Trade Injustice

Aid Conditionality: the New Colonialism?

Did you ever wonder why so many poor countries are privatising water services even though it is a failed policy are hugely unpopular?

The UK aid budget has been increasing. Debt relief has started, although promises haven’t been fulfilled. Aid has been untied from British goods and services. But there are catches. Although these measures are to be broadly welcomed, is the carrot of aid and debt relief being used to impose failed, undemocratic policies on African countries? Are there conditions on aid and debt relief?

Conditionality

Loans and debt relief provided to ‘developing’ countries come with conditions attached. These conditions can be positive: human rights, environmental etc. But they can also be negative, imposing economic policies. The World Bank, IMF and the British government promotes liberalisation and privatisation, opening up countries to the pitfalls and risks of the free market and denying national governments legitimate economic tools such as import and export taxes, centralised public services and state run utilities.

What’s Wrong with Economic Conditionality?

Conditionality ….

Takes away a country’s control over its own development and puts it into the hands of those providing the loans – the rich country creditors.
Massively undermines democratic choice and disrespects national governments’ authority over their country’s needs and interests. Often the imposed policies increase poverty and environmental damage.
Opens up poor countries to increasing foreign investment and expansion of the private sector, even when it is not in their interest.
Conditions have never been proven to be economically successful and have been hugely unpopular in countries in which they have been implemented.

How does the British Government impose Conditions?

In spite of UK government’s claim that aid is untied, it does impose conditions. Sadly DFID deny this. So how do they do it?

“Harmonisation” - The government denies imposing conditions, except that the African country must adhere to the conditions that are set out by the World Bank and IMF – including privatisation. They call this ‘harmonisation’.

Sanctioned Conditions - UK aid (and debt relief) has been withheld in countries where IMF/WB imposed economic targets have not been met. These targets may be to reduce the size of the civil service, privatisation or opening up private and external investment into public services.

Technical Assistance – Millions of pounds of aid money is given in Technical Assistance. This includes large consultancies to pro-privatisation organisations such as the Adam Smith Institute and KPMG, hardly the advocates of peoples’ right to water and environmental equity. (in India £20 million worth of aid money went straight to privatisation specialists Price Waterhouse Coopers and Anderson Consulting).

Bullying and Political Pressure – it is difficult to know what goes on behind the scenes. African governments are poorer and weaker and many have publicly complained of pressure and threats. The WTO is notorious for the treatment it gives African representatives.

This idea that the British government are merely going along with IMF/WB policies denies the important role the British government has within the WB/IMF itself and in the origination of these policies.

An Example: problems with privatisation of water

1 billion people go without clean water. In poor countries most water services are under-resourced, mis-managed and open to political influence. Shifting management and ownership from public to private is not the answer - all over the world it has been a failure.

Water is life and is also a human right. Privatisation changes the focus from rights to profits. Accountability is to shareholders in the rich countries and not with users. It must be under democratic control.
Throughout the South there have been major protests against privatisation of water – in Ghana they were bigger than during struggles for independence. Forcing privatisation denies the will of the people and undermines often fragile democracies.
When the going gets tough, for example after a drought or floods, a private company can sell off the company or wind it down and declare it bankrupt leaving people with nothing. This happened in Mozambique after the floods.
Privatisation of water leads to higher costs – even the World Bank accept this. Poor people end up paying 300% to 500% of their income on water.
Rich people can afford to pay so are profitable for water companies. They receive better services while the poor get bad or non-existent services. Companies “cherry pick” the most profitable sectors, wealthy urban areas and ignore the poor.
Profit is not efficient. There is no evidence of greater efficiency in private ownership – even from the World Bank. Payments to shareholders could be going to investment. Quality control, health and environmental considerations, public education, repairs and investment are all diluted.
The private company can influence or control the whole water cycle. In Bolivia people had to pay for a permit just to harvest rain-water.

This African Initiatives’ Briefing Paper is based on research and analysis in the UK and Africa and on our experiences and the experiences of partners, colleagues and friends working in Ghana and Tanzania.

For more information on this Briefing please contact:

African Initiatives
T: 0117 9150001
E: info@african-initiatives.org.uk