Privatization in the name of public private partnership: the case of Tanzania Breweries Ltd., an evaluation

Author:Samson Paschal
Position:University Of Bucharest, Doctoral Law School
Pages:70-87
SUMMARY

The policies of International Monetary Fund (IMF) and the World Bank (WB) have made significant impact in most developing countries, particularly in South of the Sahara. Foreign direct investment (FDI) is one of the policies spearheaded by these institutions. Countries like Tanzania, Uganda and Kenya, have experienced a wave of economic reforms in recent years. These reforms, to a larger extent,... (see full summary)

 
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Privatization in the name of public private partnership:
the case of Tanzania Breweries Ltd., an evaluation
PhD. student Samson PASCHAL
1
Abstrac t
The policies of In ternation al Mon etary Fund (IMF) a nd t he World Bank (WB)
have made significan t impac t in most develop ing cou ntries, part icularly in Sout h of the
Saha ra. Foreign di rect investment (FDI) is one of the po licies spearhea ded by these
instit utions. Coun tries like Tanzania , Ugand a an d Ken ya, ha ve expe rienced a wa ve of
econo mic reforms in recent yea rs. These reforms, to a larger extent , which have been
inspire d by Internat ional Instituti ons, ha ve recentl y faced wi th a mag nitude of concerns
which is expressed in terms of whether the right kind of pre-condi tions exists for these
measures since some of t he measure s don’t pro duce the desired outcomes in some
develo ping coun tries. The thrust of the evalu ation has been o n wh ether p rivatizati on
throu gh Public Privat e Pa rtnership presen ts a profitable policy in Tanzania . In other
words, if th ere is any evidenc e of significant performance of State Operated Enterprises
after pri vatization . This research tak es stock of the e vidence in pre and post th ree
privat ized compa nies and shows tha t in co mpetitive env ironment priva tization h as been a
resound ing success in i mprovin g performance of pub lic enterprises .
Keywords: privati zation, pub lic private pa rtnership, Tan zania Breweries Ltd ., the
World Ba nk.
JEL Cla ssification: K11, K22
1. Introduction
Markets or private ownership of resources are not new in Africa. However,
the role of the private sector in the national economy in Sub-Saharan African
countries has been limited by the deliberate choice of governments in their search
to define the best path for e conomic growth and development. Africa’s reliance on
the private sector stems from its colonial experience and ideological attitude after
independence. The colonial years had adversely affected the development of
entrepreneurial talent in Africa. While indigenous labour was used extensively in
the colonial establishments, potential entrepreneurs were not cultivated to learn the
tools of trade. For most part, the colonial powers used their own people for
enterprise management and did not share their knowledge and skills of commerce
1
Samson Paschal - University Of Bucharest, Doctoral Law School, sammy250309@yahoo.co.uk.
Juridical Tribune Volume 5, Issue 2, December 2015
71
and finance with native Africans as per Debebe
2
. As a result, the indigenous
entrepreneurial class was unable to learn the tools of the trade and compete with
the colonial business establishment. This colonial trend of not cultivating and
encouraging local entrepreneurs continued even after African nations got their
independence. With self-rule, Africans discovered the development gap between
them and the industrialized world. The continent remained mainly an agricultural
society with little industrial development. To design the development strategies and
to set the course in motion, it was believed that in the early stages of development
the State could direct the development process more reliably than markets. This
belief was also shared and supported by the United Nations and its agencies,
including the World Bank
3
. The State took it upon itself to assume the role of the
entrepreneur and it was committed to play a leading role in setting national
strategies for economic development. Domestic savings through high taxation
together with foreign aid and borrowing provided the resources needed for capital
formation and the massive creation of state-owned enterprises as per Mugerwa
4
. In
socialist countries like Tanzania, Mozambique and Ethiopia, the State controlled
virtually all aspect of economic life with little or no appreciable private initiatives.
Military or rightwing governments also pursued similar strategies emphasizing
greater reliance on the public sector as per Nwankwo and Richards
5
. As a result,
in many African countries, state-owned enterprises commonly known as parastatals
proliferated after independence.
According to Debebe, a 1986 World Bank study documented evidence of
poor performance by African SOEs. The study indicated in some West African
countries, for example, 60 percent of the SOEs posted net losses while some 36
percent showed negative net worth. Accumulated losses of SOEs have also risen
steadily in countries like Benin, Mali, Mauritania, Nigeria, Senegal, Sierra Leone,
Sudan and Zaire. Kenya was the only country that showed a positive rate of return
which amounted to a small 0.2 percent (Debebe, 1993).
The above results of public ownership policies in Africa over the past
twenty five years of practice shows the policies have failed to produce sustained
economic growth and development (Debebe, 1993). African economies have
stagnated, recording minute growth rates, declining per capita incomes, increasing
poverty, and a standard of living lower than what it was during the immediate post
independence years (Debebe, 1993). According to a UNDP report
6
, a majority of
the world's least -developed and poorest countries are in Sub-Saharan Africa where
2
Debebe F, (1993) Privatization in Sub- Saharan Africa. Origins, trends and influences on
development strategies. Centre for Economic Research on A frica. Mont clair State University.
Upp er Montclair, New Jersey 07043
3
Idem
4
Mugerwa S. K, (2002) Privatization in Sub-Saharan Countries. Factors affecting implementation.
Available on http ://www.ciaonet.org/wps/kas06.p df accessed on 02/11/2015
5
Nwankwo S and Richards D.C, (2001) Privatization The myt h of free market orthodox in Sub-
Saharan Africa. The International Journal of Public Sector Management14:2; 165
6
United Nations Development Program (2003) Human development indicators 2003 available on
http ://www.undp .org/hdr2003 accessed on 31/10/2015

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