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Tuesday, 27 July 2010

A privatisation menu...

A revealing statement from ZDA on what is on the menu for future privatisation :
Ms. Margaret Chimanse communications spokeswoman of Zambia Development Agency said the possible sale of Ndola Lime, Zambia’sleading producer of the solvent used in the manufacture of cement and used chiefly by the mines in the Southern African country was not immediate as the company was sourcing for finance to rehabilitate the plant by among other works, replace the old kiln and the hydrator. The funding is coming from DBSA and Afri Exim Bank.

She said that the other companies being considered for options for private sector participation by the government included Nitrogen Chemicals of Zambia, Mulobezi Railway, Tanzania Zambia Railway Authority and Zambia National Building Society. She added that the government was in the process of examining the business model for the power utility, Zambia Electricity Supply Corporation, known as ZESCO and makes it viable.
More ZAMTEL style battles to come. I suspect we shall see no such actions before 2011. At the very least one hopes that the electorate will pose tough questions to the parties on the future of these parastatals. 

7 comments:

  1. Mr. Capitalist27 July 2010 at 01:06

    The company I am behind in terms of privatization the most is Nitrogen Chemicals of Zambia
    and I mentioned this on my Lusaka Times post.

    Nitrogen Chemicals has been inefficient for quite a while and it needs private sector ownership for it to be viable. More especially with the coming of other fertilizer manufacturing companies like Green Belt Fertiliser and other companies like NYIOMBO Investments and AGRIBIOTECH International Limited who plan to set up fertilizer blending plants and organic fertilizer plants, the competition would surely do a private run NCZ good as it would make it innovative and competitive more especially with this wave of competition coming in the industry.

    That is most definitely a good move.

    As for the other companies, I don't see much of a problem. The only problem I have is privatizing ZESCO which I believe should not be done until a new competitor joins the industry. Not until then IMO.

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  2. Mr. Capitalist,

    The company I am behind in terms of privatization the most is Nitrogen Chemicals of Zambia and I mentioned this on my Lusaka Times post.

    What is so special about efficiency? What use is an efficient company, if you don't own it?

    ReplyDelete
  3. (Revised version)
    Mr. Capitalist,
    That same question can be flipped over in this manner: What use is the company you own when it is not efficient? The assumption is that lack of efficiency leads to losses over time.

    The answer to your question is, if its initial purpose was to serve people in place of prestige (i.e. the joy of possession), then meeting expected standards of efficiency must not be compromised.

    Okay now, rule #101 of good debating demands that, I "don't ask questions you know answers to." I will make an exception here because of the way my question arose. I will answer my own question: A company that is not efficient will eventually be a liability to its stakeholders, assuming that the conditions of inefficiency remain unaddressed. It has the potential to become a black-hole for funds that otherwise could be applied to other projects.

    So you see, either way, efficiency is an absolute essential attribute for company that produces primal goods. Does this make sense?

    ReplyDelete
  4. That was MrK's question. My bad.

    ReplyDelete
  5. Mwata Chisha,

    A company that is not efficient will eventually be a liability to its stakeholders, assuming that the conditions of inefficiency remain unaddressed. It has the potential to become a black-hole for funds that otherwise could be applied to other projects.

    Just because a company is inefficient, doesn't mean it is making a loss.

    It just means that it isn't making as much money as it could, if it would use cheaper materials, or pay it's workers less, or went into another business, or moved to a location with a lower tax rate.

    What I have a problem with, is the mantra of profit maximization at all costs. In reality, in efficiency has a lot of benefits. Higher wages mean there is more money going to consumer goods, education, etc. Higher taxes means the government can provide more services.

    What we are seeing globally, is that 30 years of undermining wages and cutting taxes for the super rich have again led to a situation where there is a collapse of demand or customers. It turns out the old well paying, unionised jobs were actually very beneficial to the general economy, because it gave workers more disposable income.

    Henry Ford (in general I'm no fan of his) knew back in the day that if he paid his workers well, they would be able to buy the cars they built. Instead of maximising profits, he turned his workers into a marketing team that led by example, by driving and repairing his cars.

    Now with Zambia's parastatals, there is a different problem. The problem is that there is no proper legal separation between the State and the Government, or for that matter between the government and the political party they belong to. There is a problem with crony hires and patronage, or of running a company into the ground with an eye on future privatisation (ZAMTEL).

    That is a matter for the Constitution, not privatisation.

    ReplyDelete
  6. MrK asks,"What use is an efficient company if you don't own it?" Answer: The main use of any company consists in the quality and affordability of the services and/or products it supplies to customers. These aspects tend to be lacking in parastatals. Why? Because they lack watchful shareholders/owners who will insist on profitability, which in turn depends on good performance.

    Only yesterday I heard of a well known Zambian parastatal which had purchased a costly piece of equipment for twice the price of identical equipment offered by another supplier. The tender committee was said to have been unanimous. No doubt they all gained personally. But the company, the government and the Zambian people all lost.

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  7. Mr. Capitalist28 July 2010 at 22:12

    "What is so special about efficiency? What use is an efficient company, if you don't own it? "

    An efficient company grows and employs even more people. If you own a business and it is not growing, then you clearly have a problem. Even someone who owns a mini-mart must strive to either make the mini-mart into a supermarket or own a second mini-market. Businesses are in it for profit. The more profit they make, the more they grow, the more people they employ, the more suppliers they contract, the more taxes they pay.

    That is the use of an efficient company. We don't need a company that is costly to the govt and tax payers when that money can be used elsewhere. Instead of always "recapitalizing" the company, let it run independently under private hands and compete. The company will be efficient, creative and innovative.

    ReplyDelete

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