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Water privatisation in Ghana

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Water privatization in Ghana has been discussed since the early 1990s as a reaction to poor service quality and low efficiency of the existing urban water utility. The World Bank supported the process of private sector participation in the urban water sector from the beginning. After many tribulations a 5-year management contract was awarded in 2006. When the contract expired in 2011, the government decided not to extend it, saying that the private operator had not lived up to expectations.

Preparation

Water privatization in Ghana has been discussed since the early 1990s as a reaction to poor service quality and low efficiency of the existing urban water utility Ghana Water and Sewerage Corporation (GWSC), renamed Ghana Water Company Ltd. (GWCL) in 1999. The World Bank supported the process of private sector participation in the urban water sector from the beginning. Following preparatory studies and a national consultation workshop in 1995, the government opted for two 10-year lease contracts among 8 options, including the option to continue public sector operation. Critics argue that the workshop was that participants had been arbitrarily chosen, that the majority of participants were foreigners, that no local NGOs participated and that the public sector option had not been given due consideration. Furthermore, they argue that a single workshop was not sufficient to prepare such an important decision, that no major public debate had taken place and that the final decision should have been taken by Parliament. According to the decision made by the government, each of the leases was to cover about half the cities and towns of Ghana. The private operators were expected to invest US$132 million from their own resources, corresponding to about one fourth of the total expected investments over the lease period. The contracts were expected to increase water production by 85%, connections by 50% and reduce non-revenue water from 52% to 25%. These expectations proved to be clearly unrealistic in retrospect. In March 2000, the government of Ghana awarded a 30-year Build-Operate-Transfer (BOT) contract for one half of the country including the capital Accra to the US company Azurix, a subsidiary of Enron. However, the World Bank did not support the contract. The contract failed before operations began due to accusations of corruption and public opposition which led to the formation of the Coalition against Water Privatization.[1][2] In 2004, the World Bank's Board approved a credit of US$103 million for an "Urban Water Project", which was later turned into a grant. The Nordic Development Fund contributes another US$5 million, while the Government of Ghana provides the remaining US$12 million of the US$120 million project.[3] The main objectives of the program, which was supposed to end in 2010 and has been extended until December 2015, are to significantly increase access to water supply systems in the urban areas of Ghana with an emphasis on improving the service for the urban poor; and restoring the long-term financial stability, viability, and sustainability of the GWCL. The World Bank also financed technical assistance and training. Moreover, it supports private sector participation.[4]

The management contract (2006-2011)

Between June 2006 and June 2011 the private operator Aqua Vitens Rand Ltd. (AVRL), a joint venture of the public Dutch company Vitens and the public South African company Rand Water, supports GWCL under a five-year management contract to improve its performance and rehabilitate and extend the infrastructure.[5]

The main objectives of the 5-year management contract were:

  • Improving the reliability (pressure and flow rate) and

quality of potable water,

  • Ensuring the company’s financial sustainability,
  • Improving customer service, and
  • Providing access to potable water at affordable prices to

low income consumers.[6]

The reduction of non-revenue water and an increase in collection efficiency were some of the means to achieve these objectives.

In March 2008, severe water shortages in Accra were reported, leading the Minister for Water Resources, Works and Housing to review whether AVRL was working in compliance with the management contract. However, he explained that the reason for the shortages were unforeseen power outages at two water treatment plants in Weija and Kpong. According to the minister, the overall situation would improve notably by the end of 2008 due to several new boreholes and a more stable power supply.[7] In March 2008 the National Coalition Against Privatisation of Water (NCAP) called for the abrogation of the management contract for alleged "lack of performance", especially related to the “Service Standard” in Schedule 4 of the contract.[8] The Minister responded by pointing to an upcoming mid-term review.

In early 2011, the Minister of Water Resources, Works and Housing, Alban Bagbin, criticised Aqua Vitens Rand for failing to live up to expectations. Residents complained that they did not receive water and workers protested against "the management style" of the company.[9] The government did not renew the management contract when it expired in June 2011. The Government is evaluating options for the next steps in the reform of the water sector.[10]

Impact

The management contract did not achieve many of its objectives: Non-revenue water remained at about 50%, compared to a target of 26%; and capacity utilization decreased from 74% in 2006 to 67% in 2009, compared to a target of 90%. However, the management contract achieved at least one of its objectives, an increase in collection efficiency from less than 80% to more than 90%.[11]

See also

References

  1. ^ Rahaman;, Abu Shiraz (2007). "Accounting and the move to privatize water services in Africa". Accounting, Auditing & Accountability Journal. 20 (5). Emerald Group Publishing Limited: 637–670. doi:10.1108/09513570710778992. {{cite journal}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)CS1 maint: extra punctuation (link) CS1 maint: multiple names: authors list (link), p. 648-651
  2. ^ Unicorn:Enron Subsidiary Azurix In Corruption Scandal in Ghana, ca. 2002
  3. ^ World Bank. "Ghana: World Bank Turns US$103 Million Ghana Urban Water Credit To Grant". Retrieved 2008-03-28. {{cite web}}: Cite has empty unknown parameter: |coauthors= (help)
  4. ^ World Bank. "Urban Water Project". Retrieved 2008-03-28. {{cite web}}: Cite has empty unknown parameter: |coauthors= (help)
  5. ^ Water-Aid Ghana (2005). "Assessment of national sanitation policies: Ghana case. Final report" (PDF). Accra. Retrieved 2008-03-26., p. 19
  6. ^ Vitens Evides International. "Management Contract 2006-2011 for urban water supply in Ghana A Partnership – in and for – development" (PDF). Retrieved 14 August 2012.
  7. ^ Benson, Ivy (2008-03-12). "Government maintains Aqua Vitens deal... to manage water supply in the country". The Ghanaian Chronicle. Retrieved 2008-03-27..
  8. ^ Schedule 4 states that within six (6) months from the Commencement Date, the Operator “produce and maintain water quality, pressure and flow rates at all (i) discharge points from treatment plants for Treated Water ("Headworks") and (ii) throughout the distribution networks that meet or exceed all relevant standards determined by the Ghana Standards Board and/or the Consumer Charter requirements, and the Drinking Water Safety Plan. In other words AVRL must ensure that water supply levels to all the urban delivery points covered by the contract. Furthermore, according to the contract (Clause 9.2) GWCL is entitled to commence termination processes in any situation where (a) the Operator fails to perform any of its obligations under this Management Contract in a material respect and such failure continues for thirty (30) days after written notice from the Grantor to the Operator requesting that such failure be cured; or (b) the Operator fails to provide the Services to Service Standards causing directly a widespread danger to the health of the public in the Service Area and such failure continues after written notice from the Grantor to the Operator requesting that such failure be cured.
  9. ^ Kunateh, Masahudu Ankiilu (26 April 2011). "Ghana: Don't Renew Aqua Vitens Rand Contract". allAfrica.com. Retrieved 19 April 2012.
  10. ^ Vitens Evides International. "Hand-over per June 6, 2011 of the management responsibility of Aqua Vitens Rand Water Limited (AVRL) to Ghana Water". Retrieved 19 April 2012.
  11. ^ Adam, Alhassan (6th June 2011). "Urban Water Policy Reforms in Ghana: Power, Interest and Performance". MPA Dissertation, University of Greenwich. pp. 44-47. Primary data are from GWCL and AVRL annual reports as well as Technical Report by Fichtner/HYTSA/Watertech. Retrieved 19 April 2012. {{cite web}}: Check date values in: |date= (help)
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