SOE RECONSTRUCTION POLICY IMPLEMENTATION IN AFRICA

ByOtive Igbuzor, PhD

Executive Director, Centre LSD, Abuja, Nigeria.E-mail: otiveigbuzor@yahoo.co.uk; info@centrelsd.org

PURPOSE OF PRESENTATION 1/2

a. To show the extensive public sector involvement in African economy before the rise of unbridled neo-liberalism.

b. To identify the factors responsible for the privatisation of SOEs in Africa.

c. To show the magnitude of privatisation of SOE in Africa.

Purpose of Presentation 2/2

d. To share success stories on the commitment of government to SOE and the performance of SOEs in Africa despite the onslaught of neo-liberalism.

e. To propose the way forward to bring about a resurgence of SOEs in Africa

OUTLINE OF PRESENTATION

1. Introduction2. SOE in Africa3. Emergence of Privatisation in Africa4. Ray of Hope- Success Stories from Africa5. The Way Forward

1. INTRODUCTION 1/4

• Africa as a continent has been faced with a lot of developmental challenges. The challenges include poor strategy, lack of capable state, poor priorities, poor leadership, colonial heritage, impact of military rule, corruption, poor regulation, etc.

• The combined effect of all of these is that Africa is the least developed continent in the world.

Introduction 2/4

• But several scholars have pointed out that what is needed to deal with the challenges of Africa is a developmental state that will pursue the appropriate strategy for development. (Historical struggle between the oppressor and the oppressed; socialism and capitalism; state and market; Marxist and neo-liberal scholars; IMF and non-IMF scholars)

• Africa started at independence with heavy reliance on development planning and SOEs.

• But this changed in the 1980s and 1990s with neo-liberal triumphalism.

Introduction 3/4

• However, with the global financial crisis of 2008-9, there is a resurgence of SOEs. This resurgence is particularly high in some countries like Venezuela, Bolivia and Ecuador.

• In addition, there are global success stories of SOE with high level of performance such as Indian Railways, Petrobras (Brazil) and Statoil (Norway) (Musacchio, A and Flores-Macais, F. (2008).

Introduction 4/4

• It has been documented that all the success stories share a commitment from the state to adopt a proper institutional framework that allows for effective and efficient management.

• The challenge is how to develop the political commitment to build a resurgence of SOEs in Africa.

2. SOE IN AFRICA 1/4

• At independence, Africa recognised the importance of strategy and development planning.

• 1960s and 1970s: Golden Period of Planning in the African Continent.

• 1980s and 1990s: Resurgence of neo-liberalism in Africa- “lost development decades” for Africa

SOE in Africa 2/4

• In the 1960s ad 1970s, there was a lot of SOEs in Africa.

• In Africa, extensive public sector involvement in the economy was reinforced by the fact that many if not most of the first generation of new African leaders were ideologically predisposed to government control of the economy’s “commanding height”

SOE in Africa 3/4

• By the end of the 1970s, the average African Country’s public enterprise sector accounted for over 17 percent of GDP compared to a worldwide average of about 10 percent (Nellis, 2005)

Table One: Share of Public Enterprises in the Development Indicators of Selected African Countries (Mako & Zhang (2003)

Country No of PEs % GDP % of Investment

% of Employment

Nigeria 600 50% 57 66

Cote d’ Ivoire 150 n/a 18 n/a

Ghana 181 n/a 25 55

Kenya 175 n/a 21 9

Tanzania 420 13 26 n/a

Burkina Faso 44 5 20 n/a

Senegal 50 9 33 n/a

3. EMERGENCE OF PRIVATISATION IN AFRICA 1/4

Factors:a. Rise of aggressive right wing governments in the

United Kingdom (Margaret Thatcher) and United States (Ronald Reagan). (Washington Consensus)

b. Deregulation and marketisation was seen by many governments as a way to adjust to the impact of the oil price hikes of 1973-74.

c. The impact of globalisation and the IT revolution gave rise to “idle capital” that market fundamentalists thought could be put to good use in privatisation

Emergence of Privatisation…2/4

d. Many SOE in Africa were performing very poorly and were in need of reconstruction. Privatisation seemed to the neo-liberals to be the only answer.

Privatisation in Africa 3/4

• Privatisation was implemented vigorously in almost all African countries in the 1980s and 90s.

• Using poor performance as an excuse the IFIs (IMF and WB) initiated SAPs in Africa.

• From 1979 to 1989, the World Bank approved worldwide 98 SAPs with SOE-related components . (Nellis, 2005). African cases accounted for 70 percent of the total World Bank SOE-related adjustment in the 1980s.

Privatisation in Africa 4/4

• The World Bank has documented that the total number of privatisation transaction rose from 200 in 1990 to 3,486 in 2002 (World Bank, 2004).

• The end result of all of these are job losses, increase in price of services and primitive accumulation by the ruling class of the collective wealth of the people.

4. RAY OF HOPE- SUCCESS STORIES FROM AFRICA 1/6

Inspite of the assault of privatisation on SOE in Africa, “as at 2005, in half of African countries, the water, fixed line telephone, railways, airplanes and petroleum products distribution sectors are still state owned and operated companies.” (Nellis, 2005)

Despite the poor performance of many SOEs in Africa, there are still many examples of African SOEs that performed very well e.g. Ethiopian Airlines, the Kenyan Tea Development Authority, Sierra Leone’s Guma Valley Water Company. (Nellis, 2005)

The Success Story of South Africa 2/6

• South Africa has taken the position that they require a strong democratic developmental state. A basic requirement of the developmental state is the strengthening of SOEs.(Min. of Public Enterp, 2000).

The Success Story of SA 3/6

• The Reconstruction and Development programme of South Africa provides that govt decide on “the balance of evidence” whether the public sector should be expanded in strategic areas through “nationalisation, purchasing a shareholding in companies, establishing new public corporations joint ventures with the private sector. (Min. of Public Enterp. 2000)

The Success Story of SA 4/6

• South Africa started a programme of restructuring of SOEs (including redesign of business management principles; turnaround strategies; improving efficiency and effectiveness; accessing globally competitive technologies; attracting FDI and ensuring growth in employment).

• Substantial revenue accrue to the State from SOEs.• The restructuring and internal organisation brought

good financial result from many SOEs including Transnet, SAA, Spoornet, Denel, Eskon and Telkon.

The Success Story of Botswana 5/6

• It has been documented that Botswana is well known for its remarkable economic growth with “the highest level of par capita growth of any country in the last 35 years.” (Acemoglu and Robinson, 2001).

• The success story of Botswana is attributed to effective state management (Harvey and Lewis, 1990)

The Success Story of Botswana 6/6

• The success story of Botswana which depend on a single mineral (Gold) is markedly different from Nigeria which also depend on a single mineral resource (oil). The difference is in the state capacity.

• It has been shown that the development crisis in many African countries is compounded by the profound weakness in the capacity of the state (Maipose, 2003)

5. THE WAY FORWARD 1/2

• Reconstruction of the African State to become a developmental state.

• Political, ideological and economic struggle against neo-liberalism in all its ramifications in Africa.

• Vigorous dissemination of the success stories of Kerala and other success stories of SOEs across the world in Africa.

The Way Forward 2/2

• Linkage with other movements such as anti-globalisation movement and the World Social Forum processes.

• Support for the resurgence of SOE in Africa.

The Way Forward 2/2

• International solidarity and action against neo-liberal scholars and politicians.

• Linkage with other movements such as the anti-globalisation movements and the World Social Forum processes.

• Support for a resurgence of SOE in Africa.

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