The politics of privatisation in Zimbabwe

IN 1980, Government adopted scientific socialism as its developmental and governance paradigm. Scientific socialism refers to a combination of political and economic science and empirical scientific methodologies to achieve socialism; where socialism is the belief that people are equal and should, therefore, equally share a country’s resources.

One economic strategy associated with this paradigm was expanding State-owned enterprises (SOEs).

It was not by accident fluke that Government adopted scientific socialism over free market capitalism in 1980.

Firstly, Zimbabwe’s Independence was achieved at the height of the Cold War, when the Soviet Union and United States were competing for geo-political and economic influence.

Since Zimbabwe’s liberation struggle was largely supported by Eastern European and Asian ideology and resources, it was natural in 1980 to adopt an economic paradigm that leaned towards communism.

Secondly, Government wanted to see social services and employment urgently extended to the majority black population after years of white minority rule and colonial oppression.

In this context, sweeping legislation was passed, affording free primary education and healthcare to the poor.

Price controls, workers’ committees and black trade unions were introduced.

While Ian Smith’s establishment bought controlling stakes in key agro-processing and textile industries prior to Independence, the majority Government continued with this culture and today, Zimbabwe has around 107 SOEs and parastatals, many of which are burdened with mismanagement, debt and high wage bills.

It is true that on the basis of populist voter mobilisation just after 1980, parastatals made political sense as they provided black workers with jobs and upward mobility.

In simple terms, in the early 1980s, SOEs won votes. But over time these have become bloated and dysfunctional.

A report from the Auditor-General’s Office dating back to 2015 suggests that many parastatals are characterised by weak corporate governance, resulting in huge financial losses and misappropriation of funds.

For that reason, there is good cause to privatise non-performing parastatals; after all, SOEs are meant to benefit the taxpaying citizen and not to milk the taxpayer.

Advantages of privatising

Improved efficiency. Private companies have a profit incentive to cut costs and to become more efficient. In this context, privatisation is positive.

Lack of political interference. Across the world, SOEs are motivated by political pressures rather than sound economic and business sense. As we have seen in Zimbabwe in the past, SOEs were, in some instances, used to “sponsor” largely political events.

Short-term view. Globally, it is common for governments to think only in terms of the next election and this often has long-term consequences. Perhaps privatisation brings private sector pragmatic long-term planning to SOEs.

Increased competition. Privatisation of SOEs occurs alongside deregulation and enactments of legislation to allow more firms to enter the industry and increase the competitiveness of the market. This is positive and welcome. Government will raise revenue from the sale. Selling State-owned assets to the private sector raises significant sums for Government. The UK government benefited from privatisation in the 1980s as did the Russian government in the 1990s.

Negatives

Natural monopoly. Privatisation runs the risk of creating monopolies. The risk of privately-controlled monopolies is that they tend to raise prices and exploit consumers.

Public interest. Entities like Zesa arguably perform an important public service. In this context, their privatisation should be considered with enough due diligence and with the national interest in mind. Government loses out on poten- tial dividends. While it is true that SOEs are often poorly managed, government should consider whether or not they would be good sources of revenue if they were managed better. Government could consider employing better management staff and techniques rather than privatisation. Foreign ownership of key assets. The greatest threat presented by privatisation is the foreign ownership of key State assets. Government should, therefore, pursue privatisation guided by indigenisation laws and should allow youth and women’s consortiums to benefit from privatisation processes.

Conclusion

It is true that the era of scientific socialism has passed and I agree with the notion that the world is capitalist and that there are no free lunches.

Zimbabwe needs to embrace competitiveness, and privatisation is the first step in that direction. While many business leaders and politicians have welcomed the idea, there seems to be consensus that the process should be conducted case-by-case and that adequate due diligence should be applied.

Furthermore, from a political point of view, 2018 is an election year.

Therefore, Government should consider whether privatisation should take place before or after elections.

Finally, the process should be guided by principles of indigenisation and involve youth and women’s business consortiums as these sub-groups make up the bulk of our people.