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Development Financing, Utility Privatization and Poverty Reduction in Africa: An Insight on Water Privatization in Nigeria
Abstract
African countries in a bid to foster growth and development process have been influenced by the World Bank and the International Monetary Fund (IMF) to engage in reform programmes. One of such programmes which gained momentum during and after the Structural Adjustment Programme (SAP) is the privatization programme which was embarked upon under the guise that the development process of these countries are largely dominated by the public sector hence the need to weed the public sector of some expenditure and transfer their ownership to the private sector to boost efficiency and increase profitability. The study tried to analyze the effect of privatisation of utility like water to poverty reduction in Africa and found that water privatisation in most African countries instead of reducing poverty aided its escalation through its attendant high costs which has affected accessibility, and affordability negatively and increased displacements. Evidence from the study also show that water privatisation redistribute income in favour of the rich instead of the poor and this has led to increase in the outbreak of water borne diseases which claimed lives of thousands of households. On the other hand increasing public expenditure in the water sector led to improvements in water provision that is more sustainable. The study raised that consistent increase and proper monitoring of public expenditure into the sector will help achieve a 100 percent access to drinkable water for both urban and rural households if properly carried out hence what Nigeria needs do is to reform enterprises and the ministries, departments and agencies of government that provide water services. Such reform should be more focused in operations modalities since the performance is below efficiency rather than wholesale privatisation of the water sector as proposed by the World Bank.
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A framework is set out for estimating the effects of interventions on child health that considers changes in the allocation of family resources, who among children survive (survival selectivity), and changes in the health of surviving children net of family resources. Estimates based on structural-equations semi-parametric models applied to data describing households from rural areas of two low-income countries indicate that conventional reduced-form estimates understate the effectiveness of improving sanitation facilities. This is due to the reduced allocation of household resources to children in households with better facilities but not to mortality selection, which is negligible.
A total of 144 studies were analysed to examine the impact of improved water supply and sanitation facilities on ascariasis, diarrhoea, dracunculiasis, hookworm infection, schistosomiasis, and trachoma. These diseases were selected because they are widespread and illustrate the variety of mechanisms through which improved water and sanitation can protect people. Disease-specific median reduction levels were calculated for all studies, and separately for the more methodologically rigorous ones. For the latter studies, the median reduction in morbidity for diarrhoea, trachoma, and ascariasis induced by water supplies and/or sanitation was 26%, 27%, and 29%, respectively; the median reduction for schistosomiasis and dracunculiasis was higher, at 77% and 78%, respectively. All studies of hookworm infection were flawed apart from one, which reported a 4% reduction in incidence. For hookworm infection, ascariasis, and schistosomiasis, the reduction in disease severity, as measured in egg counts, was greater than that in incidence or prevalence. Child mortality fell by 55%, which suggests that water and sanitation have a substantial impact on child survival. Water for personal and domestic hygiene was important in reducing the rates of ascariasis, diarrhoea, schistosomiasis, and trachoma. Sanitation facilities decreased diarrhoea morbidity and mortality and the severity of hookworm infection. Better water quality reduced the incidence of dracunculiasis, but its role in diarrhoeal disease control was less important than that of sanitation and hygiene.
Basic services are essential to reducing poverty and improving quality of life. This working paper focuses on health, education, energy and water. These services contribute to achieving the Millennium Development Goals, as well as being goals in themselves. Over the past twenty years or so, the way in which these services are provided has been subject to considerable policy debate. There has been widespread questioning of the ability of the public sector to effectively deliver such services. Largely as a result, market-oriented solutions have been promoted as a means to overcome apparent constraints posed by state-provided services. Notwithstanding the weaknesses of state provision in many countries and localities, this working paper argues that reliance on private sector provision will fail to address the central challenges of public sector delivery. Furthermore, the process of privatisation creates an incentive framework that undermines, rather than strengthens, the accountability and capacity of the State to provide accessible and affordable services. In addition, the paper argues that the adoption of full cost recovery policies can seriously threaten achievement of the MDGs. This position does not constitute a blanket statement against private sector participation in public services or against user fees. Rather, it maintains that market-led policies fail to contribute to the MDGs and often reduce the likelihood of achieving them. Strengthening the State in assuming central responsibility for providing essential public services will help correct these setbacks.
While most technical assessments classify privatization as a success, it remains widely and increasingly unpopular, largely because of the perception that it is fundamentally unfair, both in conception and execution. We review the increasing (but still uneven) literature and conclude that most privatization programs appear to have worsened the distribution of assets and income, at least in the short run. This is more evident in transition economies than in Latin America, and less clear for utilities such as electricity and telecommunications, where the poor have tended to benefit from much greater access, than for banks, oil companies, and other natural resource producers.
This paper analyzes the effect of quality and accessibility of health services and other public infrastructure on the health of children in Ghana. We focus on child survival, child height and weight using data from the Ghana Living Standards Survey. The results suggest an important role for public health policy in eliminating the rural-urban disparities in health status and particularly in improving the health status of rural children and reducing their mortality rates. Increased availability of birth services and other related child programs, as well as Improved water and sanitation infrastructure would have an immediate payoff.
