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27.09.2002 Feature Article

Water Privitization: Is this a good Choice for Ghana?

Water Privitization:  Is this a good Choice for Ghana?
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And do these donors mean it well for us at all?
After hesitating for some months, I now feel I must contribute to the current debate on the water privatisation process in Ghana. I implore the NPP government to listen to the opinions from the civil society and other stakeholders not only the donors. My contribution will centre on the role of the so-called donors, who are behind this policy. The question we need to ask ourselves is, do we really have to take the advice of these donors? Are we not giving them too much power in the administration of our national economies, which they continue to ruin? My position is that these donors use their ‘peanut financial grants’ to lure us to implement policies, which are in their best interest and which can be termed as detrimental to our progress. These donors contribute so little financially and yet are able to steer our economic, social and political directions with their conditions. As one commentator wrote “… the World Bank and IMF hold the purse strings, so they can dictate what a cash-strapped government signs up to in exchange for loans…’. Let us look at the financial assistance of three major donors: the IMF; the World Bank and the EU. This will highlight my contention that ‘financial peanut buys major policy interference’ In the IMF/World bank documents on Ghana available at www.servicesforall.org/html/countries/ghana.shtml, they have agreed to grant us loans and financial assistance of maximum US$640 million over a period of 3years when we ‘behave well’. The ‘good behaviour’ means the privatisation of the urban water and electricity companies as well as allowing private companies (read multinationals) to be part of our cocoa export trade. Now all these conditions are not meant to inject the much needed financial investment into the country to create jobs but is rather geared towards paving the way for foreign companies to reap profits at our expense in the guise of participating in the global economy. The water privatisation issue has already received some analysis e.g. the International Fact-Finding Mission Report (see http://www.citizen.org/documents/factfindingmissionGhana.pdf), so let us sidetrack a bit and consider the liberalisation of the cocoa export trade. What benefits will these foreign companies bring to Ghana when they are allowed to export 30% of our cocoa? In this global market economy, a few oligopolistic companies dominate the commodity market and decide on the prices of commodities in advance. These few companies are so powerful that you need strong ‘organised sellers’ if one is to have some influence over the price. In the current set up, at least farmers are assured of their price even if the world market tumble. There is however the negative side (when world prices go up) which needs to be corrected. At the moment the COCOBOD is not performing at its optimum and many farmers are not paid on time, and many areas have been left without infrastructure like roads to cart the cocoa products. However, we can see that after the Government has allowed some Licence buying agencies to enter the purchasing trade few of them have put up even sheds for the cocoa beans they buy. Few give any support at all to the farmers and the scales are ‘adjusted to falsify the real weights’. Many of the buying agencies have even collapsed leaving some farmers unpaid. When Ghana allows private companies to export our cocoa, the following repercussions will arise. 1. If local companies are involved in the export, they would be competing among themselves and not have the concerted effort and therefore will lack the leverage to influence the negotiating agenda on price setting. Their bargaining power will be divided and they will never have any impact on the international negotiations This will have adverse effects on Ghana’s economy and the cocoa farmers. 2. When foreign companies get involved (which is what is behind the IMF and world bank policy) part of the foreign currency earned in the export will be held by these companies abroad and will not come to Ghana. Secondly, any gains due to the increase of world prices will not get into the national coffers but in the pockets of these private companies. 3. Also by controlling the export trade, Ghana can sell upfront and generate about US$500million even before the harvest. This situation helps the country in their foreign exchange flow and helps planning. A foreign debt stranded country with limited forex reserves will lose such an important instrument. Although one should be sad about the neglect of farmers and the Cocoa Ministry (this is illustrated among them, the deplorable state of the Cocoa House building in the centre of Accra) by the previous regimes, this is another matter. 4. In any case, and the most important of all, allowing competitors in the cocoa buying and export business will mean eliminating the ‘guaranteed prices’ given by Government to cocoa farmers. This will mean allowing market forces to reign and our farmers will never know how much they will earn in advance for the buyers will never buy it at a higher price when the prices fall on the world market. Even at stable market prices, they will never pay more since their objective is to make profit.
Therefore the question again is what do we benefit from this IMF/World Bank condition or policy when implemented? The answer is just simple: allowing foreign companies to reap profits at Ghana’s expense.
Now, let us look at the financial flows from these bodies if we implement their policies: In total, we will have a grant and loan assistance of $640m over three years from the IMF/World Bank. This is the higher scenario i.e. when all given conditions are implemented. This means on the average $200m per year. The foreign currency outflows when those policies are implemented far outweighs those gains and yet we will have a damaged economy, jobs will be lost and our current account balance will be in the red. Mind you, some of those funds need to be paid back, and our debt burden increases. Please lets get serious. Now, the European Union. The recently approved agreement between Ghana and the European Union (EU) in August 2002, states that the EU will grant Ghana an amount of 311 million Euros over a period of 5 years. The heading in the Ghanaian papers failed to capture the 5 year period 2003-2007 and also the terms or conditions of the agreement. The funding agreement states that 231million Euros will be allocated for development projects and the 80million Euros for unforeseen needs like a fall in export earnings, budget deficits or emergency situations. A closer analysis of the funding contract termed ‘Country strategy Paper and Indicative Programme’ ( see http://europa.eu.int/comm/development/strat_papers/index_fr.htm) 

Kwaku B. Acheampong
Kwaku B. Acheampong, © 2002

The author has 2 publications published on Modern Ghana. Column Page: KwakuBAcheampong

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