NPM as a mechanism of accumulation by dispossession: The case of a public bulk water provider in South Africa
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Presentation to the SANORD 2016 conference on 7-9 September 2016 in Uppsala, Sweden on 'Beyond New Public Management?'
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NPM as a mechanism of accumulation by dispossession: The case of a public bulk water provider in South Africa
- 1. Carina van Rooyen Presentation to SANORD 2016 conference, 7-9 September in Uppsala, Sweden NPM as a mechanism of accumulation by dispossession: The case of a public bulk water provider in South Africa n by Ruth Stewart Carina van Rooyen Marcel Korth Admire Chereni Natalie Rebelo Da Silva Thea de Wet September 2012 53 Microfinance cover.indd 10 Thank you SANORD for the conference attendance grant!
- 2. Rand Water established in 1903 from expropriation of private water companies operating on Witwatersrand D Leith (chief engineer 1903-1910 Image source: Rand Water
- 3. (Source: Rand Water 2014:82)
- 4. Water from Lesotho to Johannesburg Abstraction Purification Distribution Imagesource:RandWater
- 5. Tunnel from Lesotho Vereeniging Zuikerbosch Vaalriver Klipriver RESERVOIRS Klipriviersberg Meyer's Hill Meredale Johannesburg Pretoria Zwartkopjes Daleside Palmiet Eikenhof + 60 km + 300m+/- 400m +/- 70 km Pumping and distribution elevations Imagesource:RandWater
- 6. Supply area Consumers 19 million Area 18 000 sq km Total pipelines 3500 km Employees 3500 Image source: Rand Water
- 7. 6 5 4 3 2 1 0 Megalitresperday Bulk supplied in SA Thousands Phalaborwa Water WesternTvl WaterCo. GoldFields Water Port Elizabeth Magalies Water Mhatuze Water Cape Town Umgeni Water Purified water sold per day Image source: Rand Water
- 8. Water demand & infrastructure Surplus capacity Peak day demand in 2005 Average annual daily demand Peak day demand in 2014 Image source: Els 2006, adapted
- 9. “Because of the situation that we are in, we could be efficient, but we could be efficient in building a Rolls Royce to do the job of a Mini” ~ executive manager at Rand Water Image source: http://buyersguide.caranddriver.com/media/assets/submodel/7017.jpg Imagesource:http://carinsuranceav.com/data_images/models/morris-mini/morris-mini- 11.jpg
- 11. Chief executive Percy Sechemane (since 2008) Chief operating officer Sipho Mosai (since 2009) Chief financial officer Matshidiso Nyembe (since 2009) Group governance executive Fikile Sithole (since 2008) Group strategy executive Vusi Kubheka (since 2012) Strategic human resources executive Wayida Mohamed (since 2009) Group shared services executive Dr. Fawcett Ngoatje (since 2008) • Operations • Scientific Services • Strategic Asset Management • Sector Growth and Development • Funding • Group treasury • Medical scheme • Provident fund • Financial control • Financial planning • Forensic audit • Internal audit • Legal services • Regulatory services • Strategic projects • Risk advisory services • Corporate communications • IT & Knowledge management • Logistic services • Marketing & Stakeholder relations • Supply chain management • Strategic programmes• Corporate planning • Corporate research & development • Financial & economic planning • Compensation & information • Employee relations • Organisational Development & Design • Talent management • Rand Water Academy Portfolio Integrating Committee
- 12. 2000 – to be a viable & sustainable full water services provider 2006 – to be the industry leader & partner of choice in sustainable water services 2012 – to be a provider of sustainable, universally competitive water and sanitation solutions for Africa Image source: http://www.digitalboardwalk.com/wp-content/images/about/vision_mission.jpg
- 13. Rand Water values (2014) Caring Equity Integrity Spirit of partnership Excellence
- 14. Services X Subsidiary Subsidiary Request to become a subsidiary
- 15. R0 R1,000 R2,000 R3,000 R4,000 R5,000 R6,000 R7,000 R8,000 R9,000 R10,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Revenue (million) Surplus (million) Potable water sales (Ml/d) Key performance indicators of RW since 199
- 16. Shifts in public management / governance Public administration New public management New public service 1980s-2000s 2000s- -1980s Structure & organisational efficiency Statist & bureaucratic – command & control approach Use market models & values: Efficiency & effectiveness Competitive & minimalist state Use citizenship & democracy Plural & pluralist
- 17. Periods of public service reform in water sector 1850s-1930s 1930s-1970s From 1980s After 2000 Early municipalisation Nationalisation Privatisation / neo- Keynesianism Remunicipalisation & renationalisation (Content source: McDonald 2015)
- 18. Intensification of corporatisation Organisational structure Efficiency Customer orientation Business orientation Pricing & profits
- 19. Expansion or stretching into other activities We’re here to serve! make a profit Imagesource: https://rachaelperkins.files.wordpress.com/2013 /10/privatization-2.jpg
- 21. “It is…generally accepted that in order for a utility to run efficiency, it needs to privatise. Rand Water has proven that this is not the case. There is a role for private sector but we don't believe that it lies in improving efficiency. Utilities should work on increasing their own efficiencies and profitability prior to considering privatisation so as to raise their value to investors. …There is no reason why a public sector entity cannot run on business principles and be efficient – this is the message we plan to take throughout the continent and we have our own successful track record to back up what we say. Rand Water wants to assist utilities get to this point so that what is on offer to the private sector has value.” (Myeza of RWS)
