Tanzania's Privatization Draws Skeptics

The Dar es Salaam port can be seen with the St. Joseph's cathedral in the foreground ,Tuesday, May 22, 2006. Tanzania is working on plans to privatize the container terminal at its Dar es Salaam port as part of its privatization program that began in 1993. (AP Photo/Khalfan Said) (Khalfan Said - AP)

Critics argue, though, that some new owners have not done better than the former state managers and some investors have simply mortgaged the companies' property, instead of injecting new money to finance revival and growth.

"People have taken over companies, but they cannot develop them .... The government has not taken any steps to see that these people are taken to task," said Nicholas Mgaya, the deputy secretary general of the Trade Union Congress of Tanzania.

Mgaya gave as examples an oil seed company, several sisal estates and a canning factory that have either closed or have been working at low capacity since being privatized.

Members of the Trade Union Congress of Tanzania have reported only a handful of formerly state-owned companies have been able to turn around, make profits and pay workers well.

"We have very few reports of successfully privatized companies. Tanzania Breweries Ltd., Tanzania Portland Cement Co. Ltd. and Dar es Salaam Airport Handling Co., these are the three cases which have proved to be a success," said Mgaya. "It is rather fortunate that the investors (in those companies) have decided to behave in a good manner. That is why the workers are benefiting."

Mapunda acknowledged not all the new managers were successful, but insisted the great majority of the 322 privatized companies were doing well. And he stresses a burden has been lifted from the government.

The government was spending on average $100 million a year in subsidies to run those companies, which had $350 million in debts, loans and losses and were operating at only 20 percent capacity on average, Mapunda said.

Now, "the government is getting revenue through taxes (from the newly privatized companies). Production is above 60 percent on average," he said.

Mapunda also said that between 1993 and 2003, Tanzania has seen 531 billion shillings, or $756 million at that time period's exchange rates, injected as new investment in the privatized companies.

However, in recent months, Tanzania's privatization program has suffered reversals.

In August, the government bought back for $1 the 49 percent stake in the national carrier, Air Tanzania, it sold to South African Airways for $20 million in December 2002.

"The partnership did not operate within the agreed terms and conditions. This resulted in Air Tanzania Co. Ltd. performing poorly and it reached a point where we had to agree to an amicable divorce," Mapunda said, declining to give more details.

Similarly, the country's only fixed line telephone company, Tanzania Telecommunications Co. Ltd., has had to advertise for new managers after its owners _ the government and a private investor _ disagreed on how the company was run and agreed to hire an independent management team.

Mobile phone service provider Celtel International, which is based in Netherlands, bought 36 percent of the company in February 2001 for $120 million and took over management control until 2005 when it agreed to re-negotiate its management contract with its fellow shareholder, the government.

"We are very much on track and the problems are highly isolated compared to the total divestiture we have done so far," said Mapunda.

"Government is not a good business manager. The government is a good administrator. That is why it is pulling out of business," said Mapunda.