This paper is about the privatization of municipal services such as water, waste and electricity in the city of Cape Town. The term ‘privatization’ is used to cover a range of private sector activities, including outsourcing and the introduction of private sector principles such as performance-based management and full-cost recovery into service delivery reforms. We also include the corporatization of services in this broad definition. The first part argues that there has been a fundamental shift away from the ‘statist’ service delivery models of the past where the state subsidized and delivered municipal services (albeit in a racially-biased manner), towards a more ‘neoliberal’ service delivery model where the private sector (and its principles) dominate. In the latter model, the state acts as a service ‘ensurer’ rather than a service ‘provider’ – in the now-fashionable language of the World Bank – and municipal services are ‘run more like a business’, with financial cost recovery becoming the most important measure of performance. The analysis is based on extensive interviews with senior city managers and politicians, as well as a review of relevant policy documents, political party position papers and an evaluation of council activities since the first democratic elections in 1996. The second part provides a detailed account of the increasing commercialization of water in Cape Town, with a focus on current efforts to corporatize the service into a ringfenced business unit. Although different from the outright divestiture of state assets in that the city retains control and ownership of water facilities, corporatization nevertheless raises many of the same concerns about access and affordability as privatization and introduces many of the same profit-oriented motives and operating principles. It is also often the first step towards outright privatization. This part provides an overview of the city’s water corporatization plans followed by a list of concerns as to their appropriateness for Cape Town, the most important of which relate to issues of accountability and regulation, the continued fragmentation of service delivery decision making, heightened pressures for cost recovery, and the process by which the corporatization proposals have been developed. Underlying much of this discussion is the argument that neither the promise nor the potential of public sector reform have been achieved in Cape Town. Contrary to written guarantees on the part of the African National Congress (ANC) that the public sector would be the ‘preferred service provider’, local ANC councils have failed to adequately explore the public sector option and have actively promoted privatization and corporatization. The other major political parties in Cape Town have been equally unwilling to consider public sector reform but have been open about their private sector preferences. So too have senior municipal managers, many of whom are responsible for the daily operation and decision making of service delivery in the city. It is at this level of the civil service that the most concrete (albeit unofficial and ad hoc) expression of privatization and corporatization is to be found.
MSP Occasional Paper No.7