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Water: Africa's lifeblood. (Water).

The availability of safe drinking water is taken for granted in much of the developed world but in the developing world, a billion people have little or no access to safe water or sanitation. The World Health Organisation believes that over 70% of diseases are caused by this lack. The situation in Africa is even more dire than in other developing continents. Yet this vital resource, often literally the difference between life and death, has never been given the priority it deserves by the international community - until the Johannesburg Earth Summit. Now the world is committed to halving the number of people without access to safe drinking water by 2015. Can this be done? If so, how? Our Special Inquiry section, Agenda, examines the current situation in Africa.

The state of the water sector in Africa was pushed into the spotlight at the World Summit on Sustainable Development (WSSD) in Johannesburg. Water was one of the main five issues on the agenda but little progress was expected before the Summit began. It was only as a result of the lack of progress on the other topics under discussion, such as Western agricultural protectionism and international trade agreements, that it became the area where most advances were made.

The sheer numbers bandied about at the Summit were staggering, with 2.4bn people world-wide without adequate sanitation services and 1.1bn people with inadequate access to water. The World Health Organisation (WHO) argues that over 75% of diseases are brought about by the lack of safe drinking water and adequate sanitation. With water infrastructure relatively cheap to install, it is easy to see why Western nations view this as a cheap way to make a big difference.

Two main targets were set: to cut in half by 2015 the number of people without access to water services, and to reduce the total number of people without sanitation by the same date. The summit delegates called on industrialised nations to provide the 'resources and technical assistance needed to embark on action programmes to meet the goals'.

As the lack of water and wastewater services is a far greater problem in Africa than anywhere else in the world, discussions on the subject centred on the continent, for once pushing the subject on to the international community's list of priorities.

All words, no action?

While the two commitments made headlines, the announcements were less spectacular than they may seem at first sight. Firstly, the commitment on water was merely a repetition of the same promise made as one of the Millennium Development Goals. Secondly, the sanitation commitment does not set any targets in terms of absolute numbers or percentages, as a result of opposition by the US and Australian governments. Finally, as with all targets or goals set at world conferences, there is no penalty - financial or otherwise - to act as an incentive for the international community to put their words into action.

In comparison with tariff agreements, it is far cheaper for Western governments to make a difference in the provision of water and sanitation services. Whether the various state, donor and development agencies actually receive increased funding for the African water projects remains to be seen, but at least a series of commitments have been made and the subject has been pushed up the agenda.

So where is all this new investment to come from and how much is needed? Jamal Saghir, the director of the World Bank's Energy and Water Division, says that total global investment in water development must double from $l5bn a year to $30bn if the two WSSD targets are to be met. A spokesperson for the World Bank said that the Bank is keen to use its Business Partnerships for Development (BPD) - which acts as a forum for state, NGO and private sector interests in the water industry - as a conduit for new projects. Yet the Bank is unlikely to provide greatly increased funding itself.

European Union representatives at WSSD were full of promises. The European Commissioner for development and humanitarian aid, Poul Nielsen, said that the EU was launching several 'partnership initiatives' for the water sector. EU President and Danish Prime Minister, Anders Fogh Rasmussen, described these new partnerships as "a concrete initiative" and said the EU had a "moral obligation to do the right thing".

However, neither Nielsen nor Fogh Rasmussen were able to put any figures on the new investment although both said that existing initiatives would be used to channel new funding. EU investment in water related development during 2001-02 stood at euro1.4bn.

A viable channel?

One possible vehicle for the distribution of new funding is the new Emerging Africa Infrastructure Fund (EAIF), set up earlier this year by the UK government's Department for International Development (DFID). The $305m fund is now also being supported by Germany, the Netherlands and South Africa, and will be used to provide low cost loans for private sector infrastructural projects.

The UK's Secretary of State for International Development, Clare Short, said: "Public sector resources will never be able to provide sufficient funding to generate the investment in water and sanitation...necessary to ensure that Africa meets the target of halving the proportion of people in poverty by 2015. The private sector frequently views investment in infrastructure in developing countries, particularly in Africa, as high risk. EAIF is designed to help smooth those anxieties whilst still requiring private investors to share financial risks."

However, one positive sign to be taken from the conference was the interest in sanitation. Until recently, the provision of water services was seen as an attractive option for donors and host countries alike. Everybody can understand the need for water and its mention creates a pure and positive image.

Conversely, the image of sanitation and waste water is not at all sexy and all parties have shied away from investing in the sector, although the provision of sanitation services can have just as great an impact upon living standards, disease prevention and life expectancy.

The South African Minister of Water Affairs and Forestry, Ronnie Kasrils, has already admitted this year that his government has neglected the wastewater sector and he has promised to rectify the situation over the next decade.

