Battle lines drawn over State bank privatisation. (Countryfile: Zambia).
Despite Zambia's trade unions and civil society waging a fierce campaign against the sale of the country's three remaining key parastatals, the International Monetary Fund (IMF) has insisted that they must be privatised. Initially the debate was over three parastatals - the Zambia Electricity Supply Corporation (ZESA - the monopoly power utility), the Zambia Telecommunications Company and the Zambia National Commercial Bank (ZNCB). More recently the argument has narrowed down to the fate of the latter.
Pressure from the IMF to privatise ZNCB was met with 'pockets of stiff resistance', as the Western media would say, characterised by mass demonstrations last seen two years ago when civil society rebuked former President Chiluba for attempting to run for another term of office.
Those opposing ZNCB's privatisation, especially the trade unions, argued that ZNCB was the only indigenous bank servicing the rural community, and that there was no guarantee that the new investor would maintain the rural network of branches.
They also argue that privatising the bank was unnecessary as it remained profitable, and that alternative reforms were available to address the bank's operational problems. The concern over rural branches came in the wake of the government's Letter of Intent to the IMF managing director Horst Kohler, promising that the new owner of ZNCB would not be required to maintain non-viable branches after two years.
Furthermore, the trade unions argue, any more privatisation would subject workers to more suffering even though the country had not recovered from the 'trauma' and 'bruises' of the privatisation programmes of the previous decade. So many companies have been sold, they contend, that the country could be left with no assets, a situation tantamount to re-colonisation.. "We have privatised enough and we urge Finance Minister Emmanuel Kasonde to halt the privatisation of ZNCB," said Joyce Nonde, leader of the Federation of Free Trade Unions of Zambia which led mass demonstration against the privatisation.
BANK DRAINING THE TREASURY?
The IMF, on the other hand, argues that the bank was a the drain on the treasury as it had continued advancing loans to cash-strapped firms like the now defunct Zambia National Oil Company (ZNOC) and the Roan Antelope Mining Corporation of Zambia (RAMCOZ). Failure by the two firms to pay back loans had forced the government to take over their debts.
ZNOC, which made losses of $1bn, is now a year into liquidation - while RAMCOZ has been offered for sale to J&W of Switzerland. The government take-over of the debts was aimed at clearing the balance sheet of the bank to enhance its attractiveness to potential buyers. The IMF had demanded that the financial haemorrhage at the bank be stopped as government could not continue pumping money into the bank at the expense of the social sector.
"The IMP does not believe in blindly privatising all state industries. However, we do have a particular problem when state-owned commercial enterprises lose taxpayer and donor money," said the IMP country representative Mark Ellyne. "However if government chooses to subsidise loss making commercial ventures, then the government must show that in the budget so that civil society can see how government is spending their money." Ellyne added that "it is unfair to the public to secretly provide subsidies through the repayment of defaulted loans".
Last year the IMP also disclosed that Zambia risked losing $1bn in debt relief and external assistance as a result of failing to meet the Bretton Wood institution's benchmark on privatisation. The debate took heightened dimensions with talk similar to the Mugabe-Blair affair. "Ellyne can keep his $1bn and we will keep our ZNCB," remarked Joyce Nonde.
Initially, government appeared to have been swayed by the public outcry as it said it would not engage in anymore privatisation. "I regret that I do not support any further privatisation and in future what we can do for existing parastatals is to invite private enterprises into partnership with ourselves," said President Levy Mwanawasa. "What purpose would we be serving by giving these companies to someone else?"
However, that was not to be. It appears the voice from Washington was much stronger than the citizens' cry. Even though the government's position appeared to be that it would not privatise the bank, during a debate in parliament in March this year an opposition member alleged that government had sold the bank to foreign investors and that a new board had been put in place.
The allegation caused enormous confusion, and the Zambian government was forced to restate its position. It later announced that it would "partially privatise" the bank - through the offer of 49% of its shares and management rights to a Strategic Equity Partner (SEP) while retaining a majority 51% stake.
This was an exact U-turn of its initial position, as of May of last year, when the Zambian Cabinet had approved the introduction of a SEP to acquire a 51% stake in the bank. The Amalgamated Bank of South Africa (ABSA) has so far expressed interest in buying the 49% shares on offer. Arguments for and against have been advanced, and government has decided. It remains to be seen which direction the bank will take after these new developments.
RELATED ARTICLE: Zambia wants national airline again
when Zambia's government dissolved bankrupt Zambia Airways (ZA) in 1994, it was optimistic that the private sector would quickly fill the void to service ZA's abandoned routes. That has not happened and Zambia now wants its national airline back.
Prior to its closure, ZA was fraught with numerous operational problems, unsound business practices, and had debts of over $110m. The then Finance Minister, the late Ronald Penza, said that government owned just 2% of the airline while 98% belonged to creditors.
Initially, two private airlines Zambian Express Airways and Aero Zambia - took to the skies, but quickly ran into financial problems due to high start up costs, poor infrastructure, low passenger loads and slow growth.
This experience has led Zambia's government to rethink its position. They now accept that the absence of a national flag carrier has severely affected the tourism industry, and the economy in general with the lack of air services to provincial centres. Government now wants an airline of its own.
As part of its economic diversification policy, government has embarked on an aggressive marketing program for the tourism sector.
The National Airports Corporation, the custodian of the country's airports, had been upgrading airports in a bid to encourage foreign airlines to fly direct to tourist resorts with little success as yet.
"It is for that reason that government has decided to see how best a private sector driven national airline could be created and possibly supported for the purpose of serving national interests," says the Transport and Communications Minister, Bates Namuyamba.
In mid April this year, the government called a stakeholders' meeting to receive submissions for the formation of a national airline. Present was the government itself, aviation experts, the private sector, the labour movement and other interested parties.
NEW AIRLINE VIABLE
Those at the meeting broadly welcomed the idea of a new national carrier. The Aviation Association of Zambia's (AAZ) research indicates that demand for air travel to, from and within the country was sufficient to provide the new airline with $50m worth of revenue in the first year of operation, using just one aircraft.
AAZ's vice president Frederick Nguluwe said that figure would grow to $72m in the second year without an additional aircraft or increased routes. "Average load factors for year two are expected to be 51%", Nguluwe claimed. "These sales levels will produce a net profit of just over $24m in the first operational year and $44m in year two," Nguluwe added.
The trade unions attending April's meeting were concerned that government finds partners for the airline enterprise with a sound financial background and an industry track record. Having listened to all the submissions, it is now up to Zambia's government to decide whether a profitably and efficient national airline is viable.
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|Date:||Jun 1, 2003|
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