globalisation of infrastructure services:...

Globalisation of Infrastructure Services: Perspective on Water Privatisation in

Dar es Salaam, Tanzania

Fourth Annual Seminar

Network-Association of European Researchers on Urbanisation in the South (N-AERUS)

Beyond the Neo-Liberal Consensus on Urban Development. Other Voices from Europe and the South

University of Paris VII

May 15-17, 2003

Marianne Kjellén Department of Human Geography Stockholm University SE-106 91 Stockholm, Sweden [email protected] Contents Introduction ............................................................................................................. 1 Globalisation............................................................................................................ 3 Regulation and the Changing Role of the State....................................................... 4 Privatisation of Service Provision........................................................................... 6 The Transnational Water Companies ...................................................................... 9 Privatisation of Water Supply and Distribution in Dar es Salaam........................ 12

Negotiating Privatisation – Third Time Lucky? ................................................ 13 Regulation.......................................................................................................... 15 Issues and Observations .................................................................................... 17

Conclusion............................................................................................................. 18 Acknowledgements ............................................................................................... 19 References ............................................................................................................. 19

Marianne Kjellén Globalisation of Infrastructure Services

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Introduction

This paper addresses the global transformation of how urban infrastructure services are looked upon, planned, financed and provided. Actors and roles are changing, along with perceptions and ideas about who should do what, and for what reasons. Today, the respective roles of the state and the market are shifting, a process that increases business opportunities for private companies specialising in infrastructure and other ‘public’ services. These increasingly transnational companies are growing in size and importance with the re-shaping of utility politics all over the world. Rich and poor nations alike simultaneously go through this transformation, epitomised by the privatisation of utility service provisioning. The related trends of globalisation, re- or de-regulation, and privatisation, along with the political underpinnings of present infrastructure transformations will be reviewed. Infrastructure services such as telecommunications, electricity, water and gas require immense investments, which give rise to economies of scale and related natural monopoly characteristics. I sometimes refer to utility services, generally meaning a slightly broader set of essential services including also public transportation or mail services. Public services imply an even broader set of activities, including health care, social security and education. Public services are generally felt to be a basic human right, rather than being things which people can chose to buy or not, depending on their taste and wealth (Harper, 2000). This also refers to the (tautological) fact that public service are generally or traditionally provided through public entities, as well as being offered to ‘the public.’ This text focuses on water services, and how global processes are locally manifest in Dar es Salaam, Tanzania. At present, the Dar es Salaam Water and Sewerage Authority (DAWASA) is in the process of being privatised. Water supply operations are being leased to a British-German consortium, while the role of the public sector is being limited to one of regulation and ownership of assets. State withdrawal from the water sector is an ongoing process – already manifest through the increasing role of independent water distributors, non-governmental and community based organisations, as well as the paucity of public infrastructure investment. This paper argues that the formal privatisation of the water utility as well as the informalisation, or informal privatisation, of water deliveries on the ground are integral parts of economic globalisation. It is fairly obvious that local place-specific dynamics as well as international influences or conditionalities for external financing shape developments in Dar es Salaam. To what extent each matters and actually contributes to the unfolding of events is more difficult to ascertain. Tripp (1997) very convincingly shows the important local driving forces towards economic liberalisation in Tanzania during the 1980s and early 1990s, a trend often assumed to be driven primarily by external interests. In the water area, however, motivations given for privatisation tend to be limited to public sector inefficiency and the government’s fiscal burden, whereas the international driving forces appear to be less often discussed. The typical explanation of the rationale for privatisation, or divestiture, in Tanzania were aptly captured in a PowerPoint presentation held at the Tanzanian Public Service Reform Commission:


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In 1993 Tanzania had over 400 parastatals which were a financial burden to the State. Had cumulative losses of over USD 100 million; indebted to Govt to the tune of USD 352 million; heavily dependent on subsidies etc. § Virtually all potential sectors e.g. manufacturing, agriculture, mining, tourism, banking,

etc. were dominated by State owned enterprises (SOEs). § Most SOEs performed poorly and contributed very little if anything to economic growth

of the nation. The main objectives of the privatisation programme are: § To improve the operational efficiency of parastatal enterprises and their contribution to

the national economy § To reduce financial burden of parastatals on the Government budget § To expand the role of the private sector in the economy, thereby permitting the

Government to concentrate resources o its role as provider of basic public services, such as health, education, social infrastructure and other core Govt. Activities

§ To encourage wider participation by the people in the ownership and management of business.

(From presentation by Kavishe, H. E. (2002) Implementation of the Privatisation and Public Enterprise Reform in Tanzania. Editors' Workshop, Dar es Salaam, 3rd October, 2002.)1

This is not to say that there is no awareness of the ongoing international processes. A paper authored by an official of the water ministry and the Director of DAWASA clearly indicate that privatisation decisions are influenced by international thinking:

There is growing awareness in many countries that government provision of water supply as well as other infrastructure services such as power, telephone, gas, transportation, has been inadequate (Sayi & Mutalemwa, 1997, p. 170).

Most of the international outlooks on the global privatisation wave, however, tend to be very critical and with a perspective very different from those who in practice implement privatisation:

A yearlong investigation by the International Consortium of Investigative Journalists… showed that the world’s three largest water companies – Suez, Vivendi Environnement and Thames Water – have expanded into every region of the world. The investigation showed that these companies are pillars of a user-pay policy that imposes high rates with little concern over people’s ability to pay. When cholera appeared on South Africa’s Dolphin Coast in August 2000, officials first assumed it was just another of the sporadic outbreaks that have long stricken the country’s eastern seaboard. But as the epidemic spread, it turned out to be a chronicle of death foretold by blind ideology (The East African, 2003, p. 1).

