Accounting for the Divergence Between Privatisation Theory and Practice in Developing Countries: The Case of the Water Sector in Ghana

Abstract

The performance and operation of privatisation in the water sector in developing countries typically diverges from that proposed within the rationalising theoretical framework. There is a broad literature that considers the various aspects of such performance and operation, from the nature of outcomes typically characterised by dispute and renegotiation, to the implications for consumers. It is the purpose of this thesis to analyse the underlying factors that contribute to this typical dispute and renegotiation process, utilising the theoretical rationale for the programme, and its associated weakness and assumptions, as an explanatory framework. Through this analysis it is possible to expose and identify the particular aspects of private sector participation (PSP), the contracts established and administration thereof, which contribute to such problematic implementation. The utilisation of such a framework further permits the identification of likely implications for the functioning of PSP where implemented prospectively. The examination of these connections is performed in a case study environment, with privatisation of water services in Ghana providing the context. The Ghanaian experience shows significant deficiencies in contract design that entail considerable delays and disputes between parties, with contractual deficiencies intensifying the already inevitable role of institutional intervention. Conceptions of water as a merit good and human right, problematic commercial viability, and an incoherent implementation with local contextual variation all further contribute to the contradictory environment of the water sector in Ghana. Theoretical weaknesses, inconsistencies and problematic assumptions are manifest in the sector and contribute to divergence in performance, and where ideological commitment to the programme is evident, this divergence is exaggerated. Theoretical validity for sector policy is therefore questionable, with consequences of increased distortion in risk transfer, significant concessions to the private sector, and the increased role of institutions. This process, it is proposed, threatens the functioning of the programme where implemented, with regulation undermined, inherent and acknowledged renegotiation and dispute, paralleled by a failure to provide sufficient capacity and structure to sector institutions.