ZAMBIA: 'Privatisation Like Grabbing Goods Fallen from a Truck'

• by Ruth Langa (lusaka)
• Friday, July 09, 2010
• Inter Press Service

Telecommunications operator Lap Green Networks, part of the investment arm of the Libyan government, bought 75 percent of the shares in Zamtel for 384 million dollars in June, the highest sum of money that a state-owned company has attracted since the southern African country embarked upon the process of privatisation in 1992.

Privatisation forms part of the conditions of the International Monetary Fund and World Bank for continued donor support. When the MMD government came into power in 1991, the two Bretton Woods institutions insisted on a structural adjustment programme that would move the country from a socialist to a market economy.

James Matale, the first chief executive of the Zambia Privatisation Agency, tells IPS that privatisation was touted as the panacea for Zambia’s economic ills 'but it is led by powerful business interests connected to government who treat enterprises and assets lined up for privatisation as goods fallen from the back of a delivery truck. There is a lot of corruption'.

He regards it as surprising that Zambia is still pursuing privatisation in its development agenda. Based on his experience he believes a capital injection into state-owned enterprises and less government interference in their operations would put them back on an even keel.

Former president Frederick Chiluba disagrees. He tells IPS that privatisation was a central policy in 'freeing the economy'. When he took over the presidency in 1991 the state was engaged in 'baking bread and providing bus transportation', argues Chiluba.

The government was subsidising loss-making entities like the copper mines to a tune of one million dollars per day at a time and the government was itself facing serious financial difficulties and huge external debt in excess of seven billion dollars.

Chiluba, who was acquitted on corruption charges in 2009, admits there were casualties. There was no learning curve; there were almost 300 limping companies running the economy that had to be placed in private hands. Some jobs were inevitably lost, especially at loss-making companies that were wound up as soon as they were sold.

'But as a policy, privatisation is a success. It brought efficiency and predictability to the economy. Money that was spent on subsidies and government subventions can now be spent properly elsewhere. The mining sector has experienced exponential growth. The temporary losses have been made up by new employers in the economy.'

Minister of Commerce Felix Mutati tells IPS that the Zamtel sale is the best deal yet. Government raised about 433 million dollars in total from the previous 267 transactions. This time around it made 257 million dollars in proceeds and a further 127 million dollars in guaranteed financing.

Mutati explains that the government had been looking for ways to strengthen Zamtel’s operations and address its long-standing problems. The state company had all but collapsed with more than 50 percent of its monthly revenues going towards salaries for its 2,400 workers. Zamtel ran at a 17 million dollar loss in 2008, which shot up to more than 30 million dollars in 2009.

Additionally, despite its monopoly status, Zamtel only managed to attract about 100,000 fixed line and wireless subscribers while the two private mobile phone operators, Zain and MTN, have over 3,5 million subscribers between them.

Despite the smaller customer base, Zamtel employed almost four times as many workers as the private competitors.

The private operators have also contributed some 270 million dollars to the state treasury while Zamtel owed the state over 56 million dollars in unremitted tax dues.

The government had two options: to inject a further 200 million dollars into the company or to engage an equity partner. 'Government does not have money, so privatisation was the best option', said Mutati.

There has been a spirited attempt by opposition political leaders Hakainde Hichilema and Michael Sata from the UPND/PF pact to promote opposition to the sale, saying the process was not transparent; that government had given up too many shares; and that the price was a steal.

But the government ensured that the major cause of concern -- retrenchment packages and unemployment -- was prioritised.

National Union for Communication Workers (NUCW) general secretary Clement Kasonde lauds the sale, saying that the union worked with government and the new buyers to formulate fair retrenchment packages for employees once the purchase has been officially concluded.

Staff will receive packages covering remuneration for three months for each year served, two months pay for repatriation and one month in lieu of notice. Restructuring and rehiring is expected to start in July 2010 and concluded by August.

'That took the wind out of the sails of critics,' says Justine Sinkoko, an accounts clerk at Zamtel who is looking forward to receiving her package and doing 'something else' with her life.

'We have ignored calls to oppose the sale because there was suffering here. We never knew from month to month when our salaries would come. Sometimes they were delayed for two months. There is no worker here who objects to the sale. Those who want can re-apply to come back,' Sinkoko tells IPS.

This is the first time that workers’ retrenchment packages were written into the purchase agreement. In the past, it was left up to the new owners to make good on their promises to pay benefits. There are hundreds of workers who are still waiting for their dues 10 years after companies were sold.

© Inter Press Service (2010) — All Rights ReservedOriginal source: Inter Press Service

Where next?

Advertisement