KANANASKIS G7 SUMMIT ISSUE BRIEFS (June 2002): Privatization – no debt relief for impoverished countries without it

Wealthy countries and the World Bank are forcing the privatization of public services and natural resources in Africa and elsewhere as a condition for development assistance. Impoverished countries are required to turn their public services and natural resources over to private owners. If they want the aid money, they have to sell off their oil, gas, mining, electricity, telecommunications, transportation and water companies. Investors say privitization brings efficiency; opponents say it hurts the poor. Whatever one believes, the poor have no say in the matter.
In South Africa, tragedy began when people in poor rural areas of KwaZulu-Natal lost access to the safe and free water they had enjoyed even under the apartheid regime. In 2000, after the water system was privatised, poor communities were charged fees for the water they used. The new corporate owners shut off the taps when they couldn’t collect.
As a result, people began to drink unsafe water, which sparked the biggest outbreak of cholera in South African history. Cholera is a disease of the poor, usually contracted by contact with contaminated water. Victims dehydrate as their bodies rapidly empty themselves. 150,000 people were infected and more than 260 died in the eighteen months of this outbreak.

Privatization is also a condition of debt relief. Heavily indebted poor countries throughout Africa and Central America have been hit hard by drought and falling prices for food crops this year, but they are not getting the debt relief they have been promised. First, they have to sell off their services and natural resources. Reluctance to comply with these and other conditions, like cutting public spending, means the international debt relief program is stalled. Only five countries have completed the requirements for debt relief since the program was launched in 1996.
Every day, 30,000 children in the Third World die of preventable causes. Many of them could be saved if they had access to safe water. The World Bank argues that governments in impoverished countries have to privatize their water supply and distribution systems if they are to get the efficient delivery of water that is needed. On the face of it, the argument makes sense. The adequate supply of water and other public services is too often frustrated by inadequate funding, inefficient bureaucracy or lack of political will. Promoters of private ownership say it brings investment and cost-effective service.
Experience and common sense say otherwise. Private investors are not attracted by poor and rural communities. Any improvements that might come with private ownership are in areas that generate profit. Private water, telecommunications and electricity companies tend to focus on efficiency in collecting tariffs, but not on improving service. Costs usually leap up quickly, annoying middle class and wealthy customers but leaving the poor without service at all.
According to the Congress of South Africa Trade Unions, privatization has cost 200,000 people their jobs. In poor Soweto neighbourhoods, up to 20,000 homes a month are disconnected from electric service for non-payment.
People in affected communities don’t have a voice in how or if they want their services privatized. In some places, the struggle against privatization has become intense. Bolivia granted a 40-year privatization lease to a subsidiary of the Bechtel Corporation in 1999, giving it control over the water on which more than half a million people survive. The company immediately doubled and tripled water rates for some of South America's poorest families. The people of Cochabamba resisted the takeover of their water, winning control only after clashes with government forces that left a seventeen-year-old boy killed and hundreds wounded, including two people blinded. Bechtel is now suing the Bolivian government for US$25 million for “lost profits.”
The fight against privatization is often deadly. Municipal workers in Cali, Colombia are targets of assassination by paramilitary death squads, with six union leaders killed in the last two years because of their fight against privatization of public services. Zambia had to sell its copper mines two years ago. Now the private owners are closing them down since they are not profitable anymore. It is a serious blow to a country that depends on copper and cobalt for 90% of its foreign exchange earnings. Meanwhile, malnutrition and starvation are increasing as drought wipes out food crops. The country cannot afford to import grain to feed its people. But it does have to keep paying US$150 million each year in debt service to wealthy countries and agencies like the World Bank.
People in impoverished countries want efficient service. In some, privatization may be the way to go. They need to be allowed to choose if it is appropriate for them. Instead, their poverty and heavy debt load is being used to force them to turn what resources they have over to the corporations.
Will any “G-8 Action Plan for Africa” take these into consideration? Not likely.

A short summary of how the IMF and World Bank debt relief
to force budget cuts and privatization:


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Debt relief delays


Human Development Index: 161 (lowest = 162, Sierra Leone)
Life expectancy at birth (years): 45
Drought, large cereal shortage. Decline in economic production. Refugees from neighbouring conflicts.

Delays in following structural adjustment demands in 2000 and early 2001 put debt relief off-track.
The government has begun opening up petroleum industry, privatizing water, electricity and telecommunications, and cut spending to get it started again, but ‘completion point’ not imminent.

Burkina Faso

HDI: 159
Life expectancy: 46
Severe drought and poor cereals harvest coupled with a rise in oil prices exacerbated the poverty level

Debt relief delayed as IMF and World Bank demand a "strict limitation of nonessential outlays," cuts to public sector wages, increased taxes, privatization of the telecommunications company (ONATEL) and electrical company (SONABEL).


HDI: 156
Life expectancy: 45

No discernable progress in debt relief process since acceptance into HIPC Initiative program in Dec. 2000.


HDI: 155
Life expectancy: 44
Poor weather conditions and food shortages. Chad now faces its worst famine in a decade. Intensified rebel fighting in the north, which led to an increase in defence spending, an energy crisis and a lack of foreign investment

Delays in starting debt relief process as Chad fell behind in following structural adjustment demands, including lifting of price controls in petroleum, reform of civil service, and privatization of water, telephones, roads, electricity, cotton sector. Chad denied a scheduled start to debt relief in Dec 2000; completion point still unknown.


HDI: 153
Life expectancy: 51
Drought, widening hunger, impacts of neighbouring conflict.

Debt relief delayed because of slowness in privatization. Government is now moving to privatize cotton, telecommunications, the railway, raise water & electricity tariffs, raise petroleum taxes to satisfy PRGF requirements.


HDI: 152
Life expectancy: 40
11.2% of adults infected with HIV

IMF and WB congratulate measures to tighten fiscal and monetary policies and civil service reforms, but delay debt relief because of spending still above PRGF targets.


HDI: 151
Life expectancy: 40
Drought, increase in oil prices.

Debt ‘completion point’ delayed, as government is criticized for the lack of speed of the privatization of the public industries, such as Malawi Telecom.


HDI: 147
Life expectancy: 54

Debt relief completion point delayed due to the slowness of privatization. IMF and World Bank are demanding faster privatization of all public sectors, including water, telecommunications and electricity.


HDI: 104
Life expectancy: 66
Drought. Economic crisis due to collapse in world coffee prices, and dependence on the US.

Delay in debt relief due to delays in privatization of the public sector, banking sector and public administration. IMF and World Bank
Demand faster privatization of electricity and reform of the civil service, cuts in public wages (result: government limits teachers' salary increase).

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