Eric Bloch: Privatisation pros and cons

ON innumerable occasions over the last 30 years, various Zimbabwean governments have declared intents to privatise many of the country’s parastatals, wholly or partially. 

This was a policy statement in the first National Economic Development Plan in the immediately post-Independence era, in the 1990 Economic Structural Adjustment Programme and in various subsequent programmes.  But, save for a few privatisations in the late 1990s, the intents have never converted to action, notwithstanding that those few privatisations of a little more than a decade ago were most successful. Declarations of privatisation intentions have largely been naught but empty words, wholly devoid of requisite action.
Recently, the Minister of Industry and Commerce Welshman Ncube, the Minister of Economic Planning and Development, Elton Mangoma and the Minister of Finance, Tendai Biti, have all alluded to privatisation of certain parastatals being one of the many policies to be pursued in driving towards a substantive and enduring economic recovery.  Their statements have provoked very conflicting reactions from diverse sectors of the Zimbabwean population, many being very supportive of the declared intent, whilst others have vigorously voiced their opposition to privatisation.
The most vociferous of the opponents of  privatisation found their opposition primarily upon the contention that doing so would result in massive exploitation of consumers by parastatals.  They found this belief on the fact that the majority of the parastatals are monopolies which would, if in private sector hands, exploit the absence of competition and consumer dependency upon those goods and services by excessive charges and prices far beyond the means of most Zimbabweans.  This claim is specious, on two grounds.
On the one hand, it is as easy for a parastatal to exploit the absence of competition as it is for a privately owned enterprise.  That this is so has been irrefutably proven by the horrendously high charges by Zesa for electricity supplied (on the relatively rare occasions that such supplies are forthcoming!), by TelOne for its telecommunication services, by Zinwa for water, and by many urban local authorities for the diverse services provided (sometimes!) by them.  Such charges have generally been at rates considerably greater than prevailing for like services elsewhere within the southern African region.  Hence, state-ownership has in no manner whatsoever protected the consumer.  In fact, government itself has set the example to its parastatals of imposition of punitively high charges, with extortionately high charges for passports, for registration of higher education service providers, and for many other governmental services.
On the other hand, the prospects of consumer exploitation by privatised parastatals are also minimised and contained by the operations of the Competition and Tariffs Commission, whose function is to ensure that undue exploitation of monopolistic circumstances do not occur.  That commission is supposed to address excessive pricing, and contain it, irrespective of whether the entity applying exorbitant pricing policies is a parastatal or a private sector entity.
There is, therefore no credible foundation for opposition to privatisation of parastatals on grounds of alleged consumer protection by non-privatisation.  In contradistinction, the benefits of privatisation are many.  That this is so is not merely theory, for it has been proven by many successful privatisations in a lot of countries.  The privatisation, decades ago, of railways and telecommunications in the USA resulted in markedly improved services, in development of competition and concomitant lowering of costs to consumers whilst generating profits for the owners, with resultant fiscal inflows for the state by taxation of those profits. Those privatisations also yielded improved quality of service delivery to consumers.  There was similar experience in the UK with British Telecom, British Gas and British Water (and, until recently, British Airways), as well as many other formerly government-owned enterprises.  Privatisation in France, in Italy, and elsewhere in Europe was similarly effective.  This has also been the case closer to home, with various previously state-owned enterprises in South Africa having been successfully and beneficially privatised.
Contrary to the misplaced fears of privatisation, the benefits of doing so can be considerable especially under current Zimbabwean circumstances.  Almost every one of the country’s parastatals is grossly undercapitalised.  This is due, in part, to governments of old not adequately capitalising them, exacerbated by years of operating losses, and compounded by the erosion of capital through hyperinflation and associated recurrent currency redenominations and eventual currency demonetisation.  By its own admission, government is bankrupt.  Therefore, it does not have the resources to capitalise the parastatals adequately, if at all.   However, privatisation would give the parastatals access to required capital.
Secondly, government would partially diminish its own straitened circumstances by the realisation of some value for the assets of the parastatals.  Of particular import is that, in common with many other enterprises, most parastatals have lost the greater substance of their technically, administratively and managerially skilled employees.  However, if privatisation is pursued with appropriate regional and international strategic parties, the parastatals would gain access to required capital and to necessary skills, would be able to rehabilitate, refurbish, and enhance their operational infrastructures, operate viably, and provide critically-needed, reliable services to the Zimbabwean economy, thereby aiding and furthering its recovery.
With government’s recent statement that it now intends to energetically and rapidly formulate and implement a Medium-Term Economic Recovery Programme to build on the small recoveries achieved in 2009, one of the many big elements of that programme needs to be substantive and rapid privatisation of many parastatals, including Zesa, TelOne, Air Zimbabwe, National Railways of Zimbabwe. The primary focus of that privatisation should be on appropriate international strategic partners with necessary financial and technological resources, although an element of indigenisation can be progressively pursued thereafter through equity listings on the Zimbabwe Stock Exchange, provided that the strategic partners are accorded guaranteed assurances of retention of their equity holdings. 
Government must not heed the unfounded claims that privatisations will be nationally prejudicial, and instead must courageously, effectively and timeously turn the oft-declared privatisation intents into reality.

Eric Bloch

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