Water Privatization in Ghana - Preparation (1995-2005)

Preparation (1995-2005)

Water privatization in Ghana has been discussed since the early 1990s as a reaction to poor service quality and low efficiency of the existing urban water utility Ghana Water and Sewerage Corporation (GWSC), renamed Ghana Water Company Ltd. (GWCL) in 1999. The World Bank supported the process of private sector participation in the urban water sector from the beginning. Following preparatory studies and a national consultation workshop in 1995, the government opted for two 10-year lease contracts among 8 options, including the option to continue public sector operation. Critics argue that the workshop participants had been arbitrarily chosen, that the majority of participants were foreigners, that no local NGOs participated and that the public sector option had not been given due consideration. Furthermore, they argue that a single workshop was not sufficient to prepare such an important decision, that no major public debate had taken place and that the final decision should have been taken by Parliament. According to the decision made by the government, each of the two leases was to cover about half the cities and towns of Ghana. The private operators were expected to invest US$132 million from their own resources, corresponding to about one fourth of the total expected investments over the lease period. The contracts were expected to increase water production by 85%, connections by 50% and reduce non-revenue water from 52% to 25%. These expectations proved to be clearly unrealistic in retrospect.

In March 2000, the government of Ghana awarded a 30-year Build-Operate-Transfer (BOT) contract for one half of the country, including the capital Accra, to the US company Azurix, a subsidiary of Enron. However, the World Bank did not support the contract. The contract failed before operations began due to accusations of corruption and public opposition which led to the formation of the Coalition against Water Privatization.

In 2004, the World Bank's Board approved a credit of US$103 million for an "Urban Water Project", which was later turned into a grant. The Nordic Development Fund contributes another US$5 million, while the Government of Ghana provides the remaining US$12 million of the US$120 million project. The main objectives of the program, which was supposed to end in 2010 and has been extended until December 2015, are to significantly increase access to water supply in urban areas with an emphasis on improving the service for the urban poor; and restoring the long-term financial stability, viability, and sustainability of the GWCL. The World Bank also financed technical assistance and training. The project explicitly supported private sector participation.