Privatization in East Africa: Gaps and Omissions in The Techniques

Abstract:     
The privatization process in East Africa has been slow and lethargic. More than a decade after the process was initiated; most of the state enterprises earmarked for privatization are still on hold. For those that the respective governments have managed to divest, the process has been bedeviled by accusations of lack of transparency in the tendering process. In most cases the direct sales have been undervalued denying government revenue, while most of the other techniques have not been very instrumental in promoting equity and broadening ownership. The stock market in Uganda and Tanzania can be considered to be relatively embryonic to be able to play a prominent role in the privatization process. It has also emerged that the institutions established to handle the privatization process do not have the capacity to handle financial and legal complexities of privatization in the international context.

Though the period since half a decade ago when privatization picked momentum is not enough time to evaluate the success of a program (especially in terms of creating a competitive market), analyst, however agree that privatization has increased efficiency of most of the enterprises that have been privatized. Joint ventures especially with foreign companies have injected capital, technology and new management style in the big parastatals that were almost moribund before privatization. Examples include Tanzania Breweries, Kenya Airways, and Hima Cement in Uganda. East African countries, unlike their counterparts in Latin America have also shied away from attempting innovative privatization techniques such as equity debt swaps. Contract management is however gaining ground. This is especially in restructuring the companies for sale.

This report takes you down the privatization road in East Africa since inception. A review of the process, events and policies that have shaped the process in the three countries of Kenya, Uganda and Tanzania are analyzed. An analysis of the privatization techniques used, why they were used, their impacts, the gaps and omission thereof are analyzed.

Number of Pages in PDF File: 26

Keywords: privatization, restructuring, state owned enterprises, east africa, divest

JEL Classification: H40, H00, A00, A10, A29, B22, D43

working papers series