In contrast, a report from the International Finance Corporation (IFC) portrays the privatisation trend as a global project – which has been successfully pursued:

Privatization is now mainstream. During the 1980s, the main proponents of privatization were nations of the developed world together with a number of Latin American nations. In the 1990s, however, the popularity of privatization widened considerably, spurred by the transition from communism in Eastern Europe and the former Soviet Union. A majority of nations including many in South and East Asia and sub-Saharan Africa now have privatization programs of their own (From the back cover of Donaldson, D. J. and Wagle, D. M. (1995) Privatization: Principles and Practice. Lessons of Experience Series 1. The World Bank and International Finance Corporation (Washington D.C.).2

1 http://www.psrctz.com/Press%20Releases/Publications/KAVISHE031002.PDF (Accessed 2003-01-27)


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This paper focuses on how the international trends tally with local events in Tanzania. Rather than attributing the developments to either local or international influences, it aims to situate the local outcomes in Dar es Salaam into the appropriate global perspective. Globalisation

The present era of globalisation differs from earlier times in terms of the increased intensity and depth of global interaction. Giddens (1990, p. 64) has defined globalisation as the “intensification of worldwide social relations which link distant realities in such a way that local happenings are shaped by events occurring many miles away, and vice versa” (cited in Bryson et al., 1999, p. 24). He establishes that “[g]lobalisation is political, technical and cultural, as well as economic” (Giddens, 1999, p. 10). There has certainly been global interaction throughout human history, and some claim that international trade and investment is of a lesser importance today than a hundred years ago (Hirst & Thompson, 1996). Actually, “globalisation has been part of capitalist enterprise for a long time… since at least 1492 (Harvey, 1995, cited in; Swyngedouw, 2000). Still, globalisation marks the advent of a new and qualitatively different phase of capitalist development, even though the only general point of agreement may be that “something significant has changed in the way capitalism has been working since about 1970” (Harvey, 1999, p. 46). While some economic aspects may not be more global now than before, the electronic communication revolution and the deregulation of financial flows certainly have created a totally new and globally flexible world economy. Held et al (1999) talk about ‘contemporary globalization’ in order to recognise previous global trends in history. Nevertheless, they argue that

…in nearly all domains contemporary patterns of globalization have not only quantitatively surpassed those of earlier epochs, but have also displayed unparalleled qualitative differences… In addition, we argue that the contemporary era represents a historically unique confluence or clustering of patterns of globalization in the domains of politics, law and governance, military affairs, cultural linkages and human migrations, in all dimensions of economic activity and in shared global environmental threats. Moreover, this era has experienced extraordinary innovations in the infrastructures of transport and communications, and an unparalleled density of institutions of global governance and regulation (Held et al., 1999, p. 425).

Indeed, looking at economics, politics, culture and technology, relations are increasingly global, and international communication, rather than being limited to elites, as in history, there is also mass communication. To a large extent, globalisation is also a story of Westernization, where Western technologies, production methods, institut ions, consumption patterns and worldviews are becoming universal (Finger & Allouche, 2002; Held et al., 1999). Indeed, many of the political and institutional developments and innovations and market-driven arrangements dealt with in this article have been initiated in or are driven from USA, Britain and other Western nations, often through international organisations.

2 http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1995/09/01 /000009265_3961219113433/Rendered/PDF/multi0page.pdf (accessed 2003-02-13)


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While there are several contemporary global trends, these trends can only manifest themselves locally. Indeed, global events are global primarily because they appear, or rather, have repercussions, nearly everywhere on the globe. This is not to say that the local manifestations of global trends have to be the same; globally implemented policies such as that of privatisation dealt with in this article, have results that differ between localities. Moreover, local outcomes in different localities have enormous impact on the implementation, and, in particular, resistance, in other localities. To adequately deal with globalisation, a dichotomous view of ‘global’ and ‘local’ is not very useful (Fagan & Le Heron, 1999). Global and local are not fixed scales, but rather the extreme points of a dialectical continuum of complex mutual interactions (Dicken, 1994). Swyngedouw (2000) finds that the preeminence of ‘global’ in the literature and political rhetoric hides the actual struggle around the reconfiguration of governance. Whether the globalisation discourse conceals or exposes the contemporary struggle around regulation of economic and social life should depend on whether globalisation is seen as a ‘project’ or whether it is a means of describing contemporary developments. Within the global contemporary developments, the next section deals with the struggle around regulation and the fate of the nation-state in times of deregulation. Regulation and the Changing Role of the State

While globalisation coincides with the time in history when the sovereign territorial state has become the most common form of political rule (Held et al., 1999), globalisation may also mark a turning point of this development, as the role of the nation-state changes, and its powers moves downwards, upwards and outwards:

…globalization is associated with the ‘hollowing out’ of the nation-state, as powers, functions, and roles pass downwards to local and regional bodies, upwards to supranational agencies, and outwards to trans-local and trans-national networks… This cannot be reduced to some unidirectional process of deregulation/marketization, nor should it be portrayed as a benign process of zero-sum regulatory redistribution across scales. Rather, what is under way here is a qualitative reorganization of the state, involving shifts in its structural form and strategic orientation (Peck, 2000, p. 71).

Two aspects of the changing role of the state are important for this paper; 1) its withdrawal from direct servicing or provisioning, and 2) its regulatory role as a ‘facilitator’ of development in general and service provisioning in particular. The state withdrawal from provisioning is discussed under the heading ‘Privatisation of Service Provisioning.’ This section concentrates on regulation. Regulation is a recurring theme in debates over globalisation. There are those who argue that globalisation signals the death of the nation state as both an arena and agent of economic regulation and governance (Bryson et al., 1999; Ohmae, 1995, cited in), whereas others see a shift in the scale and agency of regulation (Peck, 2000). That this is no zero-sum game is emphasised in the quote above. Rather, the changing role of the state forms part of a different societal deal over how capital- labour relations and the distribution of wealth in society should be handled. In the decades following the Second World War, the ‘Western world’ was characterised by 1) a ‘Taylorist’ hierarchically governed division of work, between skilled and unskilled production (mass productoin), 2) a system of accumulation based on redistribution of gains in order to safeguard effective demand (mass consumption), and 3)


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a welfare state, regulating this redistribution through social services and legislation, complemented by collective bargaining between workers and employers (Lipietz & Benko, 1998). This ‘Fordist’ mode of social regulation has changed since the 1970s, giving way to a post-Fordist regime of ‘flexible accumulation’ (Fagan & Le Heron, 1994; Harvey, 1989), including accelerating individualism that “forces individuals to be freed from the structural rigidity of the Fordist labour process” (Lash & Urry, 1999, p. 54). This development can be described as a ‘neo-liberal project’:

The 1980s saw the rise and global spread of a new neo-liberal (that is neo-conservative) approach to socio-economic regulation by nation-states, led by the Thatcher governments in the UK and the Reagan administration in the US. This neo-liberal project, based on deregulation, privatization, promoting socio-economic flexibility and reigning back the state, itself added to the globalisation process by removing national barriers to the flows of capital and finance, and by setting off a process of ‘competitive regulation’ amongst countries. During the 1980s, the neo-liberal model had spread to numerous other advanced and developing countries alike, as well as becoming firmly entrenched in the policies of the IMF (Bryson et al., 1999, pp. 29-30).

