30 April 2012

Tanzania: It's Time National Airline Was Privatised


IT is about time now the government took a bold political and economic decision and privatized Air Tanzania Corporation Ltd (ATCL).

The airline was hurriedly pieced together following the collapse of the 'original' East African Community (EAC) in the mid-1970s and the resulting fall of the East African Airways (EAA).

The national flag carrier, which has been on-and-off the intensive care unit, has proven to be a heavy burden to the government and taxpayers.

The government will be better-off without ATCL, unless there are people who benefit from this state of 'clinical illnesses of the airline. The importance of Controller and Auditor General's advice on overhaul of ATCL cannot be over emphasized.

CAG has advised the government to start afresh with the airline. Actually, ATCL needs to be completely sold or partially privatized, with private investor acquiring majority stake and power of management.

ATCL has proven beyond doubts for past decade that it cannot be successful if it continues to be run by the government under the current business environment.

There are many reasons why ATCL will never succeed under current ownership and set-up. Firstly, the government cannot do business as we have witnessed not only in ATCL but also in other public entities such as utility companies and defunct industries.

Secondarily, staff in the public organs have no sense of ownership of the corporations therefore there is possibility that they will continue to mismanage funds directed to improve the airline as witnessed in recent CAG report.

Thirdly, owners still use past success of the airline as the roadmap for current and future success forgetting that the environment has completely changed. Fourthly, unless the government goes back to a drawing board and ask itself whether it really needs to continue owning ATCL and whether the benefits are higher than the billions they spend, nothing will come up.

Fifthly, already there are many private airlines providing services in place of ATCL and people are used to life without this government airline.

The best solution will be to relinquish ATCL to private investors, possibly Tanzanians, who can run it in a more business sense. In a more business sense such that they can borrow money from banks instead of waiting funds from the government.

They can start from scratch instead of living the dream of past experience of owning seven aircrafts in the 70s. Investor should start with one aircraft, which can buy other planes.

With private ownership the government will be able to collect taxes and Tanzanians get jobs rather than using taxpayers' money to pay salaries to airline's workers who are idle. With private ownership decision making will be faster to cope with aviation industry. No bureaucratic processes that take weeks and months to make final decisions. When the Minister is dropped or reshuffled things changes direction or focus or pace.

This is not good for aviation business. The decision reached in 2002 to privatize or enter joint venture was excellent but as usual there are people who questioned it and finally it was halted. People should have questioned the viability of the investor or joint venture partner, South African Airways (SAA), not the policy.

The failed marriage with SAA should not be an excuse for the government to hesitate to privatize or sell the corporation. And this time owners should not look any further.

They should consider Precision Air, one of success storyof airline business in Tanzania to be the new investor. Precision have excellent business model that has proved to be successful by all standards. Acquiring or joining forces with ATCL will make a strong local company that will compete internationally.

There is no use for ATCL to see Precision as a competitor instead they should see themselves as partners who can complement each other.

In business sense it wouldn't be a crime to even sell it to foreign investors. What the government need is tax and Tanzanians need jobs and quality services. Now as it is no jobs are created no services are provided and the government is not getting taxes from ATCL operations. By keeping the airline what else does the government get? Security? What security? Dividend? Not in a minute.

It is not a must for a state to own an airline. It can be owned by Individuals or local companies such as Precision and still called national flag carriers.

There is nothing to be ashamed of-- -that is how the government and other Tanzanians look at it. They think it is a shame for the government not owning an efficient airline. They look at Ethiopian Airlines as role models for ATCL to succeed.

But they forget that Ethiopian airline was run by Americans from 1946 to 1971 before locals took over completely. Ethiopians had to take time to learn how to run an airline successfully.

In Tanzania, things were different. After the end of socialism regime in early 80s no efforts or special policy was put in place to prepare Tanzanians to cope with the arrival of free market economy. Many local managers who were used to running companies under state owned economy were feeling the heat after the introduction of free market economy in mid 1980s.

Until 1995 many public organisations and industries were in bad shape already, mostly mismanaged by local managers. The decision by third-phase government to privatize these public entities was good.

Apart from getting capitals there Tanzanians could learn from foreign investors the modern ways of running companies.

Tanzanians needed at least 20 years to be integrated and finally take the lead in running the companies. Management is still a major challenge in running companies for locals until today.

Unfortunately, many of these parastatals including ATCL were repossessed by the government and the story is the same---companies have gone back to poor state of welfare.

Kenya Airways is a good example of privatization. After being owned by state for many years, it was privatized in 1995 and it is among top airlines in the continent with over 30 fleets.

It is time Tanzanians realize that it is difficult for the government to do business, especially the airline business under this competitive environment.

The government should just remain with the task of putting in place better environment for private sector to do business and undertake the oversight role.

It can intensify efforts to collect taxes from private sector to solve other pressing problems such as health, water, electricity and education. Amen.

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