Graduate School of Development Studies

A Research Paper presented by:

George Omondi Mumbo(Kenya)

in partial fulfilment of the requirements for obtaining the degree of

MASTERS OF ARTS IN DEVELOPMENT STUDIES

Specialization:[Economics of Development]

(ECD)

Members of the examining committee:

Prof. [Michael Grimm]Supervisor Dr [Lorenzo Pellegrini]Reader

Privatization policy choice and its implications on private sector

participation in primary infrastructure investment in Sub-

Saharan Africa

The Hague, The NetherlandsNovember, 2010

ii

Disclaimer:This document represents part of the author’s study programme while at the Institute of Social Studies. The views stated therein are those of the author and not necessarily those of the Institute.

Inquiries:Postal address: Institute of Social Studies

P.O. Box 297762502 LT The HagueThe Netherlands

Location: Kortenaerkade 122518 AX The HagueThe Netherlands

Telephone: +31 70 426 0460Fax: +31 70 426 0799

iii

Contents

List of Tables viList of Figures viiDedication viiiWith appreciation viiiAcknowledgement ixList of Acronyms xAbstract xi

Chapter 1 Introduction 11.1 Background 11.2 Location and scope of the study 31.3 Motivation and Limitation of the Study 31.4 Research Objectives 31.5 Research Questions 41.6 Organization of the Research Paper 4

Chapter 2 Theoretical Framework and Literature Review 52.1Theoretical Framework 5

2.1.1 Theory of Private Property Rights 52.1.2 The Agency Theory 62.1.3 Public Choice theory 72.1.4 Dynamics of Privatization Model 7

2.2 Literature Review 112.2.1 What is privatization 112.2.2 Forms of privatization 11

2.3 Stages of Privatization Reforms in Africa 122.3.1 Reforms of the 1980s and 1990s 132.3.2 The second phase of the Washington

consensus 142.3.3 Diagnostic approach 152.3.4 Rationale for the reform package 152.3.5 Rationale for Government Provision 162.3.6 Rationale for the private sector participation 17

2.4 Limitation to the Reform Packages 172.4.1 Structural adjustment loans 18

2.5 SOE Reform and Results of Commercialization Approach 18

iv

2.5.1 Outcome of the Commercialization Reforms 192.5.2 Obstacles to the Implementation of Reform 202.5.3 Private Participation in Infrastructure 22

2.6 Privatization Trend in Sub-Saharan Region 242.6.1 Private Sector Participation in sub-Saharan

Africa 252.7 Issues of Controversy and Risk 27

2.7.1 Institutions and Structures of Regulation 282.7.2 Social and Economic Effects of Regulation on

Privatization Outcome 302.7.3 Corruption and Bureaucratic Malpractices’ 31

Chapter 3 Empirical Analysis 333.1 The Data and Variable Description 333.2 Descriptive analysis 343.3 Methodology and Model Specification 42

3.3.1 Quantitative Technique 423.3.2 The dynamics model 43

Chapter Four Interpretation of the Findings 444.1 Analysis of the Findings 44

4.1.1 Telecom Sector 454.1.2 Transport Sector 464.1.3 Energy Sector 474.1.4 Water and Sewerage Sector 484.1.5 Correlation and Confidence Interval

Estimates 484.2 Interpretation of Private Investment Participation 50

4.2.1 Management and lease contract 504.2.2 Concessions 514.2.3 Greenfield Projects 524.2.4 Divestiture 53

Chapter 5 The Policy Implications of the Study 555.1 General Policy Implications 55

5.1.1 Divestiture related projects 555.1.2 Concession 565.1.3 Greenfield 565.1.4 Management and lease contract 56

5.2 Conclusions 57

v

Appendices60

References71

vi

List of TablesTable 1: Correlation Coefficients 29

Table 2:Total Investment Commitment (%)of Region 39

Table 3:Total Disinvested Commitment(%) in the Region 39

Table A1: Number of Projects by Primary Sector 46

Table A2: Investment in Projects by Primary Sector (US$ Billion) 46

Table A3: Total Projects by Primary Sector and Subsector (US$ Billion) 47

Table A4: Number of Projects by Type 47

Table A5: Investment in Projects by Type (US$ Billion)48

Table A6:Total Projects by Primary Sector and Type (US$ Billion 48

Table A7: Total Projects Combined Electric and Water (US$ Billion) 49

Table A8: Total Projects Cancelled or Distressed by Primary Sector & 49

Type (US$ Billion)Table A9:Creteria for selection 49

Table B1:Infrastructure Projects With Private Participation Reching 50

Financial or Contractual Closure In Sub-Saharan Africa In 2008

Table B2 : Telecommunication 50

Table B3: Transport 51

Table B4: Water and Sewerage 51

vii

Table C1:Data Description 51

Table C2:Data Summary 52

Table C3: Confidence Interval 52

List of Figures

Figure 1: Investment Commitment in Primary Infrastructure sector 34

(1991-2008)

Figure 2: Investment Commitment in Primary Infrastructure Project 34

(2005-2008) Implementation Status

Figure 3: Infrastructure Projects with Private Participation (1990-2008) PPI 35

Figure 4: Investment Commitment to Primary Infrastructure With PPI 36

(1990-2008)

Figure 5: Investment Commitments to Primary Infrastructure with PPI 37

(2005-2008) Implementation Status

Figure 6: Investment Commitments to Primary Infrastructure With PPI 38

(1990-2008) Project Status

Figure 7: Total Projects By Primary Sector and Subsector (Us$ Billions) 38

Figure 8: Total Projects By Primary Sector and Type (Us$ Billions) 39

viii

Figure 9: Cancelled and Distressed Projects (Us$ Billions)40

ix

Dedication

With appreciation

To my parents, Dad and Mum

For all the encouragements and care

To my Brothers and Sisters

For being there for me

To Emma for standing by me

God Bless You All

x

Acknowledgement

I wish at this moment to thank God for this far that I have reached and more so, to my loving parents and siblings for all the support they have accorded me all this time that I have been in a distant land in pursuit for my post graduate studies .However, many thanks also goes to Emma and all other friends who I may not mention herein, for having stood by me all this time in my stay in Den Haag the Netherlands.

On this occasion I wish also to pass my appreciation to my supervisor and the second reader for the time and input they have dispensed into the successful completion of this study here at the International Institute of Social Study.