These changes in the mode of social regulation have in particular been studied by regulationist theorists. Regulation theorists analyse the politically contested processes of historical change in capitalist societies and “the ability of capitalism to sustain itself, despite its contradictions, through various permutations in the relationships between economic and social structures” (Gandy, 1997, p. 340). Such analyses relate to a fairly abstract form of regulation3 and functionalist view of society. There is also a more concrete ‘real’ form of regulation, which is just as much affected by globalisation. (The two are of course related.) The more concrete regulation has been defined as “state intervention in private spheres of activity to realize public purposes” (Francis, 1993, p. 5). Traditionally, this form of economic regulation has responded to market failures, such as the lack of competition, natural monopolies, and the provision of merit goods. This area is the subject of both advances and retreat of nation-states. On the one hand, there is a shift from governments’ provider role to one of ‘facilitator’ or ‘regulator’. Hence, there is a heightened interest in state regulation, typically of (privatised) infrastructure utilities. On the hand, there is an overwhelming trend towards ‘deregulation’ or ‘liberalisation’, which entails that, rather than changing the nature of state intervention in markets, there is a withdrawal. This, as shall be seen below, becomes one of the problematic paradoxes of the present privatisation trend. It is argued that governments should stay away from outright provisioning, but given the intricacies of infrastructure services, state regulation is necessary in order to make the market respond to societal needs. In practice, however, it appears that privatisation is often accompanied by de-regulation. The intricacies of infrastructure services relate to externalities, public health, the potential abuse of monopoly powers as well as concerns

3 While the French language distinguishes between “the word ‘régulation’ (…the way the evolution of the elements of a system are adjusted to the functioning of the unit) and the word ‘réglementation’ (group of institutionalised rules which can in effect serve the ‘régulation’)” (Lipietz & Benko, 1998, p.275), the English language is left with only ‘regulation.’ Hence, regulation has to be used to connote the more abstract accounts of the regulation school as well as more concrete (state) regulation of economic activity.


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regarding equity in access to services. Deregulation should really be one of ‘re-regulation’ (Vickers & Yarrow, 1993). The government regulation of privately owned utilities is a fairly new policy area for most countries. In the United States, private operations of infrastructure have long been combined with regulation. Actually, it is an extension of the old British model of rate of return regulation that is employed, in the US and more recently in many developing countries. Britain has the oldest history of utility regulation, but along with most countries, it nationalised most infrastucture provisioning since the late 1800s. Current British utility regulation builds on independent regulatory bodies controlling both technical standards and rates of returns (tariffs) (Young, 1997). Privatisation of Service Provision

At present, the public-private divide is being redrawn throughout the world, with a resulting shift towards more market oriented regimes (Peck, 2000). Worldwide, there is an enormous attention towards the alternative possibilities for service delivery. Hence, the roles and interactions between local, national and global actors and spheres are in the process of being re-moulded. The present drive towards privatisation (see Box 1) is part and parcel of governments’ shift away from direct provision of services towards regulation, in turn part of the ‘hollowing-out’ of state structures (Johnston et al., 2000). Box 1 Defining Privatisation

“’Privatization’ is sometimes used as a generic term to refer to increasing private sector involvement, but at other times is used to refer to the model of full privatization (divestiture) adopted in the UK. Similarly, ‘private sector participation’ tends to refer to the participation of formal (and often largescale) private companies, although most small-scale and informal operators can be considered to be part of the private sector” (United Nations Human Settlements Programme (UN-HABITAT), 2003, p. 162-163).

Semboja & Therkildsen (1995) understand ‘privatization’ as “(i) the transfer of control/ownership of activities from the public to the private sector; (ii) the transfer of actual service provisioning to the private sector, while governments retain ultimate responsibility for the service; and (iii) the liberalization or deregulation of entry into activities previously restricted to the public sector” (p. 2).

Gustafsson (2001) presents one narrow definition of privatisation, referring to the transfer of ownership from the public sector to private companies or individuals, and a more general one referring to the transfer of functions and responsibilities. Moreover, there is an even wider definition, generally termed commercialisation, comprising the introduction of market mimicking methods, structures and cultures into the public sector. Hence, the wider interpretation of privatisation can range from outsourcing to entrepreneurs and corporatisation of public enterprises to the total sale of assets to the private market (Gustafsson, 2001, p. 8)

This paper uses the term ‘privatisation’ very loosely, encompassing all those processes mentioned above. The actors can be both formal (companies) and informal (NGOs, CBOs, vendors etc) agents that play an increased role in provisioning (of water). The roles can be that of ownership, or other forms of control or participation. Any of these tendencies are more or less referred to when I speak of ‘privatisation.’


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The present privatisation wave is taking place more or less simultaneously in all countries of the world. It involves all sectors, including infrastructure services: “The trend of liberalizing and privatising infrastructure activities that began in a few countries in the 1970s and 1980s turned into a wave that has swept the world in the 1990s” (Roger, 1999, p. 1). This is of course not a coincidence. Rather, it is part of the proliferation of neo- liberal views on the role of the state and its place in infrastructure provision. The notion that major infrastructure services need to be provided through publicly owned networks has changed, as has the technological basis for several natural monopoly areas:

Governments in many countries have begun to allow private provision of infrastructure services, both to enhance efficiency and to ease the strain on public finances. Changes in technology have created the conditions for competition in some areas once considered ‘natural monopolies,’ particularly the energy and telecommunications sectors. This has spurred increasing private provision. Private provision has been less prominent in the water sector, where technological progress has been less pronounced and political barriers to reform can be strong (World Bank, 2002, p. 151).

While the recent trend towards deregulation and privatisation of utility services clearly has ideological (neo- liberal) underpinnings, it is also based in a genuine frustration and concern regarding the poor performance of public services, particularly in the Third World. As expressed by Harper (2000, p. 13):

“Cigarettes and soft drinks are available in just about every village, everywhere. Clean water, primary education, or health services are not. What has gone wrong? Why is it so many non-essential or even harmful products are so effectively distributed to every community that can afford them, and to many that cannot, while the things that people really need are so often difficult to get, or are not available at all?”

