Privatising South Africa's water: beware, the rent-seekers cometh…!

Governments contracting out, or otherwise sharing, the responsibility for governance of a life-critical natural resource such as water provides fertile ground for rent-seekers. The world is littered with examples of where this has gone very badly and to the detriment of the public, especially the poor.? Any desire to commit to such public-private partnerships must be viewed with commensurate caution.? South Africa has recently announced the award of considerable financial aid for the water sector, in so doing setting out fresh bait for rent-seekers.

Rent-seeking is here defined as the “act of growing one's existing wealth by manipulating the social or political environment without creating new wealth”.? Alternatively stated it is “rewards and prizes not earned or not consistent with competitive market returns”. It is an opportunity to make money off, for example, water treatment, without actually adding back material value. While the principles of the public trust demand that any ‘profits’ made from water must be directly applied back into the resource, this is seldom, if ever the case. Vast amounts of ‘water utility’ earnings? go into flashy buildings, expensive cars, inflated salaries, shareholder earnings and the like, with inappropriately small amounts being fed back into infrastructure maintenance, scientific advancement, or technology.? This goes unnoticed for a while, but, as has recently become evident in the UK, things start to go very wrong. Rent-seeking leads to social injustice.

As a recent UK report has highlighted, ‘water financialisation’ or ‘privatisation’ (which is what rent seekers wish for), there is pressure on water utilities to satisfy the demands of their shareholders and with “transparency obscured in the name of commercial confidentiality”.? This is absolutely contrary to the norm whereunder “[w]ater is vital for life, meaning that provision and finance not only need to be free of corruption, but also that services and systems operate with accountability, participation, and transparency”. The UK has learnt, to its cost, that this was wishful thinking. Without putting too fine a point on it, “private ownership of water and sewerage in England and Wales has resulted in an integrity failure of the system overall".

Another example of a service prone to rent-seeking is waste management, and recent events in Sweden provide a case in point. To all intents and purposes, all sorts of dangerous waste were being carted away and ‘professionally managed’.? However, this was all a smokescreen, and Sweden’s “Queen of Trash” was allegedly pocketing millions while dumping the waste behind the nearest convenient bush.? Does this ring any South African bells perhaps?

Back to water:? “The water sector, especially the irrigation sector, is particularly prone to both rent-seeking and regulatory capture”. This practice has been termed “mediated corruption” in Australia. The public trust, the foundation stone of South African water law, also dictates that water resources should, in no manner, be commodified other than to benefit the beneficiaries of the trust, i.e., all the citizens of South Africa AND the water resource itself. There is absolutely no allowance for private profit-taking from water uses, and, importantly, water uses must not cause irrevocable harm to the resource itself. Regrettably these fundamental in-built norms remain ignored by those tasked with their fulfillment.

Water is a life-critical resource that is both ubiquitous and scarce at the same time. Vast quantities of water flow through distribution networks, from raw potable to potable, every day.? Ordinarily, an efficient public service should ensure this supply in an efficient manner.? However, we commonly experience this not to be the case, systems are allowed to decay until they become barely serviceable, and then the whole is fostered off to a private entity, at considerable cost. In effect, the provision of an essential service has now been captured by the private sector, with rent-seeking and regulatory capture, respectively, the ‘demand for’ and the ’supply of’ decision making intended to benefit particular interests, rather than in the broader, public interest.? Equally, the general public are now exposed to exorbitant increases in the cost of obtaining water of an acceptable quality or, indeed, any water at all.

Rent-seeking is corruption by another name. Another opportunity for getting rich off water lies in the field of 'water resource restoration', and millions have been syphoned out of scarce funds with little value added to the resource itself.? A globally-common example are efforts to oxygenate a lake or dam - pumping lots of air is cheap, most often does very little (so there is an excuse to keep on pumping), and large fees can be charged for this 'remedy'. Yes, there are instances when forced oxygenation is indicated, but generally these applications are entirely cosmetic and only of benefit to the company providing the machinery - and are approved only because the state agency lacks the necessary insight.

South Africa is no stranger to what might be described as institutionalised corruption across so many spheres of governance.? Insofar as water is concerned, South Africa’s 'Corruption Watch' concluded in its “Money Down the Drain” report that “The impact of corruption in the [South African] water sector is measured in dry taps, lost jobs and polluted rivers; many, particularly young children, old people, and those with compromised immune systems, have become ill from drinking unsafe water or their homes, and toilets cannot be kept hygienic”. Also, basically defining rent seeking is, that “Companies have paid bribes to get business. Some companies have promoted unnecessary projects and claimed payment for work done badly or not at all, often colluding with officials who oversee their work. Others have monopolised specialist areas of work to grossly over-charge for their services”.?

Personally, I believe that we are only aware of the tip of the iceberg insofar as corruption in the South African water industry is concerned.? When I recently requested details of a contract, in order to try and determine if the appointed implementing agent had the necessary skills and ability, I was told that the contract was a “non-standard tender” and the information could not, or was not going to, be shared. And this for water pollution remedial work that is front and centre in the public interest! That this response was uttered at all also goes some way to demonstrate the arrogance of officials who believe they can do as they please. It's not just a 'can of worms', rather it's a whole factory producing an endless line of 'cans of worms'.

All contracts that stand to benefit from an award of public funds should be independently and openly reviewed and evaluated by actual specialists who have no vested financial interest in the outcome.

As I have been at pains to previously point out, water is not a resource that should be commodified for private gain. Private property claims in water have always been subordinate to the right of the public to maintain its waters "un-diminished except by such drafts upon them as the guardian of the public welfare may permit…”.? Alternatively put, 'certain uses have a peculiarly public nature that makes their application to private use inappropriate.’? Water is the epitome example here.

Opportunities for rent-seeking can be avoided if the commissioning authority possesses the necessary in-house insights, knowledge, and skills. This is not the case in South Africa and the susceptibility of state agencies to rent seekers is greater where the period of office of senior officials is relatively short. I have written on this aspect and the need to build an organisational memory.? Much of the mess that South African water resources are in indicates that this is not the case.? All too often it is the purveyors of a'service’ are those who are consulted for advice, and these individuals are keenly aware that their income is dependent on how well they embellish the putative value of their product.

This brings me to the aspect of the need for a healthy national (government funded) coordinated science research system, such as the CSIR provided in South Africa before it morphed into a profit-driven model that spelt the demise of its former reputation.? In the field of water research we see many aspects of rent-seeking in the form of writing and winning research grants, awarded against arbitrary criteria, absent any substantive improvement in resource management.? What is being won, in many instances, is simply tenure of salary if there is no or minimal concomitant requirement for research to yield tangible benefits. Of course this cannot be the case if there is no overarching vision for and facilitation of critical research needs.

The treatment and supply of water in South Africa is in trouble. Recent moves towards obtaining large loans and the likely increased involvement of private industry may well herald that this will only get worse.? Central to the problem, as Corruption Watch concluded,? is that “These problems are aggravated by a failure to appoint competent people to do the jobs required and officials being pressurised by politicians and seniors to do the wrong thing – risking dismissal or worse if they don’t comply”.

Rent-seeking has already infested the South African water sector, a sector which is in many ways crippled by extremely poor management.? We cannot afford to waste a single cent in efforts to push back the tide of decay.