Most technical assessments classify privatization as a success. But privatization, especially in transitional and developing economies, is seen as fundamentally unfair both in conception and execution, and it is widely and increasingly unpopular. We set out a simple framework for assessing the equity (or fairness) and efficiency gains from privatization, and for understanding any tradeoff between the two. We then review what is known about the distributional effects of privatization, focusing on changes in asset ownership, employment and returns to labor, access to and prices of utility/infrastructure services, and the selling government’s fiscal position. We conclude that many privatization programs have worsened the distribution of assets and income, at least in the short-run. This is more evident in transitional economies than in Latin America. It is less clear for utilities such as electricity and telecommunications––where privatization has resulted in greatly increased access for the poor––than for banks, oil companies and other natural resource producers, where the benefits have been concentrated.
A mother's education is widely posited to affect positively her own and her children's health and nutrition in developing economies. We estimate a LISREL system of production functions for maternal and child health and reduced-form relations for nutrition, medical care usage, and household water and sanitation, with latent variable representations of these dependent variables and of community and maternal endowments. If the maternal endowment is excluded, mother's schooling appears to have strong positive effects on health and nutrition. But this effect evaporates when the maternal endowment (i.e., abilities, habits, and health status related to childhood family background) is included, thus raising doubts about standard estimates of the impact of maternal schooling on health and nutrition.
Themes and issues in regulatory policy after privatization -- Public utility and financial markets regulation
While most countries are committed to increasing access to safe water and thereby reducing child mortality, there is little consensus on how to actually improve water services. One important proposal under discussion is whether to privatize water provision. In the 1990s Argentina embarked on one of the largest privatization campaigns in the world including the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Using the variation in ownership of water provision across time and space generated by the privatization process, we find that child mortality fell 8 percent in the areas that privatized their water services; and that the effect was largest (26 percent) in the poorest areas. We check the robustness of these estimates using cause specific mortality. While privatization is associated with significant reductions in deaths from infectious and parasitic diseases, it is uncorrelated with deaths from causes unrelated to water conditions.
The effects of access to piped water on the trends in child mortality and on differentials by income class are analyzed using
data on surviving children and other variables in samples of urban mothers aged 20–29 in 1970 and 1976. Path analytic regression
techniques are used to test a recursive model linking the supply and demand for piped water to selected household and community
level variables, and to examine their joint effect on child mortality. The model’s estimated parameters for 1970 and 1976
are used to analyze changes in mortality between the two dates. Increased maternal education accounts for a larger share of
the mortality decline than any other single factor. Increased access to piped water also contributes to mortality decline,
and such access helps to reduce the mortality differential between lower and higher income and education classes.
August 2001 Children's health improves on average as a result of policy interventions that expand access to piped water. However, the gains largely bypass children in poor and poorly educated families. The effects of public investments aimed at directly improving children's health are theoretically ambiguous, since the outcomes also depend on indirect effects through parental inputs. Jalan and Ravallion investigate the role of such inputs in influencing the incidence of child health gains from access to piped water in rural India. Using propensity score matching methods, they find that the prevalence and duration of diarrhea among children under five are significantly less on average for families with piped water than for families without it. But health gains largely bypass children in poor families, particularly when the mother is poorly educated. The authors' findings point to the importance of combining infrastructure investments with effective public action to promote health knowledge and income poverty reduction. This paper - a product of Poverty, Development Research Group - is part of a larger effort in the group to better measure and understand the welfare impacts of development projects. The study was funded by the Bank's Research Support Budget under the research project "Policies for Poor Areas" (RPO 681-39). The authors may be contacted at jjalan@worldbank.org or mravallion@worldbank.org.
How effective was public investment in stimulating the Japanese economy during the economic stagnation of the 1990s? Using a dataset of regional public investment spending, we find that investment multipliers were higher than for public consumption, although they were relatively low and declining over time. The paper also finds that the effectiveness of economic infrastructure investment, implemented mainly by the central government, is lower than that of social investment mostly undertaken by local governments. These results suggest that while public investment may yield higher output effects than other spending, its effectiveness depends upon its composition, the level of government implementation, and supply side factors.
The perception that privatization hurts the poor is growing and creating a backlash against the private provision of basic infrastructure services. At the same time, governments are finding themselves fiscally strapped, searching for ways to finance the large investments needed to expand services to the poor. In Latin America, a laboratory for privatization, evidence exists which sheds light on the privatization experience. This paper analyzes the channels through which the poor might either lose or gain from privatization, examines the evidence accumulated on what has actually happened, and then discusses the policy options available to decision-makers who want to increase efficiency while at the same time dealing with the infrastructure needs of the poor that have been identified as being important for their welfare. In that context, the issue of whether welfare considerations should form part of the regulatory approach to privatized services is examined. The paper's major aims are to shed light on the issue of who can and does benefit from privatization of utilities, and to guide policy-makers in the choices.
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