- 23. At the moment we are heading straight for the iceberg. And if we don’t re-plot that course, we are going to hit the iceberg; there’s no doubt in my mind ~ senior manager at Rand Water Image source: http://www.ssmaritime.com/Titanic-Iceberg.jpg
- 25. Publicness beyond NPM Equity Cooperation Social justice Inclusive Solidarity Public accountability Democracy Citizenship Efficiency Sustainability
- 26. Politics is not just about “expressing indignation or denouncing the powerful? What if it is, instead, about getting what you want? Then we progressives must ask: what do we want? This is a quite different question (and a far more difficult question) than: what are we against?” (Ferguson 2009:167)
- 27. They hang the man and flog the woman That steal the goose from off the common, But let the greater villain lose That steals the common from the goose. The law demands that we atone When we take things we do not own, But leaves the lord and ladies fine Who take things that are yours and mine. (English nursery rhyme c.1764)
- 28. References Bryson JM, Crosby BC & Bloomberg L 2014 Public value governance: Moving beyond traditional public administration and the New Public Management. Public Administration Review 74(4): 445-456 Ferguson J 2009 The uses of neoliberalism. Antipode 41(s1): 167 McDonald DA & Ruiters G 2012 Introduction: In search of alternatives to privatisation. In McDonald DA & Ruiters G (eds) Alternatives to privatisation: Public options for essential services in the Global South. New York: Routledge Robinson M 2015 From old public administration to the new public service: Implications for public sector reform in developing countries. Singapore: UNDP Global Centre for Public Service Excellence
- 29. Carina van Rooyen Anthropology & Development Studies University of Johannesburg cvanrooyen@uj.ac.za | @carinavr Thanks to SANORD for conference attendance grant!
Editor's Notes
- RW is the oldest public utility, and the first water board, in SA, having been formed in May 1903, by taking private concessions over, to provide water to the Witwatersrand area (RW Board 1978). From 1866, when gold was discovered on the Rand, to 1903, when RW was formed, the supply of water in Johannesburg was in private hands. Private interests used a ‘lack’ of interest by Transvaal government to provide water in Johannesburg, coupled with the huge demand for water to obtain concessions from the state to provide water (RW 1991:2). The ownership of the private water companies by mining groups indicate not only their dominance in Johannesburg society at the time, but also their interest in providing water, both to ensure water for own consumption to continue mining (McCormack 1912:4), but also for the profit to be made from selling water (Laburn 1979:2). Gold production needed large amounts of water, but sufficient water was not to be found close by. Remarkably, water was brought to the gold mines, and the city growing with the mines. But water supply was erratic, water prices were high, water quality concerns, and lack of sufficient water sources remained common. After the SA war ended in 1900, Johannesburg were under British administration. The military administration under Major O’Meara of the Royal Engineers had as first task after occupation “to bring Johannesburg back to life and to re-establish production on the mines to their pre-war level” (Bonner & Lekgoathi 2004:31). An urgent priority, according to O’Meara in his Notes on the proposed reconstruction of Johannesburg’s municipality of April 1901, was the provision of adequate water supply and sanitation (quoted in Bonner & Lekgoathi 2004:33; Tempelhoff 2003:71). Rand Water was then formed in 1903 as a public utility by expropriation of three water companies, not without wrangles about appropriate compensation.
- Rand Water is now a public utility governed in terms of the Water Services Act of 1997. The Government of the Republic of South Africa, through the Department of Water and Sanitation is the sole shareholder of Rand Water. Annually agreed shareholders compact.
- The core business of RW is the abstraction, purification and distribution of bulk potable water. Being on a watershed, the Witwatersrand area does not have a major source of water nearby; the closest big river is the Vaal River some 70km away, which is the source of RW’s water - RW withdraws 99% of its raw water from the Vaal Dam (RW 2005:15). And the Vaal River system relies on massive inter-basin transfers for sufficient water; the main inter-basin transfer is from the controversial Lesotho Highlands Water Project (LHWP), via the TransCaledon Tunnel Authority (TCTA) to the national Department of Water and Sanitation, from whom RW buys its raw water. From the Vaal Dam water is pumped to the Vereeniging and Zuikerbosch purification stations. Once treated, water is pumped to secondary booster stations at a head of about 190 metres above the Vaal River, indicating high pumping costs for RW. From the booster stations 90% of the water is elevated a further 200m to 53 reservoirs on high grounds. From here the water gravitates to RW’s consumers.