WSSD also brought together delegates from opposite sides of the argument about how to actually tackle the lack of water and sanitation services in Africa. Many NGOs took the 'privatisation is killing children' stance and it is easy to see why. John Hilary, trade policy adviser for Save the Children Fund, summarised the argument: "When you raise water tariffs in a particular country, the poorest families can no longer afford access to clean water and that means that their children have to make do with dirty water from untreated sources."

Private or public responsibility?

Yet while opponents of private sector involvement feel passionately about their cause, their argument misses several vital points. Firstly, water services have been in state hands in most African countries for decades and yet hundreds of millions remain without access to clean water or sanitation.

Moreover, in many African cities, state-owned water authorities are unable to maintain the existing infrastructure, never mind extend it to greater and greater numbers of homes. While it would be easy to discuss why water parastatals have been technically or financially unable to turn the situation around, it would be largely fruitless. As things stand in most of Africa, the situation is not going to improve and may well become a good deal worse.

Also as things stand, almost all donors and lenders, including the IMF and World Bank, are loath to invest in state run companies. On the other hand, they are keen to make grants and loans to water sector reform that includes at least an element of private sector participation, although several investigations judge that privatisation is not a panacea.

A study of 100 African Water utilities by the Water Utilities Partnership (WUP) - which was set up by the Union of African Water Suppliers and the World Bank in 1996 - concluded that privatisation is not always the best option. But if the multilaterals are prepared to provide part of the investment required then there seems little option but to go down the privatisation road.

Moreover, the increased funding promised by the EU and individual European countries will mainly be attached to private investment, while the use of private water companies in running services in African cities will attract additional expertise in water sector management and engineering into Africa.

Some may be surprised to learn that private water interests already supply water to the very poorest in practically every city in Africa. For many of the urban poor without access to piped water supplies, street vendors are the only source of 'clean' water. Yet as survey after survey has shown, the water sold by 90% of vendors is not clean at all, but merely taken from the nearest handy source of opaque water.

Many have little choice but to buy this water, which is often far more expensive than piped water would be. Anna Tibaijuka of UN Habitat says: "You have the poor paying something like up to 20 times as much as those connected to municipal supplies."

Yet offering private concessions will never guarantee success. Profit margins will be tight, progress will be slow and it is often difficult to put together an attractive enough concession package to attract bidders. In Tanzania, at present, the government is having great difficulty attracting foreign companies to bid for the contract to run services in Dar es Salaam. On the other hand, the South African government has succeeded in attracting private operators and at the same time has managed to halve the number of people without access to clean water in the eight years since the end of Apartheid.

Public private partnerships (PPPs) are the most likely vehicle for water sector development and in one form or another almost all donors and lenders favour them. In June this year, Saghir of the World Bank argued at a Water and Sanitation Programme (WSP) conference in Addis Ababa that PPPs were the best way of improving water and waste water services in Africa. Saghir added that he believed that governments were becoming increasingly concerned about the water sector and were "viewing water and sanitation through the prisms of improved health and a better quality of life".

RELATED ARTICLE: CASE STUDY 1: South Africa 7m down, 7m to go

The South African water sector is not without a large amount of controversy but the political dispute over the privatisation of services in the country masks a huge success story.

According to the South African Minister of Water Affairs and Forestry, Ronnie Kasrils, 14m mainly rural South Africans did not have access to piped water in their homes at the end of the apartheid era in 1994. By March 2002, this figure had fallen to 7.2m, so that is at least 7m people - or 10m if population increase is taken into account - who have now been connected to water distribution grids.

Kasrils says, "by 2008, everyone in the community will be receiving clean water if we maintain our current rate of progress". This has been achieved on the back of R5.3bn direct investment over the past eight years in extending water distribution. The 2002-03 budget dedicates another R888m, while a variety of donors are investing an additional R197m.

The government's commitment to providing water to the poorest has been underlined by its controversial 'free water policy', which was introduced in July 2001. Under the policy, all poor households - which equates to around two thirds of all homes in the country - are guaranteed 6,000 litres of free water a year. This is sufficient for drinking water and cooking but little else.

Private water companies argue that such provision is not economically viable but it appears that demand from industrial and more prosperous domestic consumers is large enough to counterbalance the financial losses from the scheme.

The free water policy should also help to counteract opposition to the activities of private water companies. Water and wastewater services were provided by a variety of local authorities and parastatals until recently.

Liberalisation gets preference

However, the government has embarked upon a programme of market liberalisation, so that it is now up to local authorities to decide how they wish to manage the sector. Some, such as in Johannesburg, have opted to offer concessions to private firms, while others have decided to continue using state owned entities. However, trade union opposition has stalled the process of offering concessions in many cities, such as cape Town and Durban.

