By Jacques Pauw

JOHANNESBURG, South Africa, February 5, 2003 — Every morning, as the sun rises over the Indian Ocean and paints the sky a brilliant yellow, David Radebe crosses the N2 freeway into another world.

Winding like a black snake through green sugar cane fields and over rolling hills, the freeway divides two very different communities along KwaZulu-Natal's spectacular Dolphin Coast.

Thirty miles (50 kilometers) north of the harbor city of Durban, the turnoff to the right leads to the resort towns of Ballito Bay, Salt Rock and Tinley Manor, where holiday homes of the upwardly mobile and absentee landlords perch on rocky cliffs overlooking brilliant white beaches. Radebe comes here to look for work.

On the other side of the freeway, heading toward the interior and scattered between sugar cane estates, lie the houses and dwellings of small ethnic Indian communities and three black township settlements that are home to about 12,000 people. This is Nkobongo, where Radebe lives.

Rows of new government housing line the tidy township streets. Roads and curbs are well maintained. Electrical cables crisscross the landscape above the tin roofs, and township kids, dressed neatly in blue uniforms, make their way to "Indian schools" that now have been integrated.

But the air of progress and order belies a quiet desperation. Eighty percent of township residents live in dire poverty, well below the minimum living standard of R800 ($80) per household a month. The mobile clinic that serves the townships reports an alarming increase in cases of HIV/AIDS, tuberculosis and malnourished children. Six in 10 residents say their children went hungry in the last year.

Their biggest problem, however, is water. Not because of a shortage, but because they can't afford it.

It was in this stricken community in 1999 that South Africa initiated one of five water privatization programs as part of a government policy aimed at making people pay for the full cost of having running water in their homes. The South Africans call it "total cost recovery."

Unlike many countries, where residents pay only a fraction of the total cost of having running water in their homes, the idea behind "total cost recovery" — the brainchild of private water companies and World Bank economists — is that ending subsidies will help finance improved waterworks and build the country's economy.

Free water "is not so good an idea," Yves Picaud, managing director of Vivendi Water in South Africa, said in an interview with ICIJ. "It is better to ask people to pay very little, but to pay something." Free water, he said, "gives the impression that water is free, service is free and you can use water as much as you want."

But in practice, total cost recovery may have caused more misery than development. In poor areas where privatization has been implemented, millions of people have been cut off because they cannot afford to pay water bills that often make up 30 percent of their incomes.

As many as 10 million South Africans have had their water cut off for various periods of time since 1994, according to a 2002 national survey by the Municipal Services Project, a university-based research center with offices in South Africa and Canada. Two million people have been evicted from their homes for not paying utility bills. Many poor families pay up to 40 percent of their monthly income for water and electricity.

The water cutoffs have forced thousands of poor people to seek water from polluted rivers and lakes and led to South Africa's worst outbreak of cholera, in which thousands of people were sickened and hundreds died. In the end, the government spent millions of dollars to control the spread of the disease and to truck clean water to the stricken areas.

"The cost recovery program sounds good, but...it forced people to go back to the original sources of water, polluted streams and rivers and the like," said David Hemson of South Africa's Human Sciences Research Council, Africa's largest and most-respected social science research organization.

"That was the direct cause of the cholera epidemic," Hemson said. "There is no doubt about that." [Listen to David Hemson]

"People are saying: I have to choose between water and food — or between electricity and sending my child to school," said Canadian researcher David McDonald. When it comes to cost recovery, McDonald observed, "Nobody really ever bothered to find out if people could afford these services. And, as it turns out, people can't."

Soaking the poor

In South Africa, total cost recovery has been implemented in different ways. Some local governments have privatized public utilities by awarding water concessions to foreign companies. Others have transformed their utilities into profit-driven, publicly owned enterprises.

