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11 February 2002

And not a drop to drink

Business is frustrated at the slow pace of privatisation in South Africa, but the poor, reports Brya

By Bryan Rostron

South Africa is slowly being privatised. You see it in the implausible spiderwebs of electricity lines that criss-cross the dusty, impoverished streets of Khayelitsha, Cape Town, where one legal connection illicitly supplies perhaps a dozen other households. In the affluent suburbs, fleets of private security cars patrol round the clock, replacing an underfunded, demoralised police force. In the townships, desperate citizens increasingly resort to privatised justice – vigilante lynchings and executions. But for the very poor, the privatisation of state assets threatens to become the new apartheid: an instrument of exclusion, not just from a better life, but even from the very basics.

The African National Congress is committed to a programme of privatisation, and Kenneth Clarke, the former Tory chancellor, visiting from Britain last year courtesy of Deutsche Bank, concluded that South Africa is now “on the right track”.

The most notorious privatisation involves the British company Biwater, which in 1999 was granted a 30-year contract for water provision in Nelspruit, capital of Mpumalanga Province, east of Johannesburg. The unions were outraged, claiming that the government had promised to consult, then simply rammed the deal through. The company has been dogged by controversy ever since. It has been accused of huge tariff increases, up to 100 per cent, and dwindling services, with water available only a few hours a day in some areas.

Before Christmas, a visiting delegation from Unison, the British public sector trade union, expressed deep shock at the dismal water provision in poor satellite townships around Nelspruit. At one health clinic, the visitors found no water at all. Another clinic did have water, but the surrounding community had been cut off for four days.

“There is constant pressure on people to store water in whatever containers they can find,” a nurse told the trade unionists. “It is common to find an entire family living off ten litres of water over one or two days.” The nurse also reported an increase since privatisation in diseases such as diarrhoea. In another area, the delegation found that people had to hire cars to drive three miles to collect water. In Johannesburg, as well as some smaller towns, the French conglomerate Suez has taken over water supply operations, in equally fraught circumstances.

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Yet outright formal privatisation is so far the exception rather than the rule. Despite his enthusiasm to follow the economic policies of the “Washington consensus”, President Thabo Mbeki has put an anti-privatisation communist, Jeff Radebe, in office as minister for public enterprises – perhaps with the same pragmatism, or sense of humour, that saw him appoint a pacifist as deputy defence minister.

Far more important, then, are the halfway houses – restructuring, corporatisation, public-private partnerships – which are often part of a softening-up process for privatisation or, as the ANC calls it, “managed liberalisation”.

A municipal drive for profitability has led to an enormous social crisis. Last year in Soweto, an average of 20,000 homes a month were having their electricity disconnected for non-payment. Since 1999, in Cape Town, more than 100,000 households have had their water cut off. There have been angry demonstrations all over the country.

Poor communities are beginning to organise themselves to fight back. In Soweto, moonlighting electricians immediately and illegally reconnect cut-off families to the grid; on the Cape Flats, there have been riots over water disconnections, and calls to boycott payments – reminiscent of past anti-apartheid battles – if the city’s aggressive cut-off policy persists.

Eighteen months ago, the KwaZulu-Natal provincial government began charging rural residents for water that had previously been free. Thousands of households could not afford to pay, so used river water instead. Within weeks, cholera broke out. To date, this has caused more than 250 deaths and over 112,000 cases of illness.

Though the ANC can claim great credit, post 1994, for providing new services – three million households with clean drinking water, 2.5 million connected to the national power grid – these very gains are now under threat. Utilities connect services to the “previously disadvantaged”, but do not count subsequent cut-offs when they boast of their “roll-out” success rate. Recently, the monopoly fixed-line telephone company, Telkom South Africa (already 30 per cent privately owned), admitted that of 621,219 new telephones installed in 2001, more than a third were later disconnected. Telkom claims that it is permitted to include these terminations as part of its overall growth.

“This emphasis on cost recovery, with services being outsourced, means not only job losses but disconnections of basic services and eviction of people from their homes,” says Trevor Ngwane, a former ANC municipal councillor, now chairman of the Soweto Electricity Crisis Committee. “This neoliberal economic approach carries a high price. People are saying that the ANC is like those migrant workers of the old apartheid days who had to leave their homes to go and work in the city, where they were dazzled by the bright lights, often found a new woman . . . and simply forgot their rural family.” But Jeff Radebe describes the crisis committee as “gangs of criminals”.

It is a commonplace that a privatised company is likely to pay more attention, and devote more resources, to wealthy areas – which, in South Africa, still usually means white areas.

But this is also true even when privatisation has not yet taken place. An academic study, due to be released this month, will reveal that municipal services in Cape Town sometimes devote up to 100 per cent more resources to affluent suburbs than to equivalent poor areas. In the coastal town of Hermanus, a rich holiday resort bordered by impoverished townships two miles east of Cape Town, the government introduced a flagship water programme that was supposed to provide more affordable water for the poor. But the local council, following “best business practices”, simply directed improved resources at those who could afford them: rich whites. Those who could not pay were cut off. The much-touted “working for water” campaign soon became known, by those whom it was supposed to assist, as “working for whites”.

Meanwhile, business grumbles at the slow pace of change. The apartheid regime privatised the steel giant Iscor in 1989 and pledged more, but the liberation movements saw this as a ploy to keep these huge state concerns out of the hands of the black majority come the day of democracy. Since 1994, in addition to the water concerns, there have been a number of smaller privatisations, such as the diamond-mining operation Alexcor, the holiday resort group Aventura and a former “Bantustan” airline. Most have been failures.

“The tragedy here is that there’s been a lot promised, little delivered,” says the disillusioned British representative of a major multinational asset management company. “Investors who would have been interested a year ago have simply lost heart and are now looking elsewhere. The impression is that the government is dragging its feet, so the market will simply let South Africa drop off the potential investment radar screen.”

The main state assets that the private sector is eyeing hungrily are Eskom (energy), Transnet (transport) and Telkom. Of these, Telkom is seen as the likely first candidate for full privatisation. This was promised for 2001, and has recently been put off again, due to “market conditions”. Proponents of privatisation claim it is the only way to attract foreign investment, spread wealth, create employment and encourage “black economic empowerment”.

The trouble is that most South Africans live outside the formal economy, and have become marginalised by the pure drive for profit. “What we are seeing now is a class apartheid,” says Patrick Bond, of the graduate school of public and development management at the University of the Witwatersrand. He points out that an estimated 85 per cent of the rural population and 31 per cent of the urban population are without adequate sewerage or sanitation.

“The problem with privatisation,” says Bond, “is that there is no connection between the ‘public good’ and ‘economic good’. Hence there are promises of free water and electricity, but it is only available to those connected to the grid – and whole areas of poor townships are being cut off. We are also seeing forced evictions and removals.

“These communities have no services and no connections. This means, in effect, that such places become low-income ghettos for ever. The logic of the private city is one of fragmentation. This is creating a form of geographical apartheid.”

Privatisation, as it gathers pace, could yet prove the flashpoint for renewed social upheaval in South Africa.

This is the first article in a New Statesman series on privatisation around the world

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