By Pamela Chisenga
Before its independence from British colonial rule in 1964, Zambia had a booming private sector that was mostly foreign owned. The mines were for instance owned by 2 mining corporations – Anglo-American Corporation and Roan Trust. Post independence, private sector growth flourished due to government investment in infrastructure and social services and businesses moving to Zambia from Zimbabwe in 1965 following the Unilateral Declaration of Independence in that country in 1965.
This is the bit of history that we seem to have erased in our discourse on privatization. We talk about privatization being responsible for Zambia’s economic challenges when in fact Zambia did not start off with state owned enterprises.
The move to nationalize these private enterprises was announced in 1968 by then President Kenneth Kaunda in the Mulungushi Reforms where he announced government’s intentions to acquire an equity holding of up to 51% in a number of foreign owned companies. By the way, KK seems to be the only strategic thinker we have had as a President – never mind the decisions made whether wrong or right, but you have to give it to the man, he was a President that thought about Zambia’s development in a very focused and strategic manner, changed strategy when needed but overall had a very clear vision. He obviously didn’t seem to have carried many along with him to buy into and support his vision. There was perhaps sycophantic support for his vision and almost mechanical implementation that had some good results for the initial part but eventually became disastrous.
By the early 70s, most companies, including the mines had been nationalized and government quickly set up other state owned enterprises. Not all companies could be nationalized though. The financial sector was difficult to nationalize and the private sector banks that were in the country such as Barclays and Grindlays were allowed to operate but government set up its own bank – the Zambia National Commercial Bank.
Things went very quickly pear shaped as the state owned enterprises were struggling and becoming a burden on government that had to subsidize the operations of the enterprises. Zambia was at the same time saddled with a huge oil bill – copper exports had declined and the country did not have adequate resources to pay for oil imports.
To improve the performance of the state owned enterprises, ZIMCO, the main parastatal holding company was de-linked from line ministries.
As economic challenges in the country mounted, the state owned enterprises still were not performing as well as expected and became a huge burden on government. Government needed money and although President Kaunda was reluctant to privatize, there was mounting pressure to bring in money into the economy and the country. Matters came to a head when government failed to pay salaries for civil servants, shop shelves became empty as the country was unable to produce or import basic commodities.
In 1990, at the 5th extraordinary session of the National Council of the then ruling party – UNIP, Dr Kaunda announced government’s decision to devolve economic power to the people of Zambia with the state selling its interests in state owned enterprises to the general public.
KK quickly established a task force on privatization that recommended the formation of a steering team to provide guidance on privatization and a technical committee to lead privatization process.
With this, KK had hoped to raise revenue that was badly needed by the country. This was of course too little too late as the following year in 1991 Kaunda and his UNIP party were replaced by Frederick Chiluba and the Movement for Multi Party Democracy that had campaigned on liberalizing the economy- privatization.
The MMD quickly swung into action and in July 1992, Parliament passed the Privatization Act no. 21 of 1991 and the Zambia Privatization Agency was established as the sole institution responsible for the Public divestiture of state owned enterprises. The steering committee and technical committee formed under Kaunda to lead the privatization process was disbanded
This is perhaps the most important bit Zambians need to pay attention to or remember in the privatization process – the role of ZPA in privatization. Under the Privatization Act, ZPA was mandated to decide on the mode of divestiture and the price and to advertise and shortlist based on competitive bidding.
Technical and financial evaluation of state owned enterprises was to be done by consultants. Negotiations for sale were to be done by independent teams. What is important to note in this process is the requirement for cabinet approval, starting with the tranching process (privatization was in tranches). The minister of finance signed off the sale agreements.
With this process, what we must now analyze was whether the process provided for any one individual to manipulate the privatization process? Of course the Act was not followed to the letter in some instances as the case of Francis Kaunda leading the privatization process of the mines as opposed to ZPA as provided for by the Privatization Act that was questioned by a number of stakeholders. This is one of the stories that Zambians need to be told from the beginning to the end to understand how the mines were privatized and who participated in the process.
We must also understand the external forces at play in the privatization process. Remember that some of these companies were initially privately owned? The owners of these companies did not just give in and forget about their companies – for some it was an opportunity to regain full control or ownership of their companies.
The Zambian government even under Chiluba and MMD still wanted Zambians to run these companies hence provided for things like management buy outs.
The question that we must be asking ourselves as Zambians is despite this provision for us to own these companies or at least have reasonable shares, why are many if not nearly all these companies, the ones that still exist anyway, in foreign hands?
If it was clear that Zambians were the primary target for privatization, rightly or wrongly as there are arguments for and against this approach but that is a discussion for another day, why do Zambians have a problem with fellow Zambians who may have bought interests in some of these companies?
There were a number of Zambians who bought companies, sadly, many flopped, some changed hands and eventually became foreign owned but what must be understood is that there was no law barring any single individual from benefiting from privatization. On the contrary, this was encouraged.
There was of course the issue of declaration of interest by those involved in the process and of course this was considered and it is for this reason that the privatization process was broken down in the manner highlighted above so that no single individual would have undue advantage in the process.
This is not to say the process was not without challenges – there were a lot of challenges. ZIMCO raised concerns such as under pricing of companies etc but government gave the go ahead and justified decisions made. Who was in government then? Who called the shots on the Privatization process?
The inquiry will definitely be interesting. Nabashalimo bakabamo