In Nkobongo, where David Radebe lives, the French water company Saur won a 30-year concession in 1999 to provide water and purification services to the area's diverse population of 40,000. Saur formed a local company in consortium with four South African companies, called Siza Water Company. Saur was the majority shareholder, while the majority black South African companies shared the rest.

Water that once was free for the poor suddenly carried a price tag. Initially, families such as Radebe's could afford it. Pleased to have cool, fresh running water in his new home for the first time in his life, Radebe gladly paid the connection fee and his first water bill — totaling 63.58 Rand ($6.40) — a copy of which he retains as a keepsake.

But in 2001, Radebe lost his job as a gardener at a construction company. School fees, food costs and rising water and power rates quickly drove the family into debt. The household's electricity was cut off, and the water stopped flowing. Radebe tried to install a pipe to bypass his water meter but was arrested and released on a warning. He had to beg the school headmaster to reschedule the kids' school fees. With no water, his vegetable patch dried out and the electric stove — of no use since the electricity had been cut — was repossessed.

Radebe told city officials he would never be able to pay. So they removed his water meter altogether. Many of his neighbors and friends also have been cut off. Ninety percent of township residents now access water from sources other than the Siza Water Company, according to Hemson.

Facing mounting losses, Siza Water Company did what most private and public water utilities are doing. It raised water rates — by between 98 percent and 140 percent since the inception of the concession nearly four years ago.

Other, more inventive tactics are being employed across the country.

Many townships have put meters on communal taps. To access them, residents must buy a prepaid water card, which works like a phone card. The customer slips the card into a meter and takes water from an activated tap. The water stops when the card is removed. When the card runs out, the customer has to buy another. Trouble is, people like Radebe can not afford $4.02 for a prepaid water card.

The prepaid meters are "the most insidious device," said McDonald, who co-directs the Municipal Services Project, a research center based at University of the Witwatersrand in South Africa and at Queens University in Kingston, Ontario. "People won't buy what they need — they'll buy what they can afford. So people are simply cutting themselves off rather than having the state come in and do it."

Some of the metered communal taps have been vandalized. Others just don't work; they eat the water cards so that customers not only lose their money, they lose any chance for water.

Another tactic of water control involves a simple disc with two tiny holes, called "the trickler." When people miss a certain number of payments, the water company inserts a disc into a valve, causing water to trickle through to their pipes at greatly reduced pressure. Residents can still get a minimum amount of water — but only once or twice a day.

Although Section 27 of the South African Constitution guarantees citizens access to sufficient food and water, families like Radebe's have neither.

Instead, families desperate for water in Nkobongo turn to the nearby Mhlali River and other streams. Radebe said he borrows drinking water from neighbors when he can, but at times he has had to send his kids to the river with plastic buckets to fetch wash water.

The trouble is, KwaZulu-Natal's natural water resources can be deadly.

19^th century epidemic, 21^st century economics

There was a time, said Wilson Xaba, when the taps in the Ngwelezane township just ran and ran. The water was clean and free.

Ngwelezane is a two-hour drive north of Radebe's township of Nkobongo in the former homeland of KwaZulu. Of a population of 1.5 million people, 79 percent do not have access to clean water, according to Edward Cottle of the Rural Development Services Network, a private group that conducts research on social issues.

Xaba leads a community group called Shona Khona, which means "Go There." It was started in response to the community's dissatisfaction with increasing service cutoffs by the municipality's "commercialized" waterworks.

In 1982, KwaZulu suffered a major outbreak of cholera. More than 12,000 cases were reported, and 24 people died. As part of a relief program, nine communal taps were erected by the apartheid government on the border of Ngwelezane.

It was a historic milestone for Ngwelezane. For the first time, residents were able to access purified water. According to Xaba, some residents made personal connections to these taps and had running water in their houses. For the next 17 years, the community had free water.

Until 1998, the municipality covered all costs of water from the nine communal taps. But then the town council introduced measures for more rigorous financial management.