Such frustration is felt in many wealthy countries as well. In Britain, for example, it appears that internal efficiency is low in nationalised industries, and progresses the least in public corporations with monopoly powers (Vickers & Yarrow, 1993). The 1994 World Development Report on Infrastructure finds the poor incentive structures of government bureaucracies to be the root of the problem. The identified solution is “commercial management, competition, and stakeholder involvement” (World Bank, 1994, p. 2). Present regulation changes and the reduced funding of many public institutions, are both drivers of and responses to the lowering quality of many public services (and incentive structures). In developing countries, structural adjustment programmes are partly motivated as a means to improve the public sector performance, but are at the same time negatively affecting service provisioning (McGranahan et al., 1999; Stephens et al., 2000). Thus, public services in general, and infrastructure services in particular, are increasingly being privatised or, where feasible, opened up for competition. Where the natural monopoly remains, as is the case of the water sector, the need for regulation becomes imperative (Vickers & Yarrow, 1993). In other areas, technological change and the ‘unbundling’ of services (World Bank, 1994) has paved the way for the introduction of competition. There are also related trends towards decentralisation as well as commercialisation of enterprises or authorities that remain under state authority (Blokland et al., 1999; Shirley, 1999; World Bank, 1994). A taxonomy of different


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organisational arrangements spanning a range of mixes between public and private sector involvement in water (and sanitation) utilities is presented in Box 2:

Box 2 Different Forms of Private Sector Participation the Management of Water Infrastructure

Direct Public Management comprises the archetypical municipal water-works department as well as state or national public utilities. The degree of autonomy of these entities varies considerably. Although losing ground, public utilities are the dominant form of water supply organisation worldwide.

Corporatised Utilities include water boards, corporations, authorities or para-statals. These entities are supposed to be autonomous in their operations, with specific responsibilities and powers specified by law. They are common in Africa and Asia, where many public utilities were corporatised in order to improve performance and attract World Bank loans. They nonetheless remain under public law and often with substantial government involvement in day to day business.

Public Water PLCs (public limited companies or municipal stock corpora-tions) are fairly common in Western Europe, Scandinavia, as well as the United States. These are governed by corporate rather than public law, and are hence independent of political interference. The public interest is to be safeguarded through public ownership and company bylaws.

Delegated Private Management is known as ‘the French model’ with extensive out-contracting of utility management tasks to a private company.

These arrangements include service contracts, i.e. the contracting out of e.g. construction, pipe-laying or meter reading, management contracts, where a private ‘partner’ run operations for a specified time, and,

affermage, as well as lease contracts, which tend to be of longer duration and with greater risk for the private operator. Under affermage contract, the operator collects the tariff revenue, which goes into a fund from which the contractor subsequently is paid. Under a lease contract, the operator collects the tariff revenue and pays a lease fee to the lease holder (the public sector) and retains the difference. (Partial or full concessions can also be grouped under ‘delegated private management.’)

Partial concessions include BOT (Build-Operate-Transfer) arrangements where a private agent constructs plants or networks, thereafter operates them for some ten to twenty years, after which assets are transferred to the principal (state ownership).

Full concession contract imply ownership and management of assets for a longer period of time, for up to fifty years.

Direct Private Management is known as ‘the British model’ where utilities, including physical assets, are privately owned and managed. The potential abuse of monopoly powers is to be stemmed by the public regulator, which in Britain includes ‘economic regulation’ of tariffs. Sources: (Blokland et al., 1999), as well as (Gleick, 1993) and (United Nations Human Settlements Programme (UN-HABITAT), 2003).

Infrastructure service privatisation is taking place worldwide, not least in developing countries. Between the 1990 and 1999, the proportion of low-income countries with at least one private infrastructure project grew from less than 20% to over 80%. Sub-Saharan Africa received only 2% of private investment in infrastructure, but nonetheless, three-quarters of low-income countries in this region have implemented at least one privatisation project in the 1990s. Among low-income countries generally in the world,


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most private investment goes to China, India, Indonesia and Pakistan. (Houskamp & Tynan, 2000). The private investments in water and sewerage amount to a small part compared to those in telecommunications, energy and transport (Houskamp & Tynan, 2000; Izaguirre & Rao, 2000). Public entities continue to provide most of the water and sanitation services in the world. Estimates from 1997 of the private share of the market range from 20% in Western Europe to below 5% in the rest of the world (Earle, 2000/1, citing Vivendi, 1999). The smaller section of the water industry that has been privatised, however, has come to be dominated by a small number of companies, see below. Many companies have responded to recent changes in technology and market liberalisation by turning themselves into ‘multi-utilities’ that bundle traditionally distinct services (Sommer, 2001a). There is both horizontal and vertical integration. The horizontal integration can take the form of the bundling of several services into one single network, such as combining cable television, voice telephony and internet services. There are also possibilities for marketing and improving services to customers this way (Sommer, 2001a; Sommer, 2001b). In Europe, many electricity generators have diversified vertically by buying distribution companies, thus ensuring long-term outlets for their electricity (Hall, 1999a). The integration, diversification and growing sizes of conglomerates are part of a larger global trend. Mergers and acquisitions by multinational corporations have grown substantially over the last fifteen years, and by the end of the 1990, these activities constitute over half of the flows of foreign direct investment (Shatz & Venables, 2000). Internationally, the varied contracting arrangements of the French model are gaining grounds, and so are the French trans-national public service companies. The privatisation drive since the 1980s has gone hand in hand with the consolidation of increasingly fewer global players on the international infrastructure provisioning market. Although multinational companies are often presumed to (disinterestedly) take advantage of national differences in regulatory regimes in their pursuit of global competitive advantage (Dicken, 1999), they are also major drivers of deregulation and privatisation movements. Actually, there are constant marketing activities of the corporations themselves, promoting both privatisation and trade liberalisation as inevitable historical trends (Hall, 2001). The Transnational Water Companies

The global privatisation wave has created an international market for infrastructure service provision. It is a market where transnational companies (TNCs), either as partners in consortia in the wake of divestiture of state-owned enterprises, as operators of government-owned infrastructure, or as concessionaires with their own stake in the infrastructure, are shifting the public-private divide towards private servicing. The Water Page4 describes this development:

The past decade has seen the growth of a new phenomenon – the international water company. With the increasing privatisation of water services, either through the outright acquisition of water related infrastructure or through concession contracts, several companies

4 http://www.thewaterpage.com


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have been engaged in aggressive growth programmes aimed at ensuring increasing global market share and increased shareholder profits derived from the business of providing water services (Earle, 2000/1).