Finally, my appreciation goes to all my classmate of the calendar year 2009-2010, especially the ECD class, staff and the Outgoing convenor Jan Van Heemst for their moral support and more so making life worth living here at the ISS. Consequently, I am thankful to the World Bank and the Japanese Government for the fellowship, material and financial support that has anchored my career in Development Economics to the next level.

xi

God Bless You All

List of Acronyms

IMF International Monetary Fund

ROT Rehabilitate own and transfer

PPI Private Sector Participation In Infrastructure

SOE State Owned Enterprise

RLT Rehabilitate lease and transfer

OECD Organisation for Economic Cooperation and Development

SSA Sub-Saharan Africa

BROT Build rehabilitate own and transfer

WB World Bank

IFI International Financial Institution

ERP Economic Reform Programs

SAL Structural Adjustment Loansxii

WC Washington Consensus

SAPs structural adjustment programs

xiii

Abstract

In the past decade, some insightful appraisal of public policy in line with the primary infrastructure sectors globally with a tangible shift in direction towards private management and ownership. A significant change in the perception of the roles of the public and private sectors in infrastructure development has taken centre stage in past decade. Meanwhile, the option of private sector participation in infrastructure services has become a key strategy. However, these reforms have promoted the desired levels of expectations in Africa as a continent.

In conformity, great inroads have been made in the telecommunication sector, which raises the issue of a gap between the suitability of prescribed policy and the country’s specific institutional frameworks. Notwithstanding, Africa’s diverse experience and the exceptional socioeconomic circumstances is such that policy preconditions that are imperative for successful liberalization and privatization are hardly met. Therefore, this study evaluates privatization policy choice by appraising the private sector investment participation in infrastructure (PPI) in sub-Saharan Africa in view of the fact that there is reliable knowledge around the world from which lessons can be drawn from. Infrastructure privatization ought to be viewed as a basic means to an end, and not ideally an end in itself. given, its main objective is to perpetuate an efficient sector that delivers quality service. These can be achieved in the background of a suitable market mechanism that is well structured with a properly defined regulatory system.

xiv

The findings can be attributed to the results of a regulatory reform, implementation of the private sector participation policy, combined with the influx of private entity’s investment in the primary infrastructure that has yielded a spectrum of mixed results that is reliable for redesigning future policy for implementation. Ultimately, PPI as demonstrated in this paper has a significant role in promoting investment relative to the suitability of the economic environment and investment portfolio that appeals to the regulatory framework in place.

Relevance to Development Studies

Privatization policy choice has a crucial role in addressing widespread challenges to economic conditions associated with large fiscal deficits in poorly performing SOEs .hence; privatization has the potential to minimize misrepresentation in resource allocation and moderate budget deficits. In practise increased investment, can be attributed to intensified efforts of creating an enabling environment that propagates confidence in the feasibility of amicable policy framework and its incorporation into other public policies. Ideally, this enhances efficiency of resource allocation via sound contract enforcement regulation, which is an incentive for more private sector investment and increased accessibility of private sector to financial resources.

xv

Keywords: Infrastructure, Privatization, Policy, Participation, Choice and

Sub-Saharan Africa

xvi

Chapter 1Introduction

1.1 Background Reforms in the public sector has been a long process in an attempt to streamline the ills that are associated with the performance of SOEs especially focusing on Africa historical path towards achieving efficiency in the public sector . therefore, according to( Ariyo and Jerome 1999:202), by the end of the 1980s, about 35 Africa states had received World Bank assistance for privatisation and reform programmes and 67 % of all adjustment lending targeted public enterprise reform. Subsequently, Privatization became a key tool for economic reforms for the Sub-Saharan regions in the 1990s, directing focus on private sector development.

As it stands, at the moment the IFIs had emphasized that developing countries had to liberalize, stabilize and privatize in order to achieve sustainable economic progress as prescribed by the Washington consensus. Though, trade liberation was the most effectively implemented since within a relatively short stint most developing countries had eliminated quantitative trade barriers on imports and rates of tariffs(Rodrik 2004:1). Nonetheless, privatisation was crucial for any structural reform that had been proposed by the Bretton Woods institutions in the 1980sto take any meaningful shape within the SOEs, subsequently, privatization of state enterprises were initiated in several countries in Africa that included Senegal, Niger, Kenya, Ghana, cote d’ivoire and guinea just to mention a few. However, the idea of privatization wasn’t a home-grown supported strategy by the domestic policy makers but was imposed on the countries by the IFIs. Bearing in mind that these early reforms were majorly on few divestiture programmes in the commercial manufacturing sectors but not on infrastructure

1

SOEs (Nellis 2005:16). Interestingly, the implementation of the reform package was effected much later in the early 90s after the stabilization programmes took off since it was politically and regulatory demanding than privatization per se. therefore, until the early 1990s the number of privatisations per year increased significantly, up to 1995 after which it significantly dropped (Harsch 2000:9).

Indeed, privatization reforms in Africa was anchored on a range of expectations that contributed to mixed results, especially with Ghana exhibiting a success story and Senegal the poorest results ( Ariyo and Jerome 1999:207). Particularly, much of the privatizations reforms were not tailored to suit country’s specifics since there were no efficient institutional capacity framework, capital markets, and amicable regulation systems. Hence there emerged a significant opposition that lagged the adoption process.

According to Mbongaya (2008:4) in considering the shortcomings of the privatization policy choices in the region the need for a fundamental transformation took centre stage. Regardless of the organizational cultures that stood on the way of the prescribed reforms and the regional economic environment disparity. Indeed privatization as a reform instrument was meant to better the social and economic welfare needs of people by transferring the benefits of competition and excess profits to the taxpayers. Rather, than creating natural monopolies in the pretext of private sector investment to exploit the public through increased price, artificial shortages and retrenchments that resulted from the first phase of the reform packages.

As a result of perennial scarcity of basic utilities in Sub-Saharan Africa the World Bank and OECD in 2004 concurrently reviewed the policy of privatization in the region by underscoring the need to include the concept of infrastructural privatization, case specific

2

approaches, good governance, enhancing competition and regulation without factoring in institutional capacities of the Public Sectors which apparently was an extensive service provider of basic utility services in the region. This Notwithstanding, had a far reaching impact on the society on the implementation of the government social welfare policies through a typically home grown policy designed to capture the disappointing result of the initial reform initiatives(Mbongaya 2008:3-4).this was an oversight on the part of this institutions because it generated a widespread dissatisfaction at the time of its implementation ,hence , failure was an eminent challenge in the wake of all the well intentioned policy framework..

Therefore, following the disappointing aftermath of the structural reform policy of 1980s, which was anchored on liberalization, stabilization and privatization in many developing countries without taking into account the countries specifics. a number of difficulties in the implementation process were experienced. However, the escalating dissatisfaction and opposition among policymakers raised serious questions that went unanswered, given the growing uncertainty on one hand and the perception that privatization is an ideal model to most economic problems on the other hand. This gap leaves behind food for thought that the policy reform packages may have been a constraining factor to proper implementation of the privatization process and some serious assessments need to be conducted to unravel the mystery behind this inconclusive position on which way we should rate privatization and suggest further a compromise line of strategy that would bridge the gap.

