By Probe International

Reckless Lending: How Canada’s Export Development Corporation Puts People and Environment at Risk

Grainne Ryder
Halifax Initiative
May 15, 2001

The Senegal River Basin Development Project, a US$1-billion dam project, completed in 1988, has already brought economic ruin, malnutrition, and disease to hundreds of thousands of West African farmers, and is expected to spread more misery when it starts generating power in 2002.

The EDC has provided credit insurance to a Canadian company assisting in the conversion of a failed irrigation dam in West Africa’s Senegal River basin into a hydropower project designed to deliver electricity to the capital cities of Mali, Mauritania, and Senegal.

Multinational plans for developing the Senegal River basin date back to the early 1970s, when the newly-independent countries of Mali, Mauritania, and Senegal created, on the instigation of foreign aid agencies, the Organization pour la Mise en Valeur du Fleuve Sénégal (OMVS). The original concept – popular among aid agencies in those days was a series of large-scale multipurpose dams on the Senegal River designed to provide irrigation, power supply, and improved navigation. The plan was intended to boost food production and bring prosperity to the valley’s two million inhabitants.

In 1981, with financing of about US$620 million from 12 donors, Canada and the African Development Bank among them, construction began on two dams: one at Diama, on the river delta, to prevent intrusion of salt water into the lower valley, and the second at Manantali in western Mali.

But by 1988, all funds had been exhausted yet no turbines or transmission lines had been installed at Manantali. The river was unfit for commercial navigation and as for irrigation benefits, less than one-third of the area to be irrigated actually was. Also, few farmers could afford the high cost of diesel for irrigation pumps and other inputs required to grow rice and wheat.

Instead of boosting food production, the Manantali dam has brought economic ruin, malnutrition, and disease to hundreds of thousands of West African farmers by holding back the

Senegal River’s annual floods upon which age-old farming systems, as well as floodplain and coastal fisheries depended for their productivity. For centuries, the annual floods of the Senegal River have been the lifeblood of flood recession agriculture, fishing, and cattle grazing for hundreds of thousands of people. Retreating floodwaters enriched the soil by depositing nutrient-rich silt on the land. On average, the river seasonally flooded about 150,000 hectares and up to 350,000 hectares in high-flow years. The floods provided nutrients to the floodplain and coastal fisheries, and recharged the aquifers upon which villagers depended for their domestic water supplies.

Once the Manantali dam was built, however, the floodwaters needed for growing sorghum and keeping pastures fertile all but disappeared. Once-abundant fisheries collapsed and the valley became infested with waterborne disease. According to the World Commission on Dams, between 500,000 and 800,000 people living downstream of the Manantali dam lost all or part of their means of survival due to the elimination of the river’s annual floods.

Malaria and bilharziasis have increased dramatically and resistant strains of malaria have appeared. Robert Boss from the World Health Organization said that the creation of large areas of fresh water in the lower valley “caused the largest epidemic of schistosomiasis that has ever occurred in sub-Sahara Africa.”

Upstream, the Manantali’s huge reservoir submerged almost 500 square kilometres of fertile farmland and forests, forcing 12,000 people to leave their homes and farmland. Those resettled were not compensated for their lost fallow cropland and pastures. With reduced land holdings and declining soil productivity, hunger and malnutrition often followed eviction, an ironic fact given that the original purpose of the Manantali dam was to increase food production through irrigation.

By the early 1990s, development of the Senegal River Valley was in a state of crisis. “The enormous investment made so far in River Senegal has not brought development”, writes Adrian Adams who spent two decades working with farmers organizations in Senegal. “Nor has it brought prosperity, except to a few artificial enclaves.”

Foreign aid for the Senegal River Development Authority (OMVS) had all but dried up and the plans for completing Manantali ground to a halt when political chaos and military conflict engulfed the region; some of which was provoked by the Manantali dam itself. When Manantali was completed in 1988, it opened up new prospects for large-scale irrigated agriculture in areas where black peasants had traditionally grown sorghum and maize once the annual floodwaters receded. Since peasants lacked the capital needed to convert to irrigated farming, the Moor elites of Mauritania decided to seize the peasants’ land and had 70,000 of them expelled to Senegal. Senegal and Mauritania nearly went to war over this conflict.

