Does Privatization Work? The Story of Sudan's White Nile Tannery

Abstract

This study investigates whether and to what extent the introduction of the privatisation policy succeeded in achieving the desired targets announced by the government, such as increasing productivity or provision of adequate funds for the newly privatized enterprises. A case study of the White Nile Tannery [WNT] aids that investigation. The study examines the controversy that surrounded the privatization of WNT and its subsequent performance, especially its technical and financial performance. The study reveals that the tannery’s technical and financial performance improved significantly during the period of 1992-1994, which directly followed its privatisation. Nevertheless, the improvement failed to persist in the years thereafter (1995-1999), when the tannery’s technical and financial performance trends began to show inconsistencies. There were also symptoms of under-performance, as evidenced by its declining labour productivity average, as well as its small contribution to the total exports of the leather sector. The evidence suggests that the main reason for the significant improvement that took place during 1992-1994 was the rehabilitation programme completed immediately before the tannery’s privatisation in 1992. Furthermore, the study of the White Nile Tannery demonstrates clearly that changing the ownership alone of a particular enterprise will not lead to a substantial improvement in its efficiency, unless the real problems from which it suffers are tackled and eradicated entirely. This conclusion stems from the fact that even after its privatization, the tannery’s main problem—a lack of adequate funds—remained unsolved. Therefore, if privatisation is inevitable, priority should be given to the private sector, which possesses the knowledge, expertise and adequate financial capabilities.

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