Privatisation brings new investment to water company

Ghana has embarked on the partial privatisation of its ailing water company with the help of a US$103 million loan from the World Bank. Most of this money will be used to repair leaking water pipes in the country's main towns and lay new ones.

The five-year Urban Water Supply Project aims to provide a more reliable water supply for more than eight million people in Ghana's main towns.

There, it is not just the slum dwellers and the poor who lack a regular water supply. Even relatively affluent Ghanaians with water meters in their homes are often forced to buy from private water sellers because their taps have run dry or only spurt water one or two days per week.

The water vendors, who sell from tanker trucks in the street or storage tanks and wells in their back yard, charge up to 1,000 cedis (11 US cents) per bucket for the precious liquid - 10 times more than the state-owned Ghana Water Company.

But the water company has suffered from years of poor management and lack of investment and has run up huge losses. It is no longer able to serve its existing customers properly, let alone take on new ones.

Officials said half its daily production of 120 million gallons was lost through leaks, unpaid bills and administrative inefficiency.

The government aims to improve matters by injecting fresh cash into Ghana Water to finance investment, and by placing the company under private management to improve its efficiency.

The five-year plan aims to provide piped water to 25,000 new homes by the end of 2005, besides restoring a regular water supply to existing customers who spend most of their time staring at dry taps.

It also aims to establish 350 more public standpipes this year for people living in poor suburbs where individual houses do not have their own water connection.

In order to achieve these goals, the government has written off US$100 million of debts owed by the Ghana Water Company and has raised US$120 million for new investment.

Most of this new money is coming from the World Bank, which signed a loan agreement for the project last week.

"After many years of discussion, I am happy that we can now move from talk to action," the World Bank's country director for Ghana, Mats Karlson, said at the signing ceremony. "We have prepared well and the digging and laying of new pipes should start as soon as possible."

But in exchange for this cash injection, the World Bank is demanding that the government improve the efficiency of Ghana Water by placing it under private management during the course of this year.

An international tender was launched in December 2004 to find a contractor willing to take over management of the company for five years in exchange for a monthly fee.

The contractor will qualify for a bonus payment if it exceeds agreed performance targets, but will be subject to financial penalties if it fails to meet them.

"It's baseline fee payment at the end of each month will be reduced as a form of punishment if its operations fall below standards set in the contract," Emmanuel Nkrumah, the director of the Urban Water Supply Project, told IRIN. "However, should it perform above par, it will be paid a bonus."

Nearly half the 4,600 employees of Ghana Water are likely to lose their jobs as the new private sector contractor seeks to streamline operations.

However, there is financial provision within the water privatisation project to compensate those made redundant.

"Negotiations have already started. We have earmarked US$10 million for the retrenchment exercise," said Samuel Lamptey, the managing director of Ghana Water. "What we have to do now is to detail how much each retrenched worker gets."

But not everybody thinks privatisation is a good idea.

Critics worry that it will lead to a sharp increase in water prices which Ghanaians on meagre salaries can ill afford. They also fear that water provision for the country's poorest people will be neglected as a privately managed Ghana Water Company focuses on serving those customers who are in the best position to pay for its services.

"Let us open a national debate on this private participation in our water delivery systems," said Ernest Tay Awoosah, the deputy executive director of the Integrated Social Development Centre (ISODEC), an advocacy group.

"Only then can we find out how best we can raise up that amount (needed for investment) instead of getting a private operator. It is the government's duty to ensure that water gets to everybody," he stressed.

But Finance Minister Yaw Osafo-Maafo said the talking had already gone on for too long.

"This government cannot afford the luxury of waiting for more debates on the issue," he told reporters last week. "We all have a common objective to deliver regular and safe water at an affordable cost to the poor in our society."

"Let us rather use the Public Utilities Regulatory Commission, the statutory regulatory body charged to regulate water tariffs in the country, to ensure affordable tarrifs for the poor," the Finance Minister said.

The privatisation programme is only a first step towards meeting Ghana's needs for clean drinking water. It will benefit less than half of the country's 20 million population, focussing on the 8.4 million people who live in its main towns.

The government estimates it will require US$800 million of investment to bring clean water to all Ghanaians by 2015, in line with the UN Millenium Development Goals for improving living standards.

At present only half the population has access to an improved water supply. The rest depend on rivers and untreated wells.