The international water companies are generally multi-utility companies, active in a range of infrastructure sectors. Finger & Allouche (2002) call them ‘public services TNCs.’ The dominant companies in the water sector emanate from Europe, and from France in particular, as the French tradition of ‘delegated management’ has allowed these companies to take an early lead in the global water and sewerage privatisation. The two French public service companies Vivendi Environnement and ONDEO are the world leaders in water and sanitation provisioning. Vivendi (recently renamed to Veolia) was founded in 1853 as Compagnie Générale des Eaux (created by Imperial decree) and won its first public service concession to supply water in Lyons, France. In the 1800s it expanded its activities to Nantes and Paris, and also won a number of contracts abroad. Still the company has concentrated on water provisioning inside France until a few decades ago. In the 1980s activities expanded internationally, in water, waste management, energy, transport, construction and property management. There was also a vigorous expansion into telecommunications and media (Finger & Allouche, 2002; Vivendi Universal, 2002). In 1998 the group changed its name from Compagnie Générale des Eaux to Vivendi. After the merger with Canal+ and Seagram it became Vivendi Universal and the group has since reduced its stake in Vivendi Environnement to 20% (Vivendi Universal, 2002). Vivendi Universal has become the world’s fourth largest (non-financial) TNC (UNCTAD, 2002), and appears to be concentrating on communications; in telecommunications, music, television and film, and games. Vivendi Environnement comprises Vivendi Water, Onyx (waste management), Dalkia (energy) and Connex (transport). Vivendi Water was created when Compagnie Générale des Eaux took over US Filter in 1999 (Vivendi Environnement, ), representing the largest French acquisition in the United States ever, and estimated to double the revenues of Vivendi’s water treatment business (Finger & Allouche, 2002). Vivendi Water currently serves some 110 million people with water.5 In 2000 it had a turnover of 12.8 billion Euro, representing close to half of the turnover of Vivendi Environnement. Over half of the revenues are earned outside France (Vivendi Environnement, ). As Vivendi Universal is reducing its stake in Vivendi Environnement, it has been floated on the Paris stock exchange. Apparently, the group is about to change its name again, to Veolia Environnement, (Vivendi Environnement, 2003-04-08). ONDEO is the recently formed water division of Suez, the world’s 15th largest TNC (UNCTAD, 2002). ONDEO and its partners in different locations currently service a population of 115 million people (water: 104 million, wastewater: 70 million) (Suez, 2001b). It was created out of the existing activities of Lyonnaise des Eaux (now ONDEO Services) and three other companies dealing with water treatment, process chemicals and engineering (Suez, 2001a). Lyonnaise des Eaux has a long history in public services, starting in the 1880s with production and distribution of water, gas and electricity and the provision of public lighting. It developed international activities early on in the French colonial empire. In 1967, Compagnie Financière de Suez, originating from the

5 Through Culligan, the group is also involved with the provision of bottled water (Vivendi Environnement, ).


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construction of the Suez canal, became the major shareholder in Lyonnaise des Eaux. In 1997, the companies merged into Suez Lyonnaise des Eaux (Finger & Allouche, 2002), since 2001 under the name of Suez only. The group is also active in the areas of communication, energy (through Tractebel) and waste services (through Sita). It is no coincidence that the French public service TNCs have come to dominate the world water market (Hall, 1999b). While in francophone countries, water has been treated as a commodity, the British system (until the 1980s) was based on the notion of a public service to be paid for through taxation (or fees not proportional to use). Particularly in the era of ‘municipal socialism’ of the mid-1800s, Britain and Germany embarked on the municipalisation of public services, and most European water utilities are still publicly owned. The French model, however, consists in fairly large private water companies, servicing comparatively small municipalities lacking the ability to run their own utilities (Jones, 1997). The dominance of the incipient water giants was additionally entrenched through the law of concentration in France the 1940s, making the multitude of public and private companies working alongside of Compagnie Générale des Eaux and Lyonnaise des Eaux disappear (Goubert, 1989). These companies have been able to build empires with interests in water, sanitation, waste disposal, public works, housing, heating, fire-fighting, etc. Clearly, the public services TNCs have long had global aspirations. The historic opening of international infrastructure markets since the 1980s have made such international expansions possible on a massive scale. While the two giants mentioned above have kept ahead, there are several groups forming competition, as well as collaboration. The number three and four in terms of number of people served globally are at present the Thames Water-RWE Group and SAUR (of Bouygues) (Earle, 2000/1). The third French water company Saur (Société d'Aménagement Urbain et Rural, or the Company for Urban and Rural Development), specialising in drinking water production and distribution as well as wastewater treatment, was founded in 1933. It developed mainly in France, where it still has its main base. In 1984 it was acquired joined by the Bouygues group, of which it is now a wholly owned subsidiary. The Saur group serves some 52 million people, and earns about a third of its revenues on international markets (Bouygues, 2003). The British-based water companies have a different history. Until the 1970s the British water industry was as fragmented as that in the United States. In1974, however, the municipal operations of England and Wales were consolidated into regional water authorities. These regional authorities were then sold (through floatation on the stock market), along with their physical assets) as privatisation was implemented in 1989. The British water companies hence work in those same delineated geographical areas as the previous water authorities, and are hence less experience than their French counterparts in the procedures of competitive bidding for water undertakings. They are also prohibited to merge or buy each other out (in Britain) but can engage in international operations. The British water companies are increasingly active on the global arena. They can also be bought out by companies from abroad. This is for example what has happened to Thames Water, now owned by German RWE (Gustafsson, 2001; Gutierrez et al., 2003; Hall, 1999b).


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Thames Water is now the world's third largest water company, serving over 69 million customers around the world (Thames Water, 2003). Thames Water recently acquired the American Water Works Company, through which it will manage RWE’s water business in North and South America (RWE, 2003). Other internationally active British companies are Yorkshire Water and Anglian Water (Earle, 2000/1). Another internationally ‘successful’ one is Biwater, “having gone through several crises before having some success” (Finger & Allouche, 2002, p. 132). The company was established in 1968 working with both ‘clean’ and ‘dirty’ water (‘two waters’ – ‘Biwater’). It has since expanded mainly through acquisition of companies in the water industry or complementary services. Internationally, it has been engaged in joint ventures, notably with the Dutch multi-utility firm NV Huon ENW. Biwater was one of the first firms to purchase a water company in the British privatisation exercise. It operates Bournemouth and West Hampshire Water operations in Britain. Internationally, Biwater operates as a group of companies with over 25 offices worldwide (Biwater Plc, 2003; Finger & Allouche, 2002; Public Services International Research Unit, 2000). Biwater is the international water company that is eventually to take on the lease of water operations in Dar es Salaam. Privatisation of Water Supply and Distribution in Dar es Salaam

