Latest News Editor's Choice

Opinion / Columnist

Privatization is key to Zimbabwe's economic recovery plan

04 Apr 2019 at 08:16hrs | Views
The microeconomic foundations of economies ensure that macroeconomic objectives are achieved. Stated differently, macroeconomic goals can only be achieved if there are robust institutions ensuring that microeconomic policies are designed, executed and monitored in accordance with the principles of transparency and good governance. Institutional strategies are not usually given a place of prominence in debates on national economic growth.

Privatization is the transfer of business, industry or service from public to private ownership and control.  From my own observation our economy is in deep mess, I would suggest the Government can further privatize some state entities into private ownership and control. The transfer of ownership, property or business from the government to the private sector is termed privatization.

The government ceases to be the owner of the entity or business. The process in which a publicly-traded company is taken over by a few people is also called privatization. The stock of the company is no longer traded in the stock market and the general public is barred from holding stake in such a company. The company gives up the name 'limited' and starts using 'private limited' in its last name. Privatization is considered to bring more efficiency and objectivity to the company, something that a government company is not concerned about. India went for privatization in the historic reforms budget of 1991, also known as 'New Economic Policy.

For me it's a better option look at companies like Mineral marketing corporation of Zimbabwe ( MMCZ), National Railways of Zimbabwe (NRZ), Grain Marketing of Zimbabwe (GMB) etc. we have so many companies we can mention, do we really need this drama in a once bread basket economy of Zimbabwe? From impeccable sources, GMB is left with grain that can last for 7 months, yet we had a 500 million command Agriculture project? Does that make sense? Its better we look for partnership in Government projects, and we must bring on board private players who can participate in re-building Zimbabwe.

This can be one of the key reforms idea which can bail out Zimbabwe. We can privatize at least 25 companies at 1 billion each and we can get 20 billion in Hard currency to kick start the industry. We simply need 20 billion to turn around this economy. It is not necessarily mortgaging our country but we can come up with proper economic and legal framework that can address such fundamentals on how to have a win – win situation on all State companies.

Look at ZISCO STEEL, Zimbabwe Mining Diamond Corporation (ZMDC), honestly what is our problem. If you look at these companies, they are draining the fiscus in terms of salaries and allowances. I would suggest that instead of moving with a begging bowl around the whole world, we can have investment conferences, where we can invite development partners who can come on board, we give them such offers on the condition of respecting investment laws and abiding with laws of our country. What we need in Zimbabwe is money, and how to jump start the industry, with advanced technology, so we would rather buy in the idea of privatization. Post-independence India had adopted a very conservative economy that was practically shut to the outside world. But as time went by, Indian leaders and economists recognized the need to merge with the global economy. So in 1991, India went through some very major economic reforms.

Let us focus on one such aspect of the reforms – privatization in India. Delegation: Here via a contract or franchise or lease or grant etc. the government keeps the ownership and the responsibility of an enterprise. But the private company will handle the daily activities and deliver the product or service. The state will remain an active participant in this process.

Divestment - The government will sell a majority stake of the enterprise to one or more private companies. It may keep some ownership but will be a minority stakeholder in the enterprise.

Displacement - The first step here will be deregulation. This will allow the private players to enter the market. And slowly and gradually the private company will displace the public enterprise. Here the private sector will compete with public companies and ultimately outperform them, causing the public enterprise to be displaced.

Disinvestment -Directly selling a portion or whole of a public enterprise to private parties.

The implementation of privatization could be undertaken in such a manner as to undermine the benefits that would otherwise accrue. The proper conduct of privatization requires that efficiency and transparency should be considered in the implementation process. Otherwise, the outcomes might not be efficient and there will be an associated welfare loss. The implementation of privatization requires that proper institutions be established in order to avoid practices that will result in inefficiencies and welfare losses.

The implementation of privatization in Malaysia may well have suffered from the lack of a well-defined institutional framework. Had such a framework been established prior to the execution of privatization, many of the flaws in the implementation phase could have been avoided. The absence of any consideration for institutions that could have overseen the execution of privatization led to the inappropriate implementation. This paper will be organized as follows. The second section will consider the increasing importance that has been attached to institutions, and areas in need attention within the process of institutional reform. The third section will discuss how the government planned for privatization.

We argue that privatization was a part of the country's planning process but that institutional elements were ignored. The section that follows will highlight the practice of privatization in Malaysia, demonstrating the incidence of disregard for institutional processes. The improper execution of privatization in the health care industry will be discussed in this context. The fifth section will discuss the issues of institutional reform in the case of the telecommunications sector. We will highlight the need to establish an independent body to oversee institutional reform. Finally, some concluding remarks are offered. The advantages of privatization is increase in efficiency and profits.

Judicial management has proved to be fruitless in Zimbabwe, despite companies being placed under curatorship, most companies have proved to be incompetent and no result based monitoring and evaluation systems. Systems are not put into check, so privatization can assist in institutional reforms, and cash at hand, we are desperately in need of capital or hard currency, and so we can solve one problem at a time. Privatization gives state officials greater flexibility to meet program needs. Officials can replace the private firm if it isn't meeting contract standards, cut back on service, add to service during peak periods, or downsize as needed.

Improve service quality
A number of surveys have indicated that public officials believed service quality was better after privatization. In a survey of 89 municipalities conducted in 1980, for example, 63 percent of public officials responding reported better services as a result of contracting out. If competitive bidding is instituted for a service, service quality can improve even if the service is retained in-house. The reason is simple: competition induces in-house and private service providers to provide quality services in order to keep complaints down and keep the contract. Service quality is not assured, however, by privatization. Contracts must be well-designed with performance standards that create incentives for high quality service. Furthermore, diligent monitoring of the contractor's performance through customer surveys and on-site inspections must also be performed by government in its oversight role.

Increase efficiency and innovation
Private management can significantly lower operating costs through the use of more flexible personnel practices, job categories, streamlined operating procedures, and simplified procurement. Private ownership can stimulate innovation. Competition forces private firms to develop innovative, efficient methods for providing goods and services in order to keep costs down and keep contracts. These incentives, for the most part, do not exist in the public sector. Privatization allows state officials to spend less time managing personnel and maintaining equipment, thus allowing more time to see that essential services are efficiently delivered. Privatization is one tool to make bureaucracies smaller and more manageable. Large private corporations often sell off assets that are underperforming or proving too difficult to manage efficiently. Under new owners and leaner management, such divisions often receive a new lease on life. Entrepreneurial governments can replicate this experience. Private owners are strongly motivated to keep up maintenance in order to preserve the asset value of the investment in the facility. Public owners often defer maintenance due to political considerations, increasing overall long-term costs.

Tinashe Eric Muzamhindo is studying Doctor of Philosophy at Women's University of Africa, he is also a leading consultant in Project Management. He holds a B.A from Solusi University, MA from University of Lusaka, Zambia, Certificate in Project Management ( University of Zimbabwe) and can be contacted at

Source - Tinashe Eric Muzamhindo
All articles and letters published on Bulawayo24 have been independently written by members of Bulawayo24's community. The views of users published on Bulawayo24 are therefore their own and do not necessarily represent the views of Bulawayo24. Bulawayo24 editors also reserve the right to edit or delete any and all comments received.