25 September 2003

Zambia: Benefits of Privatisation


Lusaka — ALTHOUGH there are claims of success from the sponsors of Zambia's privatisation programme, these successes have proved impossible to see with our naked eyes.

We probably need microscopes to see the real benefits of privatisation. The truth is they don't exist.

And we agree with labour deputy minister Chile Ng'uni's observation that Zambians have been broken down by privatisation, the country was so gullible as to allow wholesome privatisation of parastatals.

The real benefits of privatisation to Zambians will never been seen.

There's therefore need to save the few remaining parastatals or even create new ones where this is possible.

The few remaining state-owned enterprises like Zamtel, Zambia State Insurance Corporation, Zesco and to some extent Zambia National Commercial Bank - can have a pivotal role in Zambia's growth and development strategy.

State-owned enterprises, operating according to a logic different from that of profit-maximising entities, will be essential for promoting and mobilising investment in strategic projects.

In insisting on a pivotal role for state-owned enterprises, we are not arguing against restructuring. Our state-owned enterprises were not run efficiently and they certainly need to undergo fundamental restructuring to enable them to serve the needs of development. Nor are we necessarily opposed to restructuring involving some form of engagement and mobilisation of private capital. Our basic perspective is that the restructuring of publicly-owned assets needs to be located within the over-arching strategic objectives of achieving broad growth and development, especially job creation; building a national democratic state - an active, developmental state with effective strategic capacity within the economy; enhancing national sovereignty at the economic and policy levels in general.

We also strongly endorse restructuring efforts to avoid simplistic ideologically-driven notions that the essential aim of restructuring is privatisation as well as managerialist-inspired notions about "turn-around" formulae, and the like; restructuring needs to be negotiated strategically between the two key partners in publicly-owned entities - government and unions. But care must be taken that the needs of users are adequately represented.

There seems to be an inferiority complex about public ownership. This is understandable because for most of the last 15 years, a triumphalist neo-liberalism has sought to denigrate publicly-owned entities.

Neo-liberalism has presented parastatals as inherently bloated, tax-guzzling, inefficient and uncompetitive corporations. The fact that UNIP, and worse still Chiluba's MMD left us a bloated, inefficient, unsustainable and people-unfriendly public and parastatal sector has sometimes lent an unjustified aura of validity to the neo-liberal dogma in our own situation.

That we need to restructure our few remaining public and parastatal sectors is obvious, that this restructuring has to be neo-liberal privatisation is less obvious. But the conflation of the two things is often made, and, of course, deliberately fostered by certain forces. We need to rebuild confidence in a democratic, and effective public and parastatal sector.

There are many arguments for publicly-owned entities.

An effective public and parastatal sector will help us set our developmental priorities - this is, probably, the most obvious and increasingly accepted argument. Clearly, privately-owned, profit-maximising corporations are not going to invest major resources in overcoming our serious problems - delivering educational, health, electricity, telecommunications and transport infrastructure and services to all the parts of our country and the marginalised in our nation.

We must be careful not just to confine the importance of public-ownership to social "basket" cases where there is so-called "market failure" but also to the strategic economic priorities, including the defence of a relative national economic sovereignty.

In a number of key areas, critical economic strategic priorities will not be realised without public-ownership. The short-termism of private capital, and its foot-loose cosmopolitanism mean that key strategic economic, and not just social, national and regional objectives may be ignored or frustrated by private capital, or its undue influence.

However, it is critical that the senior management of publicly-owned entities have a clear sense of public responsibilities and national strategic priorities, and that they grasp the qualitative difference and advantages of publicly-owned entities. The tendency for some senior public sector managers to see themselves as under-graduate capitalists, rather than public sector managers with their own mandate and long-term commitments is part of a major problem.

A common argument advanced for privatisation is that this is a means to mobilise private sector investment, including foreign investment, for developmental goals, like infrastructure development and service provision. This argument is not necessarily wrong.

Where it is wrong is when it assumes that this is the only possible way to mobilise capital resources for extension and maintenance of infrastructure and service provision. The privatisation route must always be weighed against the advantages and disadvantages of other possibilities for raising investments. Governments are able to access major relatively low interest loans on foreign capital markets, especially for infrastructural projects. While this will increase the public debt, it may well prove to be financially more prudent in the medium and long term. International examples abound of privatisation projects designed to relieve governments of financial burdens that have back-fired. The example of the Argentine rail is a good current example. The freight rail system was concessioned off into six regional, privately-run entities. State subsidies to freight rail have increased 17.7 per cent since this concessioning, not to mention major job losses and a serious decline in services.

Publicly owned entities are able, in principle, to steer more surplus into re-capitalisation. This is very much in line with government's vision of major infrastructural investment, contributing through improved transport efficiencies to the overall lowering of input costs throughout our economy.

A common argument for privatisation is that government should best occupy its time and resources with setting strategic objectives, leaving management and ownership to the private sector. This might, in many cases, be the most feasible option, not least in a national and global economy that is dominated by capitalism. However, we need to be careful about the apparent seductiveness of the "steer but don't row" argument. Public management and public ownership can sometimes be absolutely critical for strategic steering itself - privatisation and partial privatisation might impair one's capacity to steer strategically.

Attempting to regulate the private sector might prove to be more complicated than actually owning and managing an entity - numerous international examples of concessions, and other restructuring projects raise questions about the complexity of regulating private entities, and of ensuring that they do indeed deliver efficiently and that they do effectively carry risk, the ostensible reason for being "rewarded" with profits.

All too often private entities nominally carry risks until there are losses, then they expect to be bailed out with public subsidies. We have seen it in Anglo's KCM in Chingola. It is true that we often lack capacity and resources in the public sector and in parastatals, but it might, in the medium-term, prove to be more reliable building such capacity and resources.

The task of regulating major transnationals might be more daunting, than improving your own public service capacity.

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