Dar es Salaam is the major city in Tanzania. In the 1988 census it had a population of 1.2 million (United Republic of Tanzania, 1996), with current estimates tending towards 3 million people. DAWASA caters for most of the bulk water supplies to the city of Dar es Salaam, but only a third of the households are connected to the piped water system (Mwandosya & Meena, 1998). Hence, different actors play a prominent role in water distribution (Kjellén, 2000; Kjellén, forthcoming). The piped water system has been in decline for the past few decades; households with piped water in Dar es Salaam receive considerably less water today compared to thirty years ago, both in terms of volume and hours of service (Mujwahuzi, 2002). How the available water quantities of water are currently distributed is not known. The physical infrastructure for water abstraction, treatment and distribution in Dar es Salaam was built by government agencies, and has so far always been managed by the public sector. Most investments in urban water infrastructure were initiated in the 1930s through the Public Works Department of the (British) colonial government. After independence in 1961, of water investments were mainly in the rural areas. In 1981, the National Urban Water Authority (NUWA) was established to operate all of Tanzania’s urban systems. In practice, it was limited to managing that of Dar es Salaam and two nearby urban areas. DAWASA was formed in 1997, also taking on responsibility for sewerage from the Dar es Salaam Sewerage and Sanitation Division (DSSD) of the city authorities. While still in the process of formation around its new responsibilities, DAWASA operations are now being leased out to a private operator. Previous economic policies in Tanzania had the public sector as the provider of most goods and services. The present privatisation exercise is part of the larger structural adjustment programme of the country. This exercise was initiated with the Financial Sector Reform, which allowed private banks to operate and liberalised foreign exchange. This has been followed by the Parastatal Sector Reform Programme, an exercise that


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started through the setting up of the Presidential Parastatal Sector Reform Commission (PPSRC or PSRC) (personal communication, Mariki, 2000-05-08). The process of formal privatisation of the water utility has been going on for some six years. In 2003, after the third round of bids from international private companies, a lease contract has been signed with a private operator. Negotiating Privatisation – Third Time Lucky? The DAWASA privatisation was launched in 1997, with the issuing of terms of reference soliciting private sector participation (PSP) in DAWASA operations (PSRC, 2000a). The government had initially envisaged a joint venture to take on a water concession (?), with April 1998 being the target date for completion of the exercise (Parastatal Sector Reform Commission, 1997). The hope was that the financing would “come from commercial sources and retained earnings” (World Bank, 1999, p. 3). Seven international companies showed interest, and of them, Biwater PLC and Northumbria Water of the UK and Saur International and Vivendi (Générale des Eaux) of France, pre-qualified to bid.6 (United Water and Thames Water, both of UK, were denied a time extension and therefore did not submit.7) The four bidders, however, offered very different arrangements, including a management contract, a lease and a concession (PSRC, 2000a). When faced with a case of “comparing apples with oranges, the PPSRC technical committee decided in early 1998 not to rule on who should be the winning bidder” (Boyd,, p. 16). This first ‘consultation’ did not lead to the privatisation of DAWASA. It appears that the government was not in a position to bring in sufficient cash or infrastructure as equity to a joint venture (Boyd, ). And “there is little or no private equity or commercial debt to finance water supply and sanitation in Africa” (World Bank, 1999, p. 3) that could support a full concession. There were also different ideas among the institutions involved regarding which strategy to pursue (Boyd, ). Moreover, the whole process appears to have been rushed and probably not prepared with sufficient care. The strategy for the future became to seek to combine public financing and private operation. The procedures were delineated with advice from Severn Trent Water International who assisted in the preparation of a ‘Supplementary Information Paper’ to future bidders. In November 1998 the Government of Tanzania approved the plan of a lease to a private operator and the restructuring of the sector. The legislation for this restructuring was passed in 1999, with the following components: There will be a ten-year lease contract awarded to a private operator (PO). The PO is to be constituted by an International Professional Partner (IPP) who will form a local operating company together with a local partner. The IPP will have at least 51% of the shares and local investors at least 20% (PSRC, 2000a). The present water authority is to be converted into a Public Granting Authority (PGA), retaining the name of DAWASA. It is the PGA that will own the assets, i.e. water and sewerage infrastructure and lease the same to the PO. DAWASA will also be responsible for a major Capital Investment Programme (CIP) to be implemented in parallel with the lease contract. The Government of Tanzania will get loans from the four co-financiers 6 Or were there five companies that pre-qualified? 7 One company disqualified?


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World Bank / International Development Association (IDA), African Development Bank, European Investment Bank and Agence Française de Développement in order to carry out the CIP. In turn, the Ministry of Finance will on-lend these funds to DAWASA, who will be responsible for investment programmes and the servicing of the debts (PSRC, 2000c). Presumably, the funds for debt servicing are those received from the PO for the lease of the operations.8 In May 1999 there was a new round of pre-qualifications, extending the invitation also to those companies who had shown interest but not submitted bids in the previous round. Biwater PLC, Saur International and Vivend i (Générale des Eaux), i.e. most of the same companies that had pre-qualified in the first round, passed the pre-qualification update. In June 1999 the PSRC met with the pre-qualified bidders and potential local investors, and the basis for the bid (the Supplementary Information Paper) was issued in September. The deadline for bid submission was eventually extended to the end of January 2000. Two bids were received, from Saur International and Vivendi, but no bid from Biwater. The technical submissions were opened first, and were both deemed acceptable. The financial submissions were opened in late February, but were both rejected (PSRC, 2002). The two bids were deemed not possible to evaluate on the ‘same basis – same formulae,’ as the bidders had provided qualifications that the Government was not able to accept (personal communication Mariki, 2000-05-08). This made the Government of Tanzania rethink the way forward, and eventually cancel the bidding. In the view of the World Bank, the bids could have been evaluated fairly and transparently. The Bank felt that “by delaying the award of the lease contract the quality of service to the population of Dar es Salaam would further deteriorate and exacerbate the frustration of cus tomers, government and private partners” (personal communication, Locussol, 2003-04-20). This is how the second attempt to privatise DAWASA operations ended. By June 2000 it was decided to “carry out a full re-bid open to all international water operators” (PSRC, 2002). The re-bid was advertised on various dates from September 2000. Eight companies made their submissions (afrol.com, 2002) and three of them pre-qualified, Biwater Plc (in consortium with Gauff Ingenjieure of Germany), Saur International and Vivendi (Générale des Eaux) (PSRC, 2002-05-24) – same three again! Tender documents were launched in February 2002, followed by a bidders’ meeting and the deadline for bids extended to end July 2002 (PSRC, 2000b; PSRC, 2002). There was discussion about issues such as clauses to protect the lease operator from adverse discretionary decisions of the regulator as well as about compensation in case of early termination of the contract. By mid-July the French bidders announced that they would not submit bids unless these issues were resolved (personal communication, Locussol, 2003-04-20; PSRC, 2003-02-19a). Only Biwater/Gauff in the end submitted a bid. The PSRC press release (PSRC, 2002-07-31) does not appear to see this as a problem. In fact, it refers to the ‘offers’ and ‘bidders’ in plural as if they were more than one. Or, does it reflect the fact that there are three different contracts being the object of the bidding – the lease contract, supply and installation of plants and equipment contract, and the procurement of meters contract? 8 Initially, in order to limit tariff increases until the quality of the services has improved, the World Bank loan would also finance the lease contract, on a declining basis (PSRC, 2000b; World Bank, 1999).


