Water privatisation: Senegal at the crossroads

The water service in the Senegalese cities has been partially privatised since 1996 under the form of a lease contract between the state and the Sénégalaise des eaux (SDE). 51 per cent of the capital of the latter is held by SAUR, renamed FINAGETION in 2005. It is a subsidiary of the Bouygues group, the fourth-largest group in the global water sector. Water management in Senegal is often presented as a ‘model’ public–private partnership (PPP), particularly by the World Bank, the International Monetary Fund and other international financial institutions, all of who have been trying to promote various forms of water privatisation for decades. According to them, the lease contract with SAUR has significantly improved access to water for urban populations, explaining that the country is one of the only ones in the African continent to be in a good way to achieve the Millennium Development Goals in regard to access to water, at least in urban areas (as they often forget to specify).

In an international context marked by the spectacular and repeated failures of water transnational corporations that have sought since the 1990s to take root in the cities of the global South, Senegal has therefore an emblematic character for the proponents of PPPs.

Recently the Senegalese government has however announced unilaterally that the contract that bound it to SAUR would not be renewed, and that in April 2011 there would be a tender for the total concession of water service, which would take place in 2012–13.

CONTEXT

The current water management system in Senegal stems from a series of reforms which were implemented in the early 1990s at the instigation of the World Bank in particular, and were part and still fit within a wider context of withdrawal from essential services by the Senegalese state. The reform of 1996 led to the establishment of three structures that replaced the SONEES (Société nationale d’exploitation des eaux du Sénégal):

- SONES, an investment company responsible for promoting investment in infrastructure and equipment
- The SDE, a private company that includes shares held by a strategic foreign partner (SAUR, who hold 51 per cent of the share capital), and the Senegalese state (5 per cent). The SDE is responsible for the technical and commercial running of supply system of drinking water. It operates with a 10-year concession with the Senegalese state and a contract that specifies the technical and commercial performance. This contract came up for renewal in 2006, and was extended until 2011.
- ONAS (Office national de l’assainissement du Sénégal), a state-owned company responsible for industrial and commercial affairs (EPIC). It is responsible for the development and running of infrastructure and equipment of collective independent sanitation of waste water and excreta as well as drains for rain water.

The law on public service management of drinking water and collective sanitation (LPSEPA) that was introduced in 2008 defined the legal framework for the supplying of clean drinking water and sanitation, and laid down the state policy in matters of public services. The state has powers to delegate public water services in the framework of this law. It carries the ultimate responsibility for management, maintenance and development of provision of water as well as all activities pertaining to their proper function, generally speaking. The sector water operators are: (i) the Société nationale des eaux du Sénégal (SONES); (ii) the Sénégalaise des eaux (SDE); and (iii) local authorities and consumer associations that have direct authority over the quality of public services and that are closely associated with the implementation of social programmes. An inter-ministerial coordination committee is designated by decree and responsible for the contractual regulation of the urban water and sanitation sector (monitoring, follow-up of contracts, arbitration).

This structure is supposed to change shortly in the framework of the so-called ‘third-generation’ reforms. The government has in fact suddenly announced that the contract would not be renewed and that a tender would be launched in April 2011 for the selection a new operator, and that the tender would be for ‘total concession, that is to say, a corporation that no longer just distributes water and charges for its consumption, but will make investments’ (the very words of a government official). An amendment to extend the contract with SAUR to the end of 2012 was signed without the government giving more details on its plans or the timing of the proposed reform.

Under a concession, unlike a lease contract, the private company (in most cases a large global water multinational) is responsible for managing, renewing and expanding infrastructure and equipment, and must find the funding itself and make the investments for a specified period, usually between 15 and 25 years. The ownership of new infrastructure is often left to the private company temporarily, depending on the type of contract. The private operator has to pay and finance investments through the sale of the service, in this case water billing.

WHAT IS THE REALITY OF PROGRESS MADE SINCE 1996?

It is a usual strategy of proponents of public–private partnerships in the water sector to start with ‘soft’ forms of privatisation such as lease contracts in order to ensure a better acceptance by the often reluctant local population, at a later stage, of more extensive forms of privatisation such as concessions. It is therefore all the more necessary to have a closer look, beyond the promotional announcements disseminated by international financial institutions, at the reality of the progress achieved since 1996.

It is hard to deny that substantial improvements have been made compared to the situation that prevailed in the late 1980s, characterised by the appalling state of infrastructures, water deficits, including in the capital Dakar, and very high inequalities between urban and rural areas, between Dakar and other cities, and between central urban areas and poorer peri-urban areas.

