Is privatisation the answer to the woes of the CWA?

Public sector and the ‘public good’

Given the required autonomy and putting a stop to excessive political nominations of incompetents and recalcitrants in parastatal bodies, there’s a good chance public sector bodies like the CWA may regain the efficiency with which a generation past of competent public servants made them shine up

The statement has recently been made in public that the Central Water Authority (CWA) would be heading for some sort of privatisation. The reason for this possible move hasn’t been stated explicitly. But one should expect that the classic argument will be made to support any such decision, to the effect that privatisation will bring more efficiency to the upkeep and maintenance of this public sector institution.

It is generally assumed that the CWA is not and hasn’t been in the best of financial health for some time. The service itself hasn’t been to the expectation of many of its clients in different parts of the country at different times. While water supply hasn’t been as drastically rationed out recently as in some past years, which experienced sustained deficits in terms of rainfall, the overall modernisation of the activity remains to be seen.

Due to political pressures, several past governments and the current one have resisted the correct pricing of water to customers. Consequently, the CWA hasn’t been in a position to generate the financial surpluses and skills it requires to be able to revamp its infrastructure, gain efficiency, modernize itself and prepare for future increase in the demand for water.

The necessity to be financially and economically viable being an imperative for any economic unit – in the public sector or the private sector — governments need not have stood in the way of the CWA when it came to charging for water the appropriate amounts called for in order for it to remain in business and keep up its infrastructure with the necessary investments. Nor should they, for having lacked the political courage to do so, now want to shield themselves from the inevitable by “privatising” the CWA, passing the buck to the “private sector” for increases that would anyway have to be introduced in the pricing of water.

Water is not needed solely for domestic or industrial use. Mauritius has an agricultural sector which draws on water supply, i.e., for irrigation, to keep, for example, our local vegetable market well supplied. Thank God our small vegetable planters keep shielding us from having to import at much higher prices and that, too, not always with the freshness with which they are supplying our needs.

Besides, the capricious climate situation – not only in Mauritius – calls for foresight in the management of our water resources. Should Mauritius one day come to the realization that it will need to depend as much as possible on its local food production for reasons of security, it will no doubt consolidate its water sector much more firmly in the public interest than this has been the case so far.

The apt public policies are essential in this regard. They can mitigate against inflating domestic prices of what is locally produced. On top of that, the CWA will do best if it has the autonomy and professionalism it needs to reinvent itself according to national exigencies. The quality of management makes the whole difference in this.

A number of countries are facing hard times due to the dearth of water for both domestic use and agricultural irrigation, which fortunately is not our lot. At least, so far. But it is not too far back when we seemed to be hitting limits of severe shortage. Insinuations were then made that water from rivulets/canals feeding Mare aux Vacoas, the largest reservoir of the country, was perhaps being diverted away for private use. Water from Mare Longue had to be fed into the Mare aux Vacoas to fill it up. This risk is ever present.

Given the risk, is privatisation the answer to the woes of the CWA? No, for two reasons at least.

First, water management is eminently of the public domain. It never feels good that a widely inputted ‘public good’, such as water, is to be sold to the public by a private enterprise despite the fact that bottled water sold at exorbitant prices by an oligopolistic local market structure – from which the CWA is absent — has become a craze among certain classes of the population. Like oxygen, water is generally considered a life-sustaining ‘public good’ not to be tainted by exaggerations of profit-making and marketing unless a specific situation requires it to be produced in limited quantities for special needs and marketed accordingly. A ‘public good’ with wide economic implications, such as water, is, according to this view, better dispensed by the public sector.

Certain people even consider water to be ‘sacred’, brought to earth from the gods just like the fire which Prometheus is said to have stolen from the gods and brought to the mortals.

The second reason our water sector need not be privatised is an economic reason. The proposal for “privatising” is probably coming now because of a chaotic situation over there needing to be put in order: e.g., inefficient staffing, poor piping infrastructure, want of a clear forward plan for water sufficiency and, most probably, an unsound financial condition due to all of this. No one would sell an enterprise in a poor economic condition unless at the risk of getting a throw-away price for it. Government would not be making a good deal in the circumstances. So, it would be better to shape it up and keep it in the public domain.

This is not the course of action that international financial institutions normally recommend to governments. It doesn’t make sense for the present owner – the government – to wilfully sell off for a trivial amount a public asset currently in poor shape due to political mismanagement over the years. A better course of action would be to eliminate political interferences, improve it to state-of-the-art and retain it in the public sector.

There is a myth that the private sector is far better at managing economic activities efficiently, compared to public sector bodies. To cite a contrarian example: Air Mauritius was raised by the public sector; had it not been for inflated egos and inept political interferences through weird appointments at its commanding heights, the company would have faced far less difficulties and would have ridden out of the storms visiting the aviation industry worldwide. There are numerous examples of excellent grooming of economic activities in the public sector provided they are allowed to be run professionally.

By contrast, as business cycles show, private sectors end up frequently in catastrophes greater than the public sector entities: one just has to recall how the much-maligned state itself had to pick up the pieces and clear the whole mess left behind by the most renowned of private sector names in the aftermath of the banking crisis of 2008 in the freest of free markets in the West. The free market is not that free after all.

Given the required autonomy and putting a stop to excessive political nominations of incompetents and recalcitrants in parastatal bodies, there’s a good chance public sector bodies like the CWA may regain the efficiency with which a generation past of competent public servants made them shine up, above the whole lot.

 

* Published in print edition on 13 March 2015

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