by Yvonne Chitiyo
Countries implementing economic structural adjustment programmes (ESAP) in southern Africa are finding it difficult to privatize their parastatals which have become targets of reform programmes sponsored by the World Bank (WB) and the International Monetary Fund (IMF).
On paper, these programmes seek to eliminate the large budgetary burdens shouldered by governments through privatization of the parastatal sector. But, despite pressure from the IMF and the World Bank, many countries in southern Africa have been cautious in implementing the privatization programme to avoid relinquishing control of parastatals to foreign capital.
Many government enterprises are to be sold or broken up while loss-making companies face closure. Those still under government jurisdiction would see the introduction of some public shareholders through joint ventures.
Zimbabwe, Zambia and Tanzania initially pursued restructuring and reform of parastatals rather than total change of ownership. However, Zambia and Tanzania later shifted, under international pressure, to full-scale privatization.
Tanzania is under pressure to privatize more than 400 ailing parastatals in six months. Last year, the country’s Railways Corporation laid off 846 employees in an attempt to cut expenditures and increase profits. However, some Tanzanians argue that since the implementation of ESAP in 1986, there has been slow progress in privatizing parastatals.
Enos Bukuku, a senior economics lecturer at the University of Dar es Salaam, who supports ESAP, says there is no turning back on this road. He adds that the problem is lack of institutional capacity within government for policy design, review, analysis and implementation.
Chairing a session of the meeting of Global Coalition for Africa (GCA) in June, Julius Nyerere, former Tanzanian president, said donors were imposing policies on Africa that had not contributed to growth but had brought economic hardship to the people.
“We were told that Africa was failing because we formulated wrong policies. But look at it now, 10 years after the World Bank and IMF have been dictating their structural adjustment programmes, we are told we are still failing,” Nyerere told the meeting in Harare.
He also lamented that African leaders were simply accepting the policies without question, saying: “We have stopped talking, we now just sign – we do not question nor do we object to these policies which have ruined our social services and have resulted in our people losing their businesses.”
Welcoming Nyerere’s frank remarks, the Daily Gazette said in an editorial that few ordinary Zimbabweans shared the official view that Esap had succeeded when many people had lost their jobs even as prices of basic commodities escalated.
However, the GCA, a World Bank initiated group, urged African governments to privatize and pursue policies encouraging private investment to speed economic growth. GCA says that development of the private sector in many countries is hampered by the lack of an efficient banking system, availability of credit and reasonable rates, and a tax structure which encourages private sector activity.
In their report, the GCA said many states had included privatization as part of economic reforms but in reality little had been accomplished and private businesses still felt opportunities were being lost to state enterprises.
Former US under-secretary of state, Herman Cohen, said that Africa’s private sector would grow only if there were limited government regulation and effective implementation of sound policies.
“There also must be functioning, independent banking systems and diversified market-oriented financial institutions, adequate provision of and equitable access to credit,” he said.
Christopher Adam, William Cavendish and Percy Mistry argue in their book Adjusting Privatization that while privatization may expose public enterprises to greater commercial pressures, it does not necessarily alter or control ownership structures in the economy.
With African governments under pressure to finance their budget deficits, they say privatization proceeds could generate valuable capital, easing the pressure for expenditure cuts in other areas.
Meanwhile, the Zambian government has unveiled a new privatization plan to end state control in key industries, and attempt to save its battered manufacturing sector.
The first privatization program e launched by President Frederick Chiluba’s government has been slow to get underway. The Zambian Privatization Agency (ZPA) has been accused of deliberate undervaluing and pricing parastatals — though with little success in selling off 150 parastatal firms in the country.
The new initiatives come at the time of a severe depression in the manufacturing sector, beaten into submission by regional competitors, mainly from Zimbabwe and South Africa.
An announcement by the Zambian Minister of Commerce, Dipak Patel, that 30 of the country’s parastatals are unfit for privatization and could soon be closed down, shows how the parastatal sector has deteriorated since government subsidies were stopped two years ago.
Before the subsidies were removed the government used to spend an estimated ZK500 million in grants and loans to the parastatal sector each year.
ZPA blamed the shortfall on economic recession. However, economists say buyers have not been forthcoming because of Zambia’s; liquidity and high interest rates.
