Efforts to wean African governments off inefficient and corrupt public companies meet violent resistance from workers and resentment from corrupt politicians
The International Monetary Fund (IMF) is simply echoing what every economist knows and indeed, what every economics student learns early on: government-owned companies are usually corrupt, always inefficient and are a drain on treasuries of money that can be better used to improve government’s legitimate services. Governments should not be in the business of business. Rather, government should count on revenue from tax levies and other traditional sources and a firewall must exist to separate the public and private sector. Government-owned companies are bad for national economies, stifling competition wherever they exist. Such companies are hotbeds for nepotism and patronage as government officials use their influence to seat relatives and cronies on boards of directors or have these unqualified individuals ensconced in lucratively paying, do-nothing positions. The IMF routinely suggests to African governments that they shed public companies with the avidity of snakes shedding unwanted skins, but the warning is received as a pro-forma Jeremiah, and routinely ignored.
African governments that have inherited government-owned companies from previous authoritative regimes, such as in South Africa, and socialistic governments, such as Tanzania, are largely loathe to privatise – along with the majority of African nations whose government-owned companies originated in the colonial era. Government officials benefit financially (even if only under the table) from such firms, which encourages officials to give jobs to relatives and supporters. Even reformists’ governments find privatisation of powerful, entrenched entities a task too daunting. Nigeria’s President Muhammadu Buhari seeks to reform the country’s scandal-plagued national petroleum company, but not as far as promoting privatisation.
This article is extracted from the February 2016 edition of IOA’s Africa Conflict Monitor (ACM) – The essential +70-page monthly report that dissects conflict developments and trends across the African continent to guide businesses, governments, academics and other stakeholders in Africa’s growth and stability.
Current ACM subscribers include AFGRI, AngloAmerican, BP, CNN International, eNCA, Halliburton, IBM, KPMG, MSF, various international government departments and major universities around the globe, ranging from UCT here in South Africa to MIT in Boston, USA.
Given the street protests that can turn violent and knowing the conflict that ensues when privatisation efforts are actually carried out, it is little wonder that government leaders take the politically expedient route of small-step reforms versus actual privatisation. In South Africa where labour unions are a key support group for the ruling African National Congress (ANC) party, President Jacob Zuma speaks mincingly about making government’s giant companies like the national airline, the electricity monopoly and the radio and television services more efficient, while ensuring the notion of privatisation is never mentioned. One reason why the South African currency and stock market tanked in December 2015 was because Zuma fired a finance minister respected by the private sector who refused to give government companies free reign to behave as they pleased at the taxpayers’ expense.
Workers, unions protest over job losses today
The default position of workers is to oppose privatisation of government-owned companies. Macroeconomic arguments in favour of privatisation cannot match concerns over loss of livelihoods. However, worker groups are doing their homework to oppose privatisation with other arguments and researched facts. In Kenya, sugarcane farm workers at government plantations are pressing for a halt in the sale of government plantations until operational issues are clarified. The workers hit upon an anomaly in government’s plan to sell the plantations to private firms: in future, these firms are supposed to work with local government authorities but local authorities have been left out of the privatisation plans and process thus far. Consultations can only forestall the sales of plantation however, and more militant means of stopping privatisation, including civil disobedience and vandalism like torching fields, have been darkly hinted at by disgruntled farm employees.
In Nigeria, the National Union of Electricity Employees (NUEE) demanded that President Buhari halt the privatisation of the electricity sector, saying that private electricity companies operating in the country thus far have failed to stabilise Nigeria’s erratic power supply and are only interested in profits rather than good service delivery. By framing the privatisation issue in terms of compromising Nigeria’s energy grid, the NUEE is distracting from its core concern, workers’ jobs. However, Nigeria’s state-owned power monopoly was responsible for the country’s electricity woes in the first place.
How difficult the privatisation issue is to manage was illustrated in January 2016 in Botswana when Kgotia Ramaphane, the head of the Public Evaluation and Privatisation Agency (PEEPA), admitted that government’s privatisation efforts had made no progress in the previous year. Two major government companies have not been privatised: the Botswana Telecommunications Corporation and the National Development Bank (NDB).
Confidence in private sector
Governments who privatise public-owned companies must have faith in foreign investors and their indigenous private sectors to make privatisation work. Malawi has demonstrated such a belief with the unveiling in December 2015 of its plan to privatise the country’s mortuaries, which are government-owned, and have the private sector provide services at government hospitals. Malawi’s President Peter Mutharika says the private sector will be able to better deal with chronic shortages of medicines and do a better job of services that have led to public protests and hospital strikes in the past.
Tanzania’s government seems to consider privatisation as an experiment, and if hiccups develop state ownership becomes the default position. Privatisation has been moving apace in the country, with nearly 300 state firms changing hands to private ownership. These include 95 agriculture sector companies, 94 firms in the industrial sector, 32 in natural resources and tourism, 23 in infrastructure-related work, 15 in minerals and 13 in myriad other sectors. However, some of the privatised companies are not doing well, and government’s answer is to re-nationalise them. Nationalisation is a word abhorrent to foreign investors and the private sector in general. The Tanzania Private Sector Foundation (TPSF) insists that rather than nationalising poorly performing companies, government should look for new private investors to take them over. It is significant that massive job losses did not occur during Tanzania’s privatisation process, and government is looking at bottom-line performance to inform its privatisation plans.
This article is extracted from the February 2016 edition of IOA’s Africa Conflict Monitor (ACM) – The essential +70-page monthly report that dissects conflict developments and trends across the African continent to guide businesses, governments, academics and other stakeholders in Africa’s growth and stability.
Current ACM subscribers include AFGRI, AngloAmerican, BP, CNN International, eNCA, Halliburton, IBM, KPMG, MSF, various international government departments and major universities around the globe, ranging from UCT here in South Africa to MIT in Boston, USA.
Resistance to privatisation can be overcome by education on public benefits
One way to illustrate to African populations the evil of corruption associated with government-owned companies is for public watchdog groups and the media to expose nepotism, patronage and bribery. Should the country be democratic and not under the sway of a despot, such exposure could lead to the embarrassment of government officials and even to reform.
Beyond this, workers and their labour unions can be educated on how government companies and monopolies cost jobs. The lesson is simple: such companies are inefficient, partly because of lethargic management by executives who do not really worry about making profits but rather strive to please their government masters, but also because they are staffed with too many employees. Some are ‘ghost employees’ who do not exist in reality but whose salaries are collected by government officials, while others have been put in place by nepotism and patronage and do not work for their salaries. Many such employees are redundant but have been retained because labour unions desire working, dues-paying members over company efficiency, and governments prefer not to irritate labour unions. If these unions were to protest in the street for human rights or against corrupt government leaders they would be crushed by security forces; but on the issue of keeping government-owned companies, which are a source of income for some government officials, the ruling parties acquiesce to the unions.
Labour unions that profit from overstaffed government companies are an obstacle to privatisation, but the lesson concludes with the reality of more jobs, and therefore more dues-paying labour union members, created by a thriving economy. Where a company is privatised, an opportunity is created for competition in a former monopolistic situation. More companies offering better services come into being. These companies create tax revenues that support public services that benefit workers as well as the rest of society.