Rethinking government economic activism in sub-Saharan Africa: Some contending issues of the privatization strategy

Journal of Third World Studies, Spring 2001 by Ugorji, Ebenezer C

First, this paper examines the nature of the growth of SOEs in subsaharan Africa. Second, some factors that aided the growth, and the performance of the SOEs will be explored. Third, the concept of privatization will be examined in terms of its objectives, and as a strategy for reevaluating government economic intervention in the economy, and for rebalancing public/private sector relationships. Finally, the theoretical framework of privatization, and its underlying assumptions will be explored in the context of political and economic realities in SSA.

THE NATURE OF THE GROWTH OF THE PUBLIC SECTOR

Generally, public goods and services are provided by the state. SSA governments have, however, through their development policies, gone beyond the provision of public goods and services and embarked upon the production and distribution of some private goods and services. They have done this through the establishment of SOEs. And, the proliferation of public enterprises has contributed to the growth of the public sector. With the persistence of the region's economic crisis since the 1980s, SOEs have come to be viewed as stumbling blocks to economic recovery.

Some indicators can be used to illustrate the extent and nature of the growth of the public sector in SSA. Looking at the levels of public and private sector consumption, data from several World Bank Development Reports5 show that between 1965 and 1980, the annual growth rate of public sector consumption in many SSA countries outstripped that of their private sectors. This was particularly so for Nigeria, Kenya, Zambia, Ghana, and Togo. When viewed as a percentage of Gross Domestic Product (GDP), the public sectors of these countries out-consumed the private sector in such activities as domestic tax transfers, foreign aid (grants and concessional loans ), and domestic credit.6

Since the 1980s, following the implementation of IMF/World Bank-- sponsored economic reform measures, such as privatization, some SSA countries have begun to experience a decline in the growth rate of government consumption. In Togo, for example, the rate fell from 22 percent in 1980 to 11 percent in 1995, Zambia's decline was dramatic, falling from 26 percent in 1980 to nine percent in 1995. For Kenya, the decline was 5 percent, Nigeria's was 2 percent, and Cote d'Ivoire's was 5 percent. On the other hand, these countries experienced an increase in the growth rate of their private sector consumption. For these countries there is, however, the question of whether the declines are the result of embracing the philosophy of less government intervention in the economy or rather the imperatives of general economic decline. This question is important because Ghana, which the IMF and the World Bank promote as an example of a country which has undertaken the proper structural reforms, actually experienced an increase in public consumption, from 11 percent in 1980 to 12 percent in 1995. Its private sector consumption declined from 84 percent of GDP in 1980 to 77 percent in 1995?