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Privatisation of State Owned Enterprises

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In accordance with the structural adjustment programme conditions laid down by foreign donors such as the IMF, World Bank and Paris Club the government of President Chiluba has introduced a comprehensive programme of privatisation. This has been done through an independent agency called the Zambia Privatisation Agency (ZPA).

Industrialisation of Zambia

Once the government has identified the firms to be privatised the ZPA make a financial assessment of each business on the basis of its assets, debt, staff and potential. They then recommend to the government the method of privatisation that consider the best. These have included:

Competitive bids
Management buyouts
Employee buyouts

By the end of 1997 the agency had privatised 224 firms earning the government revenue of $70m. Over 150 other units were waiting to be privatised.

Privatisation	1994	1995	1996	1997
Companies and firms privatised	15	60	155	197
Companies ready/under negotiation	4	24	30	34
Companies under preparation	32	12	28	43

Source IMF

The Privatisation of ZCCM

The privatisation of one parastatal has been more difficult. The powerful Zambia Consolidated Copper Mines (ZCCM) of which the government owns 60% and the South African firm Anglo American owns 27%. It generates 90% of Zambia's foreign exchange earnings and employs 37,000 people. Declining copper prices have transformed the once profitable enterprise into one that costs the government about US$ 2m per month to keep it open. The government intends it to be fully transferred to the private sector as soon as they can. However, they face a number of dilemmas.

The government has put the ZCCM up for sale but the various syndicates of multinational enterprises that have made offers have valued the firm at a level that is considered by the government to be too low given the future potential of the firm and the mining industry.

In addition they recognised that the fate of ZCCM in private foreign hands is uncertain. If a multinational firm or syndicate broke ZCCM up, the effect on the people of the Copperbelt would be immense. Thousands of people have relied on ZCCM for employment, housing, schooling, healthcare, welfare and retirement. The break up of the firm would reduce or eliminate many of these essential welfare functions putting the burden on the shoulders of the impoverished government.

The pressure to sell has increased as external aid donors such as the IMF and World Bank have made the sale of ZCCM a condition for financial assistance. With the continued fall in the world price of copper the losses incurred by ZCCM are placing an increasing burden on the government finances.

Despite attracting praise from the World Bank for the success of its privatisation programme, privatisation has had a very mixed record in Zambia. Although some failing state run enterprises began to operate more effectively after privatisation, many companies collapsed, jobs were lost and welfare programmes originally performed through a parastatal were not continued by private companies.

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