9 Jun 2011

Answering the wrong question - privatisation and the right to water

The UN General Assembly recently adopted a resolution recognising the "right to water". On the face of it, this is hardly a controversial resolution, since who would oppose something as obviously vital as water. But dig a little deeper, and there are some tricky issues here.

For many advocates of this right, the UN resolution has been used as an opportunity to re-open the privatisation debate that burned strongly and divided many over the past two decades. A recent special issue (No. 533) of Pambazuka, a magazine promoting freedom and social justice in Africa, focuses on "Water and Privatisation", aiming to do just that. The argument is that if water is a basic human right, surely it should be available for free. Or at least, multinational corporations should not be allowed to profit from its provision.

But why drag the debate back to privatisation good / privatisation bad debates that go nowhere? This almost always ends up being a very ideological debate, with right to water advocates on one side (as in this Pambazuka special issue), and market-forces advocates on the other. The two groups cannot talk to each other productively as their disagreement is so deep-rooted. It's like trying to argue whether red or green is a better colour - those who like red will not listen to those who like green and vice-versa. You can't reach a conclusion. What's more, both sides tend to ignore the evidence from the ground, or at best, to apply it highly selectively.

In practice, if market forces are left alone to deliver water, the rich get better services and prices go up. But if utilities are kept in public hands, they tend to get trapped in a cycle of bad-management and bail-outs. In both cases, expansion of distribution networks is rare and those without network connections continue to go without. 

The few successful African water utilities (Durban, National Water in Uganda, some smaller utilities in Tanzania) have shown that getting incentives right matters at the level of individual staff rather than at an organisational level. That can be done in either private or public utilities. This is the first area where we should be focusing attention. 

And strong regulation is the second. Regulation matters whether a utility is publicly or privately owned. This includes having regulators who are willing to stand up to public pressure against tariff increases. Low tariffs protect the middle classes, since they typically have household connections, but hurt the poor, since they typically don't and low tariffs undermine any prospect of expanding networks. At present, the urban poor typically pay far more for water than those with network connections, since they're buying from unregulated private vendors, often delivered by hand-cart in jerry-cans. And this water is not just more expensive (it can be as much as ten times the price per litre), it can also vary hugely in quality since these private vendors are unregulated. 

This is where turning the right to water into an anti-privatisation argument breaks down. The biggest complaint against privatised utilities is that after privatisation, prices go up. But if the right to water is used to argue against increasing tariffs to a level that provides utilities (public or private) with funds for investment, the poor will continue to go without network connections. As a result, they continue to pay far more for their water than those with network connections. 

If a utility is publicly owned, increasing tariffs is even harder, since utility managers will face pressure from their political bosses to keep tariffs low. This is the main reason why the expansion of publicly owned water supply utility networks in African has lagged so far behind population growth. 

Anti-privatisation protests in Africa have tended to be ideologically-based middle-class protests rather than mass movements. That was certainly the case in Dar, where protests were led by the NGOs TGNP and Action Aid.

It's a shame when well-intentioned NGOs end up promoting an idea that actually works against the interests of the people they claim to be supporting. TGNP, Action Aid and Pambazuka all do excellent work and I admire them greatly. But on this issue, I can't avoid the conclusion that they've been blinded by a combination of ideology and simplistic arguments.

Anti-privatisation activists are answering the wrong question. If you're asking how to keep tariffs low, the answer would be to keep utilities in public ownership. If you're asking how to improve services for the poor and unserved (which is surely what the right to water should really be about), privatisation can play a useful role. But that's not really the right answer either.

Improving services for the poor is about getting incentives for individual utility staff right, and about getting regulation and pricing right. It's not about whether the utility itself is publicly or privately owned.

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For further reading on this issue, I highly recommend Why Did City Water Fail? (pdf), WaterAid's analysis of the "failed" privatisation experiment in Dar es Salaam between 2000 and 2005 (which I was peripherally involved in producing).