Water privatization in Ghana
Encyclopedia
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.
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. The main objectives of the program, which was supposed to end in 2010 and has been extended until December 2012, are to
It provides technical assistance and training. Moreover, it supports private sector participation. Since October 2006 the private operator Aqua Vitens Rand Ltd. (AVRL), a joint venture of the public Dutch company Vitens and the South African company Rand Water, supports GWCL under a five-year management contract to improve its performance and rehabilitate and extend the infrastructure.
The main objectives of the management contract are:
In March 2008, severe water shortages in Accra were reported, leading the Minister for Water Resources, Works and Housing to review whether AVRL is 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 will improve notably by the end of 2008 due to several new boreholes and a more stable power supply. 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. The Minister responded by pointing to an upcoming mid-term review.
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
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
Non-revenue water
Non revenue water is water that has been produced and is “lost” before it reaches the customer. Losses can be real losses or apparent losses . High levels of NRW are detrimental to the financial viability of water utilities, as well to the quality of water itself...
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
Azurix
Azurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America...
, a subsidiary of Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
. 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.
In 2004, the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
'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
Nordic Development Fund
The Nordic Development Fund is the joint multilateral development finance institution of Denmark, Finland, Iceland, Norway and Sweden. It was established in 1989 and adheres to the development assistance policies of the Nordic countries and has financed 190 development assistance credits valued at...
contributes another US$5 million, while the Government of Ghana provides the remaining US$12 million of the US$120 million project. The main objectives of the program, which was supposed to end in 2010 and has been extended until December 2012, 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.
It provides technical assistance and training. Moreover, it supports private sector participation. Since October 2006 the private operator Aqua Vitens Rand Ltd. (AVRL), a joint venture of the public Dutch company Vitens and the South African company Rand Water, supports GWCL under a five-year management contract to improve its performance and rehabilitate and extend the infrastructure.
The main objectives of the management contract are:
- Extending reliable water supply especially to low-income areas
- Making potable water affordable for low-income consumers
- Increasing cost recovery
- Ensuring investments based on low-cost and concession financing
- Supporting further involvement of the private sector
- Reducing non-revenue waterNon-revenue waterNon revenue water is water that has been produced and is “lost” before it reaches the customer. Losses can be real losses or apparent losses . High levels of NRW are detrimental to the financial viability of water utilities, as well to the quality of water itself...
- Increasing water treatmentWater treatmentWater treatment describes those processes used to make water more acceptable for a desired end-use. These can include use as drinking water, industrial processes, medical and many other uses. The goal of all water treatment process is to remove existing contaminants in the water, or reduce the...
In March 2008, severe water shortages in Accra were reported, leading the Minister for Water Resources, Works and Housing to review whether AVRL is 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 will improve notably by the end of 2008 due to several new boreholes and a more stable power supply. 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. The Minister responded by pointing to an upcoming mid-term review.