South Africa’s flagship water privatisation initiative will collapse unless government agrees to a R109-million bail-out.
The 30-year deal spearheaded by Britain’s BiWater and signed in Mpumalanga’s capital Nelspruit in 1999 was supposed to rapidly expand basic water services into the region’s impoverished villages without placing a financial burden on the taxpayer. Both the government and BiWater described the groundbreaking concession as a model for the rest of water-stressed South Africa.
But the people supposed to benefit most, 300 000 rural villagers and township residents, weren’t convinced and instead embarked on a concerted rates boycott that is costing the consortium R13-million a year.
Infrastructure development, envisioned as the centrepiece of the deal, also ground to a halt one year later in July 2001 and BiWater’s local partners, the Greater Nelspruit Utility Company (GNUC), officially suspended all infrastructure projects in August.
GNUC MD Brian Sims warned this month that the boycott had effectively crippled the initiative. Sims claims, in leaked letters, that the losses are so great the consortium’s foreign shareholders will pull out unless Nelspruit’s umbrella municipality, the Mbombela council, agrees to an immediate R72-million rescue package over the next seven years.
The GNUC is also pushing for an additional tariff holiday that will see the taxpayer lose R109-million over the remainder of the concession period.
The proposed relief measures include a dramatic R18-million reduction in the GNUC’s loan repayments to Mbombela, as well as the scrapping of lease payments to council worth R4-million a year — or R28-million over the next seven years.
The GNUC is, in addition, demanding that it be charged reduced electricity tariffs to operate infrastructure, translating into a R800 000 annual saving, and that council performance auditing fees be decreased by R750 000 a year. The tariff reductions would mean a R43,4-million loss over the concession contract’s remaining 28 years.
But not even these measures will, Sims claims, make the deal viable. The GNUC is therefore lobbying for a higher than planned 10% rates increase in Nelspruit’s former white suburbs and is also asking for an increase of R700 000 a year in the council’s existing R2,2-million annual subsidy to deliver a minimum of 6 000 litres a household a month free of charge.
”Payment levels are as low as 10% in some townships, and we are being forced to pursue pretty draconian measures in addition to the request for tariff adjustments,” says Sims.
”This will include the seizure and auctioning of homes belonging to prominent residents involved in the boycott. We’ve been very careful to target only people we know can afford to pay, but who have been refusing.”
Community leaders targeted for prosecution include local political figures, business leaders, and senior government officials in the justice, health and home affairs administrations.
The grassroots far-left Anti-Privatisation Forum has branded the planned auctions as a provocation and vowed to expand the current boycott to the rest of Nelspruit’s 300 000 residents. At the moment, only 120 000 residents in KaNyamazane and Matsulu are refusing to pay.
Forum spokesman Henry Nkuna said township and village residents had only been required to pay R14 a month for water under apartheid. This rose to R88 a month after 1994, before leaping to an average R500 a month after the GNUC took over in 1999.
”It’s pure profiteering. Almost half township residents are unemployed. How are they expected to pay R500 a month?” Nkuna asked.
He added that residents also believed they were being overcharged for supposed usage, and that meters installed in formal townships were incomprehensible to residents. Sims dismisses the profiteering charges, stressing that the GNUC had never expected to make profits in the first five years of the concession.
”The rescue package is necessary just to cover operating expenses. This is a long-term investment, and no one realistically expected profits for 10 of the 30 years we plan to be here. But, we’ve made a substantial investment and cannot be expected to carry these kinds of losses because of a politically inspired boycott,” says Sims.
Mbombela’s deputy municipal manager Roelf Kotze would meanwhile only confirm the council had agreed to assist the GNUC in principle and was considering a ”package of things”.
”We’ll reduce costs [for the GNUC] where we can, but will not undermine our own financial position. The point I think people are missing is that many people who never had water are now getting a reliable service,” said Kotze.
The Mbombela council will debate the GNUC’s proposed tariff reductions on April 15. — African Eye News Service