Both pretense and promise: The political economy of privatization in Africa
Following independence, governments throughout Africa greatly expanded bureaucratic control over economic activity. However, greater state intervention brought stagnation rather than development. In the 1980s stagnation turned into steep recession. The major development organizations responded with offers of financial assistance, but with important strings attached. The donors were willing to provide aid only if a government embarked on a program of fundamental economic reform, including policies that reduced state control over the economy and permitted greater room for market forces and private initiative. An important facet in this strategy was privatization. By the late 1980s, most African countries had initiated structural adjustment, including a privatization program. Unfortunately, privatization in Africa has not been very successful. This study addresses the twin questions of, “Why has privatization been so elusive?” and, given the importance of reducing state control over the economy, “What can be done to improve privatization's prospects?”
The answers to these questions emerge from theory and fieldwork. Drawing on 'the new institutionalism' it becomes evident that the fundamental problem is the narrowness with which privatization is generally conceptualized. As a remedy, I develop a more comprehensive framework that focuses on the structure of industries and not the sale of enterprises. Adopting this framework allows the articulation of not one, but three separate privatization strategies. Further, the framework makes clear that the outcomes of a privatization effort depends on the interaction of the choice of strategy with other factors, especially the regime's underlying patterns of governance. The framework is then applied to privatization in Africa. Detailed case analyses of privatization in Cameroon's banana, sugar, seed, and fertilizer industries permit identification of the promise and pitfalls associated with each of the three strategies.
Theory and cases reveal that privatization's poor record in Africa is due to a combination of a preoccupation with selling-off state enterprises and the deep-seated resistance African leaders have toward anything that reduces the rents they receive from controlling economic activities. To realize the promise of privatization, I argue for stressing those privatization strategies that emphasize competition, addressing privatization as a political as well as an economic problem, and recognizing that in Africa competitive industries will generally not emerge spontaneously, but will have to be crafted intentionally.
0503: Agricultural economics