In effect the study will attempts to review the privatization policy choice and investigate the role it plays at influencing private sector investment participation in order to draw some lessons for

3

policy implications that is all inclusive and adequately promote primary infrastructure investment with minimal negative social outcomes. Another point of focus will be on the analysis policy choice that comfortably accommodates the public interest goals of maximizing the social welfare needs that were neglected by the initial reform package.

1.2 Location and scope of the studyThe study targets the regional primary infrastructure projects in low and middle income sub-Saharan African countries. In this case 45 countries within the region are captured, on the basis of the energy, telecommunication, transport, water and sewerage sectors. Further, investment trends are analyzed relative to the specific policy ideology of concession, management contract, divestiture and Greenfield type project over a period spanning (1990-2008).

1.3 Motivation and Limitation of the StudyThe study revolves around the review of the privatization policy choice after the mixed results of the implementation of the first phase of the structural reform programme in the 1980’s that raised dissatisfaction among policymakers, academia and the political class. However, the study may not answer all the problems associated with the failure of the first phase due to inadequate concrete information on the accurate investment commitment values by the individual stakeholders in the private enterprises mentioned.

1.4 Research ObjectivesThe general objective of this paper is to evaluate privatization

policy choice and its impact on private sector investment in primary infrastructure project. The proposed research has also the following specific objectives:

4

(i) To determine the role of privatization policy choice in promoting private sector investment participation in primary infrastructure in the region.

(ii) To evaluate how the policy choice has adequately captured the social welfare outcomes of privatization.

1.5 Research Questions

The major question that arises in this paper is how has privatization policy choice influenced private sector investment participation in primary infrastructure in the sub-Saharan region? Other Subsequent questions that are equally relevant are as follows(i) What role does privatization policy choice play in promoting private sector investment participation in primary infrastructure in the region?(ii) What policy choice adequately captures the social outcomes of privatization?

1.6 Organization of the Research PaperChapter two will constitute the theoretical framework and literature review ,subsequently, chapters three will highlight the empirical analysis on methodology ,chapter four will highlight the interpretation of the results and finally chapter five will indicate the policy implication of the study and the conclusion.

5

Chapter 2 Theoretical Framework and Literature Review

2.1Theoretical Framework

The Privatization concept is founded on three main theoretical perspectives that have been used to explain the move towards privatization reforms which revolves around, the property rights, agency, and public choice theories respectively. The main assumption underlying these theories is that in a proper macroeconomic environment and the existence of suitable regulatory market driven forces generally enhances the level efficiency in organizations (Adams 2006:296-297).

2.1.1 Theory of Private Property RightsIt is a socio-economic association that constitutes the allocation of resources, considering the fact that owners enjoy the benefits and cause harm to others as a result of the entitlement (Starr 1988). Furthermore, the more elaborate the rights onto the resources allocated to the decision maker, the stronger will be the incentive to preserve and utilize these resources more efficiently (Plane 1997). Moreover, private Property rights entitles individual owners to an equity claims on the property of a private enterprise (Hanke 1987)as cited in(Adams 2006:297). As such, the three important criteria for efficiency of property rights are,

(i) Universality It describes how the scarce resources are owned by individuals

and organizations, such that at any given point in time either the public sector or the private sector is entitled to ownership of an enterprise, through the different existing forms of ownership.

6

(ii) Exclusivity Describes the restricted rights to ownership and management of

the enterprise, especially where politicians and rent seeking bureaucrats are restricted from influencing decision making processes once a SOE has been privatized as described in the concept of agency and public choice theories respectively.

(iii) TransferabilityThis concept that ensures resources can be allocated from a low to high yield uses, as demonstrated in the transfer of ownership title in form of concessions, divestiture, and Greenfield and management contracts. As such, the process of privatization facilitates transfer of entitlements from one party to another with an objective of enhancing productivity and efficiency ( Adams 2006:296-297).

Libecap (1989) asserts that private property rights matters, and further provides the basic economic incentive structure that shapes resource allocation on the premise of ownership and contract enforcement (Mahoney 2005:111). Ideally, this theory will attempt to answer the question of transfer of ownership entitlements from the public to the private sector by highlighting on how policy choice and contractual transactions influences privatization process with bias on concession, management and lease contract, Greenfield project type and divestiture.

2.1.2 The Agency Theory

The agency theorist argue that, opposing interests and goals of principals (owners) and agents (managers) create a conflict where agents focus their attention on maximizing their personal driven interests at the expense of the owners. Hence, the inefficiencies and low performance in SOEs may be as a result of agency related cases. Moreover, in most instances this arises due to lack of incentives for the agents and the presence of highly compromised

7

monitoring institutions. Therefore, the agency theorists advocate for privatization of the SOEs as a means of promoting radical changes in corporate governance and managerial incentives (Acquaah 2005).

Ideally in our case ,the stakeholders in the privatized enterprise take different positions in the ownership structure, and those that have been contracted to perform their mandate for instance in management and lease contract project type, will have to meet the set objectives and standards relative to the performance contract signed between the principal(owner) and the agent(manager).consequently, the agent is motivated because the incentive to achieve the desired performance level is commensurate to reward which is pegged on the market rate. Therefore, the PPI is likely to be significantly impacted positively as a result of increased accountability and productivity in the enterprise.

in this case the drive to private sector entitles investors to freely transfer ownership titles for productivity purposes and maximizing benefits ,which translates to improved efficiency and higher residual returns to investment further, it focuses on explaining how the private sector through, speculation invest in the most rewarding portfolio, which in turn promotes efficiency (Acquaah 2005).

2.1.3 Public Choice theory

The proponents of this theory took a standpoint that SOEs are generally inefficient and poor performers due to political related demands and pressure to maximize on the public interest goals of increasing employment, increasing wages and initiating more development projects. Normally, politicians capitalize on this to increase their chances of re-election, which in most cases compromises the operational efficiency and better performance. However, privatization in practise renounces political control by

8

altering the enterprise goals from public driven interest to concentrate on efficiency and performance associated with reduced unemployment, wage expenditure and improved productivity with better efficiency level (Acquaah 2005).

2.1.4 Dynamics of Privatization ModelThis model happens to be the brain child of (Fluck,John and Ravid 1996:280-284) which, essentially addresses the concept of alternative ownership structures that goes with privatization processes. The model attempts to describe how the government decides on which level of privatization policy if adopted will maximize both public and management relative to the pre-existing macro-economic situation. These choices directly impact, on private sector investment in primary infrastructure in a particular economy of choice. In essence the manufacturing, service and production industry of any functional economy generates profit levels (π) and employment levels (E), relative to the existing market structure. These set of variables (π , E ¿, can be generated at a time (t) and forms the function of the macroeconomic condition of the economy and the level of technological changes in line with the productivity levels.

