only four years and returned control
to the public utility.
The water companies have also dramatically increased their lobbying
and federal election campaign spending. In Washington, they have
already secured beneficial tax law changes and are now trying to
persuade Congress to pass laws that would force cash-strapped
municipal governments to consider privatization of their waterworks
in exchange for federal grants and loans. Government and industry
studies have estimated that U.S. cities will need between $150
billion and $1 trillion over the next three decades to upgrade
their aging waterworks.
Worldwide, the ICIJ investigation showed that the enormous
expansion of these companies could not have been possible without
the World Bank and other international financial institutions, such
as the International Monetary Fund, the Inter-American Development
Bank, the Asian Development and the European Bank for
Reconstruction. In countries such as South Africa, Argentina,
Philippines and Indonesia, the World Bank has been advising the
leaders to "commercialize" their utilities as part of an overall
bank policy of privatization and free-market economics.
In South Africa, heavy lobbying by private multinational water
companies, such as Suez, together with advice from the World Bank
helped persuade local councils to privatize their waterworks. Some
communities began turning their utilities into commercial
enterprises as a preparatory step to outright privatization. Others
immediately contracted out to private water. Urged by the World
Bank to introduce a "credible threat of cutting service", the local
councils began cutting off people who couldn't pay. An estimated 10
million people have had their water cut off for various periods of
time since 1998. The result has been cholera and other
gastrointestinal outbreaks.
The ICIJ investigation focused on the activities of these companies
in South Africa, Australia, Colombia, Asia, Europe, the United
States and Canada.
The investigation showed that while these companies claim to be
"passionate, caring and reliable", as one company states, they can
be ruthless players who constantly push for higher rate increases,
frequently fail to meet their commitments and abandon a waterworks
if they are not making enough money. As in South Africa, the water
companies are pillars of a user-pay policy that imposes high rates
with little concern over people's ability to pay. These rates are
then enforced by water cutoffs despite the serious dangers to
people's health that these actions create.
The water companies are chasing a business with potential annual
revenue estimated at anywhere from $400 billion to $3 trillion,
depending on how you do the math. Water is the basis of life and,
if they have to, people will pay just about anything to get it.
"These companies want to crack open this oyster and go get the
pearl inside. It's big money," said Boys of Public Services
International.
About 1.5 billion people do not have access to safe drinking water.
The United Nations predicts that by 2025 two thirds of the world's
population will experience shortages of clean water. Experts claim
enormous financial resources will have to be expended to meet this
need. ...
The free marketers
...
Lending about $20 billion to water supply projects over the last 12
years, the World Bank has not only been a principal financer of
privatization, it also has also increasingly made its loans
conditional on local governments privatizing their waterworks. The
ICIJ study of 276 World Bank water supply loans from 1990 to 2002
showed that 30 percent required privatization - the majority in the
last five years.
...
The bank claims its policy of privatization alleviates poverty by
bringing management efficiency and private capital to developing
countries whose cash-starved water utilities are usually in a mess.
The bank argues that private companies succeed in bypassing the
usual bureaucratic morass and political cronyism and corruption
that corrodes so many public utilities in poorer countries. While
it is clear that considerable improvements have been brought to
many waterworks as a result of privatization, in many cases, the
companies put in relatively little capital of their own, relying
primarily on loans from the World Bank and related international
financial institutions to help cover costs of repairing and
expanding waterworks networks.
There's also evidence that if the World Bank applied the same
energy and money to improving local utilities, while allowing them
to maintain control of their water systems, the local utility would
actually perform better than private companies. ,,,
A global oligarchy
The investigation also showed that the water companies have joined
forces with the World Bank and the United Nations to create an
array of international think tanks, advisory commissions and forums
that have dominated the water debate and established privatization
as the dominant solution to the world's water problems.
"What we have seen during the 1990s has been the setting-up of a
kind of global high command for water," Ricardo Petrella, a leading
researcher on the politics of water, wrote in the French daily Le
Monde in 2000.
The leading think tank on water issues and the principal adviser to
the World Bank and United Nations is the World Water Council, which
was established in 1996 by the World Bank and the United Nations.
It is headquartered in Marseille, France, and one of its three
founding members is Rene Coulomb, a former Suez vice-president.
In 1998, the WWC created the World Water Commission to promote
public awareness of water issues and to help formulate global water
policies. The commission holds water conferences around the world
and channels its policy statements through international forums
held every three years. ...
Both of these institutions strongly support privatization and a
user-pay policy. "Global experience shows that money is the medium
of accountability," the commission said in a 2000 report.
The commission has held two international forums on water with a
third planned for Kyoto, Japan, in March 2003. At its forum at The
Hague in March 2000, the commission issued a policy statement that
said water management was the main problem facing mankind and the
solution was to treat water like any other commodity and open its
management to free market competition.
Serageldin stated that water delivery should be in private hands,
but publicly regulated, in the same way as private companies run
the food industry.
The ties that bind the World Bank to the major water companies
include shared membership on the boards of various policy
institutions as well as personal and business relations. ,,,
Financial titans, bribery and fraud
In addition to their political connections, each of the three
leading companies has enormous financial resources. Each is among
the top 100 corporations in the world. Together they had revenue in
2001 of $156.7 billion and continue to grow at a rate of about 10
percent a year, outpacing the economies of some of the countries in
which they operate. ...
Though competitors, the companies often form joint ventures to
obtain water concessions in foreign countries. The ICIJ
investigation, for example, revealed that Thames and Vivendi formed
a business alliance in 1995 to capture the Asian market. Suez and
Vivendi share interest in Buenos Aires. And Thames and Suez, with
the support of the former Indonesian dictatorship, divided up
Jakarta.
Finally, the private water companies make promises they often can't
keep - a tactic one World Bank water official called "over
selling." Essentially, they promise to deliver a better service at
a lower price. The ICIJ investigation found, however, that
governments often drive up water prices just prior to privatization
to give water companies room to immediately reduce prices and win
popular approval. Once a company has won the contract and lowered
prices, it often quickly attempts to renegotiate for higher rates
and reduced performance targets. The fact that the companies now
control the city's waterworks gives the company tremendous leverage
in these negotiations. In many cases, water prices soar and
original targets for expanded water and sanitation systems are not
met. ...
Even in developed countries, such as Australia and Canada, which
generally have stronger regulatory bodies than poorer countries,
privatization has weakened public accountability. ...
Global expansionists
Having established firm footholds on six continents, the big three
water companies say they now intend to concentrate most of their
efforts on the potentially lucrative markets of North America,
China and Eastern Europe. All three told ICIJ they hope to more
than double their revenue and their client base in the next 10
years. ...
Some countries are definitely not on the privatization agenda any
more. Yves Picard, managing director of Vivendi in South Africa,
said his company is not interested in concessions in southern
Africa unless the World Bank or other institutions finance the
capital costs. Otherwise, he said, there is no payback for the
company because people are too poor to pay the high water rates
private companies charge to cover their capital costs.
Dependence on the World Bank appears to be increasing. There is
rising concern among the companies that capital markets are not
open to them because water is such a volatile political issue and
many poorer countries have unstable local currencies. ,,,
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Date distributed (ymd): 030317
Region: Continent-Wide
Issue Areas: +economy/development+
The Africa Action E-Journal is a free information service
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commentary and reposted documents. Africa Action provides this
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