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The private operator should now also be responsible for managing some construction works on behalf of DAWASA (PSRC, 2000b). The lease (and other) contracts were signed on 19 February 2003 (PSRC, 2003-02-19a). The handing over of operations are expected in July 2003, after the government has secured the funds for the CIP, now estimated at US$ 160 million. On City Water Services’ web-site, it appears that City Water Services themselves, along with World Bank, the African Development Bank and the European Investment Bank, will contribute to the CIP (City Water Services, 2003-02-19). The initial pledge by Agence Française de Développement to co-finance the CIP is not mentioned in any of the current press releases, although they still figure on the PSRC web-site (PSRC, 2003). It is not unlikely that they have withdrawn from the Programme since the French water companies in the end decided not to bid for the DAWASA lease contract. Other remaining issues until the handing over of operations to City Water Services include the conversion of DAWASA into an asset holding company and the transfer of staff between DAWASA and City Water Services (PSRC, 2003-02-19c). It appears that a transport equipment manufacturer and dealer, Super Doll Trailer Manufacture Company (Tanzania) Limited, has become the local minority shareholder of City Water Services (City Water Services, 2003-02-19; Superdoll Trailer Manufacture Co. (T) Ltd., 2002). The actors involved in this privatisation deal appear quite relieved that the process, after two failed attempts, has finally been concluded. As expressed by the Minister for Water: “The divestiture of DAWASA has been a long and complex transaction involving tremendous effort” (PSRC, 2003-02-19c), but as pointed out (of course) by the Director of City Water Services, a lot of work remains (PSRC, 2003-02-19b). The transaction consultant estimated (in 2000) that it would take some five years for there to be any real impact of the privatisation (personal communication Wilkes, 2000-03-02). Whether the eventual signing of the lease contract means that any problems have been solved will be left for the future to determine. That the simple transfer from public to private management would solve Dar es Salaam’s water problems is unlikely (unless you believe in some inherent efficiency of the private sector). Rather, how the private operator and the public regulator function together for the benefit of their clients and constituency is what will determine the future. There is however hope that sorely needed investments in the water system will soon be initiated: “The long-awaited [my emphasis] water supply and sanitation project for Dar es Salaam is set to start in mid-July this year” (Business Times, 2003-04-11). Regulation In the Tanzanian case, there appears to have been agreement in opting for a multi-utility regulator, to oversee privatised operations of water and sanitation, power as well as telecommunications (World Bank, 1999). It is important for regulators to be independent from government ministries, and well funded (Wilkes, 2000-03-02). The joint regulation model was also recommended at a workshop on competition policy and utility regulation in Tanzania. As expressed by Young (1997): “Amongst arguments in favour of a multi-sector body are that it will have greater independence from both the regulated utilities and the sector Ministries, and that a multi-sector body, after it is established will be able


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to take on responsibilities for new sectors faster than if individual bodies are set up for each sector” (p. 53) Nonetheless, the 1999 legislation defining the responsibilities of the independent regulator “in the DAWASA designated area” paved the way for a separate ‘Water Regulator’ (The United Republic of Tanzania, 1999). However, through the Energy and Water Utilities Regulatory Authority Act and Amendments to the DAWASA Act in April 2001, a multi- (or two-) sector regulatory authority (EWURA) was provided for. The Regulatory Coordinator was appointed as of November 2001 (PSRC, 2001-12-07). At the time of writing (April 2003), the regulator (although nominated) is however still not in place. The Regulator is to be financed through a part of the tariff revenues collected from the water users. This has been envisaged on the rate of 5 Tanzanian shillings per cubic metre (personal communication, Mariki, 2000-05-08).9 This appears to be late, given that the privatisation exercise was initiated already in 1997. However, according to Msimbira (1999, p. 12) “[e]xperience has shown that regulatory frameworks should be established by law just before or concurrent with privatisation of an entity.” The report (draft water policy document), however, does not provide the details of such experience. Apparently, most privatisation exercises have taken place prior to the creation of regulatory agencies. Generally, the contracts themselves provide a reasonable regulatory framework to start with (personal communicaiton, Locussol, 2003-04-20) My impression is that the interest in regulation is minuscule compared to that given to the privatisation and divestiture. As no ted by Gutierrez et al., after having reviewed the economic, environmental and water quality regulation in Britain:

It appears odd that donors are more concerned with enforcing PSP in poor countries, rather than with promoting the creation of the similar institutions and legal protections as those existing in England and Wales specifically for poor consumers (Gutierrez et al., 2003, p. 15).10

The World Bank (IDA) however requires that the regulatory act and terms of reference, as well as the lease contract (privatisation), are to ‘be final’ before the financing is approved (World Bank, 1999). As the regulator is not actually in place at this time when DAWASA (the Asset Holding Company, or Public Granting Authority) and City Water Services (the private operator) will need to be ‘licensed’ to start their new roles, the legislation has recently been amended in order to allow the licensing to be done by the Minister of Water (personal communication, Locussol, 2003-04-20).

9 This is the smallest proportion of the tariff, as 50 shillings go to the lease holder, DAWASA, to coordinate the investment programme and to service the loans, and as much as 322 shillings (PSRC, 2002-07-31) are to cover the private operators costs. The World Bank will cover parts of this on a declining basis in order to allow tariff increases to a later date when services have improved (World Bank, 1999). 10 Moreover, the same report notes that “a key reason why government authorities in Dar es Salaam, Accra and Kathmandu are considering some kind of private sector contracting is that they do not have the necessary human, technical and financial resources” (Gutierrez et al., 2003, p. 13). It is far from obvious that the necessary resources will be there for effective regulation.


