Privatisation of CWA: ‘Private firms should not be allowed to milch the cow and go away’

Prem Saddul – Associate Professor & Former Chairman CWA

 


Water is a public good. The very essence of Water Rights is that different sectors must use it but NOT own it’


 

Prem Saddul, Associate Professor & Former Chairman CWA, is well-placed to discuss several of the issues currently being articulated publicly by concerned stakeholders, namely consumer groups, social activists and trade unionists among others. With the government maintaining that it is going ahead for private sector induction into the sector, Prem Saddul clarifies the distinction between privatisation and strategic partnership, and spells out the conditions under which any such formula must function. He addresses the issues of pricing, technical capacity and management, human resources and suggests the direction in which we must proceed.

 * The idea of having a foreign strategic partner for the CWA to help bolster its performance and capacity has been canvassed for a number of years. There have also been some debates about its eventual privatisation. But it appears the present government is now going forward for its outright privatisation. Are you comfortable with the idea of having a private sector profit-motivated company taking control over the supply of water, which most economists agree is a public good?

You are right to say that this issue has been raised for a number of years. During my period of chairmanship at the CWA, a lot had been said, discussed and reflected upon on such concepts as privatisation, Public-Private Partnership, and on the not-well-understood concept “affermage”, a term which many holding high level positions at the CWA did not understand clearly.

Many reports had been tabled regarding the Water Sector Reform for Mauritius. We have heard of the World Bank Report of 2008, the National Water Policy of 2010, and the voluminous Master Plan for Development of the Water Resources of Mauritius of October 2012, the Water Sector Reform of Mauritius from the Singapore Water Enterprise and from CH2M HILL. There were also delegations from other countries that came forward with all sorts of ideas and proposals.

In November 2014, a French firm was requested to make an assessment of the situation at the CWA with a view to taking over the administration of the water sector of Mauritius. The delegation did meet me, but I was not convinced with their “motives”. In the meantime, general elections were organised and the Water Sector Reform was not then on the agenda.

* Would a private supplier would do a better job, or would you say, based on your exposure to the water supply sector during the time you had been in the Chair of the CWA, that the latter institution is in need of a strategic partner instead?

For me, Privatisation is not the issue and is not the answer to address the problems existing at the CWA. I am against privatisation of the CWA in the real sense of the concept. However, based on the present situation, a situation which we must not place on the back of the CWA , but on a certain lack of goodwill and support from various governments, I would rather prefer and support a win-win Private-Public Strategic Partnership venture for a given period of time. This Private-Public Partnership should be like “un mariage sous le régime de séparation de biens et non un mariage sous la communauté des biens”. The Government and the CWA will retain all the assets. Only the administrative aspects should be taken over by the Private Partner.

I am confident that such a strategic partnership would bring in new technology, inject more capital and create a better mindset for a better administration of our water sector.

* What ails the water supply sector in Mauritius, according to you? Bad management, the prevailing low water pricing, political interference in the running of the CWA? What else?

There are many inter-related reasons. Bad management and planning in the light of the uncertainties related to climate change, lack of political will, unnecessary delay in signing of loan agreements between the CWA and the Ministry of Finance (2014) are some of them. There is also that incapacity to balance the demand-supply equation, lack of appropriate technology, know-how and appropriate mindset.

At the CWA, there is a quantity of quality as far as human resources with the right profile are concerned. But the problem is that not enough has been done in the field of capacity building, training and exchange of ideas with overseas water sector operators. If they were given the tools, the CWA people would have done a better job, but as the former General Manager used to say “Governement attache nous la mains ek lipieds… et zotte dire nous nager”… but somehow the CWA did manage to keep its head above water.

* The view has been expressed that except for the Midlands Dam, which has taken a long time in the making, the implementation of sound projects to increase storage capacity in terms of reservoirs and other dams has not obtained the degree of priority it should have received. What is your personal view on this matter?

Mauritius is not water stressed. We receive a good annual rainfall of 3,900 M3 per person per year. Approximately 90% of that rain water is lost. We are not doing enough to catch the rain as it falls. Every year more than 100,000 million cubic meters of rain water goes to the sea via our waterways.

Therefore, priority must be given to increase our storage capacity by creating more medium-sized dams, connect and extract more water from rivers for treatment and distribution. One project which has not gone far and which, in my assessment, is crucial, is “Water Rights”. Here again, the will of various governments has been seriously lacking. Water is a public good. The very essence of Water Rights is that different sectors must use it but NOT own it — as it is the case in certain areas of the island.

