By TOM MALITI
The Associated Press
Friday, October 20, 2006; 12:07 PM

DAR ES SALAAM, Tanzania -- There was a time in Tanzania, having a beer with friends meant standing in line for hours. And even then you weren't guaranteed a drink.

Then the government began to remove decades-old state controls on the economy and privatize state-owned companies. Beer and other goods became more readily available and the government saved the $100 million it spent each year subsidizing state-owned companies.

Officials of the government's privatization body, the Parastatal Sector Reform Commission, see the regular and consistent supply of essential commodities as one more success of the privatization program launched in the early 1990s. Government officials acknowledge the switch to free enterprise has not been completely smooth, but disagree with critics who say there have been serious problems.

"Before 1993, the country was facing severe shortages of essential commodities. People used to queue for their supplies, but now nobody is doing that and prices have stabilized," said Joseph Mapunda, the commission's spokesman. He added once dormant companies have been turned into viable enterprises.

Chris Maina Peter, a professor of law at the University of Dar es Salaam, agrees shortages have ended, but said Tanzania's privatization program has had more failures than successes.

"The only company where one can say there was a turnaround was Tanzania Breweries," Peter said. "I remember in the old days it was impossible to get beer in Dar. But with the new management, you get beer."

The East African country was a one-party state from independence from Britain in 1961 into the 1980s. It has since undertaken political and economic reforms, turning away from socialism that many African countries embraced after independence and embracing multiparty democracy.

Entrenched state control over the economy that saw close to 400 state-owned companies on government books by the time it changed direction.

In some cases, potentially viable businesses remained closed for years, but the government continued to pay them subsidies.

An example was a state-owned paper mill that did not produce for 10 years because its management had failed. But Tanzania's treasury continued to pay a staff of about 800, said Mapunda. Since privatization, the new owners got the mill producing paper again within two years of buying it in January 2004 for $1 million.

Mapunda said that to date, the Parastatal Sector Reform Commission formed to handle the transition has privatized 322 state-owned companies by selling some government shares or entire companies or negotiating management agreements. Only 35 companies remain to be privatized and the commission is scheduled to complete its work in December 2007, Mapunda said.

The privatization program also catalyzed the setting up of the Dar es Salaam Stock Exchange that began trading in April 1998. Through it, some formerly state-owned companies have sold their shares to the Tanzanian public. Seven of the nine companies listed on it are former state-owned companies, including Tanzania Breweries.

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.