9:  Exploitation on Tap

Why is Britain using its aid money to persuade  South Africa to privatise its public services?

George Monbiot. Published in the Guardian 19th October 2004

No one could have accused the  Conservative government of  breaking its promise to bring back  Victorian values. When, in 1992, it  permitted private water companies to  install pre-paid meters in Birmingham,  the people who couldn't afford to  flush their toilets started defecating  into pots, which they then emptied  out of the windows of their tower  blocks.(1) It made one quite nostalgic.

The meters were ruled illegal in 1998,  on the grounds that they deprived the  poor of their most important  resource.(2) So it goes without saying  that the model has now been exported  to two of the world's poorest urban  communities.

Some African countries are so short  of money that delivering clean water  to everyone is almost impossible. But  not South Africa. In purchasing power  terms, it is the world's 21st biggest  economy.(3) It is also one of the most  unequal. It could afford to provide  everyone with sufficient water, as long  as it was prepared to sting the rich  and subsidise the poor. But that is a  "non-market policy", and therefore  out of bounds.

The problem for any government  which attempts to run its services on  free market principles is that some  people cannot afford to pay. This  means that you must send men to  their homes to cut them off. In South  Africa, where people are aware of  their rights, that means confrontations  and riots. So Johannesburg City  Council, which has set up a public- private partnership with the British  firm Northumbrian Water and its  French parent Suez, has devised an  easier way to do it: rather than  disconnect people, you force them to  disconnect themselves. Over the past  year, the council has been installing  pre-paid water meters in the two  poorest districts of Johannesburg:  Orange Farm and Phiri. It has chosen  them for the obvious reason that they  contain the largest proportion of  people who can't pay.

It does so in full knowledge of the  consequences. Prepaid meters were  first installed in Madlebe, in KwaZulu  Natal, in 2000. Those who had no  money had to draw their water from  the rivers. The inevitable outbreak of  cholera infected over 100,000 people,  and killed 260.(4) The meter scheme  was dropped.

Today, a full scale insurrection is  brewing in Phiri. Last week the  residents blockaded the main road  through Soweto. They have been  ripping up the pipes and fighting with  the workmen. The old anti-apartheid  activists have now turned on the  ANC.

To understand what is happening in  South Africa, you must first under- stand the role of its biggest foreign  investor, the United Kingdom. So let  me take you back to the days of  Victorian values, and the visit to  South Africa in 1996 of the Chancellor of the Exchequer, Kenneth  Clarke. Trade missions are normally  led by junior trade ministers. But  South Africa had a new government,  which wanted to invest heavily, but  whose leaders had no prior experience  of running a country. It was rich,  naive and ready to be led by the nose.

"Privatisation has been at the very  heart of our public sector reforms in  Britain," Clarke explained before he  went, "Can what we have done here in  the UK be exported to South Africa?  I would argue definitely yes ... British  business can help. They have an  unrivalled wealth of experience in  privatisation, private finance and all  types of public sector reform ... The  real beneficiaries of reform will not be  the politicians or company share- holders but the ordinary people. ... In  this way, Britain can share in the  bright future that beckons for South  Africa."(5)

South Africa is too big simply to be  told what to do. Foreign governments  can't just march in there with instructions as they do in Zambia or Mozambique. But since apartheid fell, the  World Bank, the IMF, the UK and the  US have been flooding the country  with advisors and consultants. In  1996, the year of Clarke's visit, the  policy paid off, when the government  devised something called the Growth,  Employment and Redistribution  Strategy. It's widely seen as a self- imposed structural adjustment programme: it does everything the  powerful countries wanted, while  creating the impression that it was all  South Africa's idea. And at the heart  of it is the notion that "market  disciplines" will help the poor to  escape from poverty.