* Would you say that the merger of the Central Water Authority and the Water Resources Unit (WRU) of the Ministry of Energy and Public Utilities would have created the necessary synergies to produce the best outcomes in this vital sector?

That was the central idea behind the coming of the Singaporeans. Much time, energy and money were spent on the idea of creating a Mauritius Water Authority, which would have merged the CWA, the WRU and the Irrigation Authority. The problem was that Government favoured that mega Institution to be managed by an overseas firm. The Singapore Cooperation Enterprise started to point its nose. Is it not a Private-Public Sector partnership mode? There were so many issues at stake that the idea died slowly.

* Regarding the prevailing low water pricing – apparently at an average of Rs 5.00 per cubic meter, it is less than one cent per litre –, there may be political reasons why water could not have been priced at the appropriate level to make the sector more efficient. Is this what’s really preventing the CWA from generating sufficient surpluses to make for the required capital investments or for the future viability of projects undertaken in the water sector?

Providing up to 6M3 of potable water free to around 65,000 poor and needy customers constitutes a commendable social responsibility, and this will ensure that the most vulnerable have access to potable water as a basic human right.

However, cost recovery is essential for all infrastructural developments and for ensuring the financial sustainability of operations. Therefore, all beneficiaries must pay an appropriate amount towards the cost of providing services.

Water tariff is Mauritius is the lowest compared to any country in Africa. Water tariff remained stagnant from 2002- 2011 due to lack of political will. The last water tariff rise was in January 2012 and in the meantime inflation rate has been in the range of 4 to 5% per year.

For me, a rise in water tariff is a must. In fact, it should have happened every year at a rate acceptable to the public, instead of waiting for 8 to 10 years and request for a 100% or 125% rise.

The CWA spends Rs 15 to treat and distribute 1M3 of water for consumption and sells it at Rs 4.50 M3 to consumers consuming less than 10 M3. In other words, it sells 1 litre of treated potable water of world standard at 0.6 cent. The same capacity is sold at Rs18 by private bottlers…that makes around 3,600 times that amount and people do buy bottled water without grumbling.

* Another issue that has been canvassed in the media as well as in the CWA itself is the leakage of nearly half of the water pumped into our aged piping system which is said to be at the heart of our water problem. That would entail the replacement of the piping system where necessary – to the tune of around several billions of rupees. If the aged piping system is really at the heart of our water problem, how come we are getting water at the pressure level at which it comes to our taps?

The greatest weakness attributed to the CWA is the high percentage of non-revenue water (40% of treated water goes to waste) and of course the attitude of doing-business-as-usual at the CWA. A sustained programme of changing old pipes has been on since the creation of the CWA. However, this capital expenditure is being done based on the financial capability of the institution.

Somewhere, we must break that vicious circle of producing potable water and sending them to perforated and an aged piping system.

Is it why a Strategic Partner is being sought to address those issues for a given period of time? We must not forget that a high percentage of consumers do receive water in their taps on a 24/7 mode.

* We do not understand the rationale of going for privatisation, that would presumably transfer the assets of the CWA lock, stock, and barrel and pass on the control of water supply to a foreign-owned profit-motivated company, while at the same time investing billions of rupees – public money — in the replacement of the existing piping system and many more millions into new water metres? Sounds fishy, isn’t it?

As I mentioned earlier, privatisation is not the appropriate term to use. People and more so, trade unionists will not accept that. The more acceptable mode of cooperation would be a CWA-Private Sector Strategic Partnership involving a water sector operator of international repute. Government must come forward with well-defined terms and conditions and, if in five years, the expected results are not achieved, the contract should be terminated. We would also advise Government to implement an acceptable tariff rise schedule for the different grades of consumers before any such partnership transaction is concluded and that no further tariff rise should be entertained. This would prevent any private firm from milching the cow and then go away.

* If we should go for privatisation, as the present government seems intent to do so, we presume there are specific steps required to complete the transaction, like the professional and independent valuation of the CWA’s assets, for example. How do we go about that as well as the other measures to put into operation to ensure the public interest is safeguarded?

This is a long procedure that may take time to implement. Everything must be done in transparency as water is becoming a “blue gold” and will be the issue for the 21st century. The terms and reference of any form of partnership must be clearly laid out with focus on addressing the current issue and more importantly prepare forecasts of future water requirements for the time horizons 2025 and 2050 covering all water usages – both potable and non potable. We need immediate and long term investments.

 


* Published in print edition on 20 April 2018

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