In the competitive manufacturing and tradable services sectors, efficiency gains, defined as improved performance of the company, have been generally achieved with wide variations in performance across firms and countries. The same is less true for the utilities sector, with the exception of telecommunications where spectacular gains have been recorded because of the quasi parallel introduction of GSM competition. After the 1997 privatisation of restructured CI- Télécom in Côte d’Ivoire, three cellular operators entered in the market. Between 2001 and 2004 operating costs per line decreased by almost 50 per cent, and turnover rose by 70 per cent.
The counterpart of the gains in efficiency and much of the reason for opposition to privatisation is the fear of massive lay-offs. The evidence, however, is less clear. The competitive sectors generally experienced a significant decrease of employment in the year of privatisation, which was then followed by a stable period and an upward trend in the two years following the launch of a privatisation plan. Examples of this pattern occurred in Tanzania and Mozambique. In public utilities, however, large-scale layoffs have been widespread as the combination of considerable overstaffing and insufficient training seriously limited efficiency. Consequently, job redundancies have been particularly severe in the power sector, while water mostly remained under strong public control.
To soften the impact on employment, under public opinion pressure, some national authorities have become more attentive to job preservation during the privatisation process.
In Zambia and Burkina Faso, for instance, the retention of existing staff became an explicit criterion with which private investors had to comply. In the case of the privatised water company of Guinea, employees have been redeployed in subcontractor companies2. As a cushion against the negative social impact of job redundancies, some Southern African governments have negotiated severance packages in cooperation with companies and trade unions.
by Lucia Wegner Privatisation: A Challenge for Sub-Saharan Africa This Policy Insights is derived from the special theme section of the 2003 African Economic Outlook and on a 2004 OECD Development Centre Study
To learn more about this author, visit OECD Development Centre's Website.
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