Residents were required to pay a flat monthly rate of $4.50 for water and electricity. At the end of 1998, the nine communal taps were converted to prepaid meters. To access water, residents had to pay a connection fee of $5. Only 700 households could afford the registration fee. Two-thousand families remained unconnected.

"They came to us and said we are wasting water," Xaba recalled. "We were not consulted, they just told us. For those houses with taps, they put meters in. Then they put the prepaid meters in. We said 'no' and then they cut our water. They said the water belonged to the municipality. They used a phrase, 'No money, no water.'"

In August 2000, at least four of the meters stopped working. "We could not get water from anywhere. Nobody explained anything. It took three weeks before the meters were working again. The boreholes were dry. We had no choice but to get water from the rivers."

A survey by the Municipal Services Project found that 11 percent of Ngwelezane's residents said they got water from the river as a result of the cutoff.

They started using ponds and streams contaminated with cholera bacteria, and the disease spread like wildfire. The Ngwelezane/Empangeni municipality, which includes the mostly white town of Empangeni, had $10 million in reserves that could have been used to address the crisis, according to Edward Cottle and David Hemson. But the municipal government remained "impassive" in the wake of the outbreak, Cottle said.

"There had been no attempt to subsidize the extension of services to poor communities," Cottle told ICIJ. "The municipality rather sought to impose prepaid water meters on the existing free water supply and to subsidize industry through the introduction of tax breaks and incentives."

The first cholera case in Ngwelezane was reported in August 2000. Within four months there were thousands of cases of the disease, which spreads through food or water contaminated with cholera. The causes of cholera have been understood since the mid 19^th century.

The disease ultimately spread to the Eastern Cape and then to the capital, Johannesburg, becoming the largest cholera outbreak in South African history before it ended in early 2002.

According to government figures, about 120,000 people were infected and 265 were killed. Hemson, who was sent by the government to investigate the outbreak, disputed the official figures and said more than 250,000 people were infected and just under 300 people died.

Hemson said he discovered that the municipal government had put locks on people's taps, forcing them to take water from the lake and river. "That spread this cholera epidemic throughout the entire community," he said.

The local council eventually reacted by removing the prepaid meters from communal taps and charging people a flat rate of $2 to $2.50 per month for water. The South African government gave KwaZulu-Natal $2.5 million in emergency funds to fight cholera in the province. It also trucked water into the affected areas at a cost of $45,000 per month.

"It is hard to fathom how a democratic government, which prides itself with promoting seemingly progressive water legislation, could experience one of the biggest outbreaks of cholera," Cottle said.

Unless the government gets rid of its policy of cost recovery, "cholera will continue to haunt South Africa for a long time to come," he said.

And it will be costly. As a result of trying to recoup its water costs, the state is now paying "tens if not hundreds of times more dealing with the health crisis,'' said David McDonald of the Municipal Services Project.

Despite best intentions, the ANC blunders

Ronnie Kasrils got the first hint that his government's cost recovery policy was not working in 1999 during a visit to a village in the former homeland of Transkei. Kasrils, once a committed communist and soldier in the African National Congress' armed wing, had just become the minister of Water Affairs and Forestry.

His department was coordinating a project in the village of Lutschenko in which each resident was contributing 10R ($1) a month to receive basic water service. While touring the village, according to press reports at the time, he came upon a woman digging in a riverbed.

"You don't have to do this anymore — we have this project now."

"I have to," she replied. "I haven't got 10 Rand."

In February 2000, Kasrils issued a new policy, giving six cubic meters (1500 gallons) per month of free water to every household in the country. But he failed to provide rules to implement the policy.

By the end of 2002, 57 percent of all South Africans were getting the free water, but fewer than a third of them were poor. The remainder didn't need free water, according to Kasril's department. And millions of poor people still did not have the clean water they needed.