Finally in June 1997, donor agencies decided to breathe new life into the Manantali project by retrofitting the failed irrigation dam as a power plant with a massive infusion of aid, including $38 million from the World Bank. CIDA provided $30 million, while the EDC provided credit risk insurance. EDC spokesman Rod Giles would confirm only that the credit risk insurance was for a Quebec City-based firm, Entreprise Conjointe Lambert Somec GLR, involved with the project’s transmission lines. The EDC has refused to say when this insurance was issued and the EDC does not publish details of its project lending and insurance activities.

Other Manantali donors include the African Development Bank ($35 million), France ($94 million), Germany ($65 million), European Union ($37 million), the Islamic Development Bank ($21 million) and the West African Development Bank ($19 million).

Under construction since 1997, Manantali is scheduled to start delivering power to Senegal and Mauritania in April 2002, while Mali will get its share in August 2001. The $445-million project includes the installation of a 200-MW power plant at the dam, about 1,500 kilometres of transmission lines connecting the three capitals, and nine transformer stations. Mali, Mauritania, and Senegal are to receive 52 per cent, 15 per cent, and 33 per cent of the project’s output, respectively.

Manantali donors are well aware that phase one has been nothing short of a disaster. According to a 1997 report by the African Development Bank, the Manantali dam “had seriously upset the basin’s ecosystems and destabilized traditional economic activities, with the result that the region has become the poorest in all three countries. Increased social inequalities and malnutrition have caused a mass exodus of workers from the river basin … the development of irrigated agriculture and the fact that salt water is now prevented from entering the delta have caused a proliferation of carriers of endemic diseases such as bilharziasis. The incidence of malaria has also increased, and resistant strains of the disease have appeared.”

Without explaining how, the African Development Bank, CIDA, and the World Bank contend that sinking hundreds of millions more into the Manantali power project will help reverse the costly environmental and economic damage caused by the dam. According to the African Development Bank, the power project is “an opportunity to rectify the negative effects … on the fragile ecosystems of the river basin, traditional floodplain agriculture, river fishing and the health of the local people …”.

Similarly, Diane Marleau, the then-minister responsible for CIDA, also maintained, again without substantiation, that the Manantali power project would be managed to protect the “health and traditional interests” of downstream farmers. “CIDA is confident”, wrote Marleau, “that [the project] will contribute to improved living conditions of the Malians, the Mauritanians, and the Senegalese.” World Bank official Philippe Durand was also quoted in International Water Power & Dam Construction, the hydro industry journal, saying that “power will not be produced at a detrimental cost to other [water] users.”

But critics argue that once the turbines are installed, the dam operator will be under pressure to maximize power generation revenues by holding water back in the reservoir instead of releasing water to downstream farmers when they need it, either during the rainy season or in times of drought. This will further deprive already impoverished farmers of the precious water they need to grow their crops. And while donors have called for more studies of health problems and declining fisheries productivity, there is no plan to reduce the rate of exposure or infection in the valley, nor is there any provision to compensate valley residents for past or future damages and losses.

Manantali donors insist the dam operator will recreate the annual floods but it’s clear from the reservoir management plan that the area flooded will be diminished, and more people are going to be impoverished. Under the current plan approved by donors, including the EDC, 50,000 hectares would be flooded only once every 10 years, only 30,000 hectares would be flooded on average, and there would be no flood recession agriculture at all every third year.

Arguably, the real reasons donor governments and agencies decided to revive Manantali have little or nothing to do with fixing the floods in the Senegal River Valley. The World Bank is supporting the Manantali project, according to its own documents, as a way of generating revenue that will “help service the debt incurred in building the Manantali dam” and to “promote private-sector participation in running the project and other future projects in the Valley.”

