Global PFI Summit

SAMWU condemns Global Privatisation Summit starting Monday in Cape Town

SAMWU condemns the Global Summit on Public-Private Partnerships and Private Finance Initiatives, which starts in Cape Town on Monday. The Summit is hosted by Minister of Finance Trevor Manuel and Minister of Local Government Sydney Mufamadi at the Cape Sun Hotel. In attendance are privatisation ministers from 14 countries, as well as international financiers that only give money to local government when it promises to privatise, such as Bank of America, European Investment Bank and Commonwealth Bank of Australia.

The Development Bank of Southern Africa, a public finance institution which refused to lend Nelspruit TLC money to upgrade its water infrastructure but then lent a British multinational R150 million to privatise the water, is attending the conference, and has clearly taken on the role of a private bank. SAMWU objects strongly to this.

SAMWU is disgusted that international consultants which only advise municipalities to privatise, such as Price Waterhouse Coopers, KPMG and Investec, are speakers. Consultants have already milked our municipalities of well over R200 million in the last two years - money which is desperately needed for service delivery.

The union believes that the concept of Private Finance Initiative (PFI), which was introduced in Britain in the early 90's by the Conservative government, has no relevance at all to South Africa and the developing world.
It has already been rejected by one million public sector workers in England. Under PFI, private companies take over services for as long as 60 years. Instead of the municipality borrowing money to finance services, they are forced under the PFI to pay a hefty annual fee to the private company.

Under PFI, the future provision of public services is determined by what the private consortium wants rather than what the public needs. The lengthy contracts mean that elected councillors lose control completely of any influence they have over service delivery. Entire councils can be replaced yet service delivery remains tied into a contract. International experience shows that PFI projects profit from paying lower wages than municipal employers and by cutting back on health and safety standards.

There are many examples of PFI contracts failing, such as the British pass port office where the private company failed to provide a computer system that worked, leading to huge delays in processing passports, huge queues at passport offices and more expensive passports. The cost of PFI arises from the "buy now pay later" financing of projects. The long term costs of PFI are much higher than in publicly financed projects because of the high setting up costs of a PFI contract. Costs escalate further with high interest that the company pays private banks on loans, lengthy negotiations involving solicitors and consultants, and the profit margin that must be built into the cost of the service - PFI consortia demand an excessive rate of return of over 20% on their investment.

It is a mark of disrespect that Ministers of Finance and Local Government are hosting a conference to effectively determine the future of services in South Africa during elections, when ordinary people are voting for councillors who are supposed to be the ones deciding with the community on service delivery. "The PFI mechanism also seriously undermines delivery of free basic services," said SAMWU General Secretary Roger Ronnie.

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