SOUTH AFRICA: Financial Institutions Eye Public Services

Publisher Name: 
Inter Press Service

Anti-privatisation protestors are expected to
descend on the streets of Johannesburg this month as they demand a reversal
of the sale of their municipal water supply to French multinational Suez
Lyonnaise des Eaux.

Johannesburg residents will wake up to the new reality of private water
flowing through their taps Apr. 1 when Suez Lyonnaise officially takes over
the municipal service. Suez Lyonnaise also runs water supplies in other
cities such as Buenos Aires, Casablanca, Jakarta, Manila and Santiago in
Chile.

The South African Municipal Workers Union (SAMWU), which forms part of a
broader civic campaign against privatisation in the country, charges that
when Suez Lyonnaise took over Casablanca's water supply, prices rose three
times during the first year of operation and in Santiago the company
insisted on a 33 percent profit margin.

SAMWU is protesting the privatisation deal concluded last month because the
new company ''has not come up with any plan to extend running water to
Johannesburg's poor. All they have said is that they will improve services''.

The union is appalled that the ruling African National Congress, which came
to power in 1994 with promises of providing free basic public services to
those who cannot afford them, is inviting profit-driven multi-nationals to
run these services. They see the hidden hand of the international financial
institutions (IFIs) in the government's about-turn from a left-leaning
ideology to neo-liberal policies that push privatisation.

South Africa is not undergoing structural adjustment programmes unlike the
majority of African nations to its north. But under its self-adopted
Growth Employment and Redistribution Strategy, which upholds the major
tenets of the Washington Consensus and which the World Bank had a hand in
writing, it is liberalising its economy.

Its moves at privatising public services have the blessings of the other
IFIs, such as the International Monetary Fund (IMF), which have been
selling the line that the private sector brings efficiency and this will
benefit the poor in the long-run.

Civic movements have not bought that line and the battle brewing on the
streets of Johannesburg may only be the beginning of a global struggle as
the 140 members of the World Trade Organisation (WTO) negotiate the
expansion of the General Agreement on Trade in Services (GATS) which was
first adopted in 1994.

The agreement is contentious because it potentially targets all service
areas - health, education and social security, sectors that affect the
environment, transportation services, postal and municipal services -
opening them to free trade.

''These talks would radically restructure the role of government regarding
public access to essential social services world-wide, to the detriment of
the public interest and democracy itself,'' warns an international network
of civil society organisations campaigning against GATS.

The group includes the US-based Alliance for Democracy and the Institute
for Agriculture and Trade Policy, the Norwegian Union of Municipal
Employees, Thailand's Focus on the Global South and the World Development
Movement in Britain. They intend to protest the resumption of official GATS
negotiations expected in April. The negotiations began in February 2000.

The world cast a big 'no-vote' to further liberalisation of global trade by
blocking the Millennium Round of the WTO in Seattle in November 1999. The
smoke and pepper spray that engulfed protestors in Seattle had barely
lifted from the streets, when the WTO launched two sets of negotiations -
GATS and a move to expand the Agreement on Agriculture.

The agreements could be concluded by next year and an expanded GATS could
pave the way for many more Johannesburg's around the world.

GATS will limit constraints to free trade especially those applied by
governments. These could include labour laws, subsidies such as those used
in public works and policies discriminating against foreign companies
gaining access to local markets.

But why is there a rush to privatise the service industry? It is among the
fastest growing sector in the new global economy and transnational
corporations realise how lucrative health, education and water provision
can be.

The global health sector is estimated to be worth 3.5 trillion- dollars
annually - about the size of the total value of exports from the 24
Organisation for Economic Co-operation and Development (OECD) countries in
1990. Global expenditure on education is estimated to be 2 trillion dollars
and water, one trillion dollars.

Europe and the United States are so far differing on whether water should
be included in GATS. Europe is eager to get more of its transnationals into
service niches around the world such as that carved out by Suez Lyonnaise
in municipal water supply. Suez Lyonnaise serves 110 million people.

It remains to be seen which way US negotiators will go. They may have to
balance out the interests of powerful environmental justice advocates who
do not want water included in GATS and those of corporations who are
pushing for limited coverage of GATS in areas where they are competitive
with European corporations, notes Ruth Caplan of the Alliance for
Democracy, one of the groups opposing GATS.

In an article in Canada's Globe and Mail newspaper at the end of last
month, WTO director general Mike Moore described activists opposing GATS as
''merchants of fear''.

''The WTO's critics have always taken liberties with the truth,'' he
charged. ''But the lies and distortions they are peddling about the WTO's
services agreement, known as GATS, are truly astounding.

''Freeing up trade in commercial services - everything from telecoms and
tourism to finance and freight transport - offers huge benefits for every
part of the world. Allowing foreign suppliers to compete with domestic ones
lowers prices, improves quality and increases choice,'' noted Moore.

In the past it has been the IMF and the World Bank pushing for the
privatisation of services such as water, through conditions attached to
structural adjustment loans driven by the Washington Consensus - a global
economic model based on the principles of privatisation, free trade and
deregulation.

In a recent random review of IMF loans issued last year to 40 countries,
the non-governmental Globalisation Challenge Initiative (GCI) found that in
12 countries - most of them African, very poor and debt-ridden - loan
conditions required the privatisation of water, or policies ensuring full
cost-recovery.

The countries were Angola, Benin, Guinea-Bissau, Honduras, Nicaragua,
Niger, Panama, Rwanda, Sao Tome and Principe, Senegal, Tanzania and Yemen.
In the study, Sarah Grusky of GCI noted that the significance of water
privatisation conditions in IMF loans means it is those countries that are
most dependent on the IMF, whose markets are at the mercy of the private
corporations.

AMP Section Name:World Financial Institutions
  • 110 Trade Justice
  • 187 Privatization
  • 194 World Financial Institutions