Tanzania says bye to Biwater

In 2003 the Tanzanian government was put under immense pressure by the IMF and World Bank to privatise state run organisations in return for much needed debt relief. This included water and sewage services which were awarded to UK company Biwater, also known as City Water, with the financial support of the UK government "including £440,000 on a publicity campaign to highlight the benefits of private enterprise" 1.

Well, all did not work out as planned for Biwater and less than two years later they found their staff deported and their company seized by the state. It was one thing to force a liberalising contract onto a poor nation you have undue influence over it's quite another when the new water company simply cannot do its job.

Biwater's argument is familiar and essentially boils down to "a contract is a contract" and have demanded millions in compensation. What's so familiar about this is that it's always the government that has to keep to the contract and never the company. The company did not meet its contractual obligations, failed to run the capital's water systems properly, invested less than half the money it was obliged to in infrastructure and City Water went broke - the government rightly decided the contract was null and void.

Biwater were horrified that some tin pot government cared more for the people who'd be denied the right to water and sanitation than it did for some piece of paper they'd been forced to sign under duress, so they took them to the international court. Today that court ruled that the Tanzanian government was naughty but had nothing to pay. Good for them (for once).

In short Biwater were rubbish. Or, in the chairman's own words, there was ‘corporate failure all the way to Dorking’. They were unable to "perform" to the standard of their state owned predecessor, were bringing in less profit and water charges were higher. It would be one thing if this was a company producing luxury goods, but this is water and sanitation, essential to life - and they were screwing it all up whilst screwing the poorest down hardest.

Tanzania had no choice but to step in and take over the failing company. A government spokesman justified this saying "expropriating their property was like shooting a corpse - no harm done." Wenonah Hauter, executive director of Food & Water Watch said “Biwater failed the people of Tanzania, yet it had the audacity to run to an international trade court to try to get millions of dollars off of its mismanaged scheme to profit from water, this is fitting justice.”

Earlier this year a "tribunal ordered City Water to pay £3m in damages to Tanzania, and £500,000 towards legal costs" but Biwater have refused to pay up insisting that City Water (the subsidiary company they set up for the deal) no longer existed and therefore could not be held accountable for any fine. Nice bit of having your cake and eat there. They mess up the water supply but instead of coffing up for the fine they insist they want compensation for having been put to the trouble of messing it all up. That's how business works I guess.

Tanzanian government lawyers however take a different view and say “The whole affair was the prescription of the World Bank. It will be fair that they should pay the government,” after all this is a poor nation having been stitched up by international institutions who have been proved wrong in their thesis that private companies are more effective than public ones in providing public services. Even the terms of the deal were explicitly in favour of the rich. According to WDM "98 per cent of the funds to support the water privatisation in Dar were to be spent in the areas where the richest 20 per cent of the population lived."

Even big international institutions are beginning to question whether the third world can cope with purely free market solutions to their problems. You can't expect a government to sit back and watch as the price of water rockets whilst the service deteriorates, but I guess that's why they always needed the financial strong arm tactics in the first place, to make sure that there was no place on Earth where Western corporations were not making money.