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The Efficiency and Labour Market Impact Have Varied Across Sectors

Written by: OECD Development Centre

Article Overview: 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 Efficiency and Labour Market Impact Have Varied Across Sectors

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

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Article Tags: african governments, burkina faso, cellular operators, competitive manufacturing, efficiency gains, launch, lay offs, layoffs, national authorities, power sector, private investors, privatisation plan, privatised water, redundancies, services sectors, social impact, spectacular gains, stable period, upward trend, water company



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