The ruling African National Congress makes impressive claims for its record on water delivery. When it took power in 1994, 13 million South Africans did not have access to clean drinking water. By February 2002, the government said, it had reduced that number to 6 million. Kasrils has promised "basic supplies" of water and electricity for all by 2008. [Listen to the government's water promotion]

But the ANC's progress report seems exaggerated. According to Cosatu, South Africa's biggest trade union, 98 percent of whites, but only 27 percent of blacks, had access to clean water in their homes in March 2001. In rural areas, only 2 percent of blacks had indoor plumbing.

Despite South Africa's rating by the United Nations Development Index as a middle-to-upper-income country, one child in every 22 dies before reaching the age of 1. Diarrhea is a frequent cause of these deaths and often is directly attributable to poor water and sanitation. In many ways, South Africa still remains two countries. The 13 percent white minority is 18^th on the Human Development Index, equal to New Zealand. The dominant black majority is 118, in line with Bolivia.

Of all the countries in the world, in 2001, only Guatemala had a wider gap between rich and poor than the one that exists in South Africa.

The World Bank takes credit

According to a 1999 World Bank strategy report, the bank played an important role in charting South Africa's privatization strategy.

It used South Africa as a sort of test laboratory to "pilot our evolving role as a 'knowledge bank,'" the report stated.

"The Bank has provided technical assistance and policy advice in virtually all sectors of the economy," Pamela Cox, World Bank director for South Africa, wrote in the introduction to "South Africa Country Assistance Strategy," a bank report. The report stated that the Bank's International Financial Corporation has played an "active role in the further development of infrastructure in South Africa and promote the increased participation of the private sector in this area."

It goes on to say that the bank's primary objective in influencing South African policies was to "help reduce the apartheid legacy of poverty and inequality." Unfortunately, it didn't turn out that way.

The bank sent its own experts and brought in others to help South Africa fashion a new economic policy that involved decentralizing power partially through privatizing utilities.

Patrick Bond, a professor at the University of the Witwatersrand in Johannesburg who has written extensively on water privatization and the World Bank, told ICIJ that the Bank sent what he called "reconnaissance missions" in the 1990s to prepare the new ANC government for privatization and cost-recovery.

By the time the ANC took over, World Bank advice was explicitly biased toward privatization.

By November 1994, Bank staff, led by the deputy resident representative, Junaid Ahmed, had drafted the main sections of South Africa's "Urban Infrastructure Investment Framework." A final draft was issued four months later under the auspices of the Reconstruction and Development Ministry in the office of President Nelson Mandela. The framework provided for communal taps and for pit latrines in areas where households earned less than $80 a month, Bond said.

In October 1995, the World Bank's main water expert on Lesotho and South Africa, John Roome, advised then-Minister of Water Affairs Kader Asmal to make several policy changes. These included introducing a "credible threat of cutting service" to non-paying consumers.

In 1996, total cost recovery became an official policy of the government when it adopted its fiscally conservative Growth, Employment and Redistribution macro-economic policy, known as GEAR. The central features of the policy are a reduced role for the state, fiscal restraint and the promotion of privatization.

Mike Muller, director-general of the Department of Water Affairs and Forestry, acknowledged the bank's contribution but added: "The policy for cost recovery has been in place long before the World Bank was allowed to come here. And it's an absolutely sensible way of running a water system and the way most water systems are run in the world."

Bond disagrees. "Much of cost recovery to date in South Africa has been driven by a blind ideological faith in neo-liberalism," he told ICIJ. "There has been no effort to explore alternatives."

Call me a Thatcherite

After taking office as president in May 1994, Nelson Mandela proclaimed, with a nod to Britain's proponent of privatization, former Prime Minister Margaret Thatcher, "Privatization is the fundamental policy of our government. Call me a Thatcherite, if you will."

Thabo Mbeki, who at the time was Mandela's deputy president and succeeded him in 1999, agreed with that position.