However, the limitation of the model is that it captures simply two macroeconomic state specifications of θ as either Good (G) or Bad (B).in addition another important assumption is that the economy revolves around the first order Markov process and the matrix of transition probability given by

R =

Where rθ ,stands for, θ = G or B, as a conditional probability of obtaining a good state and (1-rθ) stands for a bad state at time (t),

r G (1−rG )r B (1−r B)

9

bearing in mind the economy was in the state θ, θ=G,B at time (t-1).considering that (rG, rB),fully describes the transition matrix exhaustively.

The viable vector set of(π,E) can be expressed as f(θ,h) as a function of θ(state of economy at time (t-1) and (h) representing the level of technology existing in the economy at time (t-1).however ,it also represents the function of the history of production in the economy in the past period given by (t-1),that explains the function of distribution of property rights and ownership structure allowed at (t-1).

i) Management objective

Apparently, production process is delegated to the new management by means of corporate governance process in most corporate sector. Further, the distribution of property rights and the strength of private ownership establish the degree of congruence of corporate governance process with the government objectives. In this case the degree of privatization in the economy is represented by ( Ω)where, (0≤ α ≤ 1¿being the extent of ownership in the private sector. For instance, 100%ownershipof the state corresponds to Ω=0, yet, when government ownership at least 51%which translate to Ω=049, while Ω=1 signify, a fully privatized economy.

The preference of the management is expressed as M(π ,E ,

Ω).hence, the functional dependence of M on Ω(degree of private ownership establishes that the more private the structure of ownership the further management is inclined to its profit focused owner hence, less priority is apportioned to employment levels. Moreover, it’s on the extreme given a bad (B) macroeconomic state. Otherwise when Ω=0 (fully state owned) which also explains the close linkage of management objectives with that of the state.

10

In addition, if we represent the preference of the government as U(π ,E , θ, h), where θ=Good or Bad, macroeconomic state we realize that the government values the profits(π ¿ for the purpose of future supplementary capital and corporation tax revenue source. this will also raise public confidence on the adopted privatization scheme.

Employment (E); the more opportunities created as a result of the adopted privatization scheme the better for politician vying for political office. History(h);directly influences government objectives in line with changes in technology as explained by the F( θ, h),of possible Feasible output vectors(fluck et al.1996:283).

Note; that direct reliance of history on U(π , E , θ, ) can be explained by the specific experience with reference to a history of privatization that become popular or otherwise without necessarily looking at the profits and employment and employment it produced. FOR instance the adoption of a privatization reform that led to the choice of Ω=0.49,hence raising expectations that in case the economy experience subsequent Bad(B) state then negative and dissatisfaction against the government, though given the same output(π , E ¿, then the utility of The government U(π , E , B, h), with a specific history of two period IN The stage(I) is relatively lower than U(π , E , B,O),with no history in the same stage(I).

ii) Government Problem of Choice

It identifies the level of privatization in accordance with a governance mechanism that maximizes the expected utility. Ideally, the government makes decision at a time (t-1) based on the existing state of the economy as expressed by θ= B or G.

Production decision is delegated to the new management with the information about the state of the economy at a time (t), when the choice of profit and employment levels (π , E ¿, in maximizing

11

their objective relative to F (θ, h) state of the economy and its history.

Where the government chooses Ω level of privatization, at a time (t-1) at θ, state of the economy to maximize utility bearing in mind that output is selected on a delegated production process as a function of B and G to be achieved at time (t),(Ω)privatization level and at a history(h).

Since the state θ=G or B

Then maximize rθ U(πG* ,EG

* ,h) + (1-rθ )U(πB* ,EB

* ,h)…within (0 ≤ Ω≤ 1) …….a

Where (πG* , EG

* )= arg max M(π ,E , Ω)….with reference to (π , E)

........................b

Such that (π , E)ϵ F (G, h)…….........................................................................................c

(πB * , EB

* )= arg max M (π , E , Ω)….with reference to (π , E)

............. …………..d

Such that (π , E)ϵ F (B, h)…..............................................................................................e

Apparently, on the account the current state (θ) at a time (t-1), the government implements the level of privatization ( Ω) at the beginning of the period (t).consequently, successive uncertainty brings the state(θ) to B or G, which essentially the delegated management attempts to solve the problems on the equations(b)-(c) or (d)-(e) relative to the arising macroeconomic condition (fluck et al.1996:283).

In conclusion, the study is focused on the theory of property rights as described above, basing my argument on, the concept of exclusivity, which is decisively linked to the public choice and the agency theories respectively.. In addition, the concepts of

12

universality, and transferability have been describe in the context of private sector ownership of public enterprises in the phase of privatization reforms. However, the agency and public choice theories are modalities of efficiency which is associated with proper management, better productivity and profitability. Ideally, privatization is associated with better management practices which in essence demands for radical structural changes in the style of the newly privatized enterprises, hence, the dynamics model identifies the element of choice relative to a suitable ownership structure that reflects the country specific policy needs on private sector investment in primary infrastructure bearing in mind its role of promoting investment commitment.

2.2 Literature Review

2.2.1 What is privatization

Privatization1can be defined as the transfer of operational control of an enterprise from the government to the private sector. Although operational control can be placed in private hands through leases,

1 Privatization in Africa Oliver Campbell White Anita Bhatia

13

concessions, or management contracts, control is most often tenable by majority ownership. Therefore, Privatization is characterized by transactions those results in a government ceding ownership control by decreasing its equity stake from 50 % or more to less than 50 %. This definition would therefore amount to equity dilutions and joint venture that leaves the state holding less than 50% of the ownership (Bhatia and Campbell 1998:159).

2.2.2 Forms of privatizationPrivatization can be attributed to many different forms,

especially in the private sector participation at product or service delivery. The most common forms according to Koma and Pamacheche (2007:4-7)are described below.

(i) Management contract Here, the main responsibility for provision of services initially

provided by a state-owned firm is passed on to a private provider. Ownership though, remains with the state and all the necessary capital investments continue to be provided by the state. Besides, a performance contract is negotiated with an outsourced management company. As such, the benefit from management contracts is the market discipline and technological knowhow to state owned firms and the efficiency gains of a market-oriented enterprise.

(ii) Lease A private firm is bestowed with the responsibility of operating

and maintaining the assets of an initially state owned firm. The state retains ownership and responsibility for financing capital investment .however, the new operator has strong incentive to minimize cost and improve efficiency by enforcing the agency and public choice theory in the management of the business.

14

(iii) ConcessionGenerally, a private firm takes over responsibility for operating

and managing the assets of a public enterprise, as it is in a lease arrangement. However, in a lease arrangement, the private firm takes further responsibility of financing long-term capital investment of the firm.

