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PSRC: Did it achieve its mission?
2008-01-23 08:34:01
By Theo Mushi
Presidential Parastatal Sector Reform Commission has officially wound its operations and its assets transferred to another institution.
When it was formed in 1992 it was given the mandate of implementing the privatization programme which covered nearly all state owned enterprises estimated then to be slightly over 400.
These included ventures in mining, manufacturing, trading, tourism, banking and utilities.
PSRC work met with apprehension in the early years because most of the people including government officials and politicians did not understand the advantages of divestiture of state owned enterprises.
It had to conduct intensive public education to make public opinion leaders understand why it was necessary to sell the state owned enterprises to local and foreign investors.
The history of state owned enterprises is that in most cases starting capital was funded by the government while opening cost were loans from the state owned banks—CRDB, NBC and TIB.
These were managed by personnel who did not have both good managerial and business skills or lacked experience in managing enterprises in particular sectors.
There was also massive misappropriation of resources and the result was that most of state owned enterprises were loss making and had to be subsidized by the government.
One of the reasons to privatize state run enterprises was to remove productive activities from the government and leave it to carry out its core functions which includes provision of defence and security as well as economic and social services.
It also remained with the responsibility of creating a favourable climate for the growth and expansion of the private sector.
At the time PSRC wound up its operations it had divested over 350 enterprises by way of outright sale and joint ventures.
Some of the enterprises were mothballed because of being technically and financially unviable and hence individual assets were sold to various buyers not as a going concern.
There was resistance at the beginning that state owned enterprises were being sold to foreigners only but it has now been classified that it is only a few big enterprises that are 75-100% owned by foreigners.
This was because there was no single local investor or a consortium of investors who could afford the capital outlay as a strategic investor.
Such enterprises included ACA/Tanga, Mbeya and Twiga cement companies, Tanzania Cigarette Company, Tanzania Breweries Limited, Tanzania Oxygen Limited, National Engineering Company (NECO) and TANALEC, Tanzania Cables Ltd and a few others.
Reports also indicate that over 60 percent of the privatized companies have been acquired by local investors and this includes participation in joint ventures.
PSRC experienced some success stories and these included.
TBL, TCC, cement companies and Morogoro Canvass Mill.
South African Breweries injected large capital and better technology in TBL and modernized the Dar es Salaam and Arusha plants and built a new brewery at Mwanza.
Production of beer has increased fivefold and there is more variety to suit consumer choice.
The capacity has increased to the extent that TBL is now exporting beer to Australia, Europe and USA.
The same could be said of TCC which is exploring export markets.
Morogoro Canvass Mill has been rehabilitated and it is now exporting its products to European countries.
Cement companies are now producing 1.6 million tons per year and have ventured to export markets in east and central and southern Africa and as far as India.
There have also been some problems with the privatization exercise and one of them was lack of transparency in the tendering process which led to many complaints from local and even foreign investors and a case in point is the privatization of NMB, ALAF and Kilimanjaro Hotel.
There were also allegation of valuation of assets or net worth or value of the companies and that some of them were sold at a throw away price.
In some cases some companies would not continue with the same lines of production because of fear of competition from cheaper imports and this involves companies in the textile and leather sector.
It is also alleged that some investors dislocated the companies and took away the plants and machinery to invest in other countries.
The other case is that of investors not starting operations at all and converting the companies into warehouses.
This happened in the case of Bora Shoe Company and light source manufacturing company which produced bulbs.
Others included Mbeya Ceramics and some textile companies.
In the agricultural sector there was success because now investors in the sisal and coffee estates have revamped the industries.
In the tourism sector some of the hotels have been expanded and modernized to four and five star status.
It was necessary to privatize the companies because strategic investors brought in more capital, better technology, managerial skills and used their international connections to explore export markets.
It was necessary for PSRC before it wound up its operations to conduct economic and social impact assessment of the privatization programme.
It was necessary to determine how privatization contributed to sectors and GPP growth rate.
Privatisation was also supposed to create more jobs by expanding and diversifying operations.
Did it contribute to increased exports? Did it bring in better technology?
It was also supposed to train a local cadre of managers in entrepreneurship.
The success or failure of privatization must be based on the above criteria.
All said and done it is expected that for those which have proved a failure as non starters the companies should be deprivatised by the sectoral ministries and sold to other more able investors.
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