STATE OWNED ENTERPRISES (SOEs) AND PRIVATIZATION

BACKGROUND
It is very expedient to note that privatization of the SOEs came as part and parcel of the IMF initiated Economic Recovery Programme (ERP) launched in 1983.

 The ERP had the following objectives: a.To improve the overall efficiency of the economy. b.Minimize or eliminate government deficit. c.Stimulate the private sector to take over as the engine of growth and employment. d.Reduce the size of the public sector

 DEFINITION
Privatization is the sale of nationalized industries back to the private sector of the economy. The process in which the state sells all or part of its ownership to private investors local and/or foreign.

 MECHANICS OF PRIVATIZATION
Trade Sale, where a company is sold to a single firm or consortium. This is also known as outright sale A placing with a Group of Investors A public floatation on the Stock exchange

Management/Employee Buy Out. In this case shares are offered to management, workers or both.
Franchising or Contracting Out. This is normally the case with refuse collection and disposal. AMA can just contract that out.

DIVESTITURE IMPLEMENTATION COMMITTEE (DIC) The Divestiture Implementation Committee was established by PNDC Law 326 of the Divestiture of State Interests (Implementation) Act 461 in 1993. The function of the DIC included the following: and coordinate and evaluate all

1. Plan, monitor divestitures;

2. To make appropriate consultation for successful processing of all divestiture programmes; and 3. To ensure consistency in procedures for divestiture in particular with regard to valuation, invitation for bids, negotiation of sales and settlement of account.

THE PROBLEMS WITH PRIVATIZATION IN GHANA

Transparency: Sovereignty: Strategic: Retrenchment: The End of Service Benefit Severance Award Problems: 6. Social Cost:

1. 2. 3. 4. 5.

 Justification Government subversions to SOEs rose from 1.1 Billion in 1982 to 7.3 Billion in 1986. Besides in 1986 18 Enterprises were indebted to the Government to the tune of 40 Billion. Furthermore, lack of proper definition of the Mission Statement of the SOEs accounted for the poor performance of SOEs in Ghana. It was not clear as to whether these SOEs were to make profits, break-even, shut down or even incur losses. Similarly, corruption has over the years accounted for the poor performance of SOEs.

 BENEFITS/ADVANTAGES OF PRIVATIZATION FROM THE GHANAIAN PERSPECTIVE

1. 2. 3. 4. 5. 6. Money is realized. Reduction of burden on government Increasing competitiveness Transfer of technology Injection of local private capital Employment and profits

 SPECIFICS:THE GHANAIAN EXPERIENCE

1.
WEST AFRICA MILLS COMPANY LTD (TARKORADI)

The new German owners have invested over DM 30 million salvaging it from imminent collapse in the early 1990s. Production of cocoa butter has risen from 10,000 to 20,000 metric tones a year, and to 30,000 metric tones a year in the case of cocoa cake.

The number of employees has also increased from 170 to 240 in less than two years of purchase.

 2. TEMA STEEL COMPANY

1. Once considered as Ghanas industrial backbone.

2. Prior to divestiture, operations had ceased altogether.

3. However, after divestiture, it now produces various sizes of high tensile and mild steel rods and billets. 4. Employment is reported to have increased from 130 to 500 within five years (about 400% increase). 5. Operating at a loss prior to divestiture it is recorded around 350 million profit by (1995) only a few years after the sales.

 3. GOLDEN TULIP (CONTINENTAL HOTEL)

Prior to its divestiture, the hotel has 116
employees but it came to 306 in few years after divestiture. The hotel currently employs nearly a thousand employees.

Besides a major expansion of executive facilities adding another forty-three executive rooms, two presidential suites, five apartments and two boardrooms.

A lot more are going on.

4. GHANA HYDRO-FOOD COMPANY LTD - GAFCO (TFCC)

a. The Government has a 25% shareholding in GAFCO with the balance held by industries - Bau Nord Ag. b. The Swiss Company, has undertaken a complete rehabilitation of the 4 industrial plants previously owned by the corporation. c. Employment in GAFCO has increased from pre-divestiture level of 494 to 1,600 within three years of purchase.

5. Tropical Glass (formerly the Abosso Factory of GIHOC Glass Manufacturing Company Limited) now one of the leading producers of beer bottles on the West Coast of Africa.