December 24, 2005

UK water giant to sue Tanzania

Biwater, the UK-based water company, is to sue Tanzania after its government revoked a contract to supply water and sanitation to the country's largest city, Dar-es-Salaam. Tanzania was forced to privatise its water industry to qualify for international debt relief. The UK government has spent millions of pounds paying advisers including the Adam Smith Institute to facilitate what has turned out to be a botched privatisation. Biwater, a one-time Conservative Party funder, was two years into a 10-year contract when it was sacked in May 2005. Tanzania's government confirmed it had cancelled its deal, which was contracted two years ago to bring clean water to the capital, Dar es Salaam, and the surrounding region within five years by installing new pipes.
Tanzania has made a series of allegations against Biwater, which is working in Dar es Salaam with the German engineering firm Gauff under the name City Water. It claims that no new domestic pipework has been installed, the company has not spent the money it had promised, water quality has declined, and that revenue has decreased. “The water supply services in Dar es Salaam, Tanzania and in the neighbouring places have deteriorated rather than improved since this firm took over some two years ago. The company has failed to produce the goods," Tanzania's water minister, Edward Lowassa, said. Cliff Stone, the British chief executive of City Water, denied the accusations and said a case had been filed against the Tanzanian government for alleged breach of contract. "It looks as if we are being confrontational, but we are not. We had a contract" he said. He accepted that the project was well behind schedule and that no pipes had been installed but he claimed water quality and quantity had improved and that 10.000 new customers had been signed up in two months. Stone claimed the Tanzanian government had given the company wrong data about water supplies and the delays were not of City Water's making.
The privatisation scheme was facilitated by British aid money. The Department for International Development (DfID) paid Adam Smith International, sister organisation of the free market UK think-tank Adam Smith Institute, more than 500,000 to provide advice to the Tanzanian government. More than 250,000 of that sum was spent by Adam Smith International on a video which included the words: "Our old industries are dry like crops and privatisation brings the rain."
The collapse of the contract throws into question other water privatisations planned around the world, and the British government's involvement in them. Resentment against private water monopolies is growing, and there have been demonstrations in South America, Africa, the Caribbean, and Asia. Private firms are furthermore increasingly pulling out of water services to developing countries. Argentina is being sued for $38bn by a range of energy and water firms. The World Bank said that present investment of $15bn on water access needs to double if the millennium goal of halving the 1.1 billion with no access to water is to be met. Many western companies are accused of profiting from the poor and raising prices above what they can afford. But City Water claimed that it stood to make little money out of the scheme. "Our declared profit was to be just 10%. There is no way we can make super-profits in Dar es Salaam" said Mr Stone. "We have been losing money. Profits always come at the end of a contract. The plan was to use this as a model for other projects and recoup money later on." The DfID has said it has paid more than 36m in the past seven years to Adam Smith International and PricewaterhouseCoopers to advise countries on privatising utilities.
The international development group ActionAid condemned the World Bank and the British government. "The British government and public should not support this kind of tied aid from the IMF and the World Bank. The Tanzanian government's decision to revoke the contract with Biwater is very welcome," said Rose Mushi, the director of ActionAid in Tanzania. (The Guardian / The Observer / World Development Movement, London)

related link:
Online Petition to Biwater on World Development Movement

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