Water Privatisation – Senegal At the Crossroads

Olivier Petitjean And Elimane Diouf

9 June 2011

While the Senegalese government wishes to ‘disengage financially from the water sector’, it is precisely the previous public management of water that has begun to improve infrastructure and people’s access to the resource.

The water service in the Senegalese cities has been partially privatised since 1996 under the form of a lease contract between the state and the Sénégalaise des eaux (SDE). 51 per cent of the capital of the latter is held by SAUR, renamed FINAGETION in 2005. It is a subsidiary of the Bouygues group, the fourth-largest group in the global water sector. Water management in Senegal is often presented as a ‘model’ public-private partnership (PPP), particularly by the World Bank, the International Monetary Fund and other international financial institutions, all of who have been trying to promote various forms of water privatisation for decades. According to them, the lease contract with SAUR has significantly improved access to water for urban populations, explaining that the country is one of the only ones in the African continent to be in a good way to achieve the Millennium Development Goals in regard to access to water, at least in urban areas (as they often forget to specify).

In an international context marked by the spectacular and repeated failures of water transnational corporations that have sought since the 1990s to take root in the cities of the global South, Senegal has therefore an emblematic character for the proponents of PPPs.

Recently the Senegalese government has however announced unilaterally that the contract that bound it to SAUR would not be renewed, and that in April 2011 there would be a tender for the total concession of water service, which would take place in 2012-13.

CONTEXT

The current water management system in Senegal stems from a series of reforms which were implemented in the early 1990s at the instigation of the World Bank in particular, and were part and still fit within a wider context of withdrawal from essential services by the Senegalese state. The reform of 1996 led to the establishment of three structures that replaced the SONEES (Société nationale d’exploitation des eaux du Sénégal):

– SONES, an investment company responsible for promoting investment in infrastructure and equipment

– The SDE, a private company that includes shares held by a strategic foreign partner (SAUR, who hold 51 per cent of the share capital), and the Senegalese state (5 per cent). The SDE is responsible for the technical and commercial running of supply system of drinking water. It operates with a 10-year concession with the Senegalese state and a contract that specifies the technical and commercial performance. This contract came up for renewal in 2006, and was extended until 2011.

– ONAS (Office national de l’assainissement du Sénégal), a state-owned company responsible for industrial and commercial affairs (EPIC). It is responsible for the development and running of infrastructure and equipment of collective independent sanitation of waste water and excreta as well as drains for rain water.

The law on public service management of drinking water and collective sanitation (LPSEPA) that was introduced in 2008 defined the legal framework for the supplying of clean drinking water and sanitation, and laid down the state policy in matters of public services. The state has powers to delegate public water services in the framework of this law. It carries the ultimate responsibility for management, maintenance and development of provision of water as well as all activities pertaining to their proper function, generally speaking. The sector water operators are: (i) the Société nationale des eaux du Sénégal (SONES); (ii) the Sénégalaise des eaux (SDE); and (iii) local authorities and consumer associations that have direct authority over the quality of public services and that are closely associated with the implementation of social programmes. An inter-ministerial coordination committee is designated by decree and responsible for the contractual regulation of the urban water and sanitation sector (monitoring, follow-up of contracts, arbitration).

This structure is supposed to change shortly in the framework of the so-called ‘third-generation’ reforms. The government has in fact suddenly announced that the contract would not be renewed and that a tender would be launched in April 2011 for the selection a new operator, and that the tender would be for ‘total concession, that is to say, a corporation that no longer just distributes water and charges for its consumption, but will make investments’ (the very words of a government official). An amendment to extend the contract with SAUR to the end of 2012 was signed without the government giving more details on its plans or the timing of the proposed reform.

Under a concession, unlike a lease contract, the private company (in most cases a large global water multinational) is responsible for managing, renewing and expanding infrastructure and equipment, and must find the funding itself and make the investments for a specified period, usually between 15 and 25 years. The ownership of new infrastructure is often left to the private company temporarily, depending on the type of contract. The private operator has to pay and finance investments through the sale of the service, in this case water billing.

WHAT IS THE REALITY OF PROGRESS MADE SINCE 1996?

It is a usual strategy of proponents of public-private partnerships in the water sector to start with ‘soft’ forms of privatisation such as lease contracts in order to ensure a better acceptance by the often reluctant local population, at a later stage, of more extensive forms of privatisation such as concessions. It is therefore all the more necessary to have a closer look, beyond the promotional announcements disseminated by international financial institutions, at the reality of the progress achieved since 1996.

It is hard to deny that substantial improvements have been made compared to the situation that prevailed in the late 1980s, characterised by the appalling state of infrastructures, water deficits, including in the capital Dakar, and very high inequalities between urban and rural areas, between Dakar and other cities, and between central urban areas and poorer peri-urban areas.

THE EXTENSION OF THE NETWORK AND NEW CONNECTIONS

Today, by contrast with the situation that prevailed in 1996, 90 per cent of people in Dakar and 85 per cent of those in other cities officially have access to drinking water (79 per cent and 63 per cent respectively have an individual connection to the network; the others rely on a collective connection close to their residence). More than 1.64 million additional people are said to have gained access to the water network, particularly through 150,000 so-called ‘social’ connections, offered at a very low rate for the poor. Cuts in the water supply, frequent before, have become increasingly rare. The quality of the water supply has also improved.

In contrast, however, to what is suggested (including towards the Senegalese themselves) by the promoters of public-private partnerships, most of the progress in extending infrastructure and network connections has not been accomplished by the private company responsible for commercial exploitation, the SDE, but by the public company responsible for infrastructure, SONES. The overall portfolio mobilised by SONES consists mainly of loans (56.2 per cent), donations (27.2 per cent) and state contributions (14 per cent). The major issue of this form of raising finance has been that it substantially increases the burden of public debt (1,448.2 billion CFA for the foreign debt, and 392 billion CFA for national debt in 2008). In other words these developments are largely explained by the significant funding provided by the Senegalese government on the one hand and the IFIs (international financial institutions) and other donors like European development agencies on the other. The latter funding was offered only under the condition that water services be partially privatised, and they will need to be repaid, even if they were granted with low interest rates and with other favourable conditions. This situation reflects how lease contracts often turn out to be very poor bargains for governments: they are the ones that need to seek loans and fund infrastructures, while the private company, which is the only visible face of the service for the general population, collects all the financial and reputational benefits. In any event, the progress achieved in urban Senegal cannot be explained by the fact that the operation of service was entrusted to a private company rather than a public operator.

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