To be kept informed about events and site udpates, enter your email address and click on the arrow search
CPGB-ML Blog Hands off China Gallery (Flickr) Videos (YouTube) Radio (Soundcloud) Red Youth Lalkar Shop
Proletarian
Search Proletarian search

>>back to Proletarian index >>view printer-friendly version
Proletarian issue 18 (June 2007)
Tanzania’s water scandal
How ‘aid’ boosts imperialist superprofits
Imperialism is brutal, cynical, at times crude and at times clinical in the way that it extracts superprofits from the oppressed countries of the world. The story in recent years of the water supply and sewage system for Dar es Salaam, the capital of Tanzania, is just one example of imperialism’s ruthlessness masquerading under the guise of ‘aid‘.

The mask has slipped somewhat in response to the Tanzanian government’s refusal to accept the disgraceful treatment being foisted upon it, however. Having been forced to privatise the water system of Dar es Salaam, the government has cancelled the contract with British-based company Biwater after two years of grossly unsatisfactory delivery. British imperialism is attempting to keep the matter as far from the public eye as possible.

What is happening is that Biwater is suing the government of Tanzania for £25m, which it claims are lost potential profits. It is doing so in a court that belongs to the World Bank, called the International Centre for the Settlement of Investment Disputes (ICSID). This court, in which tribunals ‘arbitrate’, was set up by the World Bank and is based in Washington DC, which does not encourage faith in claims that it is independent.

Proceedings can be held in a variety of locations around the world. Biwater has insisted that this case is not heard anywhere on the continent of Africa, and has succeeded in ensuring that the tribunal instead takes place at the Permanent Court of Arbitration in The Hague. Biwater has also successfully opposed the Tanzanian government’s request that the proceedings are held in public. There is no mention on the ICSID’s website of what is currently happening.

So-called ‘debt relief’

In the 1990s, when its public debt was spiralling, Tanzania negotiated partial debt relief with the World Bank. But, when this relief came, it was dependent on conditions that included privatising the Dar es Salaam water supply and sewerage system. The World Bank stipulated a 10-year lease contract and the requirement that the private company increase charges to customers, ie, the residents in receipt of water supplies.

Part of the spurious rationale for this privatisation was supposedly ‘increasing efficiency through competition’. In fact, there was only one bidder for the contract – City Water, a subsidiary of Biwater, in which it formed a consortium with a German engineering company, Gauff Ingenieure. If it was going to get the ‘debt relief’, the Tanzanian government had little option but to accept.

One piece of ‘small print‘ in connection with the contract was that Tanzania accept investment rules enforceable by ICSID. The ICSID website states that recourse to its tribunals in entirely voluntary for all parties, but, once consent has been given, the ICSID tribunal ruling is final – there is no appeal, and governments are obliged to ensure that awards are enforced! Despite the claim that participation is voluntary, in practise, when consent is a prior condition of aid or debt relief, there is really no choice. In addition, companies can take governments to ICSID tribunal, but governments like that of Tanzania cannot sue companies!

Privatisation contract and failure to deliver

City Water was contracted to improve and update the water system in Dar es Salaam in 2003. Most of the finance for the project came from international agencies in the form of loans to the Government of Tanzania amounting to $140m (£75.5m). Biwater had to put in only $8.5m and was required to pay no taxes for the first five years.

The World Bank had put conditions on the contract so as to make it attractive to international companies, and so the ‘improvement‘ to be made to Dar es Salaam’s water system was only required to be delivered in the areas already receiving a piped water supply. The service area did not include the poorest neighbourhoods of Dar es Salaam, which did not have any piped water and already had to pay more to water vendors. Only 2 percent of project funds were allocated to non-governmental organisations (NGOs) to work in these neighbourhoods. The poorest 80 percent of the population were to benefit from only 2 percent of the funding.

And that is not all. In the event, Biwater failed to deposit any money in the fund that was supposed to finance the NGO’s paltry special projects in these areas!

City Water’s record in the area of Dar es Salaam that it was supposed to be improving was no better. By 2005, the whole project was well behind schedule. The company had done no work on improving the pipe infrastructure, it had not paid the Tanzanian government the lease fee and, instead of providing $8.5m towards the project, as the contact required, it had only provided $4.1m. City Water’s record of collecting payments for water was worse than that of the previous public utility (which was grossly underfunded), and it had indulged widely in the ‘group punishment’ of cutting off water supplies to whole districts when chasing late payers.

It is with very good grounds that, in the middle of 2005, the government of Tanzania cancelled the contract with City Water and detained and deported some of City Water’s executives. Guardian Unlimited reported on 25 May 2005 that Tanzania’s water minister, Edward Lowassa, had said simply: “The company failed to produce the goods.” (‘Flagship water privatisation fails in Tanzania’ by John Vidal, www.guardian.co.uk)

Imperialist hypocrisy

The same article reported that the British chief executive of City Water, stating that a case had been filed, said: “it looks as if we are being confrontational, but we are not. We had a contract”! He went on to say: “Our declared profit was to be just 10%. There is no way we can make super-profits in Dar es Salaam.” That must be the reason why Biwater, the parent company, is suing for £25m worth of lost profit! It had been contracted to put in $8.5 million to the project!

A visit to the company’s own website reveals that “Biwater’s mission is to earn a world-class reputation … founded on the highest standard of customer service, ethics and environmental care.” That is not the experience of the people of Tanzania, to be sure.

In a bizarre aside, the workings of British ‘aid’ are further exposed by the antics of the Department for International Development. This department supplied over £650,000 to support the project, but, instead of channelling this money to the poor of Dar es Salaam, it paid it to a British company called Adam Smith to give advice to the Tanzanian government. Adam Smith used more than £500,000 of this money to develop a public relations song and video “explaining the advantages” of privatisation. The song actually contained the words “privatisation brings the rain” !

Tanzania is a very poor country, ranking 162 (15 from the bottom) in the United Nations Development index. Life expectancy is 46 years, 38 percent of the population does not have access to an improved water source, per capita health expenditure is $29 per year, 90 percent of the population live on less than $2 per day, and 58 percent on less than $1, and even after ‘debt relief‘ the national debt is $1.75bn (16.1 percent of GDP). ( www.foodandwaterwatch.org)

But Tanzania does not have to be poor. It is the looting of its resources and the exploitation of its people by imperialism that not only keeps it poor but makes it poorer. The current sorry saga of Dar es Salaam’s water system is just one example of how so-called international aid is used by imperialism, not to help, but, on the contrary, to extract more superprofits from the oppressed people of the world.

The struggle against imperialism

It is to Tanzania’s credit that its government has kicked City Water and Biwater out of the country. Venezuela and Zimbabwe, for example (both having several cases filed against them at the ICSID court!), are showing that imperialism can be defied. The Great October Revolution has shown even more that imperialism can be defeated and socialism can be built. That example has been followed by others, even small countries like the Democratic People’s Republic of Korea and Cuba.

Rather than being misled by the hype of so-called international aid, we say that the way forward is the defeat of imperialism, and call for support to all anti-imperialist struggles.
>>back to Proletarian index >>view printer-friendly version