A Reasoned and Loud “No” to Privatization of Public Utilities

The present elected Members of Parliament have no popular mandate to proceed with such a transformative decision as the privatization of the Central Water Authority

A communique following a Cabinet meeting in February last stated that this government has decided to adopt the recommendations of a World Bank report regarding the “reform” of the Central Water Authority. The said report has unsurprisingly suggested that the CWA should engage with a private company as a “strategic partner” to ensure a more efficient distribution of water to the country.

In spite of the obvious precautions taken in the formulation of the proposed solution there is no escaping the fact that what is being proposed is a “privatization” of water distribution in the country – no private partner will enter into such a deal if it does not have the “right” to set profit maximization prices at some point in time.

Whatever the rhetoric the fact is that we are in for the commoditization of water in a market determined environment. This constitutes the dividing line between pro-privatization and anti-privatization campaigners of water networks. Whereas the former, under the usual guise of the benefits of unfettered free markets, have no qualms with such a situation, the latter consider that WATER, being a national resource of vital importance to the well-being of a nation, cannot under any circumstances be privatized and managed under purely market forces.

This is indeed a political and moral stand and therefore seeks solutions for water distribution and accessibility which extend beyond the reductionist and abstract concepts of the free play of market forces.

Water is universally considered as a scarce resource which could lie at the heart of many a geo-political crisis in the near future. In the context of the rise of “sustainable” development, which many feign to ignore, is the very antithesis of unfettered markets (look at Donald Trump’s recent decision to reverse the Obama actions to restrict coal production in the United States), water distribution and consumption simply cannot be and should not be “commoditized/privatized”.

The democratic/political dimension

The issue of privatization generally and privatization of the public utilities was never included in the Manifesto of the Alliance Lepep when it went campaigning to solicit the votes of the electorate during the last elections. It therefore has not been sanctioned either by the parties in that Alliance or by the presently elected members of Parliament and even less by the people of Mauritius through their votes.

The gist of this article is to argue that the question of privatization is a critical issue – not of “economic efficiency” but of “political economy” for any country and even more so for a country with the political and economic history like Mauritius. At the risk of being too simplistic for the initiated reader, it may be interesting to spell out the difference between the two at this point:

Whereas economists tend to view social and economic changes and the resulting institutional framework simply as being the result of abstract and impersonal market forces (Adam Smith’s often abused concept of the invisible hand), the political economist is intent on shedding light on the interests at play, the resulting coalitions and the frequent capture of policy by ruling elites.

The present saga started with the above-mentioned communique following a Cabinet meeting.The rationale for justifying the proposed privatization relies heavily on the approach of the World Bank whose mantras of greater efficiency are being cited as the principal justification for this solution to the current operational “inefficiencies” of the Central Water Authority.

There is no doubt that for a long time the “corporatized” CWA has suffered from a bloated bureaucracy, incessant political interference in its operational decision-making and a seeming lack of a clear “mission statement” (public service?).

The “pre-packaged” one-size-fits-all solutions as proposed by such institutions as the World Bank do not offer any form of guarantee that such practices shall somehow cease once the proposed privatization is implemented. Indeed one can argue therefore that the biggest risk and, in our view, most probable outcome, is that in the local socio-political context one finds oneself with the persistence of the same “inefficiencies” with the excessive costs being borne by the consumers indiscriminately.

The technical dimension

Within the context of a liberal market economy, the case for privatization usually rests on the argument that through the free play of “market forces” of competition, enterprises are forced to adopt lean and efficient operational methods under the threat of hostile or friendly “take over” by competing firms. As a consequence, the argument goes the ultimate consumer benefits from the unrelenting competition in terms of price and quality of products brought to the market.

The point in the proposed privatization of a public infrastructure network such as the CWA is that none of the above presumed advantageous conditions exist. The presently public-owned network is a MONOPOLY, and there is absolutely no possibility that a parallel competing network could survive in this small market. We are therefore simply witnessing the transfer of ownership from the public to the private sector on the assumed conviction that the private sector will run the operation more efficiently. In the absence of a competitive setting this stand is just a profession of faith and nothing else.

Are we, in the event, expecting the future private operators to surrender their “profit-maximization” motives in the name of service to the community? To supply water to the far-off and inaccessible regions generally populated by the poorer sections of the community for whom the costs become unaffordable?

Surely, it can be argued, the CEB and CWA have quite a few elements of “business” surrounding them. It remains, however, that the core features which distinguish such public access facilities in a small island economy like ours is that they cannot ever be exposed to a “competitive” market and will under every configuration remain Natural Monopolies. What distinguishes them from other businesses is their vital importance to the protection of community rights and welfare. Indeed some authors have argued that such critical institutions contribute to the maintenance of open markets and individual freedom in society at large.

Conclusion

The issue of privatization is obviously one which cuts across party lines. The present elected Members of Parliament have no popular mandate to proceed with such a transformative decision as the privatization of the Central Water Authority. In the name of democracy, could we envisage an occasion on which members of Parliament would be invited to vote on the issue, free of any whip? That would certainly enrich our democratic process by allowing parliamentarians to express their views.

Finally, it is perhaps relevant to conclude with a question to those ardent supporters of privatization of the CWA:

are we envisaging that this ultimate anachronism, constituted by holders of Water Rights, would soon be negotiating with the future private operator about the price at which they will sell “their” water to this newcomer?

That would indeed be a perfectly “rational” demand based on well understood “self-interest”- the ultimate hallmark of perfect market principles.

 

*  Published in print edition on 13 October

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