Privatisation under scrutiny

Zambia's controversial privatisation programme, a key condition for donor aid, has resulted in the loss of more than 105,000 formal sector jobs over 10 years, according to a new study. The study, presented by Zambia Privatisation Agency (ZPA) Chief Executive Andrew Chipwende at an Economic Association of Zambia forum in Lusaka last week, noted that of the total jobs lost, 50,000 were attributable to companies closing after privatisation. However, Chipwende said the programme had recorded more successes than failures, despite criticism by trade unions and civil society groups and Zambia's difficult economic environment. "For instance, 80 percent of the workers in most parastatals that have been privatised would have been retrenched had the companies remained in government hands," he argued. Some state enterprises that closed have been resuscitated. Chipwende pointed out that when privatisation started in 1992, most manufacturing companies were operating at 30 percent capacity utilisation, and a reduction in the workforce was inevitable to increase competitiveness and rationalise operations. Zambia has sold 257 out of 280 state firms in the past 10 years, and is under donor pressure to privatise the Zambia National Commercial Bank (ZNCB) and lease the power utility ZESCO and telephone firm ZAMTEL. At stake could be relief on the country's US $6.5 billion debt under the Highly Indebted Poor Countries initiative. President Levy Mwanawasa has, however, criticised the programme. "Privatisation has contributed to high levels of poverty, loss of employment and asset stripping," he told a visiting delegation from the International Monetary Fund last week. "We are not saying that we do not want to privatise, all we are saying is that we want to slow down the process. Our experience has been that of job losses so we want to examine other ways this can be done," Mwanawasa said. His populist position has won the backing of the unions. "We think it is commendable that the president wants to slow down the privatisation pace of the remaining main parastatals," the head of the Zambia Congress of Trade Unions (ZCTU), Leonard Hikaumba, told IRIN. "So many jobs have been lost in the process and the way we have been treated by some investors has not been sincere." According to the ZCTU, only 11 percent of Zambia's labour force is employed in the formal sector while the remaining 89 percent is either scrapping a living in the low paying informal sector, or are jobless. Some analysts argue that the problems besetting the state bank, ZESCO and ZAMTEL have been because of mismanagement, and they are in dire need of either reform or leasing. The government, for instance, has had to issue up to K250 billion (US $50 million) in government bonds to clean up ZNBC's balance sheet. A report by the auditor general showed that money from ZESCO was diverted to fund the ruling party's campaign during the run up to the 2001 elections. "Privatisation is necessary, there is absolutely no question about that. What concerns most critics is the fact that the money realised from privatisation is not properly accounted for and no social safety nets are put in place for those who lose jobs," said Mervin Syafunko, business editor of The Monitor newspaper. Zambia Association of Manufacturers chairman Mark O'Donnell told the forum on privatisation that the government's continued hold on ZESCO, ZNCB and ZAMTEL was a drain on resources. "How does government issue a K250 billion bond to keep ZNCB afloat and allocate only K90 billion [US $18 million] of the budgeted K600 billion [US $120 million] to the health sector?" According to the ZPA study, Zambia has earned at least US $1.3 billion from privatisation, including US $990 million from the sale of mining assets such as Konkola Copper Mines. However, Konkola was dumped by its new owners, Anglo American, soon after it was acquired for US $90 million, reportedly three times less than its "true" value. Anglo cited the drop in world copper prices and competition from cheaper producers in Chile. The government was also criticised for the manner in which it had negotiated the sale, after years of foot-dragging, when better prices had been offered. O'Donnell said there were examples of successful mine privatisations, citing an increase in copper output last year. "If privatisation was a bad thing, how do you explain the performance of the other mines in the Copperbelt despite Anglo's pull out?" he asked.