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Privatization - solution to poverty, or another burden?

by Derek MacCuish

Prime Minister Chrétien was off to Africa this April, to talk about poverty, economic development and the “G-8 Africa Action Plan.” The trip included a visit to South Africa , which has just been through the worst cholera epidemic in its history. One of the main causes was the privatization of water.

Privatization is a big issue in most Third World countries. Investors say it brings efficiency. Opponents say it hurts the poor. Whatever one believes, the poor have no say in the matter.

The South Africa tragedy began when people in poor rural areas of KwaZulu-Natal lost access to the safe water they had enjoyed even under the apartheid regime. Last year the water system was privatized. For the first time, poor communities were charged fees for the water they used. The new corporate owners shut off the taps when they couldn’t collect.

Cholera is a disease of the poor, usually contracted by contact with contaminated water. Victims dehydrate as their bodies rapidly empty themselves. In South Africa , 150,000 people were infected and more than 260 died in the eighteen months of this outbreak.

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. They are telling impoverished countries 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, transport and water companies.

Privatization is also a condition debt relief. Heavily indebted poor countries throughout Africa and Central America have been hit hard by drought and falling food crops this year, but they aren’t getting the debt relief they’ve 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 four 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 aren’t 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 nonpayment.

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 aren’t profitable anymore. It’s 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 can’t 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?

Hunger rising in Malawi, Zambia

The past year ravaged Sub-Saharan Africa with flood and drought, hitting Malawi and Zambia especially hard with the worst food shortage in fifty years. Currently, over three quarters of the population is without food stocks in countries that are already economically fragile and unable to provide sufficient health care and education for their citizens, let alone lose their only means of subsistence to adverse weather conditions. Both countries are waiting for debt relief from the stalled IMF/World Bank program.

By Hayley Coristine

In February, a young Malawian mother attempted to sell three of her children into slavery to earn money to feed her two other children. Her sixth and youngest child died earlier that week after starving to death. She explained her situation with utmost lucidity: “I cannot provide food for all my children; they will certainly die if I keep them all. If I sell the oldest ones who are strong enough to work, I will have money to feed my two youngest and perhaps they will have a better chance of surviving.

Relief volunteers gave the woman food to nourish all five of her children, yet the current situation enveloping Malawi is leading to an environment where similar incidents are not only possible but certain. Ranked 151^st of 162 countries on the UNDP Human Development Index, Malawi ’s average life expectancy is 37 years. One quarter of children do not live to see their fifth birthday; 48% of those under five are malnourished.

Volatile weather conditions destroy food stocks

The destruction comes not only to crops but also to citizens themselves as they become victims of a disaster that will continue to wreak havoc on all aspects of their existence in poverty. Despite favourable spending on health and education, over 12 primary schools in the capital of Lilongwe closed in February as parents argued that keeping the schools open put their children’s lives at risk.

In February, the government was unable to deny the situation any longer. A great number of people began exhibiting signs of starvation, including swollen stomachs and feet; the more significant cases resulting in death. By the end of the month, President Bakili Muluzi announced that the country was dealing with its worst crisis in 50 years, a crisis that left 70% of Malawi ’s population in danger of starvation. In January, 100 people died from starvation as a result of gross maize shortages; at the end of February, over 300 deaths were reported as people starved to death while in search of food in the streets.

The massive number of deaths comes after a heavy rainy season in 2001 that washed away a large amount of maize, millet and rice crops, which serve as the main source of subsistence for many Africans. Following the floods came a shortage of rain in 2002, drying up much of the remaining grain which is still a few months away from being harvested. Even as rain begins to fall in different regions of the nation, the crops are unsalvageable as the rain does nothing but rot the wilted grain. The rest of the crops are too dry to be rescued.

Maize prices continue to rise while food stocks dwindle

These weather patterns have proved to be deadly as Malawi ’s maize stocks are already dangerously low. Malawi depends heavily on agriculture land, which serves as its most important natural resource. Yet the cycle of drought and flooding, as well as the rapidly growing population, contribute to a constant need for relief food. As maize becomes increasingly difficult to obtain, the price is on a steady rise- up 340% since the beginning of 2001- making it difficult, if not impossible, for people to afford basic subsistence.

With over 65% of Malawi ’s population living below the poverty line, as the price of basic subsistence rises, more and more people rely on relief maize sold through the Agricultural Development and Marketing Corporation (ADMARC), a government-run agency. ADMARC maize sells for significantly less than maize at local markets, and upon each delivery, allows each person to buy up to 10 kg of maize. Yet even at this lowered price, families that can afford maize can often only afford 2 to 4 kgs together. ADMARC maize, however, lasts only one to two days after delivery due to high demand, and the agency must frequently turn away people who have been waiting in line for days. This often means people must go without food for weeks, as the alternative requires buying maize from private businesses who import the grain in large quantities from Tanzania and South Africa , then resell it in small amounts at inflated prices up to 600% of the original value. Currently, 80% of Malawi’s 10 million people are without food stocks, and with an average yearly income of US $170, the drastic increase in price means Malawians are awaiting a slow and torturous end as they starve to death.