In Johannesburg, Northumbrian Water, a subsidiary of French water giant Suez, won a five year concession to run water and waste water services in January 2001, while another Suez subsidiary - Water and Sanitation Services (WSS) - holds 25 year concessions for various local authorities in the provinces of Gauteng, KwaZuluNatal, Eastern Cape, Western Cape and Northern Cape. It is expected that a number of companies will submit bids for the large Johannesburg concession when it comes up for renewal in 2006.

However Union opposition and hostility from the general public have been stoked up by several widely publicised cases. Such cases have encouraged opposition to private concessions and COSATU has made the Biwater concession a cause celebre.

Opponents of privatisation claim that 400% tariff increases have been introduced, but Biwater argues that such figures can only be calculated by including fines and insists that the average annual tariff increase is just 10%. COSATU is organising a huge petition against the concession, while Biwater plans to take debtors to court. The failure of the concession would set a precedent and President Thabo Mbeki is reported to have said that "under no circumstances must Biwater be allowed to collapse".

Despite such cases, the government is pressing ahead with reform of the sector. The 1998 National Water Act set out the theory behind the government's strategy, while the publication of the National Water Resource Strategy (NWRS) in July this year should help to fill in much of the detail.

One year on from the introduction of the free water policy, the NWRS may offer other incentives for the powerful South African trade union movement to accept the government's policy of combining public and private control of the water sector.

Kasrils told the National Assembly: "I am ensuring that water is used in the public interest. We are moving further away from the situation where people who owned land could claim the right to whatever water flowed past them and use it however they wanted to, regardless of the needs of those out of sight of the river."

CASE STUDY 2: Tanzania

Investors fight shy

While private companies have been queuing up to invest in water in South Africa, there has been little interest in the rest of Africa.

The Parastatal Sector Reform Commission (PSRC) is overseeing the privatisation of the Dar es Salaam Water & Sewerage Authority (DAWASA). It aims to split the parastatal into two halves: a public granting authority (PGA) and a private operator. The concession on offer is that for the PGA, and although there were originally three pre-qualified bidders - Biwater, Vivendi and Saur - only Biwater eventually submitted a bid.

The tender process was delayed on several occasions and at several stages but in July this year, the Tanzanian authorities announced that they had managed to secure the full $145m required under the investment plan. In addition to the $98m promised by Agence Francaise de Developpement (AFD), the European Investment Bank and the World Bank - all of which is conditional upon a successful tender process - the African Development Bank (ADB) signed a contract to provide a $47m loan plus a grant of $1.65m for technical assistance. Biwater will only be required to make an investment of $6.5m into standpipes and water meters out of total expenditure of over 20 times as much, yet it still appears as if no other company believes it can make a profit out of the deal.

Rehabilitation part of the deal

The DAWASA concession actually covers the whole of Pwani (or Coast) Province of Tanzania, which contains Dar es Salaam itself, with an estimated 4m inhabitants and growing by the day, plus the coastal town of Bagamoyo to the north, in addition to surrounding villages and small towns. However, even Bagamoyo only has a population of around 66,000, so the successful bidder's attention will certainly be focused on the Dar es Salaam end of the operations

The project's aims are stated as 'the improvement of the quality of provision of service in the Dar-es-Salaam water supply and sanitation system in terms of accessibility, quality, reliability and affordability of services to the population'.

The concessionaire will be required to rehabilitate the existing water and wastewater infrastructure, begin to extend the number of homes with direct access to supplies and implement a community water supply and sanitation programme.

Under the terms of the concession, the private operating company must set up a local operating company to manage the concession, and Tanzanian interests are to hold a stake of between 20% and 49% in the venture. It is up to the preferred bidder to select its Tanzanian partners. Severn Trent Water International (STWI) has acted as transaction advisers on the tender since June 1998.

Tanzania is one of the poorest countries in the world and most inhabitants of Dar es Salaam are supplied from stand-pipes, for which they pay no charge. Water vendors take water from the standpipes to sell in parts of the city without any water supplies at all. As a result of the unreliability of official supplies, many richer people buy water from private operators, which have around 15 tankers operating in the city.

In practice, there is no single Dar es Salaam wastewater network but rather hundreds of very local systems. They have been developed on an ad hoc basis as and when required and so have been built to innumerable specifications. In many districts there is no formal sewerage treatment or removal service. The leakage rate, convincing customers to pay for water and the number of illegal water connections are all major problems. The Ministry of Water estimates water leakage at 50%, although part of this is undoubtedly caused by illegal connections to the network.
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Author:Ford, Neil
Publication:African Business
Date:Nov 1, 2002
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