Privatization in Sub-Saharan Africa: Some Lessons from Experiences to Date

Abstract

Privatization became a central element of economic reforms in most countries in Sub-Saharan Africa during the 1990s. Yet, empirical evidence regarding the impact of privatization remains scarce. Since the seminal work of CAMPBELL-WHITE & BHATIA [1998], covering transactions on the African continent until 1996, no comprehensive assessment has been conducted. At a time when public opposition to further privatization is growing, this paper aims at giving a broad overview of the impact of privatization in Sub-Saharan Africa from 1991 to 2002 in the light of recent developments, and to derive some general trends and conclusions from the body of empirical evidence available to date. During this period, about 2300 privatization transactions have taken place, generating a total sales value estimated at US$ 9 billion. The main findings on the impact of privatization are as follows: first, privatization has had a minimal one-off impact on the budget; second, firm turnover and profitability have generally increased immediately following privatization but the evidence is mixed regarding the sustainability of the initial post-privatization upswing; third, employment has been adversely affected by privatization, although the latter has not resulted in massive layoffs in absolute terms; fourth, FDI and stock markets have played a limited role in privatization transactions despite some showcase transactions; fifth, regulation and competition have often been overlooked in the privatization process, and even where they have been dealt with, enforcement problems have greatly limited their effectiveness; sixth, privatization has created new political patronage opportunities, leading to numerous corruption scandals which have damaged the credibility of the privatization process; finally, social aspects of privatizations have generally been overlooked, reflecting the tendency to focus on privatization transactions, rather than on sector reorganization at large including wider social objectives.

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