(iv)DivestitureIn divestiture, state owned assets are sold to a private entity

where management and subsequent capital investment needs become the responsibility of the new private sector operators. Furthermore, private placement for shares of companies is sold through direct negotiation, and initial public offering, where shares are sold through a public offering on a local stock exchange. Finally, Divestiture can either be in partial, sale of 49% of shares and below or full scale, with total transfer to the private sector.

(v) Joint ventureA partnership between a public enterprise and a private investor

respectively, can be an appropriate solution in a situation where full-scale privatization attracts much resistance. Risks are shared and any struggle for control can be counterproductive to its success. However, economies of scale and access to new technologies and management expertise can be positive outcomes of joint ventures.

(vi)Asset saleIt constitutes the disposal of assets of an enterprise, arising

from the termination of the business operations. However, a number of assets can remain unsold. Chances are that the selling of public assets is at a giveaway price. Such sales are usually

15

inevitable and are usually affected by auction Population (Koma and Pamacheche 2007:4-7).

2.3 Stages of Privatization Reforms in AfricaIdeally ,Africa and most of the developing countries ,have had a difficult past in dealing with the economic challenges that go with structural adjustment programs that were prescribed by the world bank with regards to stabilization, deregulation and privatization. Particularly, the move towards privatization of poorly performing SOEs entailed an extensive reform package that called for massive resources, strong political will and a stable economic environment with market conditions suitable for successful implementation of desired private investment commitment within the region.

2.3.1 Reforms of the 1980s and 1990sApparently, during the 1980s the WB formulated a number of SAL agreements on the basis of the Washington consensus that emphasized on countries to diminish the deficit on the state budget and institute a devaluation of the currency as a structural measure to give private sector opportunities to increase productivity ,efficiency and better utility of economic resources. However, the SALs of the 1980s failed to produce to produce the desired economic impacts but produced unexpected social and economic results. Nonetheless the assessment of the Asian miracle of the early 1990s had a great lesson on the success of the East Asian countries that was attributed to state intervention,(Stovring,2004:13).

Consequently, in 1990, john Williamson formulated the Ten Commandments in acknowledging the East Asian economic management, which came to known as the Washington consensus to guide policymaking in Latin America. It advocated for the adoption of policy guidelines that touched on ;fiscal discipline, reorientation

16

of public expenditure priorities in areas of high economic potential to improve distribution of income, for instance, primary healthcare ,education and infrastructure. interest rate liberalization, Trade liberalization, liberalization of inflows of DFI, Privatization, Deregulation (to abolish barriers to entry and exit) and finally secure property rights(woo,2004:3).apparently this first phase of the doctrine focussed on regulating the prices . Though, it didn’t materialize good outcome in Africa and Latin America except in Ghana and Chile respectively. However, east Asian countries experienced higher growth rate regardless of the Asian crises of 1997-1999,due to liberalization of capital account that began in the 1990s(Woo 2004:15).

In addition, the large scale economic deregulation performed dismally, since, the removal of interest rate ceiling and entry barriers into the banking system became costly in many countries. This was as a result of explosion in the number of banks and total loans fuelled lots of speculation and none performing loans, which essentially bankrupted the banking system. This prompted the government to refund depositors to prevent a possible a possible economic, social order and political status meltdown.

Apparently, privatization of state assets accompanied sales at heavily discounted prices to political elites thus replacing public monopolies with private monopolies a clear path of looting the public resources,(ibid:15). Therefore, in this period African governments, regardless of any donor assistance, did not succeed in reforming state enterprises with evolutionary methods such as (commercialization) without ownership change. This failure gave rise to a reform approach pointing towards private sector participation and ownership (Nellis 2005:2).

17

2.3.2 The second phase of the Washington consensus

It focussed on getting the institutions right ,though more ambitious than the initial reform package(Woo,2004:18).since the augmented Washington consensus focused heavily on institutional and governance, which attempted to address the problem encountered in the implementation of the original agenda which had the right fix on problems but implementation and effectiveness were impaired. It suggested that the reason for failure of privatization and subsequent opposition was due to inappropriate regulatory systems. Further, financial crises caused by the financial liberation were due to weak prudential regulation and corporate governance systems.

However, it also reflected what the rich countries already looks like and the institutional reforms did not describe what countries ought to do to develop. Furthermore, it did not correspond to what developed countries did during their initial development stages but where they ended up once they developed. Consequently, the level of administrative competency, human resources and political related capital required to complete this institutional reform agenda was farfetched in the developing economies(Rodrik 2004:5-6).

Notably, the first phase of the Washington consensus, concentrated on limiting government interventions for a much less control of the economic activities, whereas the second phase, the state is acknowledged as a conductor of the economic activities in providing and maintaining the infrastructure that facilitates the efficient operation of the private market economy. However the first and the second phase appreciated the fact that without the state intervention market operation may not be as effective compared to when the state is involved (Woo 2004:18).this reform packages faced more challenges at the implementation stages thus paving way for a yet more interactive strategies for reforms.

18

2.3.3 Diagnostic approachIt focused at identifying significant bottlenecks and marshalling efforts in alleviating distortions that directly stand on the way of the prescribed reforms. All together the initiative attempted to optimize on the administrative cost and resources that would have been required to achieve the desired reforms to avoid going after numerous targets. The approach clearly pointed out why different fixes subscribed to different country specifications, given that, the strategy was targeted to match policy priorities with diagnostic signals. Being a bottom-up approach it empowers countries to perform their own diagnostic strategy, however, the augmented approach presented each country as an identical institution with a list of reforms that were absolutely contrary to the diagnostic one which was sensitive to political and administrative constraints that was being practised. Furthermore, the approach recognises the dynamics and the nature of the binding constraints overtime, hence presenting a more favourable environment for implementation of the reform packages.

Consequently, the approach happened to have embraced strategic measures like resource mobilization and financial sector reforms in countries with investment constraints due to lack of investible funds and high cost of capital. Hence, foreign investment would be the best option to unlock the constraint on condition that a relatively high demand and an equivalent return to private investment prevailed in the market (Rodrik 2004:9-12).

As such, private sector oriented reform strategy has produced some notable successes in Africa, as indicated by increases in the quantity and quality of service offered by the private sector, especially in telecommunications sector. Most previous studies of private participation in infrastructure though, indicate that performance generally improved, compared to what could have

19

been logically expected to have happened under continued public ownership and operation (Nellis 2005:2).

