Glenda Daniels
Consumers have to prepare for massive tariff hikes as privatisation plans by the government steamroll ahead.
The cost to the consumer of the privatisation of electricity, water, telephone, transport and municipal services is going to be exorbitant in cash terms. And in delivery terms, huge questions are emerging.
But this is not going to stop the government. The privatisation avalanche began last week when the Eskom Conversion Bill was passed in Parliament, while other developments have taken place over the past year with water and telecommunications.
The Congress of South African Trade Unions (Cosatu) lost its most serious battle this year with Eskom, but the federation has tabled notice for a strike in August over the issue.
The real concern is what this means to the consumer’s pocket.
According to Cosatu consumers will pay between 22% and 50% more for electricity but it says this is not a pie-in-the-sky figure the government’s own consultants have estimated this rise.
“One of the biggest problems with privatisation is that the government is doing it in a sweeping way. There is the belief that private capital will create profits, and then it brings in foreign experts and we end up with a Coleman Andrews situation,” says Neva Makgetla, Cosatu’s fiscal monetary and public sector policy coordinator.
Trevor Ngwane, the head of the Soweto Electricity Crisis Committee, which is dealing with electricity crisis management in Soweto with about 20 000 cut-offs a month, says: “The most common form of credit control when services are privatised or otherwise run on the profit motive is the cut-off.”
Water has become equally controversial. Internationally, water privatisation is dominated by three multinationals Suez Lyonnaise des Eaux, SAUR and Vivendi all of which are presently in South Africa bidding for contracts. According to the South African Municipal Workers’ Union’s Anna Weekes: “All over the world they have equally bad track records the main being that water prices shoot up by over 200% within two years of the contract being signed.”
Locally, in Nelspruit, where water is in the hands of private company Biwater, tariffs shot up within 18 months from an average rate of R80 for all services to R400 for water alone.
The Dolphin coast has been a test case in contracting out. But already significant price increases have been reported with the company Siza a subsidiary of multinational SAUR. Tariff increases there have been in excess of inflation but local authorities have blamed the Umgeni Water board for the crisis.
Telkom’s deregulation means that the cost of local calls, which most people make, will go up while international call rates will drop, says Makgetla. She predicts a slowdown in the installation of telephones in rural areas.
An international study says that basic telephony should cost no more than 0,7% of a households total income. But in South Africa, the total amount spent on telephony is 2,87% of a household’s income, according to the Communication Workers’ Union (CWU).
Cosatu general secretary Zwelinzima Vavi says communication workers have “experienced first-hand the dangers of privatisation”. In the past three years, he says, 17 000 workers have lost jobs just in Telkom, while the restructuring of Telkom has been associated with the decline of services. According to the October Household Survey, in 1999 less than a third of African urban households and less than one in 10 African rural households had telephones, compared to 80% of rural and urban whites.
“Soaring rental charges for telephones place them beyond the reach of at least a third of our people. The increase in local telephone charges makes telecommunications increasingly inaccessible,” says Vavi.
“Local charges rose 35% even after inflation in the past two years. At the same time, we saw a 40% fall in the cost of international calls, which mostly benefits business and the rich. We should not be surprised at these kind of results from privatisation. Our only surprise is that the government can still call it ‘developmental.'”
Privatisation around the world over the past decade has had some disastrous consequences, according to the International Labour Resource and Information Group:
l In Cochabamba, Bolivia, water prices went up by 50% within less than a year of privatisation to a consortium of companies led by United States company Bechtel. Some workers spent up to 20% of their wages on water.
l In Egletons, France, the price of water more than doubled within three years after privatisation.
l In Buenos Aires, Argentina, despite promises that the price of water would decrease after privatisation to Suez Lyonnaise des Eaux (now active in Johannesburg), the price increased. Three sets of increases took place: of 29%, 21% and 8%.
l In Hungary, the country’s six electricity distribution companies owned by two multinationals threatened legal action against the government. The government has restricted the increase in tariffs to 6%, but the companies say the tariff restrictions will unjustly cut their revenues.
l According to Public Services International, in the United Kingdom within the first five years of water privatisation the rate of cut-offs tripled and prices increased by more than 50% in the first four years.