- Customer base includes metropolitan municipalities, local municipalities, mines and large industries. Covers five provinces (including Gauteng, Mpumalanga, and parts of the Free State, the Northwest Province, and Limpopo) – area represents more than 40% of SA’s GDP.
- RW is one of the world’s largest public water utilities, larger in Africa, supplying 4.4 billion litres of water per day.
- Have installed capacity of over 5 300 Ml/d. The first phase of the 2009 augmentation scheme will increase capacity to 5900 Ml/d by 2017/8. Just over 60% of its installed raw water capacity is used; 70% of treatment capacity; 66% of primary pumping capacity; 64% of booster pumping capacity (RW 2006:17)
- Governance through a non-executive board & portfolio integrating committee.
- Objectives of people, planet & profits – Naicker
- Sounds like great public-centred values!
- Foundation, formed in early 2000s, to support communities in management of water, as part of RW’s corporate social responsibility. Operate on a cost-recovery basis. Rand Water Services was formed in 2000 as a vehicle driving RW’s engage commercially in non-core, other, secondary activities. In 2010 the RW Board decided to integrate the operations of RWS back into RW. In 2012 saw the establishment of a Sector Growth and Development Division, to focus on: Specialist Water Services; Strategic Customer Partnerships; Water Demand Management; Bulk Sanitation; Catchment Management services; Business Development; and Research, Development and Innovation Academy formed in 2013 to enhance human resources capacity in the water and sanitation sector, especially at local government. Graduates complete 18 months training in the Academy, before posted to municipalities. RW applied to DWAS to “allow the Academy to be corporatised, into a not-for-profit-company” (RW 2014:26).
- Increased revenue, based mainly on increased sales of potable water (expansion of supply area & increased water demand of consumers). Increased profit / surplus. Operate on full cost recovery – include ‘appropriation to reserves’ (surplus/profit) targeted at 15% in 2000s. Increased profit correlate with increased water sales.
- Kingdom et al (2006) of the World Bank, for example, the critical dimensions of a well-run utility (whether public or private – thus blurring the distinction) are autonomy, accountability, customer orientation and market orientation. My research on RW identified two broad themes related to NPM, namely intensification of their corporatisation & expansion of their activities.
- private sector activities in the water sector peaked in the late 1990s, and reached its lowest point by 2003 in developing countries, mainly due to the high financial and political risk, and lower-than-expected financial returns to private companies (Coffey 2006; Johnson 2004:96-97; Morgan 2006a:319). Corporatisation (or commercialisation) of water supply as process of institutional change where management institutions (rules, norms and customs) change to allow for introduction of commercial principles (like full cost-recovery & competition), commercial methods (like cost-benefit analysis, ring-fencing & performance contracts) & commercial objectives (like short-term financial bottom-line & profit-making). NPM promote corporatisation through managerial & financial ring-fencing Back to public trend (McDonald 2015:8).
- In an earlier process of commercialisation at RW in the 1980s and early 1990s under Vincent Bath as the first chief executive officer (CEO) was followed by deepening commercialisation between 1997 and 2001, when the Water Services Act of 1997 was implemented. On the departure of Bath from RW in 2002, Bath said that “I shared the vision of ensuring that RW became a fully commercialised institution” (Aquavita March 2002c:3). A third phase of commercialisation then started in 2002 with the appointment of Simo Lushaba, the first black CEO of RW and the first CEO with a managerial background rather than an engineering one. The drivers behind the corporatisation of RW were not economic and fiscal crises, nor public criticisms of lack of efficiency, as is often the case in NPM. Business governance through the policy directives of DWAS and the permeation of the South African macro-economic policy context and neoliberal hegemonic water discourse, appear to have driven change. The key features of NPM as implemented in RW: organisational structure: since 2005 new structure was the clustering of business processes; reducing the historically- held power of the Engineering Division within RW. RW was moving away from being engineering-dominated to managerialism where professional managers and management consultants dominate. Efficiency: performance management, reduce costs (e.g. staff cost through reducing of benefits), technology utilisation. Customer orientation business orientation pricing and profits: - cost-reflective+ tariff is RW’s definition of full cost-recovery includes all working costs (including maintenance costs), management, and repayment of loans (so far cost-reflective), and an appropriation for surplus (RW 1978) (now ‘cost-reflective plus’). Hybrid nature of RW: in naming of activities: In its 1996 annual report RW described itself (with my emphasis) as a non-profit public utility run on strict commercial lines (RW 1996a:3-4). But in the same document – and in a pamphlet by RW Marketing on water saving – RW also described itself as a non-profit making, self-funding, non- government organisation. In the same year the chair of RW Board referred to RW as a business organisation (Bonner & Lekgoathi 2003:106). The chair of the RW Board labelled this hybrid animal when he wrote in the 2004 Annual Report that RW was a “state-owned enterprise straddling the private and public sector” (RW 2004a:10). In activities: primary function of RW abstract, clean and distribute bulk potable water. But by 2005 its primary activity was “to provide water services to water services authorities and other water services institutions within its service area” (RW 2005c:1) – including bulk sanitation services (at cost recovery). Note, not all corporatisation happens with commercial imperative in mind.
