4. A Cause for Good? Private Sector Participation in African Water Provision

Figure 1 The Dolphin Coast, KwaDukuza Municipality

In many African countries, private sector participation (PSP) was presented as a solution to the failure of centralised governments to provide an adequate water supply. In this post, I hope to illustrate the advantages and disadvantages of privately run water services, through a case study on the Dolphin Coast. 

In 1999, the Dolphin Coast (KwaDukuza Municipality) saw one of the first private contracts in South Africa, with a 30-year water concession handed to Siza water, owned by Saur (see Figure 2). It was thought that the concession would bring international managerial expertise that would improve efficiency and bring greater financial capability to expand water infrastructure.

Figure 2 Area of the Dolphin Coast covered by Siza Water concession 

However, these benefits did not materialise. In 2001, South Africa’s new free-water policy recognised the right to a certain quantity of water as a constitutional right. Saur renegotiated the contract to provide 0-10kl of water for free but charged a flat rate of 20 rand/month for people to be a ‘customer’. A key criticism of PSP has been its vulnerability to political dynamics. Here, this caused a renegotiation which excluded the poorest people within the community.

Furthermore, renegotiations saw a reduction in the investment to extend the pipe network. Instead, pre-payment meters were implemented because they enabled people to buy water at the utility tariff, without a piped network. However, the reality was that many people could not afford to pay for the metres. Whilst previously, people were able to use the taps for free and receive treated water, under the prepayment system, those who could not afford to pay were forced to use nearby streams. Even for those who could afford to pay, there were still issues such as delayed repairs of faulty meters, difficulties replacing the cards, and too few convenient metres which forced many to find their own water sources. These metres were correlated with one of the worst cholera outbreaks seen in Dolphin Coast, which illustrates the severe humanitarian consequences which can arise from poor water management. 

'Nobody really ever bothered to find out if people could afford these services. And, as it turns out, people can’t.' – David McDonald

Though the Dolphin Coast concession is often cited in criticism of PSP, there have been cases of success in which it seems that public, private and community-based actors can work together. For example, the success of PSP in Côte d’Ivoire was partly because the Ivorian government provided strong policy guidance and clear separation of the roles of the organisations involved. The private water company was able to use a rising block tariff and improved bill collection to collect an income for the government, which was used to fund cross-subsidies and expand infrastructure. This evidences how a social cause can be built into a profit-driven model and how privatisation, if designed well, can improve welfare. 

Finally, the question of the role of PSP cannot be considered without an understanding of the political circumstances in which water provision is needed. External governance factors, such as security of tenure and government structure, contribute to whether PSP can work with national governments to succeed.