“We would like to sell off parastatals on the stock exchange one by one, and hope tl at business will pick up after the first few have been sold,” said Mumba Kapumpa, chairman of the securities and exchange commission.
Because of the shortage of bidders, the ZPA is expected to re-advertise many of the companies put up for sale last year. The overall unprofitability of these companies is believed to be the major reason why the rate of privatization has been so sluggish.
Although Zimbabwe’s restructuring programme is roughly on schedule, its approach to privatization has always been hesitant.
The World Bank welcomed the country’s indication that it would privatize most of its major public enterprises and warned that state ownership must be highly reduced if they are to be efficient.
According to some researchers, advances and direct subsidies to the country’s 40 parastatals totalled over, ZS650 million (USS81 million) a year accounting for 40 percent of its budget deficit in the 1990-91 fiscal year, which was then estimated at 10.3 percent of Gross Domestic Product (GDP).
Dr Khaled Sherif, a public enterprise specialist, argues that with this amount of subsidies, the government could have created enough jobs to absorb90 percent of the country’s school-cleavers population, estimated at 20 000 per year.
Some economists believe the main reason government is hesitant to implement full-scale privatization is the concern over transferring assets back to foreigners and the inherent mass retrenchments coupled with it.
To avoid this, the government has considered buying the majority of shares and holding them on behalf of nationals until these have the money to directly buy shares in the companies.
A World Bank chief economist based in Washington and responsible for African economic affairs, Ishrat Hussein, told Zimbabwe Economics Society members that government was being encouraged to reduce its control on parastatals.
Hussein said once privatized, the public corporations must not continue to borrow from local banks but from foreign banks so as to be exposed to international competition and to improve efficiency.
Zimbabwe’s Senior Minister of Finance, Bernard Chidzero, says parastatals engaged in activities which can be operated commercially, and compete with the private sector, should be privatized totally or partially.
There is, however, strong support in the society for preserving the state-owned sectors despite pressure to meet international donors’ conditions to continue to finance ESAP.
Some analysts argue that privatization in Zimbabwe will lead to the economy being dominated by whites and foreign investors as they have more money than indigenous black business people.
A government official was recently quoted as saying privatization would mean the transfer of assets back to foreigners.
A Zimbabwean economist, Dr Austin Chakaodza, urged the government to abandon ESAP, describing it as devastating and unworkable. He says the World Bank and IMF and other international financial institutions are the new colonialists.
In February, the National Railways of Zimbabwe’s (NRZ) Road Motor Services department was transformed into a separate entity to make it viable.
This was seen as a move toward privatization. But NRZ general manager, Alvord Mabhena, refuted this arguing that they are commercializing some operations to enable the parastatal to operate on purely business principles. He said commercialized departments would remain under NRZ but will run separate businesses as profit-making ventures.
With effect from 1 July, Zimbabwean government commercialized the Cotton Marketing Board (CMB), Cold Storage Commission (CSC) and Dairy Marketing Board (DMB) as “government owned” private companies. The commercialization of the agricultural boards is part of the government’s plans to operate toward a market-oriented economy aimed at creating competition and improving efficiency.
“Despite the World Bank’s call to privatize parastatals, not all would be privatized as that means giving away what is left for the majority blacks.
In spite of what everybody says, we will continue to subsidise our people as much as possible,” said President Mugabe. He challenged the international financial institutions and donors to say how they intended to empower the indigenous when calling for privatization. When a government privatizes enterprises, these were bought by those with the sources, usually the minority, he said.
At independence in 1980, Zimbabwe inherited a commercial infrastructure in which there was little black participation.
Meanwhile, Sociedade Austral de Desinvolvimento (SAD), a leading private investment consultancy, is currently involved in the privatization of the country’s small firms that employ less than 500 workers.
Under this programme, 80 percent of the company’s shares will be sold to the private sector and 20 percent to its workers. However, most workers have been so drained by the war that they cannot afford to buy any shares.
The World Bank, in a review of the economic restructuring programmes in African states, has concluded “they still have a long way to go”.
The reforms, even incompletely implemented, can put African countries on the road to development, the report said, while cautioning Africans against placing unrealistically high hopes in the reforms.
For the success of the programmes in Africa, the report recommends keeping budget deficits small, encouraging competition and high productivity, abolishing government marketing boards and privatizing public enterprises.(SARDC)
