The state's electricity and water companies are being extensively reconditioned before they hit the showroom floor.

the government's interests in everything from beer to blankets, cigarettes to cement have been successfully sold to private sector investors over the last six years. But the really tricky parastatal companies to sell — the utilities providing electricity and water — are still on the block.

The need for effective utilities is pressing. The overriding complaint of business in Tanzania is the cost of energy, the highest in East Africa. "Tariffs are high in sub-Saharan Africa and Tanzania has the lowest consumer density, which means the infrastructure cost per customer is higher," says Patrick Rutabanzibwa at the Ministry for Energy and Minerals.

Electricity is also unreliable, a complaint equally applicable to water supply in Dar es Salaam, where it is estimated that 50 percent of the water is lost through leakage and illegal links to the system. Both factors are retarding economic growth.

"If the utilities become more efficient, the economy will grow more quickly, because they are engines of growth," says John Rubambe, President of the Parastatal Sector Reform Commission (PSRC), the man charged with divesting the state's business concerns by 2003.

The plan for both main utilities — Dawasa, the water and sewerage company for Dar es Salaam, and Tanesco, the state's electricity supplier and distributor — is to rehabilitate the companies prior to a sale.

Tanesco is due to be unbundled into generation, transmission and distribution companies and the focus firmly placed on improving efficiency within the organization. Power generation has already been liberalized, and although contractual disputes have put back one main power project, the IPTL diesel-powered turbine plant, both this and the Songo Songo gas to power project will soon come on line.

Reform of the power sector cannot come too quickly for industrial users, who have been burdened with subsidizing residential users. The high cost of electricity has encouraged one major user, Tanga Cement, to look for alternative fuels. With a million-dollar monthly electricity bill, general manager Leon Hooper is using cashew husks, an agriprocessing bi-product, to fire one of the plant's furnaces.

As for water provision, the system itself is not in good shape. The on-going strategy for Dawasa as it awaits privatization, due imminently, is to reduce water leakage and unaccounted water from 50 percent to 25 percent, increase significantly water supply, and to expand the network. In anticipation of privatization, a regulator for the water industry has also been established.

However, in both utilities, effective running of the services is hampered by widespread non-payment. There is little culture of paying bills. Prepaid water and electricity meters have helped to encourage compliance but short of disconnecting water and power, itself expensive and extreme, little can be done.

Head of the postal system, S.M. Msofe says that his network could eventually be used for the payment of utility bills. Indeed the Tanzania Posts Corporation (TPC) is due itself for partial privatization. But the company is a rare example of a state company that makes money. An efficient postal system that offers courier, internet and money transfer facilities, TPC is a model for the continent, often receiving delegations to find out just how they do it. Now TPC is concentrating on mechanizing counters and introducing tracking technology for its courier business.

But this is a rare example of the state receiving any money from one of its companies. Mostly it has been the other way around, although in the case of the successfully privatized companies, such as the cigarette company and the breweries, these are now the largest taxpayers in the country. Still, the electricity and water utilities remain a drain on government coffers; once they are privatized, it won't only be their customers who will be cheering.