Privatisation succeeds

The privatisation programme in Zambia has been a resounding success. Zambia Privatisation Agency (ZPA) public relations officer Jane Shamwana said in an interview with African Business that approximately $93m plus has been raised from the sale of parastatals - also known as State Owned Enterprises (SOEs). $150m in liabilities have been assumed by the purchasers.

A few illustrative examples of success scored in the ambitious programme include: Foodcorp (formerly Zambia Horticultural Products), which has since privatisation increased its labour force by 50% from 23 to 46 and has pumped in massive investment over the last three years, improving efficiency in the process.

Success stories Currently the firm is working closely with local farmers who supply the factory with raw materials such as mangoes, tomatoes, pineapples and citrus fruits. The injection of $3.5m in working capital has facilitated the improvement of capacity utilisation from five per cent at privatisation to 60%. Farmers are also being assisted with inputs in the form of seeds and seedlings. The Chunga Scheme in Lusaka is a case in point.

Bonnita (Parmalat), formerly Dairy Produce Board (DPB) which operates in Lusaka, Mazabuka, (Southern Province) and Kitwe (Copperbelt Province) has increased annual production by 200% since privatisation. The company also has a deliberate programme for assisting smallscale farmers. It is using local labour at all levels with 150 staff and only two expatriates. Bonnita makes long life milk from raw fresh milk and is now in a position to start exporting dairy products. Zambia Sugar PLC has invested several hundred million dollars and expanded the area under cultivation at Nakambala in Mazabuka. The company has reduced the number of expatriates from an average of 15 before privatisation to an average of four. It is also committed to training and has invested heavily in management and skills training in order to meet future technological demands. Zambia Sugar supports small-scale sugar cane growers through the Kaleya small holders scheme.

Another company with a glow of success is Lever Brothers, formerly Refined Oil Products (ROP). The firm has met its privatisation obligations despite several difficulties facing the manufacturing sector in Zambia and has invested more than $3m to boost operations. Lever Brothers built the factory in Ndola (Copperbelt Province) in 1964 (Zambia's year of Independence) and it was then nationalised along with various other companies. It was in a poor state of repair when they bought it back through competitive tender a few years ago. Following massive rehabilitation works, they have improved the quality of products such as bath soap and washing powder, which are stocked by most leading retailers.

Other successful companies worth noting are African Explosives Ltd, Zambia State Financing Company, Roan Air, Chilanga Cement PLC, Chibuluma Mines PLC, African Farming Equipment (AFE), Kabwe Industrial Fabrics, Nkwazi Manufacturing Limited, Zambia Oxygen Company (ZAMOXpurchased by British Oxygen Company), Zambia Cold Storage and Zambia Pork Products, to mention but a few

The failures However, there have been some failures along the way. Examples of companies that failed are National Drum and Can which went into receivership after a management buy out collapsed due to lack of working capital. General Pharmaceuticals, Crushed Stones Sales and Kapiri Glass Products also went into receivership. Eagle Travel failed due to the general decline in the travel and tourism industry, which was aggravated by the liquidation of Zambia Airways whose ticket sales they had monopolised before privatisation. Most of the lesser successes have involved smaller companies, which were sold via management buy-outs and to Zambian individuals. Reasons for this are diverse, including the lack of capacity to raise long-term financing to undertake new capital investments; lack of new technology and market development strategies; low entrepreneurial skills and the inability to adapt to the new competitive environment prevailing in Zambia.

The current privatisation process was conceived in 1991 following the ascension to power of the Movement for Multiparty Democracy (MMD) government which included a privatisation policy in its manifesto as the centrepiece of its economic reform programme.

Parastatals had increased from 14 at Zambia's independence in 1964 to more than 150 in 1986. At that time, the state controlled about 80% of the economy while the 20% in private hands was not allowed to function in a truly private sector manner. This brought about major distortions and endemic macro-economic instability. On top of this, there was monopoly in the manufacturing industry, thereby creating no consumer choice. At the start of the privatisation programme, there were more than 150 SOEs. However, some of these SOEs were split up, thus resulting in approximately 300 companies and units.

SOEs had a negative impact on the Zambian economy due to their inefficiency. For example, between 1985 and 1989, SOEs drained $455m in direct and indirect subsidies. This was against a payment of only $22m in dividends. Shortages were the order of the day with low quality products and services being offered. Political appointees, rather than trained managers ran the companies