Water privatisation: looking at Mali

Throughout the world, there are various approaches towards managing the provision of water. Since the 1990s, private sector participation has been heavily promoted by the IMF and World Bank to reduce the burden of providing water on the state. Like everything, privatisation comes with its costs and benefits; in this post I will explore the success of the privatisation of the water supply in Mali.

Privatisation entails a huge variety of ‘contractual arrangements between the government and the private sector’ (Bayliss 2003). These may include:

• management contracts – agreement between owner and a company that will oversee the project operating the enterprise for a fixed payment
• leases – government owns assets and private actor operates these; government is responsible for investing in infrastructure
• concessions – distinction from leases is obscure, difference is usually that the private investor is responsible for investing in infrastructure
• divestiture – partial or full sale of a unit to another party (i.e. transfer of ownership of water infrastructure)

Mali, a country I have focused on previously, is located in Western Africa. According to Water Aid, 3.7 million people in the country do not have access to safe water – about 22% of the population. The water supply in main cities falls under the responsibility of Energie du Mali (EDM), traditionally a public enterprise. Regulation, sector support and policy are carried out by the central government (Estache and Grifell-Tatje 2012). With an extremely low GDP of $36 billion in 2015, foreign direct investment (FDI) can have huge macroeconomic impacts on the country (CIA World Factbook).

Map of Mali and surrounding countries. Source: Michigan State University Museum 

In recent decades, Mali has tried to augment private sector participation in water provision. In 2000 the Malian government transferred operations of the main electricity and water company EDM to the French group Saur, signing a 20 year lease with the intention of improving accessibility and performance in provision (both technical and financial). The result was a rise in output quantity; total water supplied and sold increased by over 40% in the period 2001-04 (from 30.1 to 43.2 million metres cubed). About half of this went to residential subscribers, two fifths to industry and the rest to public fountains. In real terms, consumers actually faced a reduction in prices by 11.5% (Estache and Grifell-Tatje 2012).

These demonstrate some clear benefits for consumers, but does that mean all consumers? While revenues increased by over a third, practically all income came from industry and residential subscribers. In Bamako, the capital, 13% of water was sold in public fountains, yet in many other urban areas, less than 5% of water went to these (Estache andGrifell-Tatje 2012). Public fountains are a key source of safe water for the poorest who lack the ability to pay for a private tap or for the costly water infrastructure. The fact that rural areas (which are difficult and expensive for any enterprise or operator to connect for water delivery) tend to be home to the poorest means that there is virtually no financial incentive to increase access to clean water for Mali’s poor.

Other than spatial and socio-economic disparities in distribution, there were other issues with the privatisation of water in Mali. In theory, privatisation would reduce the economic burden of supplying water on the state. However, the Malian government gave the private actor subsidies to avoid a significant increase of 26% in water and electricity prices (that would make these unaffordable for much of the population), meaning this service was still a drain for government funds (Mainguy and Jeppesen 2009). From 2001-03, one-off subsidies of over one billion CFA francs (in real terms, i.e. not taking into account inflation) were given to EDM.

Post-2000, EDM was regulated by the Regulation Commission of Water and Energy (CREE), the objective of which is to protect consumer interest and coordinate private sector participation. According to Estache andGrifell-Tatje (2012), the ‘insistence of the regulator to collect data needed fuelled the tension between the regulator and the operator and contributed to end the privatisation experience’. The lease, initially signed for 20 years, lasted a quarter of its life. ‘Multiple mistakes and inaccuracies’ in terms of tariffs, price indices and valuations were recognised later on, and were also blamed for the failure of privatisation in the country. After Saur withdrew from the lease contract, ownership of EDM was split, with the State of Mali taking the highest percentage, followed by Saur.

As can be observed from Mali’s experience, private sector participation is complex and can face an array of issues, both economic and social. The impacts of privatisation of water provision are beneficial for some people in some areas, but not others.  In countries where privatisation has been unsuccessful in serving the general population or more isolated communities, there has been much resentment towards it. In Mali, anti-privatisation protests that broke out in Bamako left one dead and more injured in 2008 (IRIN News 2013). One thing seems clear: if the government cannot provide access to piped clean water for rural marginalised communities because of limited financial capacity and incentives, a private actor that is profit-oriented is most likely not the solution — providing water for the poorest is not seen as financially viable, let alone profitable.