2.3.4 Rationale for the reform package

On the other hand, Jerome (2002:10) argues that “following the apparently successful privatization programme in Britain-privatization gained a considerable momentum in developing countries given its endorsement by the multilateral financial institutions as a major plan of adjustment policy and reinforced by the need to reduced government expenditure in the face of burgeoning fiscal deficits” took centre stage in Africa. Consequently, after this dispensation, African governments fell under pressure from the donor community to adopt privatization policy. This followed a series of disposal off thousands of state-owned enterprises. Categorically, proponents of privatization expressed the need to minimize waste, improve economic resource efficiency, revitalize the private sector and mobilize supplementary foreign and domestic investment. Though, the process encountered a spate of controversy, governments had to proceed more carefully and cautiously with the issue of privatization in light of the previous results of the first implementation phase of privatization (Harsch 2000:8).

Unprecedentedly, privatization mushroomed in the subsequent period, which went contrary to the tradition of reliance on previously monopolies in the public sector that serviced the market demand, just because of the weak private sector structures that were in existence during and after independence time. But with the increased clamour for economic liberalization by the IFIs and the donor communities, more African countries acknowledged the

20

essence of privatization. This was under the guise of, decreasing public sector inefficiencies, widening the scope of the private sector, attracting more investment, adopting new technology in an attempt to revive economic opportunities. At the same time, some governments were cautious to proceed more carefully as earlier mentioned in avoiding if possible the uncertainties, conflicts and drawbacks that marked many of the privatizations operations initiated towards the end of 1980s and early 1990s (Harsch 2000:8).

2.3.5 Rationale for Government ProvisionAccording to world bank(2004) as cited in(Adhia 2004:1 ) claimed that services such as water, electricity and transport are of strategic importance to be left in the motivations and penalties of the market, hence, the state control is essential. Secondly, the state will ensure fare distribution in furthering its social equity goals. Finally, these services constitute high set up costs and economies of scale, which is a fertile ground for natural monopoly to thrive in a free market. Hence, may lead to exploitative practices. Therefore, this justifies monopoly utility enterprises owned and controlled by the local government.

2.3.6 Rationale for the private sector participationDue to the disappointing performance of state owned monopolies, as a result of no motivation from competitiveness, low labour productivity, declining fixed equipment and service qualities, the need to subject it to market discipline.Ideally, the price structure of SOEs is highly influenced by political underpinnings than on the cost structure, which has given rise to resource allocation distortions and serious revenue service shortage and insufficient investment capital for expansion (Adhia 2004:1).

21

2.4 Limitation to the Reform PackagesMost significantly, African privatization process particularly in infrastructure is constrained by socio-economic upheavals. Given its trail of history, the increasing hostility towards privatization and the inadequate information on the subject, there the need for an incisive appraisal of infrastructure privatization in Africa is urgent. Moreover, a significant gap currently exists in the literature where a Comprehensive evaluation of infrastructure privatization in Africa are limited to studies conducted mainly by international financial agencies with a skewed interest in the privatization process for instance (Kerf and Smith, 1996; Nellis, 2003; OECD, 2004) on country specific (Ayogu 2001; Azam, Dia and N’Guessan 2002; Ariyo and Jerome, 2004) on sector specific as well as (Bayliss 2001, Karekezi and Kimani, 2002).their findings point out that results of a decade long of regulatory reform, implementation of the privatization process and liberalization agenda, coupled with the increased private investment in infrastructure have categorically produced mixed results of particular success and dismal performance in the rejoin (jerome,A.2004:3).

Although private sector participation in infrastructure services has revolutionized into a new tradition, specific reform packages have not materialized to date in Africa. Notwithstanding, the unabated success in the telecommunications sector, there has been a significant gap that explains the mixed results pointed out by the previous literature studies. Surprisingly, Africa’s socio-economic characteristic constrains the policy preconditions that are obligatory for effective liberalization and privatization realization (Ariyo and Jerome 1999:207).

22

2.4.1 Structural adjustment loansAs a result, Infrastructure sector reform packages in Africa

are not designed inline to solve the inherent challenges in the sectors, but implemented in compliance with SAL provisions set by the multilateral development banks and the regional, global trade accords. However, one cannot deny the fact that sub-Saharan region’s experiences, opposition and dissatisfaction of privatization initiatives that can be attributed to its dismal performance in the region (Jerome,A 2004:4).

2.5 SOE Reform and Results of Commercialization Approach

Privatization of SOEs revolves around major policy tools for the realization of the objectives of ERP, due to the poor performance of SOEs with enormous strain on public revenue in the form of non-recoverable loans and annual subventions from the treasury, therefore, a growing quest for privatization was grounded on the persistent dissatisfaction, worsening economic environment and severe fiscal crises that had bedevilled the African continent in the 70s (Ariyo and Jerome 1999:201-02).

Subsequently, in the 80s, the IFIs particularly the World Bank formulated several SAL agreements based on the Washington consensus, which prescribed countries to diminish the deficits on state budgets by instigating currency devaluation. The reason behind these structural reforms was to give the private sector greater scope so as to promote growth though enhanced efficiency in productivity and utility of the economic resources where there is less direct state intervention in production and resource allocation, but govern the regulatory framework for market and economic policy (Stovring, 2003:13).

23

Moreover, until the late 80s the WB had provided assistance on privatization to 30 governments in the sub-Saharan region, specifically, supporting restructuring of SOEs that will remain under state control and which serve socially vital purposes such as water, transport, energy and telecommunication and further to assist governments increase the efficiency of both the state and business. ideally, privatization assistances took place in the context of macroeconomic policy reform such as liberalization of trade regimes, pricing reform, demand management and elimination of monopolies (Kikeri and Nellis 1989:665).all these prescription were against the backdrop of addressing inefficiencies in the SOEs; focusing on the degree of government intervention in markets, extent of macroeconomic distortions, imperfect competition in the internal market(ibid:664).hence, its wasn’t surprising that privatization failed to achieve the desired impact in several countries(Ariyo and Jerome 1999:207).

2.5.1 Outcome of the Commercialization ReformsApparently, the reform process took centre stage with the move to privatization and commercialization packages launched in 1988as a major component of SAPs initiated in 1986,(Jerome and ariyo,1999:205),where ownership was vested in government whereas management and financing was coordinated by government regulatory along bureaucratic lines. In this case the path to privatization entailed four main stages for instance; commercialization; where user charges are introduced and followed by full setting of commercial performance objectives. Corporization; where the SOE is created usually by a statute, Restructuring; an intermediate step required where SOE hasn’t been operating in a commercial environment before. These, prepares the SOE for divestiture, though, it may be vital in improving the performance and efficiency of enterprises under state ownership. Finally,

24

Divestiture; entails the sale in stages of partial or the whole all of the government’s shareholding in a SOE (Stovring 2004:14).

