Who's afraid of privatisation in Africa? The successes, heartbreaks, and (sometimes bizarre) reversals

It's estimated that the number of state-owned enterprises in sub-Saharan Africa fell from 6,069 to 4,058 in just 5 years (1990-1995), a 33% reduction

THE recent announcement that a private American firm could be taking over public education in Liberia has elicited strong reactions around the continent, for good reason; the deal will see the government of Liberia direct public funding for education to support services subcontracted to Bridge International Academies, a private, for-profit, US-based company.

But it is part of a bigger trend. Three decades after an intensified push for economic liberalisation began, spearheaded by the IMF, World Bank and other creditor institutions, privatisation in Africa remains controversial, on a continent that entered its independence era reliant on a large public sector to stimulate economic development – and to dish out the fruits of patronage.

Privatisation was intended to cut public sector inefficiency and waste, provide greater scope to the private sector, attract more investment, bring in new technology and revive economic growth.

Much of the initial impetus for privatisation in Africa came from creditor institutions, as part of their push for structural adjustment. By 1998, some 34 African countries had World Bank project or programme financing agreements that included privatisations and three-quarters of World Bank loans or credits were conditional, in part, on privatising state enterprises.

Such conditions have provoked resentment from African governments and fed a popular public view that privatisation is basically creditor-driven, or a form of “recolonisation.”

Visceral reaction

It seems that the visceral reaction against Bridge International Academies’ ventures in Liberia could be driven by one of two things (or both) – either there is simply something essentially “sacred” about education, making some to believe it simply should not be handed over to a private, for-profit firm, or, it is the fear of the scale proposed in Liberia’s case that is frightening - especially about how it would so totally change the African state as most know it today.

The most intensive period of privatisation in Africa was in the mid to late-1990s, when government-owned firms from national airlines, banks, shipping companies, public utilities and telecommunications firms were disposed of all around the continent, shrinking the public sector dramatically.

The World Bank estimates that the number of state-owned enterprises in sub-Saharan Africa fell from 6,069 to 4,058 in just five years (1990-1995), a 33% reduction.

In Côte d’Ivoire, for example, with the sale of more than 50 state firms in three years, the public sector’s contribution to gross domestic product (GDP) declined from 9.5% to 2.8% between 1994 and 1997 and its share of formal employment fell from 22% to 7% over the same period.

The clear success has been in telecommunications, where liberalisation of phone networks unleashed the mobile revolution in Africa, with subscriptions growing 2,000% in a decade. Private radio and television stations are also a dynamic sub-sector, and have dramatically altered the continent’s cultural and artistic landscape.

Africa’s railways have also been extensively privatised in recent years. Since 1990, railway concessions have been granted in 16 countries, including Zimbabwe, Zambia, Malawi, Cote d’Ivoire, Kenya, Uganda, Senegal, Mali and Madagascar, with a few more countries having begun the process of privatisation. By 2010, almost 70% of the entire sub-Saharan African rail network (excluding South Africa) was wholly or partially privatised.

Night light density

One study by Matt Lowe, a scholar at Massachusetts Institute of Technology (MIT) found that privatisation of railways in Africa had not only had improved transit times, service delivery and productivity, but had also had a positive, significant and localised impact on economic activity, proxied by light density at night measured by satellites.

Railway station at Jinja, Uganda in 2010 photograph. In the 1980s and 90s, the Kenya-Uganda railway fell into a state of disrepair. (Photo/Flickr/US Army Africa).

African countries have also attempted to privatise their ports – Dubai-based logistics company DP World has operations in five countries in Africa; in the ports of Algiers, Djibouti, Maputo and Dakar the company wholly manages the port’s container terminals. APM Terminals, part of Denmark’s AP Møller-Maersk, operates another six, and Hong Kong’s Hutchison Ports operates one.

The result has been improved efficiency largely because of better management and technology; in Maputo, for example, as well as the new trucks and cranes, there are new computerised systems to track down boxes more quickly.

But in other sectors, performance has been mixed. Water seems to be a particularly fraught sector. One success story is in Kibera, a Nairobi slum, where four water dispensing machines have been installed that operate like cash machines—with customers able to buy affordable water using smart cards.

The new machines have made water up to six times cheaper, is cleaner, and is helping improve health, residents say.

But a 1999 privatisation in Mpumalanga, South Africa led to an increase of up to 69% in the cost of water in the municipality Mbombela. When communal taps were replaced by a prepaid metering system people were forced to turn to rivers for their water, leading to disease outbreaks.

No ongoing projects

The International Finance Corporation (IFC) is the private investment arm of the World Bank and leading financier of public-private partnerships in water around the world, and last year said it had no ongoing water concession projects in Africa, and was working on very few in developing countries.

From a high of 85 major projects in 2007 globally, only 22 were recorded as starting in 2013. Moreover, 63 projects, representing 28% of the IFC’s total water investments over the past 20 years, have failed or are in difficulty, according to the bank.

“In the last five years the failure rate of [IFC] water and sewerage privatisations has increased to 34%, compared with a failure rate of just 6% for energy, 3% for telecommunications and 7% for transportation, during the same period”, Anna Lappé, director of the Small Planet Institute is quoted to have said.

Local residents wait to fill their jerrycans at a water distribution point in Kibera, Nairobi. (Photo/File)

In fact, a report by the Transnational Institute (TNI), Public Services International Research Unit and the Multinational Observatory suggests that 180 cities and towns in 35 countries, including Johannesburg, Accra and Maputo have all “re-municipalised” their water systems in the past decade.

“Re-municipalisation”, and on a broader scale, the re-insertion of the state in sectors that it had got out of – or had never really been involved in the first place – is another parallel trend unfolding in Africa.

Some of the forms of the increased government footprint – such as Kenya’s government disbursement of loans to small businesses, youth or women groups and attempts to re-restrict bank interest rates, or Nigeria’s heavy handed control of the currency regime is familiar enough.

Army beauty pageant

But it can take on some strange iterations. In Uganda, for example, the army in 2014 took over the running of the “Miss Uganda” beauty pageant, with an army general saying the move was intended to “attract young people into the agricultural sector”, adding that it may help to solve the “problems of hunger and poverty among the youth of the country.” The winner is positioned as a national ambassador for agriculture of sorts.

The military is also in the process of taking control of the country’s agricultural production scheme, which is meant to move farmers over from subsistence to commercial farming. To achieve the transition, more people need to get interested in agriculture, Gen Caleb Akandwanaho aka Salim Saleh, the presidential adviser on military matters said.

But observers were incredulous as to how a beauty pageant would get the youth interested in agriculture, and what that actually had to do with defence or military matters in the first place.

“So how is this going to work?” one post asks. “Will the girls be perched on top of tractors?”

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