Privatised water would be better managed

As the parliamentary opposition memorably complained at the time, the National Water Bill was 'frog-marched' into law in July 1998. The new Act established the National Government as 'the public trustee of the nation's water resources'. Although all that newly-nationalised water within our borders is thus 'government water', it comes in two kinds.

There's the raw and often dirty kind in the clouds, puddles, ponds, rivers and ground. Anyone can drink it for free at risk of falling in and drowning. Or of contracting dysentery or cholera because of other things people do in it, much like fish in the sea.

Then there's the 'added-value' treated kind from taps. This we're supposed to pay for if we use more than a 'free' monthly allowance. It's 'potable water', meaning you don't get sick when you drink it. Moreover, to the surprise of many foreign visitors, it's of world-class quality.

Not that most tap-water gets drunk. In fact, since most doesn't, Mrs Thatcher even briefly contemplated saving more than enough tax money by scrapping bulk purification to pay for giving bottled drinking water to every Briton. But let us all agree that drinkable tap water is a 'nice-to-have', and if something's worth doing it's worth overdoing. Nobody thought to suggest a parallel pipe network carrying much cheaper 'industrial water'. We mustn't throw baby into 'industrial' bathwater! So all our tap water is world-class, at least in theory.

Government, then, has all the water, and consequently all the responsibility for making sure we don't all die for lack of it. The Department of Water Affairs and Forestry (DWAF) is working through the development of enabling legislation towards 'the provision of sustainable and affordable water services to all South Africans'. This of course is all about treated water, not the raw stuff we can already use at will, if there's any of it lying around.

Government's idea is that DWAF, or another such regulator, will oversee a Water Service Authority (WSA) in each geographic area. The WSA will empower one or more Water Service Providers (WSPs). Preferring that the WSPs should emerge unchanged from existing Water Boards of Local Government, DWAF views private-sector firms only as a 'last resort'. As the Water Services Act of 1997 puts it, the WSA 'may only enter into a contract with a private sector water services provider after it has considered all known public sector water services providers which are willing and able to perform the relevant functions'.

Doesn't that seem rather monopolistic and uncompetitive? Surely it's more than a little hard on taxpayers, ratepayers and water-buyers? Imagine if it was apples (or electricity or letter-post)! You'd have to buy all your apples from state apple farms as long as there were any surviving state apple farms with apples to sell. Regardless of price or quality or how much nicer or cheaper private apples may be. So private apple farms would disappear, more or less. So there would be little or no competition and you'd simply never know what you were missing in terms of better and cheaper apples. Shades of the Soviet Union.

Well, but the WSP can always choose to outsource operations to a private firm, or form a public-private partnership. And fortunately there are already a few examples of this in South Africa. But clearly such partial privatisations are currently out of favour with the ruling alliance. At every turn they're subject to virulently leftist criticism from unions, NGOs and journalists. Each operational difficulty ignites strident anti-privatisation rhetoric and lobbying, as happened with California's electricity supply and Britain's Railtrack. Here the 'resistance' goes further. In October, for example, the Anti-Privatisation Forum (APF) helped residents in Phiri, Soweto to remove newly-installed water meters and a Johannesburg Water employee was shot twice in the chest.

Prior government failures to deliver or collect payment, and the regulatory constraints that cause most of the problems, are ignored or rationalised away. The private sector is regularly lambasted for alleged 'market failure'. The APF advances the curiously inverted argument that installation of a new water reticulation network and pipes to Soweto households robs the poor of their right to water. That means, their right to unlimited amounts of potable water without payment.

Although it contradicts the prevailing wisdom to say so, partial privatisation is probably 'worse than nothing'. It generates mounting resistance for little benefit since it cannot possibly deliver the real benefits available from full privatisation. Let us remind ourselves about reality. In the private sector 'they' constantly try to sell us more at lower prices, with better quality and service. In the public sector 'they' often have to urge us to use less of their products at higher prices or with declining quality and service.

Among the many significant differences between public 'enterprises' and private enterprise are the profit motive and freedom from various political imperatives to pursue unprofitable goals. You can't get that motive to apply, or that freedom, in a public-private partnership or an outsourced government contract.

You can, however, get both profit motivation and business autonomy (within the law) by selling off the whole caboodle so that the state is completely out of the picture. Then, and only then, if government wants to, it can ladle out specific and targeted subsidies to producers. Or, better still, to consumers. It can dole out vouchers to the needy for whatever it wants to support - education, transport, water, even apples. But, as with apples, once a product or service is out there in the private sector where it belongs, it will sooner or later reach whoever wants it. Then government won't need to be involved at all.

But sooner is politically preferable to later. So, in the privatised interim, government may choose to incentivise swift extension of potable water services to all and sundry. Then it can hand out suitable state contracts, subsidies, vouchers or whatever. Taxpayers may not like seeing too much of their money thrown at specific social goals like 'flush toilets throughout rural areas'. But at least there would be none of the further wasteful inefficiency so endemic to public operations.

There's more than enough water to go round. But we can always expect rising water prices and growing water shortages while it remains government water. That's simply what happens with state 'enterprise'. Full privatisation of water services, however, would banish any such risk. Easy as apples.

Author: Dr Jim Harris is a freelance researcher and writer. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.


FMF Feature Article\18 November 2003