THE EXTENSION OF THE NETWORK AND NEW CONNECTIONS

Today, by contrast with the situation that prevailed in 1996, 90 per cent of people in Dakar and 85 per cent of those in other cities officially have access to drinking water (79 per cent and 63 per cent respectively have an individual connection to the network; the others rely on a collective connection close to their residence). More than 1.64 million additional people are said to have gained access to the water network, particularly through 150,000 so-called ‘social’ connections, offered at a very low rate for the poor. Cuts in the water supply, frequent before, have become increasingly rare. The quality of the water supply has also improved.

In contrast, however, to what is suggested (including towards the Senegalese themselves) by the promoters of public–private partnerships, most of the progress in extending infrastructure and network connections has not been accomplished by the private company responsible for commercial exploitation, the SDE, but by the public company responsible for infrastructure, SONES. The overall portfolio mobilised by SONES consists mainly of loans (56.2 per cent), donations (27.2 per cent) and state contributions (14 per cent). The major issue of this form of raising finance has been that it substantially increases the burden of public debt (1,448.2 billion CFA for the foreign debt, and 392 billion CFA for national debt in 2008). In other words these developments are largely explained by the significant funding provided by the Senegalese government on the one hand and the IFIs (international financial institutions) and other donors like European development agencies on the other. The latter funding was offered only under the condition that water services be partially privatised, and they will need to be repaid, even if they were granted with low interest rates and with other favourable conditions. This situation reflects how lease contracts often turn out to be very poor bargains for governments: they are the ones that need to seek loans and fund infrastructures, while the private company, which is the only visible face of the service for the general population, collects all the financial and reputational benefits. In any event, the progress achieved in urban Senegal cannot be explained by the fact that the operation of service was entrusted to a private company rather than a public operator.

THE PRICE OF WATER

The promoters of the lease contract also highlight the fact that the price of water in urban Senegal has not been subject to the dramatic increases that have often characterised other privatisations of water services in developing countries. Thus the price per cubic metre for the so-called ‘social’ bracket (consumption of less than 20 cubic metres per month) has increased by 19 per cent between 1996 and 2009, representing an average annual increase of 1.5 per cent. Overall, for all brackets, the increase was greater, at 3 per cent per year. As the water rates for individuals have stagnated since 2003, the increase was actually 40 per cent over the period 1996–2003. The fact that there has been no additional price increase since 2003 can be partially explained by state policy (as the price of water is set by the state), and the will to provide a positive response to pressure from consumer organisations and trade unions.

Moreover, the establishment of a ‘social’ tariff system (the price of water increases according to the amount of water consumed) touted by the proponents of the lease contract hides the fact that the poorest, those living in suburbs and who have no access to individual connections, continue to pay more for the water because they must use a collective water source and are therefore charged at the rate corresponding to a high consumption – not to speak of those who still don’t have access to the network at all.

THE PERSISTENCE OF DISPARITIES

Beyond the debate on the progress actually achieved, the lease contract did nothing to resolve the structural problems of water service in Senegal, namely the issue of unequal access and the financial equilibrium of the service. These fundamental problems have only been avoided.

First, the problem of water access in rural areas has been simply erased from the contract. If today a large majority of urban Senegalese has, one way or another, access to drinking water, this is the case of only 62 per cent of the rural population (and only 17 per cent of them have access to sanitation).

Residents who do not have a personal connection to the network but depend on collective access cannot, as we have seen, benefit from the ‘social’ tariff because the overall consumption at their connection puts them in the higher bracket. Substantial proportions of the urban population still are without access to the network or can no longer afford to use it. They have to rely on private fountains, where they purchase water for a price far higher than the official rate, or on polluted water sources such as rivers or artisanal wells. Water-related diseases, including cholera, have not diminished in urban Senegal.

The unilateral application of a billing system based on individual consumption has had other negative consequences, such as the suppression, under the pretext of fighting water wastage, of many public fountains, often locally managed by communities, which provided the poorest with water for free or at a very low cost. Institutions such as schools and mosques, which benefited from preferential treatment (and sometimes a free water supply) as part of this community system, had to bear heavy bills or give up their water supply. A whole system of sociability, involving mainly women, has been suppressed and replaced by a system based on a conception of water as a commodity.