Canadian Involvement

The Canadian government and companies have figured prominently in the Manantali project dating back to its inception in the 1970s. While the Manantali project has impoverished hundreds of thousands of people, Canadian companies have done very well by this disastrous scheme. In 1981, CIDA provided C$46 million to help build the Manantali dam and continues to provide grants to OMVS to this day. Hydro-Québec International and SNC-Lavalin began their involvement in the mid-1980s by helping to plan Senegal river development. In 1993, CIDA paid C$4.9 million to a consortium including Hydro-Québec International, Dessau Associates and SNC-Shawinigan to advise the Senegal River Development Authority, OMVS, on the feasibility of constructing a regional electricity distribution network that would connect Mali, Mauritania, and Senegal.

Then in 1998, after donors had decided to rescue Manantali, CIDA provided another C$30 million, out of which C$19.8 million went to Sulzer Canada for turbines (manufactured in Burnaby, BC), C$6.8 million went to Tecsult International of Montreal for installation and supervision of the turbines, and an undisclosed amount went to Roche International of Sainte-Foy, Quebec for a three-year fisheries study.

As it happened, Hydro-Québec International and the French company Elyo, a subsidiary of Suez Lyonnaise des Eaux, bought a 34 percent stake of Senelec, Senegal’s national electric utility in early

1999. One-third of the output from Manantali’s CIDA-financed turbines will go to Senelec. Hydro-Québec International and Elyo had planned to increase its stake to 49 per cent over the next five years but in March 2000 Senegal’s newly elected President, Abdoulaye Wade, for reasons that remain unclear, terminated the Senelec privatization deal. Senegal’s energy minister, Abdoulaye Bathily, was quoted in the Financial Times as saying that the “results [of the deal] were disastrous.” Apparently, with no legal framework in the agreement to bind Hydro-Québec International and Elyo to investment commitments, there had been little spending on maintenance of aging equipment or investment in new power plants to ease the country’s power shortages. The Financial Times also reported that new management replaced local staff with costly expatriates while cutting loose local suppliers in favour of foreign ones.

OMVS is now soliciting bids from utilities and companies to operate the Manantali dam and power plant.

Manantali Is Uneconomic

Manantali is more expensive and less reliable than the alternatives. For a fraction of the capital sunk in Manantali, a string of modern and reliable power plants could have been quickly installed to supply power where needed, without adding to the burgeoning debt burdens of each country. Had the three governments decided instead to invite the private sector to invest in power plants that could supply power to their respective distribution utilities, they could have eliminated power shortages and ended chronic under investment in electricity infrastructure and services throughout the region.

Fortunately, Senegal has begun to move in this direction, encouraging private investment in small-scale power plants to ease power shortages and expand services in rural areas, while leaving Senelec with its monopoly on distribution. Several U.S. companies are now building high-efficiency power plants in the 30-90 MW capacity range.

As modern cost-benefit analysis for existing dams elsewhere has shown, it can be more economical to decommission dams and restore free-flowing rivers and riverine fisheries than it is to keep dams in operation. In the case of Manantali, its social, environmental, and economic costs are astronomical and growing, the electricity alternatives are cheaper and more reliable, and flood-recession agriculture has proven more cost-effective than irrigated farming. If a cost-benefit analysis of decommissioning Manantali were undertaken, NGOs contend the analysis would reveal the economic benefits of decommissioning Manantali outweigh the benefits of operating it for power production and irrigation.

Based on evidence that problems caused by the Manantali dam will likely be prolonged and worsened by the hydropower additions, citizens groups in donor countries and those representing farmers and herders in the Senegal River Valley, have demanded that the Manantali power project be stopped until:

  • the annual flood is reestablished for the benefit of downstream agriculture, herding, and fishing;
  • diseases caused by Manantali are eradicated;
  • valley residents affected by the dams are fairly compensated; and
  • the riparian rights of affected citizens are recognized.

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