The state of Africa

Privatisation in Sub-Saharan Africa: Where Do We Stand?
OECD Observer

Does privatisation work for some of the world’s poorest countries? Privatisation in Sub-Saharan Africa: Where Do We Stand? looks at the last decade of privatisation in Africa and discusses its successes and failures in terms of public finance, economic efficiency, pricing and local markets.

From privatising telecoms in Mali, electricity supply in Mozambique or water services in Gambia, it seems that privatisation efforts have at times taken one step forward and two steps back. Part of the problem, says Privatisation in Sub-Saharan Africa, is the perception that transactions are often considered detrimental to the poor because of the loss of state subsidies to basic services, inefficient though they may be. Furthermore, while a theoretical aim of privatization is to raise productivity, which should cut prices in real terms and increase employment and growth, in practice, jobs get cut and prices have risen to levels that may be low internationally, but high by local standards.

Privatisation in Africa started in Côte d’Ivoire in 1960, with the partial sale of the water supply company. It accelerated dramatically in the last decade or so and by the end of the 1990s, a majority of African countries had received World Bank assistance for privatisation programmes. In fact, 67% of all adjustment lending involved public enterprise reform. Yet cumulative proceeds of privatisation account for just $8 billion compared to $46 billion in transition economies over the same period. In at least half of the 48 Sub-Saharan countries in 2002, the water, fixed-line telephone, railway transportation, air transportation and petroleum product distribution sectors were still state-owned.

Efforts to privatise continue, with 2,535 privatisations to date in sub-Saharan Africa, and 332 pending as of 2002, many of them utilities. This augurs for more price jumps, but may improve equity if investments spread. Privatisation in Sub-Saharan Africa reports that in Uganda, 94% of the population in 1995 was effectively subsidising the 6% who had access to electricity, to the amount of $50 million a year. In urban areas of Ethiopia in 1996, around 86% of subsidies on kerosene were used by the non- poor.

Privatisation in Sub-Saharan Africa is published by the OECD Development Centre.

©OECD Observer No 242, March 2004




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