Despite large aid support, Ghana's privatised water utitily
AVRL consistently failed to meet its contractual commitments. Water is
now back in state hands, but it will need increased investment and a
vigilant civil society to deliver the services Ghanaians need.
Ghana finally yielded to pressure from multilateral donors in
2006 and privatised its urban water utilities. The Government’s
experiment with what it conveniently referred to as “private sector
participation”, and not privatisation, was short-lived. This was despite
considerable high hopes and expectations fostered by the Ghanaian media
as well as very well-resourced backers and promoters of privatisation.
The road between 2006 and 2011 was bumpy for the new management. The
period after 2011, after water returned to the public sector, has also
not been smooth. However it has highlighted the cost and key challenges
that confront a public/state facilitator and provider of urban water
within the context and constraints of a developing country.
The economic context before privatisation in Ghana was similar to
most African countries in the 1980s and 1990s. These economies were
characterised by high trade deficits due to a decline in prices of
exports and a surge in the prices of imports, with resulting high budget
deficits. This made it impossible for such countries to provide needed
support to vital state-owned enterprises, and there was a consequential
decline in the efficiency of such enterprises.
Particularly in Ghana, there was pressure from the International
Monetary Fund and the World Bank for fiscal discipline. The intention
was to keep the government from investing in state-owned enterprises
(SOEs) and supporting them to weather the economic storms of the time.
The prescription was to rather leave such roles for the private sector.
Whether such private sector actors existed in Ghana at the time and were
willing to take the risk were issues that did not receive much
attention. This did not prevent a vigorous push by donors requiring the
government to privatise, for example, the urban water and energy sectors
in exchange for economic assistance
This pressure led Ghana to open up its urban water sector to private
‘capital’ in 2006. The government’s original offer of a lease concession
was not successful with previously interested bidders saying a lease
involved too high risk in relation to political stability in West Africa
and the large liabilities of the Ghana Water and Sewage Corporation
The truth was, however, that they had wanted to pay very little.
Their concern about stability was not so much about stability of West
Africa, but more about the wider stability and sustainability of water
privatization contracts globally. On the continent and elsewhere in
Latin America, similar contracts had been overthrown and were a major
cause of uneasiness for the bidders for the Ghana contract.
As a result private sector actors sought an arrangement that could
allow the private sector to participate in urban water supply in Ghana
without being required to make any direct investment.
The Government therefore contracted Aqua Vitens Rand Limited (AVRL), a
company formed by Vitens Evides International of the Netherlands and
Rand Water of South Africa. The company was paid USD 5 million as
management fees for five years. Additionally, they administered donor
support to the contract of USD 120 million for non-infrastructural work
with huge cost overruns.
New water provision failed to meet expectations
A close study of the contract shows how much it
privileged AVRL above the state. The contract was clear about the
obligations of the Ghana Water Company Limited and very general about
the obligations of AVRL.
The road became bumpy for AVRL because of the contradictions in the
contract, particularly the arrangement where the private actor invested
nothing financially and was given guaranteed returns before any
The effect of this was that shortly after the signing of the
contract, AVRL had to contend with the high expectations of workers
seconded to it, as well as expectations of citizens who had been told of
the efficiencies of AVRL. With no new investments by the new actors,
AVRL faced similar challenges to those that the Ghana Water Company
Limited faced: poor conditions of work for workers and irregular water
availability for most citizens.
In the end, AVRL failed consistently throughout the contract period
to meet its targets. Some of the significant failures included inability
to reduce non-revenue water
inability to improve water quality, and consistently poor performance
in six other target areas identified in a World Bank commissioned
technical audit report.
These facts, in addition to the unmet expectations of citizens and
workers of the company, created the conditions for the contract to be
Reverting to public management
The same media that was instrumental in getting the public to accept
AVRL became the ally of citizens and the workers in forcing them out. In
June 2011, the management contract with AVRL was discontinued. However,
operations did not return directly to the Ghana Water Company Limited
as expected, but passed to an interim structure that the government
named the Ghana Urban Water Company Limited. Some activists believed the
World Bank (opposed to discontinuation despite the evidence) influenced
this process. There was therefore a deadlock situation for about two
years, after which pressure from civil society ensured a full reversion
to the public company, Ghana Water Company Limited.
Currently, the urban water sector is fully owned by the state and is
managed centrally by the Ghana Water Company Limited through its
regional and district offices. It retains both production and
Ghana Water Company Limited’s Performance
Unfortunately the improved performance expected by citizens has not
yet materialized and signs of poor water supply are everywhere and
increasing. Water is still fetched and stored in yellow 25 litre gallon
containers in most communities.
One cannot blame the Ghana Water Company Limited entirely for the
present difficulties. The five years of dormancy in which they were
placed during the management contract was enough to affect their
momentum and rob them of continuity from their past experience.
Another publicly run water utility, the Uganda Water and Sewerage
Corporation, offers a useful point of comparison. It was spared this
hiatus and had reforms that did not bring in new managers but rather
corrected what was wrong within the public corporation. The Uganda Water
and Sewage Corporation is today celebrated as a successful case. It
even now offers assistance to other countries, like Ghana, learning from
the challenges it had.
At the Global Water Operators Partnership conference of 2013 in
Barcelona, the UN-Habitat facilitated the second phase of a mentoring
partnership between the Ghana Water Company Limited and the Uganda Water
and Sewage Corporation under a public-public partnership (PuPs). Under
the arrangement, the Ugandan Water Corporation acts as a mentor for the
Ghana Water Company Limited.
Influence of Uganda – The promise and dangers of PuPs
Uganda’s experience, was one in which the water utility was highly
corporatised. This process has been prone to sacrifice access for
efficiency. A case in point is the introduction in Uganda of prepaid
water metres to increase revenue collection efficiency. Under the
public-public mentorship by Uganda, the Ghana Water Company Limited
announced a similar policy in February 2014.
Intense public reaction and revulsion caused the policy to be halted,
though not abandoned. Meanwhile, public investments into expanding
infrastructure has improved relatively. Such investments mean that the
capital city Accra’s current capacity of 93 million gallons
a day will increase to 158.3 million gallons by the end of 2014. This
will provide 8.3 million gallons in excess of current demand.
Though the increase in capacity would improve access, the Ghana Water
Company Limited is looking for ways to avoid using public (tax) finance
to fund its operations. This makes citizens the sole source of cost
recovery, with poor areas and people being the most vulnerable. This was
behind attempts to introduce the pre-paid water metering in Ghana.
What the Ghana-Uganda partnership shows is that in the absence of a
vigilant civil society, even a state company will sacrifice the common
social objectives for profit objectives. Civil society therefore has an
obligation to expose this discriminatory public policy and to mobilise
public support behind the social objectives that should equally inform
water supply to make safe water available for both rich and poor.
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