Municipalities have used harsh tactics to enforce total cost recovery. In certain towns in the Eastern Cape — the traditional heartland of the ANC — municipalities resorted to "apartheid style" tactics to force people to pay. In Stutterheim, streetlights were switched off to "punish" non-payers. In Queenstown, special debt collectors and private security firms were appointed to collect arrears and cut off water of errant residents. In Fort Beaufort, local council officials refused to collect sewerage buckets in so-called "squatter" camps – where the poorest of the poor live in tiny tin shacks.

Township protests broke out around the country, with people demanding an end to prepaid electricity meters and water cutoffs. The demonstrations turned violent in some areas, as protesters clashed with the police.

"People are very, very angry," McDonald, of the Municipal Services Project, said. "We're starting to see a ground swell of opposition."

The project, surveying the impact of cost recovery on the poor, found that more than a third of the 2,530 respondents interviewed in July 2001 said they could "not afford to pay for these services no matter how hard they try" or that they could pay only if they "cut back on other essential goods like food and clothing."

In March 2000, one month after Kasrils promised free water, the World Bank released its "Sourcebook on Community Driven Development in the Africa Region — Community Action Programs."

Despite the hardships already evident from total cost recovery policies, the bank's report advised: "Promote increased capital cost recovery from users. An up front cash contribution based on their willingness-to-pay is required from users to demonstrate demand and develop community capacity to administer funds and tariffs. Ensure hundred percent recovery of operation and maintenance costs."

McDonald said officials disregarded the reality on the ground.

According to his research, only 50 percent of households are capable of paying a "reasonable fee" for services such as water and electricity. Seventeen percent of households can pay for services only if they cut down on essentials, such as food and clothing. Eighteen percent said they cannot pay at all.

"Ability to pay is at the root of the payment crisis, not a culture of non-payment. You cannot squeeze blood from a stone," McDonald said.

Menahem Libhaber, the World Bank's senior water and sanitation engineer in Latin America, told ICIJ there are thresholds beyond which people simply cannot pay.

"Look, we can raise the tariffs only by a socially acceptable amount — 3 to 4 percent of income — if you get to more than that, they will not pay," Libhaber said. "The World Health Organization suggested you could go to 7 percent, but to me just 5 percent. South Africa is paying too much."

A countrywide study released in December 2002 by the Department of Local Government shows that many municipalities are charging unaffordable and unreasonably high service rates and people simply can't afford to pay them.

South Africa's 300 local councils are owed $670 million in outstanding water payments, the study said.

The French connection

While privatization was a post-apartheid policy, one French company already had established deep roots in the country.

Lyonnaise des Eaux, now Suez, was the first water multinational to create a presence in South Africa — and it didn't wait for the coming of democracy in 1994.

Ten years earlier, at the height of apartheid, French foreign trade advisor Henry Castelnau and two advisors to Lyonnaise des Eaux's chairman, Jérôme Monod, arrived in South Africa for talks with the government and local authorities.

Through its wholly owned subsidiary of Lyonnaise Water Southern Africa, Suez bought interests in South Africa's largest construction company and a pipe manufacturer in the early 1990s. It then placed all of its South African interests under Water and Sanitation Services South Africa, a wholly owned subsidiary.

By 1995 the new firm, known as WSSA, had management contracts in three Eastern Cape towns: Queenstown, Stutterheim and Fort Beaufort.

To drum up business, the company used what Witwatersrand University political scientist Greg Ruiters calls a "panic strategy." Ruiters has extensively researched the concession for the Municipal Services Project.

WSSA officials met with Fort Beaufort council members before the 1994 democratic elections and warned them that the post-apartheid era was going to bring about "demanding consumers, a payment crisis and militant unions." The company claimed it could help the three local councils solve these pending problems, as well as provide substantial savings and a world-class service. The Suez subsidiary said consumption would rise and consumers would start paying as they became more aware of the "value" of water.

A secrecy clause was written into the contracts preventing any member of the public from seeing them without the explicit approval of Suez, according to union officials and Ruiters.

