Although it has been argued public/ private partnership can be beneficial, there are many disadvantages associated with the same sources of water distribution procedures. These ought to be taken into consideration whenever the thought of privatization comes into mind. Several reasons make privatization the least option when planning and deciding on what method to use in managing or running water service for the citizens of a country to benefit. First to ponder in this section is the fact that one of the disadvantages of privatization is the idea that it leads to the decline in service quality.
The cost saving practices used by many private partners of companies in water services have the likelihood of leading to decline in services quality particularly when implemented irresponsibly. Many of the attempts to privatize water service delivery have failed miserably. The major examples of such idea is the situation that happened in Bolivia among the many situations that other third world countries experienced with regards the water privatization movement pursuance. In most cases the partner like the private member may end up making some saving but at the same time the service quality may be diminishing (Kauffman 43).
This is particularly because of the fact that the motivation of such firms of private organizations is to merely gain profit from the business. They may see it as a social responsibility; however, there is a larger percentage of being motivated to continue that said distribution for the sake of earning ample income for themselves. Another argument against privatization is loss of control over assets used by the government to provide essential services. This is common under asset lease or asset transfer model arrangements.
In cases where a private company is involved in partnership with public partner with which their interests conflicting, tensions are likely to occur. This is particularly because of the reason that the private partner is majorly motivated by high profit and this may escalate the tension between the two partners. Thus, higher cost of financing results from privatization. This is because the practice offers utilities with the option of traditional financing options. For example a private company may use private debts, equity or a combination of both to finance capital enrichments.
The return on equity required by private companies ranges between 10% to 15% and this eventually leads to a cost of capital that is likely to be higher than the cost of tax-exempt financing common in the public sector. The other disadvantage of privatization is that it can lead to deterioration of assets. When privatization is effected, the private company or partner is charged with the responsibility of ensuring that the assets are kept in good working order and condition so as to meet the long term needs of the utility’s customers.
Failure by private companies to invest enough capital in repair, replacement and maintenance of the system is likely to worsen gradually, thus performance and service quality may end up being compromised ("The Privatization Chronicles", 35pp. ). Under the asset lease models, asset deterioration can be quite a big problem. This is the reason why there is a need to understand and evaluate the said movement much deeper. Other reasons against privatization of water services are that with corrupt governments it can be done in a much corruptive procedure.
This means that the companies awarded the tender to run water service provision to the public may not be competent enough to render the services required. The shifting of the budget for the programs for the sake of the government official’s personal gains could be noted as one of the possible results of this particular set up of distributing water to the society. This may lead to deterioration of the situation instead of it improving. This could be in the form of poor service delivery and low quality water. Privatization of water services in a country often results in lay offs of staff.
For example in Ghana when Aqua Vitens Rand Limited (AVRL) started managing urban water supply about 1600 workers were laid off and this represented more than half of the staff. This was intended to cut costs and led to the remaining workers’ doing a lot of work (theirs and that of the laid off colleagues). This means that the laid off staff will not have a means of living. Another bad aspect or side of privatization is that the employees are transferred to another employer like from the government to the private company without enjoying termination benefits from their former employer.
The government preparing to privatize certain services like the government may resort to withholding promotion and pay increases and freezing of work training (The Implications of Privatization on Low-Income People: Internet). This is unfair to employees because it touches their sources of financial needs or their means of living. Employees in this case end up being less motivated like in the case of those being transferred to the new private firms.
Although private companies may gain good revenue collection, they may not in essence have achieved the public goal of increasing the number of connections, increasing the number of supply, improving quality or reducing water–borne diseases. This is so because many of these private firms are interested in high revenue collections without considering the main objectives of privatizing public water service. Another aspect of privatization that should be fought at all costs is the fact that many private firms are usually foreign based employing local nationals of different third world countries.
The expatriate managers are paid large amount of money in comparison to what was being paid the country’s nationals who are at a managerial level. This particularly happened in Ghana and attracted a large public outcry. There is no logic behind sacking a manager who is paid little amount money and replacing them with another who is paid higher amount of money. Privatization of water may lead to price hikes of this important commodity. For example, as mentioned earlier, in Bolivia, Betchel a large yet greedy multinational company raised the price of water by 43% to 60% depending on customer income.
This means that such organizations can discriminate in terms of prices of water to different groups of clientele with those in poorer neighborhoods getting cheaper rates than the middle income groups. At other times the practice is the reverse that is it involves raising the water rates for the poorest families as was the case in Bolivia making it harder for the poor ones to purchase water and thus in turn makes it possible for an increased supply of water to wealthier societies within the said country.
Water, being a basic commodity should not be sold, clearly because this will mean curtailing the right to water particularly for the poor citizens. Water is almost everything in a human being’s life like ranging from that of drinking and sanitation, agriculture, industrial use among others and as such should be sold at affordable rates to all. The main reason for raising water rates can be attributed to the lust for much increased profits by the private companies. It is therefore in the best public interest that the government of a country runs and manages water supply system in order to regulate water rates.
Price of water rates increments has also been witnessed in Ghana where the government is planning to privatize the water sector (Mike Prokosch & Karen Dolan 22). Another premise against privatization is the widespread global concern about privatization and cost recovery policies. This is because these tend to treat water as commodity or an economic good to be sold in the market place. These raise the hindrances to provision of clean and affordable water which is essential and basic need to both the rich and poor which in turn makes privatization an enemy to the wellbeing of humans.