- RW stated its aim to become a source-to-tap utility company involved in the full cycle of water services, including bulk water supply and retail water, bulk and retail sanitation and resource protection. Since 2000 it shifted slowly from ad hoc other activities being corporate responsibility to support the RDP, to consolidated cost-recovery, and to profit-making from other activities, both within SA and outside its borders. RW involved in ‘other’ (non-core) activities – both in SA and outside its borders – as corporate social investment (CSI), capacity building and commercial (retail water services, sanitation services, pipe making).
- Critique and protests against private sector involvement in public water services have led to calls by groupings on the left for the creation of public-public partnerships (PUPs) as a mechanism for improving public services and negating private sector involvement. RW viewed as ‘leading exponent’ of PUPs in water sector. RW claims that it supports PUPs – rationales of public interest (CSI, support local government but only at cost recovery) and supporting NEPAD. The case of RW warns against an uncritical push of PUPs as part of Beyond NPM, but rather still within NPM. And it’s in line with Swyngedouw (2006a:64) warning of the common fault to equate public ownership with a non-commodified form of service delivery.
- I have found that RW had asserted its public entity status in order to access more easily the many opportunities for money making in capacity-building, support activities, and management contracts, partly due to the contestations it face, both inside and outside of RW. Within SA RW’s stated commitment to PUPs has had a particular bearing. In these PUPs RW had pushed for cost- recovery, principles of competition and efficiencies (principles common in the private sector and in NPM), ensuring that a corporatised model has been established. RW defines as one characteristic of PUPs that “they allow for full cost recovery (including a mark up) or in certain instances for a sharing of profit” (RW 2000). ‘Capacity building’ means promoting efficiency along lines of corporatisation – RW promote role of public water provider “complementary to private sector providers” (RW 2002); promote shift from municipal public to corporatised public (RW 2003) In Africa through RWS (commercial arm of RW), highlight its public utility identity is deceptive, as it acts as commercial entity. Accused of using ‘public’ ownership as smokescreen to hide profit-making intentions. RW running in name of the public, but act in interest of private (Al-Hassen Adam 2005) In many cases RW uses its ‘publicness’ to promote its commercial interests - RW a pro-market public sector utility Through PUPs RW is furthering corporatisation of public entities, & ‘entrepreneurial’ ethos through capacity building (promoting efficiency) & strengthening commodifcation of water. Shifting of water from a common good to an economic good is part of process of commodifying water. David Harvey describes that as an example of ‘accumulation by dispossession’ = accumulation of wealth based on changing property rights & relations, e.g. utility services & nature. It is the latest way in which capitalism deals with its inherent tendency of over-accumulation (through spatio-temporal fixes). Mechanisms of accumulation by dispossession: Privatisation, commercialisation and commodification.
- Schizophrenic: tension between ‘public’ nature & ‘private’ actions – “SOE straddling the private & public sector” (Camay) Janus-faced
- On a question to a senior manager, who had been engaged in other activities before 2005, about how Rand Water Services fit into what Rand Water does: Well it doesn’t. It doesn’t help us, in fact it has been a distraction; again, it has taken our focus off from what we are supposed to be doing. But why do we need it? Why do we need to earn profits? We were formed for a hundred years ago now; for 95 years we supplied water and the money it cost us to supply that water is what we set our tariff at. Now why do we need to have ten million extra coming? I think we have lost the plot.
- Therefore at turn of 21st century have intensification of process of water commodification & “debates over the form that the commodification process” take (Swyngedouw 2006:58) The form that some commodification takes now is in name of public Public ownership do not guarantee non-commodified form of service delivery Non-profit—non-profit partnerships (inelegant acronym on NPNPP) (McDonald & Ruiters 2012).
- Publicness is much more than public ownership. Also called new public service (Denhardt & Denhardt 2011), public value management (Stoker 2006), managing publicness (Bozeman 2007) Need commitment to equity, universal provision, inclusive, social justice, subsidisation, cooperation, integrated planning, public accountability, democracy, citizenship, sustainability.
- The nature of contestations within the state organ undergoing NPM indicates what might be possible regards ‘beyond NPM’, and should be explored more.