By 1996, the WSSA could boast in its annual report: "Whilst these are early days in winning their acceptance, we now have the support of the government. We helped draw guidelines of private sector management of water and sanitation services and are now helping with a regulatory framework."

But Ruiters said water privatization in the three towns proved to be disastrous. His research showed that water tariffs increased up to 300 percent between 1994 and 1999. The municipalities did not derive a cent of profit from its water revenue; all increases went to paying off WSSA charges.

According to Ruiters, Fort Beaufort paid $40,000 a month to the company.

By 1996, a typical township household was paying up to 30 percent of its income for water, sewerage and electricity. Average income in the area at the time was less than $60 per month, with more than 50 percent unemployed.

The majority of township residents couldn't pay their bills and were dealt with ruthlessly. Queenstown appointed special debt collectors and introduced a re-instatement fee that was almost twice the average township income.

The assistant treasurer for Fort Beaufort, now called Nkonkobe, said in his 2000 municipal report: "The majority of debtors against whom action was taken are pensioners or unemployed."

By the late 1990s, old-style, anti-apartheid resistance tactics were reemerging in the communities, with stone-throwing and violent confrontations between local authorities and angry communities, protesting the electricity and water cutoffs.

Ruiters said the WSSA showed "remarkable tenacity" in clinging to its three contracts in the eastern Cape. The company said in a 2000 monthly report: "Based on our experience, we know that revenue can be gathered humanely and fairly."

But something had to give. By 2000, Fort Beaufort municipality no longer could pay the management fees to WSSA, and in December 2001 it persuaded a High Court judge to cancel its contract with the company. WSSA was given two weeks to vacate the municipal offices that they were occupying.

War by water pressure

In Nelspruit, a three-hour drive east of Johannesburg, the water providers and the water drinkers have had quite enough of each other.

Henry Nkuna, for one, is threatening war.

Nkuna was once a combatant in the Azanian People's Liberation Army, the armed wing of the Pan Africanist Congress, which continues to be a leftist political party favoring land redistribution and black empowerment. The armed Pan Africanists gained notoriety during the apartheid struggle for masterminding attacks on whites in churches, bars and on farms.

Now, Nkuna is declaring his readiness to respond to new water policies with violence. "If you dare to do cost recovery in the townships, it will spark a fire," Nkuna warned in a November 2002 interview. "It will be something you will regret forever."

Nkuna's new enemy is the Greater Nelspruit Utility Company (GNUC), a consortium of the British water company Biwater and a local black empowerment company, Sivukile Holdings, which has a 30-year concession to provide water and sanitation services to a population of 240,000.

Brian Sims, GNUC's managing director and head of Biwater in South Africa, is a veteran water man. He has worked all over the world: New Zealand, Australia, the Philippines. "Name it, I've been there."

"Never in my life have I seen such a culture of non-payment than here in Nelspruit," Sims said in disgust. "People simply don't pay. We are suffering massive losses."

In the summer of 2002, GNUC instructed its lawyers to proceed with legal action against 796 households in Nelspruit that were more than $300 in arrears on their water accounts.

"Letters of demand have been sent out. This is the beginning of a process to break the culture of non-payment in the townships," GNUC commercial manager Harold Moeng said in a November 2002 interview.

Nkuna and his Anti-Privatization Forum are fighting to force the municipality — now called Mbombela — to cancel the GNUC contract and introduce a flat rate of $3 a month for all municipal services in the municipality and its surrounding townships and villages.

"If it's necessary, we'll use violence," he warned. "If they [GNUC] come into the township to cut our water supplies or take our goods, we'll vandalize their cars and beat up their workers."

The threat of violence is the latest in a series of obstacles and setbacks for the concession, which has seen youths marching on councilors' houses in the townships, the destruction of water meters, illegal water connections and one of the highest rates of non-payment in the country.