Ultimately, the lease contract has reinforced previously existing dichotomies in the provision of water services, creating a two-tier system distinguishing between creditworthy consumers and others, at the expense of a perspective of universal right to water for all citizens of Senegal. This two-tier system is likely, once again, to be compounded by a total concession of the service.

A FINANCIAL SITUATION RESTORED ONLY IN APPEARANCE

The second structural problem that has been resolved only in appearance is that of the financial equilibrium of the service.

SONES – which manages the funding of investments, contracts loans from donors and is responsible for their repayment – is experiencing significant financial difficulties. These may explain, along with the problems of mismanagement that also characterise SONES, why the Senegalese government now wishes to withdraw entirely from a sector in which it has heavily spent.

The financial difficulties that SONES is facing can be explained by the institutional instability at the head of the company, which is caused by the decisions – often political in nature – as well as the extent of the debt owed by the state to the water services, which is said to be 36 billion CFA and which weighs heavily on the accounts.

It must be noted that ONAS also has presented a structural deficit since its creation in 1996, the fees repaid by the SDE only covering about a third of its operating and investment costs according to some sources.

THE RISKS OF A CONCESSION

The prospect of a total concession of the water service is likely to exacerbate all problems reported above.

First, everything suggests that the fundamental reason for the announcement of a future total concession is the desire of the Senegalese government to get rid of SONES and disengage financially from the water sector, even though it is precisely its financial commitment that has led to improvements.

In theory, the future private contractor will have to take care of investments and of the loans that will be necessary for them. There are in these conditions only two ways they can secure reasonable profits – which is the only raison d’être for a private company. These are either by drastically increasing the price of water, with the risk of being confronted with the resistance of the population and soaring unpaid bills, or by failing to implement but a small portion of the necessary investments – a trend already common among private contractors because their contracts do not run for more than 25 years, while the lifetime of networks and equipment is closer to 50 years. In both cases, the population, and primarily the poor, will bear the costs.

Indeed, it is actually not certain that the Senegalese government will find a company willing to take over the water service under a concession contract. Most large multinational water companies are now very conservative in their investments in cities of the global South and focus on less risky types of contracts. But even this situation is a source of danger, as Senegal might be tempted to attract a company by offering even more advantageous conditions in terms of guaranteed profits, weak regulatory framework and definition of the concession’s perimeter. The unilateral and opaque manner in which the government has so far handled the announcement of the end of the lease contract does not bode well from this point of view, even though a total concession of the service would require much more rigorous and independent mechanisms of control of the private provider.

‘Unprofitable’ users may therefore be abandoned for good, for the benefit of some customers that will promise fast and secure income for the private company, and will not need new investments.

ALTERNATIVES EXIST

So is there no alternative to this move towards a complete privatisation? The current system could certainly be improved by increasing transparency, regulation and renegotiating the fees repaid by the SDE to SONES.

But above all, without denying the past and present problems of the water public service in Senegal, only a solution based on public management seems likely to extend the progress already achieved and to address the structural problems identified above.

There are, however, two conditions. The first is a genuine democratic reform of the water service, with real transparency, accountability and genuine participation of citizens and civil society. Various public services from the global South, in Brazil and India in particular, have carried out such reforms to great success.

The second is the ability to access financial, technical and organisational support. If international financial institutions and major donors continue to focus on public–private partnerships as the only solution to all the problems of the water sector and as a condition to access their loans, there is an emerging trend in favour of public solutions. The European Union has recently set up a small fund to support public–public partnerships in the field of water for the African, Caribbean and Pacific countries (ACP). In public–public partnerships, it is not a private company but another public utility that helps a water utility to reform and improve its performance and the quality of its management, for reasons of solidarity rather than profit. Public–public partnerships started more than 20 years ago when the water company of Yokohama, Japan, began to sign contract for assistance with other water utilities in Asia. Today, 70 countries are concerned by public–public partnerships. Public water utilities that are ready to engage in such partnerships often are in industrialised countries (such as the water utility of Paris who assisted Vietnam and Morocco, and the one of Amsterdam, active in Egypt and Suriname) but there are also South–South public–public partnerships, for example between Morocco and Mauritania.

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* The authors wish to thank all those who contributed to this article with their insights and analyses, in particular Moussa Diop and Jacques Cambon.
* This article is part of a special issue on water and water privatisation in Africa produced as a joint initiative of the Transnational Institute, Ritimo and Pambazuka News. This special issue is being published in English and in French.
* Please send comments to editor[at]pambazuka[dot]org or comment online at Pambazuka News.