However, the implementation of privatization and deregulation in Africa has produced relatively weak results compared to Latin America and South East Asia, (Stovring 2003:12). However, the outcome of divestiture was mixed, though generally positive in Jamaica, guinea, Togo and Niger, for WB supported reforms, yet, for non-bank supported reforms in Malaysia, Mexico and Thailand, for instance had significantly enhanced financial performance. Moreover, despite of the challenges of technology and political complexity such as inadequate policy framework, weak capital markets, heavy liabilities, reluctance to sell to foreign investors labour union and bureaucratic opposition. Nonetheless, government commitment, public campaigns, WB presence and other donor community may have contributed to the positive results obtained. In addition, divestiture, as a method of privatization was desirable since it promotes both widespread and domestic ownership(Nellis and kikeri, 1989:667).However, the East Asian success in particular Malaysia, was attributed to the concerted state intervention in economic activities which was in line with the second phase of the Washington consensus(Stovring 2004:13).further, the poor performance of the Malaysian private sector was entirely as a result of the initial economic reforms but this trend changed drastically after the country specific intervention of vision 2020 initiative and its implementation (Ariyo and Jerome 1999:209).

Finally, according to (ABD:2001)as cited in(Adhia 2004:10) claims that privatization benefits are much though thinly spread over a huge population over a long time period, however, its cost on job losses and business is accrued to a section that can successfully mobilize resistance to privatisation. Notwithstanding,

25

the achievement of lowering costs to consumers that has increased the number of options, yet it has not convinced the opponents but furthered the discontent overtime.

2.5.2 Obstacles to the Implementation of ReformThe implementation process may have slowed down due to governments attempt to counteract the adversity of the process of divestiture of increased unemployment, foreign ownership, concentration of property in the wrong hands, plant closure and pricing problems. Other issues that also contributed grossly to this backdrop was lack of transparency in making specific deals of sales at unstated prices, to dubious purchasers without a competitive bidding procedure (Nellis and kikeri,1989:667).

However, the two writers (Ariyo and Jerome1999:207-09)give a caution that the implicit assumption that public bureaucracies and sector are endemically inefficient whereas the private sector is inherently efficient may not be valid in several developing countries. Especially where there is a harmonious relationship between the two sectors and also where the culture of private enterprise has not fully developed. Moreover, the role of foreign capital in financing public sector reforms and foreign participation in privatization may have been misinterpreted as concentration of wealth in foreign hands, yet it was essential, particularly for countries that considerably weak private sector. for instance “by 1992 in Sudan, firms from Scandinavia, Britain, the US and the Arab states dominated as bidders for SOEs slated for privatization under the country’s National Economic Salvation program introduced in June 1990”(ibid:203).

Nellis and kikeri (1989:664), further claim that reforms without involving ownership change had mixed but modest results, given that economic theory views competition more crucial than

26

ownership in determining efficiency outcomes. This point of view is supported by the assertion by opponents of privatization in developing countries that in substituting shareholders for civil servant supervision there will be no need for ownership change, because the same factors accounting for inefficiency in the public sector performance will equally influence private sector performance. Therefore, there is no way the private sector will perform better than the public sector, given the degree of government intervention in markets, prevailing macroeconomic distortions and the imperfect competition in the internal markets.

However, Vickers and yarrow (1991) had the opinion that competition directly improves monitoring as an incentive for efficiency in production hence justifying private enterprises leverage over SOEs given a competitive environment. Nevertheless, in a none competitive with possibly natural monopoly privileges the effects of privatization remain unclear (Boubakri and Cosset,,1998).furthermore, Vining and Boardman(1992)as cited in(Omran 2004:1023) assert that there is an insignificant difference between public and private ownership at low level of competition given both forms are likely to adopt similar rent seeking behaviour.

However, in an increasing and competitive environment, the private entity has more incentives for managers (agents) to adopt optimal profit objectives (Alchian 1977, stano, 1975:277).this is acknowledged further by D’souza and Megginson(1999) as cited in(Omran,2004:1023) that privatized enterprise in a competitive industry like telecommunication would yield significant economic returns without macroeconomic distortions. An argument that is similar to that of parker and Hartley(1991) whose assertion that much efficiency gains arises where competition replaces monopoly without necessarily relying on ownership status, and that if both the public and private enterprises would yield similar

27

allocative efficiency if subjected to competitive environment without considering the structure of ownership(fare, grosskopf and logan,1985)as cited in (Omran,M. 2004:1023). Otherwise according to (Cook and Kirkpatrick, 2003; Shirley and Walsh, 2001; Adam et al 1992),as cited in(Adams 2006: 298)claim that as a result of market failure SOEs are likely to efficiently maximize on social welfare gains in a situation where private manger(agents) optimize on profit and welfare benefits. Consequently, Shirley and Walsh (2001) as cited in ( Adams2006:298) acknowledge that in developing nations, monopolies tend to be predominant due to perennial market failures, imperfect information and high cost of entry into the industry.

Alternatively, Nellis and kikeri,(1989:664-5) claim that to enhance SOEs performance the government should create appropriate incentive systems that will attract and reward good managers, as well as isolating SOEs from excessive and inappropriate supervision, institute performance contracts and in a nutshell provide commercial and industrial SOEs with basic set of goals and proper managerial autonomy that will facilitate the attainment of good performance levels under state control.

Otherwise, the governments can as well promote privatization for other legitimate reason than efficiency and reduction of budgetary burden posed by SOEs through, reconstructing local capital markets, encouraging foreign investments, regulating the power of public sector unions, which are the main goals the state has attempted to achieve through the divestiture programs. This perception comes in handy given that SOEs aren’t performing to the expectations and a broad range of reform strategies have attempted to address the endemic inefficiencies.

28

2.5.3 Private Participation in Infrastructure

In the Early years of 1990s, infrastructure industries under, energy, ports, railways, roads, telecommunications and water & sewerage were in most cases exclusively in the domain of the public sector control. Consequently, this gradually led to Private corporations currently constituting of at least 45% of the key sectors of the large-scale service delivery enterprises. On average it is higher in developed countries than for developing countries and for particular sectors than for others (Estache et-al. 2005:1).

In accordance with the poor performance report of African SOE, the reforms corresponded with a major shift in economic thought that took centre stage towards the end of the 20th century (Stanislaw and Yergin 1998) as cited in (Nellis 2005:18).Arguably the Keynesian assumption that the public interest was served better by government intervention, and subsequently the Hayekian notion that “government failure” was more of a problem than “market failure.” This was in retrospect of the collapse of the USSR and successive revolutions in the satellite states, which paved way to a strong and sustained growth in OECD countries and spurred increase in private capital available for investment in emerging markets that were channelled to technological innovations in infrastructure production and distribution, especially in telecommunications. These approach to reform gave in to an extensive reworking of economic conventional wisdom on policy items of natural monopolies, contestable markets, and the nature and functions of privatization contracts that designed the emergence of reform packages in the early 1990s that promoted the optimal economic course of action, targeted at restraining governments and unleashing markets (Nellis 2005:18).

