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An analysis of the objectives and effects of privatisation on the public sector
Zimbabwe Coalition on Debt and Development (ZIMCODD)& The Southern Africa People's Solidarity Network (SAPSN)
September, 2006

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Executive summary
Privatisation programmes were adopted and implemented in Zimbabwe in 1991 under the rubric of Economic Structural Adjustment Programme.As in most African countries, they were adpoted under mounting pressure from external and domestic forces. The economy was under stress, a situation that was ascribed to interventionist economic strategies that dominated Zimbabwe’s development plans since independence in 1980.

At independence, the new Black government under Robert Gabriel Mugabe had inherited an economy in which the economic institutions and activities were structured solely to serve the supremacist interests of the minority settlers. This inherited legacy of deeply embedded inequalities practically asserted the need to put the state in command. To this end, the inherited civil service, which by virtue of its composition and orientation, could not be trusted to effectively implement government policies, was overhauled, with blacks being fast-tracked to senior positions in the service. In the public enterprise sector, inherited state enterprises were either restructured or expanded or created in various sectors of the economy in order to ensure affordable services to all hirtherto- neglected groups and areas. Socio-economic realties such as small domestic markets, dependency on primary export, income disparities, shortage of indigenou entrepreneurial skills also inclined the state to adopt interventionist policies during the first decade of independence.

State-led strategies made visible contributions to socioeconomic development during the first decade. State subsidies to the parastatal sector ensured that prices of basic foodstuffs and agricultural produce were afforable to the ordinary people. They also led to phenomenal growth of extension and credit services to communal areas. The health and education sectors scored major successes in terms of infrastructural expansion and provision of services.

However, this phenomenal expansion in the social sector was not matched with a corresponding performance on the economic front. The civil and parastatal sectors had over-extended and had in the process become obese, unmanageable, inflexible, inefficient, and a major drain on the fiscus. While it was possible to underwrite public state inefficienies with huge subsidies during the immediate post-independence era, by the 1980s, a host of exogenous and indogenous problems had emerged to constrain the fiscal capacity of the treasury.

Under domestic and external pressure, the State in Zimbabwe adopted privatisation measures as components of the Economic Structural Adjustment Programme [ESAP]. Global intellectual and ideological concensus had shifted from interventionism to neo-liberal market-based strategies. Countries such as the UK, Ghana and Zambia were often cited as success stories in a bid to promote the privatisation agenda.

However, a decade since the implementation of privatisation in Zimbabwe, the supposed benefits are yet to be realised. The incidence of poverty has increased to more than 80% of the total population. Virtually all the economic indicators are in decline and the expected benefits from privatisation such as economic growth, increased revenue inflows from the sale of privatised companies, broad-based ownership, price stabilisation due to competitive production and improvements in economic efficiency are yet to be realised.

Privatisation of parastatals led to the retrenchment of many employees, worsening their welfare, as there were no social safety net mechanisms in place. Over 300 workers were retrenched when Air Zimbabwe was commercialised in 1994. The Cotton Company of Zimbabwe reduced its permanent workforce from 3,000 to 500 between 1994 and 1998 and the Grain Marketing Board retrenched half of its 2,500 workers within a year in 1998. Most retrenched workers were forced into the informal sector to survive.

The outsourcing and commercialisation of services in local authorities resulted in a reduction in the quality of service as well as the skyrocketing of prices beyond the reach of the ordinary people. The outsourcing of refuse collection in Harare for instance resulted in the uncollection of refuse for days, however with contractor continuing to receive fees. The commercialisation of ZESA resulted in a massive increase in electricity tariff rates to market rates as a way of cost-recovery beyond the reach of most people.

In few cases where government managed to raise revenues, this did not trickle down to the ordinary people at the grassroots. Its impact on economic empowering the indigenous population was not substantial to limited financial resources on the part of the indigenous as well as lack of collateral to enable the indigenous to borrow funds from financial institutions. Unlike the case in Malaysia and other African countries such as Zambia, the state in Zimbabwe did not put in place a coherent legal framework and specific defence schemes to buttress the indigenous agenda. Privatising entities were only exhorted to respond to indigenisation ideals. For instance, the Dairibord Employee Share Ownership Trust Fund established by the company when it was privatised in 1997 ended up benefiting management at the expense of employees because contributions to the fund were based on individual employee earnings. Management whose contributions were much higher than those of ordinary workers took almost total control over the company.

In fact, the privatisation drive in Zimbabwe has in recent years lost steam. There are even reports of privatisation policy reversals. For instance, the Zimbabwe Privatisation Agency established in 1999 to spearhead privatisation of state enterprises has had its orientation refused towards restructuring insteady of privatisation. This policy incosistency has left the public in a quandary as to the exact state policy on privatisation. This has also been worsened by absence of an institutional framework with clearly defined lines of responsibilities. There is need to demacate the responsibilities of the PAZ, the Department of State Enterprises, Anti-Monopolies and Anti-Corruption, and responsible ministries. There is also need for a Privatisation Act, with provisions for indigenous economic empowerment. In the absence of such legal frameworks, privatisation processes may be turned into avenues of political patronage. Independent regulatory bodies have to be established in key sectors of the economy in order to curb negative externalities usually associated with the post privatisation era. There is also need for policy consistency, broad based consultation and commitment to policy implementation. Economic policy frameworks crafted especialy since the 1990s were either abandoned mid-stream or ignored or still remained on paper.

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