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Issues and Observations This section discusses the Tanzanian privatisation experience with regards to several issues and perspectives, ranging from what are the driving forces behind privatisation to how it is financed. The Pressure to Priva tise Infrastructure privatisation can be seen as a logical expansion of capitalist markets. That is, the opening up of (public) services markets for private capital and profit making. Clearly, there are strong corporate interests that coincide with neo- liberal views of the ideal size and role of the state, i.e. that it should be small and uphold law and order, with as little interference as possible into economic life. Vested interests behind privatisation are clearly there, although the extent to which they drive the privatisation trend can be debated. In the case of Tanzania, the pressure to privatise is probably partly from ‘below’ – manifest in people’s fatigue with the poor performance of most public utilities, and represented by views such as that ‘it cannot get any worse.’ There is also pressure from ‘above’ or ‘the outside,’ particularly through conditions attached to loans. A review of forty countries revealed that twelve of them, including Tanzania, had the condition of ‘water privatisation or full cost recovery’ attached to their IMF loan agreement (afrol.com, 2001). This is an important conditionality, as the IMF’s ‘seal of approval permits access to other international creditors.11 The government’s main reason for privatising (or divesting) appears to be to get rid of loss-making parastatals. Indeed, the parastatal sector is to a great extent responsible for Tanzania’s foreign debt. However, as regards the utilities, it appears that the government will still need to pay, or at least to assume responsibility for international loans in order to finance investment as well as operations. Resistance There are also voices of resistance: “Civil society organisations fear that the privatisation deal, one of the conditions allowing Tanzania to receive HIPC12 debt relief will produce higher water bills or even become another corruption trap”13 (afrol.com, 2002; SADOCC, 2003, citing). Tanzania’s trade union leaders have criticised the ongoing privatisation process for causing economic hardship to the working population. They are also critical of the lack of transparency and the fact that the workers, represented by the unions, are apparently not included as stakeholders (Panafrican News Agency, 2001-05-01). There is also some reference to “misleading anti-privatization campaigns being waged by a section of the media and the public” (TOMRIC Agency, 2000-09-08). Notwithstanding

11 The typical procedure, or division of labour between the World Bank and IMF, is that IMF loans include water privatisation or full cost recovery conditionalities, and then there are corresponding World Bank loans and projects to implement financial, managerial and engineering restructuring (afrol.com, 2001). 12 HIPC = highly indebted poor countries 13 The Tanzania Electricity Supply Company (Tanesco) management contract has been described as ‘scandal turned to farce’ (afrol.com, 2002; SADOCC, 2003, citing). The PSRC have responded to the debate by assuring that the selection process was transparent and that stakeholders were involved (PSRC, 2002-02-29). The charges of nepotism and incompetence were however not refuted.


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some (scattered) resistance to liberalisation and privatisation, the main issue of concern appears to be the influence of the foreign capital. As noted by Gibbon (1999):

As far as ownership is concerned, it seems that the colonial/neo-colonial pattern is again reasserting itself. Former corporate owners are prominent, as are companies headquartered in Kenya and South Africa (with the international division of labour between these countries largely based on levels of capital required for entry). Local investors involved both in privatisation and ordinary investment have mostly been from the ethnic minorities traditionally associated with business and trade. ‘Africanisation’ as it was brought about through the parastatals appears to [a] large degree to have been reversed.”

The Lack of Competition / Interest Competition, with the possibility of bankruptcy of agents that are not up to standards, helps competitive markets to be rid of the worst performers. This check is not there in the public sector or non-competitive markets. Hence, there are efforts to introduce competition into public services as well as infrastructure provisioning. This may work in theory, but in practice, the introduction of competition into the water sector is highly problematic. The lack of feasible technological options to the investment-heavy piped networks that create economies of scale and natural monopoly characteristics remain in the water sector. The ‘potential competition’ between localities is also problematic, given that there are so few water companies on the international arena. Mergers and acquisitions continuously make companies fewer and bigger. Kuczynski (1999) comments that “bidders will be cynical if there are repeated failed attempts to privatise the same thing without clear reasons why the bids are rejected” (p. 218). It appears that the international companies’ interest in the lease of Dar es Salaam’s water system has not been overwhelming. The first two attempts to privatise failed, probably because the conditions were not commercially attractive enough. According to Wilkes (2000-03-02) “tenderers did not want to put money into such risky business.” As put by Boyd (, p. 33): “Most private companies with the experience, resources and skills to turn DAWASA around think that the water utility is a headache beyond any remedy and is not a viable business opportunity.” Apparently, the conditions have been made attractive enough for one company to dare take on the challenge. The fact that eventually only one bidder came fo rward, and consequently won the contract for the lease of water and sewerage operations in Dar es Salaam, signals the lack of effective competition in this market. Moreover, in the three bidding rounds, the same three companies (Biwater, Vivendi and Saur) pre-qualified each time. In all of the rounds, at least one company has withdrawn, apparently over disagreements or lack of clarity as regards the conditions. Water undertakings are clearly a risky business. Bid preparations are also expensive, but probably negligible in comparison to what a poorly negotiated contract can cost. Many other issues could be raised, such as asymmetric negotiation powers, the conflicts between equity and profitability, or efficiency, and who pays for privatisation – or water for that matter. Conclusion

Globalisation of infrastructure services relates to the fact that public service restructuring is presently occurring in a similar fashion all over the world – in rich and poor countries


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alike. The simultaneous implementation of both new and old ideas, backed by powerful agents, has material local effects on every-day life and provisioning around the globe. The restructuring of infrastructure provisioning relates to: 1) The withdrawal of the state, where deregulation is more prominent than ‘re-

regulation’ and where the state withdraws from direct provisioning. 2) The advance of the private sector, through the privatisation of infrastructure utilities,

where private companies take on different types of services and responsibilities fo r provisioning, as described in this paper. (There is also a multitude of private actors, ranging from NGOs to small-scale entrepreneurs that fill gaps left by the formal system of provisioning.)

Privatisation is promoted as a way of reducing the fiscal burden on governments and that efficiency should improve (as a result of competition and appropriate incentives). The process should also be fair and transparent. The Tanzanian case diverts in three major ways from how privatisation is often promoted: § The private operator only contributes a fraction of the funding, i.e. little private

finance compared to the financial burden still carried by the public sector. § In the final bidding round, only one company came forward, i.e. there is a lack

competition. § As commercial information is not available to the public, there is (in spite of efforts

from the parastatal sector reform commission) a lack of transparency. While the lease contract has been signed, the restructuring of Dar es Salaam’s water sector restructuring is in its final state of loan negotiation. Thus, most bits are falling into place, and there is hope that the long-awaited up-grading of the infrastructure will soon start. Whether such a refurbishing could have been successfully carried out by a restructured public utility is open to debate. In the present case, private operation is a condition for loans to be granted. Privatisation has become the only practicable way forward for Dar es Salaam’s water sector. Acknowledgements

This research has been supported by the Swedish International Development Cooperation Agency Department for Research Cooperation, SAREC. References

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