Wolfensohn will lose face if he gives nod to dirty dozen

Patrick Bond and David Letsie
Business Day
November 17, 1999

Today in Pretoria the World Bank meets on the corruption-plagued Lesotho Highlands Water Project. Bank president James Wolfensohn, who is said to have a strong interest in the case, has a chance to put his money where his good-governance mouth is. After his speech to last month’s Transparency International conference in Durban, expectations are high.

But they have been high in relation to third-world debt cancellation, too, because of the worldwide Jubilee 2000 movement. Wolfensohn has disappointed the Jubilee campaign by providing stingy relief tied to onerous conditions, such as his demand last year that Mozambican public health fees for impoverished clients be quintupled, in exchange for a meagre 9% annual payment reduction.

The Jubilee 2000 South-South Summit is being held later this week in Midrand. More than 200 representatives of debt groups from across the third world are demanding that Wolfensohn fulfil his historic duty on the eve of the millennium, or face calls for a boycott and disinvestment campaign against World Bank bonds.

The simpler issue on the agenda of today’s meeting is corruption, specifically the padding of Katse Dam construction costs by a “dirty dozen” of multinational corporations to fatten at least one official’s Swiss bank account by at least R12m. The bank played a crucial role in the water scheme. It project-managed many core components, lent Lesotho $150m (which it should now cancel), and established a secret London trust as a way of circumventing mid-1980s, anti-apartheid financial sanctions.

It was revealed in September that the bank gave official support to the corrupt project head, Masupha Sole. In 1994, six years after Sole’s reign of bribery and corruption began, a senior bank official sent a strongly worded letter to the Lesotho government insisting no action be taken against Sole because it would “seriously jeopardise the progress of the project”.

Dubiously, the bank claimed it was unaware Sole was about to be fired for corruption. A closely related background issue evokes corruption of a different type: the role the bank plays behind the scenes in persuading SA officials to adopt its controversial views on water pricing and privatisation.

The bank’s SA Country Assistance Strategy of March this year claims Lesotho task manager John Roome’s “power-point presentation (was) instrumental in facilitating” a revision in SA’s approach to bulk water management.

In stingy bank style, Roome advised then water and forestry minister Kader Asmal in October 1995 to drop proposals for a free lifeline tariff and rising block tariffs because municipal “private concessions (would be) much harder to establish”; to establish a “credible threat of cutting service” to nonpaying consumers; and to be “very careful about irrigation for ‘previously disadvantaged'” South Africans”. Moreover, a proposed $750m World Bank loan for infrastructure, apparently now under consideration would, if deputy resident representative Junaid Ahmad has his way, promotes municipal services privatisation, including Johannesburg’s controversial Igoli 2002 corporatisation plan.

The plan envisages a mass transition of low-income Johannesburg residents into pit-latrine ghettos. This followed the argument by Ahmad in a 1994 plan for urban infrastructure – adopted in revised form in 1997 – that government should not provide water-borne sewage to low-income households.

Ahmad offered this advice with no reference to the public health and environmental implications of dumping excrement directly through porous dolomitic soils into a high water table. In 1991, when such a strategy was applied by apartheid bureaucrats in Winterveld, cholera broke out. No wonder Johannesburg’s policy has been nicknamed “eColi 2002”. The city now faces a spectacular contradiction associated with World Bank advice: the waste of money associated with the first two Lesotho highlands project dams.

The main reason why Vaal water, which until 1995 cost 30c a cubic metre, is being augmented by Lesotho water that is five times more expensive, is that the bank overestimated the expected demand for water from Lesotho in Gauteng by 40%.

A threefold threat is therefore emerging for the World Bank: firstly, that when more bank loans for Lesotho dams are pushed upon unwilling Gauteng water consumers, they will be increasingly unwilling to pay; secondly, that bank ideas about water infrastructure policy will be rejected by the “beneficiaries”; and thirdly, that municipal worker, community and political protest will derail the privatisation of Johannesburg.

These errors of technical and political judgment are coming to a head just as Wolfensohn addresses the Lesotho corruption crisis.

A wide range of social, community and labour movements has united in protest, including the SA Municipal Workers’ Union, Jubilee 2000 and township civic groups.

Not only Ahmad, Roome and other staff have erred in policy and project work. Wolfensohn probably overstated his institution’s commitment to fighting corruption at the Transparency International conference in Durban last month.

After the hype about how corruption causes poverty, expectations are high that he will debar the corporations implicated in Lesotho bribery from further World Bank work. Many of the companies – which include ABB of Switzerland, Impregilio of Italy, Dumez of France and SA’s Concor – are still active in bank projects.

Will Wolfensohn have sufficient will to blacklist the big firms? It is the firms’ big northern governments which ultimately pay his salary. An SA minister was right to label northern reluctance “criminal” at a recent World Economic Forum meeting. Anger will emerge today if Wolfensohn and the bank wink and nod at the dirty dozen.

Bond is a Wits University political economist and Letsie is an Alexandra activist. They gave invited testimony to the World Commission on Dams Southern Africa hearings last week.

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