Marketing 2 Essay, Research Paper

The term Privatization is often loosely used to mean a number of related activities, including any expansion of the scope of

private sector activity in an economy and the adoption by the public sector of efficiency enhancing techniques commonly

employed by the private sector. While acknowledging that no definition of privatization is water tight, we will define

privatization, for the purpose of this paper, as the transfer of productive asset ownership and control from the public to the

private sector.1 The transfer of assets can be total, partial or functionary, with the sale being implemented by methods such as

private sales, leasing arrangements, employee buy outs and share issues. In Africa, many governments have embraced the idea

of privatization, brought to the fore mainly as a part of the adjustment and stabilization programs of the mid-eighties and the

nineties. Privatization now frequently features in government policy statements and in conditionalities from donors. The past

decade has also seen the World Bank and other donors get increasingly involved in lending operations towards parastatal

sector reforms that included privatization components.

African countries share a number of common features in relation to the drive towards privatization. For most of these countries,

the first twenty years of independence were characterized by rapid growth, driven by favorable terms of trade and high levels of

public investments in infrastructure and services. The development of import substituting industries brought in the dramatic rise

of parastatal corporations, which were also used as vehicles for increased local participation in the economies. Many

governments moved to nationalize existing foreign interests in their countries and also to create new state enterprises to carry

out the various production and trading functions. Parastatal corporations rapidly dominated the extractive industries,

manufacturing and financial sectors of their economies, and acquired important economic and political status, becoming major

sources of employment. The moderate growth experienced in the seventies, however, was quickly reversed by the financial

crisis of the early eighties, and associated inefficiencies made parastatal sector reform a major element in the reform efforts

implemented by the countries.

Zambia was one of the earlier countries to embark on a major privatization exercise as part of its economic reform program

started in 1992. Although progress was initially slow, mainly due to the inertia associated with start up activities and generally

opposition from interested parties2, the program picked up momentum in the last two years, culminating in the rapid divestiture

of public enterprises that many have compared only to privatization programs in eastern Europe. This paper reviews the

privatization program in Zambia, highlighting the major tools and mechanisms employed, and the achievements and constraints

faced by the authorities in privatizing one of the largest public sectors in Africa. The paper begins with a brief overview of the

main economic issues surrounding moves towards privatization of public enterprises.