Since many families cannot even afford the cheaper prices of ADMARC maize, let alone the highly inflated prices at greedy local markets, they have turned to this year’s meager—and still unripe— harvest for subsistence. Many people are eating green, immature maize in attempt to stay alive. Others are eating wild fruits, grass seeds and banana roots, some of which are poisonous, which creates a great danger for those who are starving and desperate for food. Even without the threat of early harvest, the remaining crops will only bring in 1.5 million metric tonnes of maize at best, far below the expected and greatly needed 2.2 million mt. Early harvest productions also means food stocks will be exhausted months earlier than usual which will lead to another food shortage in 2003, creating greater crisis for an already starving nation. Although the government banned the sale of green maize, farmers are harvesting their crops early in a desperate attempt to make some money.

The Government’s response

In early 2002, the Malawian government attempted to assuage starvation with food and other donations. As of early March, it had delivered 156.25 metric tonnes of maize to flood victims, as well as 21.85 mt of beans, blankets, plastic pails, roofing sheets and pots. Yet upon learning the news of the government’s relief attempts, many people in harder-hit rural areas rushed to populated, urban parts of the nation in order to receive donations. Both the large concentration of people and the shift in diet to, literally, whatever is available, have proved to be to fatal as poor sanitation is a breeding ground for disease and infection. The result of such a large number of rural citizens moving to urban areas induced outbreaks of cholera, which have primarily broken out in central Malawi . At least 161 Malawians have already died of cholera; there are over 9000 more people who have been afflicted by the disease. Currently, case fatality is over 2% and health authorities say the figure could be much worse, as there are many unreported cases.

After acknowledging the crisis, which has affected more than half the nation’s crops, the government appealed for US $21.6 million in order to avert greater disaster. Yet so far little over US $1.5 million has been secured, leaving Malawians in desperate need of aid as they face a future where uncertainty rules.

Zambia

In 2001, torrential rains hit Zambia , drowning the majority of the country’s crops; prolonged drought followed in 2002, targeting maize crops in southern regions of the country. The nation’s people have stood by, helpless, as their main source of food dries up, wilting prematurely. Zambia’s food shortage will leave 1.3 million people without sufficient food and will continue until at least early 2003, past the next harvesting season. Despite the desperate need for relief food, Zambia has seen a slow response to the World Food Program’s (WFP) donor relief program this year, mainly because of presidential elections.

Even for those who can afford it, maize is becoming ever more difficult to obtain as the country’s currency, the kwacha, is steadily declining in value. This has provoked great concern among importers, especially millers, as businesses desperately trying to import maize to cover the deficit have to deal with the lack of foreign exchange.

Earlier in 2002, the Zambian government hoped to avert disaster and encourage a steady flow of imported maize by waiving customs duties for 19 maize producing mills. The mills took advantage of the situation and began hoarding maize stock in order to drive prices up. Such actions mean that Zambians not only have considerable difficulties in obtaining maize, but millers’ unscrupulous behavior meant the price of the necessary grain has exploded by 600%. The Zambian government responded to the actions by instituting a committee of lawyers to identify and fine millers guilty of overpricing their maize stock, and revoking the trading license of those in question.

The government ordered 42 000 million metric tonnes of maize from South Africa, but so far only 12 000 million metric tonnes has arrived. Even in mid-February, the Integrated Regional Information Networks (IRIN) confirmed that maize was still in short supply on the market and was selling for about 45 000 kwatcha (US$11), up from 18 000 kwatcha only 4 months ago. In addition to the problems surrounding the regulation of maize, physical damages have taken an equal toll on international transportation routes as poor road conditions have left many roads impassable. This leaves already starving people to walk long distances to obtain food.

While such meteorological disasters might not seem out of the ordinary for Sub-Saharan African countries, as disasters continue to occur in Malawi and Zambia, the two nations are pushed further into a state of disrepair. Both are fighting a continued struggle to repay old debts before they can even attempt to begin thinking about fully focusing on the welfare of their citizens. Yet the two factors are interconnected, as debt repayments continue to take away a substantial amount of money needed to pay for better health care and education. Meanwhile, the magnitude of the crisis is felt with each death and is mirrored in each person who cannot afford to live their life properly, who cannot afford to live properly as a human being in their own country.

Hayley Coristine is a volunteer with the Social Justice Committee