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Eric Bloch Column

Foolhardy rejection of privatisation

By Eric Bloch

IT is almost a quarter of a century since government first stated its intent to pursue, with vigour, a policy of privati

sation of state enterprises.

Almost every economic development plan or programme formulated by government, soon after it came to power, has included declarations of intent to “commercialise”, and then privatise, parastatals.

At one stage government alleged such a determination to do so that even formulated the National Privatisation Agency to spearhead the intended disinvestment by the state from its plethora of business operations, but that agency proved to be relatively short-lived.

Admittedly, there was a brief period of time within which government not only spoke out assertively of its privatisation intents, but actually transformed a few of its declared intents into realities. It very successfully disinvested, to a significant extent, from Zimbabwe Banking Corporation and Commercial Bank of Zimbabwe in the financial sector, Rainbow Tourism Group, a substantive operator in Zimbabwe’s dynamic tourism industry, Zimbabwe Reinsurance Corporation, a principal player in reinsurance underwriting for the insurance sector, Cotton Company of Zimbabwe in the agro-industrial sector, and from Dairibord as the principal commercial processor and supplier of diverse dairy products.

All those privatisations not only generated much needed capital for government, and rid it of responsibilities which it was ill-equipped to handle, but also resulted in the very considerable development and growth of those enterprises, to the benefit of the economy, the fiscus, and the populace as a whole.

All of them were successfully listed on the Zimbabwe Stock Exchange, and are very significant components of the Zimbabwean economy.

But despite those six very major privatisation successes, government’s entrenched craving for absolute control of anything and everything has motivated it to pay naught but lip-service to its further privatisation policy statements.

Not only has there been no further movement towards implementation of privatisation policies, but there appears to be an increasingly intensifying resistance, within government, to any such implementation, including articles of major prominence in state controlled newspapers arguing against the benefits of privatisation.

Interestingly, the most recent of such articles which appeared very shortly after the report on the Zimbabwean economy presented by the Sadc secretariat in Lusaka, apparently included a strong recommendation on privatisation in Zimbabwe.

That article, written by Jacob Mujokoro, very correctly recognised that a factor in evaluating the attributes, and the disadvantages, of privatisation, is “the general underperformance by parastatals”.

He notes that “the poor performance of parastatals is not only reflected in their failure to declare dividends to shareholders and being a drain on the fiscus, but also in a serious deterioration in service delivery and knee-jerk policies that have failed to improve the economy”.

However, he argues that in the present distressed state of the economy, now is not the time to resort to privatisation.

He argues that pursuit of privatisation at this time would place “the wealth of the country in the hands of a few foreigners”, and alleges that such an economic policy would “hand wealth to the rich, but it will also usher in increased impoverishment of the masses who rely on services provided by parastatals”.

However, such arguments disregard the fact that, on the one hand, almost all of the parastatals are over-burdened with debt and are to a major extent insolvent, or on the threshold of insolvency, and that, on the other hand, they are invariably failing to provide services to the masses and the economy as a whole.

Endless load-shedding by the Zimbabwe Electricity Supply Authority, compounded by frequent generation or distribution failures, never-ending failures to supply clean and sufficient water by the Zimbabwe National Water Authority, continuing deficiencies in telecommunications, and grossly inadequate coal production by Hwange Colliery Company, are but a few of very many examples of the pronounced inadequacies of the majority of Zimbabwean parastatals.

Mujokoro argues against the proponents of privatisation, stating that “by selectively citing the success story of commercialisation of firms like Dairibord Zimbabwe Ltd and Cotton Company of Zimbabwe, proponents of privatisation ignore some critical aspects”. He ponders: “What does one gain by selling off the hen that lays the golden eggs?”

But, in doing so, he disregards that most of those “hens” were only pullets when they were disposed of and it was under the drive of privatised ownership that they developed and matured into the highly productive hens that he refers to.

It was the injection of capital, and extensive business expertise, that transformed those businesses into the economic power-houses that they are today.

It is exceptionally rare for governments to run business entities effectively.

On the one hand, recurrent political interventions are contrary to sound business decision-making and constructive operational procedures. On the other hand, the absence of any profit-making motives and personalised investor interests detracts from attaining business successes, irrespective of whether those successes are measured by returns on equity, or by extent of consumer satisfaction attainment.

Privatisation of parastatals has been successfully and nationally beneficially attained in numerous countries.

In the US many decades ago, railroads and telecommunications services, amongst many other enterprises, were privatised to an extent as resulted in vastly improved services to the American population, and significant capital inflows to government, over and above considerable ongoing fiscal inflows by way of direct and indirect taxes.

The same holds good in the UK. France successfully privatised numerous enterprises, ranging from automobile manufacturers to service providers.

South Africa has increasingly done likewise over the last 10 years. And these are but a very few of the very great number of countries that have resorted to privatisation, benefiting their economies, and their populations.

There are no credible reasons why Zimbabwe cannot, and will not, achieve like results, provided that the privatisation is implemented without politically driven agendas, and synergistic domestic and international investors, possessing technological expertise and financial resources are attracted.

What is necessary is that government has a genuine will to disinvest from its enterprises, that market forces govern the future operations of those enterprises, in a competitive environment, and that the disinvestment is,pursued in a transparent, constructive, manner.

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