A VOICE FOR PRIVATISATION

The date was December 17, 1909 when Churchill said, “It is one thing to discern an evil;
it is another to discern the cause and nothing could be worse than to try to remedy an
evil without truly discovering its cause” while defending Britain’s Free Trade policy after
allegations that it encouraged poverty. These days, the issue is privatisation. Proponents
argue that the privatisation of the numerous, inefficient, unmanageable, unproductive and
money-guzzling SOEs would alleviate poverty and give government a chance to
concentrate its scarce resources on policy making and enforcing while opponents argue
that it would tip the balance in favour of the rich and make life harder for the poor.
An article in your magazine (June 2005) referred to Africa’s State-Owned Enterprises
(SOEs) as ‘Jewels of the Crown’. Very funny! In Nigeria, according to Danjuma
Mahmoud (Senior Consultant, Nigeria Economic Summit Group), between 1975 and
1995, more than $100 billion was invested in about 600 SOEs under Federal Government
control, yet as at 2000 only 160 were still engaging in economic activities. In addition,
5500 board appointments existed in these non-performing firms and over 50% of all non-
performing public sector debts were generated by these SOEs which collectively returned
about 0.5% profit. In fact without Nicon Hilton (now Transcorp Hilton) and the Central
Bank of Nigeria, the returns would have been negative. ‘Jewels of the crown’ indeed!
These SOEs are more like eye-sores and leeches that suck much needed funds from
technological development, education and social infrastructure.
Also mentioned was the privatisation of Nigeria’s National Ports Authority (NPA) where
about 10,000 of the 13,000 workers were to be retrenched. What the writer did not
address however was the reason for it. The question is this: should 13,000 workers be
paid for jobs 3,000 people can do? Is it not more beneficial to free these assets – people
and capital – for productive activities where in the long run, they can benefit both
themselves and the nation as a whole? True, NPA hadn’t been making a loss, but it had
remained highly inefficient and unable to modernise and cater for the greatly expanding
demand.
Obviously, the writer knows nothing of Schumpeterian Economics. A few years back,
Donald Hicks (professor of Political Economy, University of Texas) having been
contracted by the State of Texas to find out what it would take to create 3 million jobs by
2020, found that “economies that succeed are those that quickly shift assets to their most
productive uses through vigorous economic churning” – a process which Joseph A.
Schumpeter (1883 – 1950) called ‘Creative Destruction’. Rather than considering jobs a
fixed sum to be protected and augmented, the focus should be on economic churning – on
continually recreating the state’s economy.
The unwillingness to take the bold step of constantly shifting resources to more
productive areas is based on sentiment which is akin to superstition and is one of the
culprits of Africa’s backwardness. When will we realize that any organisation that cannot
maintain itself and produce returns should either be transferred to more competent hands
or shut down?
It shouldn’t be strange that the donor community demands privatisation as one of the
conditions for aid. If we are asking for aid, it makes sense to ensure that our own
resources are being well utilized. Nobody wants to fund a doomed enterprise. In fact, any
donor that does not demand this condition becomes partly to blame for the negative
results. It is also unfair to take offence that the majority of buyers are foreigners. Afterall,
they are the ones who have been able to raise the necessary financial and managerial
capital. Their track records prove it. It is unfortunate that Africa’s history in corporate
development hasn’t been remarkable. But not for long: Transcorp, an indigenous
Nigerian firm which purchased the Nicon Hilton, has also purchased at $760m the
Nigerian telecommunications company (NITEL) and its GSM subsidiary, MTEL.
The story of the Nigerian telecommunications sector has shown the effectiveness of
private sector participation in areas where SOEs previously held sway. Despite its
decades long lead, ready infrastructure and manpower, barely 6 years along the line,
NITEL now lags far behind its counterparts in the provision of GSM services. From less
than a total of 500,000 lines, Nigeria now boasts over 23 million GSM subscribers alone,
tariffs are much lower and service delivery is better – but of course, this does not apply to
the government controlled MTEL. When competition sets in, companies eager for profit
are forced to become more efficient, prices invariably drop, and the race to gain market
share begins. During this process, much needed jobs are created, wealth is created and
government benefits from tax.
Typical of sophists, the writer noted that ‘African countries are ignoring alternatives’ but
failed to mention even one of those alternatives. This ‘privatisation’ spree far from being
a ‘spur-of-the-moment’ phenomenon is a bold and informed decision which shows that
African leaders are finally willing to genuinely tackle their problems and let go of the
pies through which many have siphoned public funds.
History has proven government’s inability to manage commercial enterprises effectively.
The constant pumping in of funds, recurring losses, scandals and plagues of inefficiency
well proves this. Search far and wide; it is impossible to find any well-to-do nation in
which government dominates the wealth generating process. It isn’t the role of
government to delve into business and wrestle with problems, but to identify problem
areas which might inhibit private sector participation and develop strategies to deal with
them. Furthermore, it is governments’ duty to control the zeal for gain of these private
enterprises and remind them of their moral obligations towards the communities from
which they obtain their succour.
It is impossible to be player, referee and policy maker all at once and our leaders now
realise this. African leaders have discovered synergy: the transfer of SOEs to private
hands, while the government as the referee ensures that all play well and fair for the
benefit of the beloved ‘common man’.

Beecroft, John O.
Benue, Nigeria.
November 2006.