The corporations loved it. KPMG told  its clients that if they went to South  Africa, they'd "find a major business  opportunity about to burst forth in a  country where there is a lot of good  will towards UK".(6) The International  Project Finance Association reported  that UK businesses "now have the  opportunity to export their public- private partnership know-how and  expertise ... We are world leaders  within this field and must now  capitalise on the various opportunities  that exist abroad".(7)

The Labour government took South  African civil servants on a tour of  privately-financed British hospitals,  and took the private financiers on a  tour of South Africa. The South  African government, unaware that  Britain's private finance initiative rests  upon nine separate kinds of public  fraud and false accounting,(8) began  commissioning its new hospitals and  prisons by the same means and from  the same British companies. Now,  suckered again by a new round of  trade fairs and ministerial visits, it has  begun to permit foreign companies to  move in on its essential public services. Making a bed for them requires  "cost recovery" and "marketisation",  which is why pre-paid meters are now  being imposed upon the people of  Phiri and Orange Farm.

The agency keeping the South African  government on track is Britain's  Department for International Development (DFID). This year it is giving  6.3 million to the Adam Smith  Institute - the ultra-rightwing privatisation lobby group - for "public sector  reform" in South Africa.(9) Staggeringly, the Institute has been given its  own budget - 5m of British aid  money - to disburse as it pleases.(10) By  this means, DFID can generate all the  support it likes for privatisation and  public-private partnerships, while  avoiding direct responsibility for the  decisions the institute makes.

DFID is plainly breaking the law. The  International Development Act  forbids it from spending money for  any purpose other than the elimination  of poverty. It might also have broken  the rules forbidding it to link aid  money to deals for specific British  businesses. DFID funds or has  recently funded (it has so far been  unable to tell me whether or not the  scheme is still current) something  called the "British Investment in  South Africa Promotion Scheme",  which promotes "business-to-business  links" between companies in the UK  and companies in South Africa.(11)  What this is doing inside a foreign aid  department, no one can say.

I am not suggesting that DFID has  told Johannesburg council "thou shalt  strike a public-private partnership with  a British company, and make sure that  it is profitable for that company by  forcing everyone to pay the full price  for their water, regardless of their  ability to do so." I am suggesting that  it is creating a policy environment  which encourages that outcome. And  it is doing so with money allocated for  something called foreign aid. Is there  anyone out there who thinks this is  how it should be spent?


1. Eg Ian Gregory, 2nd September 1992. Cut  off from their Element. The Guardian.

2. Law Report, 6th March 1998. Automatic  suspension of water supply unlawful. The  Times; Roland Gribben, 21st February 1998.  Councils win water pre-payment battle. The  Daily Telegraph.

3. The Economist, 2003. Pocket World in  Figures. Profile Books, London.

4. Eg David Hall, Kate Bayliss, and Emanuele  Lobina, June 2002. Water privatisation in  Africa. Presented at Municipal Services Project  Conference, Witswatersrand University, Johannesburg  May 2002. Public Services International Research  Unit, University of Greenwich.

5. HM Treasury News Release, 10 July 1996.  Clarke Says British Business Can Help South  Africa. Speech to the CBI Invest in South  Africa Day.

6. Bill Davidson, KPMG. 11th March 1999.  PFI/PPP for South Africa: Opportunities  through Partnership. http://

7. Geoff Haley, Chairman, UK branch of the  International Project Finance Association, 1st  August 2000. Exporting and Expanding the  UK Private Finance Initiative: A Review of  Public Private Partnerships. IPFA.

8. George Monbiot, 18th June 2002. A Chal- lenge to the Chancellor. The Guardian. Also  available at archives/2002/06/18/a-challenge-to-the-chancellor

9. Hilary Benn, 26th January 2004. Parliamentary answer, Hansard column 15W. [146938] cm040126/text/40126w03.htm

10. Derek Warren, press spokesman, DFID,  18th October 2004, pers comm.

11. Eg UK Trade and Investment, viewed 18th  October 2004. Investment Overseas. overseas_investment/overview/ introduction.shtml; Clare Short, 15th December  1997. Parliamentary answer, Hansard column 26  [20478].

http://www.parliament.the-stationery- vo971215/text/71215w07.htm

Index                                                                                                        Next