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» 10.12.2009 - Zambia to tighten anti-craft laws
» 31.08.2009 - Not yet over for Chiluba
» 26.08.2009 - Heads rolling as govt seeks to jail Chiluba
» 17.08.2009 - Chiluba acquitted
» 14.08.2009 - A few more days before Chiluba’s verdict
» 23.07.2008 - Zambian ex-leader's wife to face graft trial
» 31.03.2008 - No pardon for Chiluba
» 05.05.2007 - Ex-Zambian leader guilty of graft

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Economy - Development

Zambia privatisation process still disputed

Zambian ex-President Frederick Chiluba in court

© ZambianWatchdog/afrol News
afrol News / IPS, 9 July
- Zambia has sold some 262 state-owned enterprises in the past 18 years, with the latest being the telecom company Zamtel. A former privatisation agency chief says the process was "like grabbing goods fallen from a truck."

Zambia has sold more than 262 state-owned enterprises in the past 18 years, with the latest being the telecom company Zamtel. A former privatisation agency chief says the process was "like grabbing goods fallen from a truck."

As the debate continues about whether privatisation is the best policy option for the country, the government has learned from experience and addressed labour concerns more adequately in the most recent deal, the sale of the country's beleaguered telecommunications company Zamtel.

Telecommunications operator Lap Green Networks, part of the investment arm of the Libyan government, bought 75 percent of the shares in Zamtel for US$ 384 million 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 and MMD party leader 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 Mr Chiluba.

The Zambian 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.

Ex-President 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."

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

Minister 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 US$ 17 million loss in 2008, which shot up to more than US$ 30 million 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 US$ 270 million to the state treasury, while Zamtel owed the state over US$ 56 million in unremitted tax dues.

The Lusaka government had two options: to inject a further US$ 200 million into the company or to engage an equity partner. "Government does not have money, so privatisation was the best option", said Minister 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) Secretary-General Clement Kasonde lauds the sale, saying that the trade union worked with government and the new buyers to formulate fair retrenchment packages for employees once the purchase has been officially concluded.

Staff are to 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 was 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," Ms 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.

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