29

In the process African nations embraced these policies without much choice. Unlike many decision makers in the ex-communist states and Latin America, most African leaders were not convinced that emphasis on this private initiative was applicable and appropriate in their settings. But due to much reliance on donors and the IFIs African governments had little choice but abide by the policies prescribed by their financiers. Neither, would they amend the content , scale and slow the pace of the implementation of the policies, nor employ passive non-compliance to water down and interrupt their impact, but, as divestiture and PPI emerged as the central premise of IFI-supported SOE reform and conditionality, most if not all borrowing African governments unenthusiastically complied (Nellis 2005:18).

.

Further, the privatization experience of the 1980s led the IFI policy analysts to acknowledge that a country’s privatization prospects varied according to the income level, institutional capacity and individual country circumstances. “In low-income settings privatization is more difficult to launch, and the chances of a negative outcome are greater.” (World Bank: 1992:29) as cited in (Nellis 2005:18). The same report noted the specific obstacles facing infrastructure privatization in the African region. It described that, the poorer a country is with SOEs operating in the utility sector in a non-competitive environment, the more guarded one should be in moving towards privatization. Notwithstanding the concern of theoreticians in the Bank itself, in the period 1989-92, the average annual number of World Bank privatization operations worldwide rose rapidly(Nellis 2005:18).

In the 1990s, donors came to view rehabilitation as legitimate towards the road to liquidation, divestiture or PPI. Previously, four-fifths or more of World Bank SOE reform conditions had focused on restructuring, with one-fifth or less on privatization.

30

These percentages substantially turned around and discredited since there were some industrial enterprises in which public ownership and operation was essentially justified. In consequence, all SOEs producing tradable goods became fair game for privatization. (Nellis, 2005:18).

2.6 Privatization Trend in Sub-Saharan Region

Notably, shifts in approach become all the more important as the trend of privatization picked up momentum across the African continent. Although a handful of African countries began major privatization programs in the 1980s, and subsequently in the 1990s the numbers increased significantly. According to White and Bhatia (1998) as cited in(Harsch 2000:9), Nearly 2,700 privatization transactions had been effected in sub-Saharan Africa by the end of 1996.subsequently, after 3years more than a hundred transactions were in the pipeline (Harsch 2000:9).this, can be attributed to the improved investment environment that followed the post independence period and the quest for efficiency in the poorly performing public enterprises. However, following the new dispensation, a class of political elites and rent seekers cropped up with the main motive of acquiring entitlements in the newly privatized firms within the region.

Currently, 45 African countries have some form of privatization program. Such countries include Liberia and Sierra Leone, which for a long time have been ravaged by war, and have either begun to initialize the process or plan to do so in situations where security is an issue. Rwanda for instance, after the genocide of 1994 rolled out a very vibrant privatization program ever since And has further finalized 11 sales in 1998 alone. On the other hand, Namibia being one of the very few with no plans to privatize for all the reasons that

31

its state enterprises are relatively operating at a profit (Harsch, 2000:9).

As such, ‘between 1996 to1997, African privatization initiatives took another turn to a larger and more attractive SOEs such as national airlines, banks, shipping companies, public utilities and telecommunications enterprises. As a result, revenues scaled up significantly. According to World Bank data, the total sales value of all enterprises privatized in sub-Saharan Africa between 1988 and 1996 reached just over $2.7 billion. Moreover, the governments of Egypt, Morocco and Tunisia earned $2.4 billion from privatizations in 1997, compared with $3.3 billion in 1995-96 and just $1.2 billion over the five-year period 1990-94’ (Harsch, 2000:9).

Furthermore, telecommunications become predominantly a dynamic sector for privatization. Most African mobile phone systems were unable to reach more than a small minority of the population. Hence, African governments found that selling of shares in the existing telecommunications enterprises to foreign companies was the best option of accessing new levels of technology and investment capital meant to modernize and expand their systems. Therefore, in the period of (1995 to 1997) a section of telecommunications enterprises in 6 sub-Saharan countries were disposed off for a total of more than $1.7 billion and the new owner’s cum-partners declared further plans for additional investments in the sector. Eritrea, Cameroon, Gabon, Kenya, Mali, Mozambique, Niger and Nigeria have now privatized their telecommunications systems to date ( Harsch, 2000:9).

Indeed, because of privatization, the size of Africa's public sector has remarkably declined. For these reason, the World Bank estimated the number of SOEs in sub-Saharan Africa to have

32

dropped from as high as 6,069 to 4,058 in the period of 1990 to 1995, a significant 33 % reduction. Even though smaller in size, the remaining public sector was particularly in a better financial strength given that many of the mainly inefficient and unprofitable enterprises were among those disposed- off ( Harsch, 2000:9).

In conclusion, many African governments had bought the idea of privatization to a larger extent though the main challenges that arose was in the process of implementation .this stage would have marked a turning point , primarily because it’s the most important in determining the economic path for take-off.to better level of efficiency and productivity.

2.6.1 Private Sector Participation in sub-Saharan AfricaHowever, according to, Thomsen, (2005)as cited in(Thoenen,2007:3) in 1990 investment level in primary infrastructure with private sector participation rose from US$ 13 billion to a first peak of US$114 billion in 1997(world Bank, PPI database 2006).This rise was partially due to the realization of the need for adequate infrastructure financial support relative to the existing socio-economic and fiscal constraints alongside regulating the macroeconomic environment. As such, many governments softened their stand and accommodated the influx of private investors (Thomsen 2005) as cited in (Thoenen 2007:3).

“Many participatory poverty assessments reveal how much the poor value infrastructure services which provide direct benefits to them. In a summary of the views and opinions expressed by the poor themselves in a recent worldwide survey, Narayan (2002) notes that “the lack of basic infrastructure particularly roads, transportation and water is seen as a defining characteristic of

33

poverty.” The effects on women are often especially severe (Jerome 2004:7).

In retrospect, infrastructure is generally viewed as a fundamental determinant of convergence and a step in the right direction in the reduction of endemic disparity across regions. All the more, reliable evidence exists for Argentina and Brazil, where upgraded access to sanitation and roads was a significant determinant of convergence for the poorest regions (Estache and Fay 1995). There is also a substantial evidence on the importance of adequate infrastructure services in facilitating an enabling environment for viable business opportunities ( Jerome 2004:7).

This according to (Pamacheche, Koma, 2007:3), through privatization, sub-Saharan African countries can materialize an expanded and more dynamic private sector, through an efficient and effective infrastructure provision coupled with increased investment. These positive elements of privatization will subsequently lead to the achievement of government economic goals, and create an enabling economic environment for job creation in these countries. However, many water privatizations in Africa failed to achieve the desired result in several African countries. since, the expected price reduction and improved services, adversely impacted on the poor who ended up paying more for the water, which in effect is the contrast of the. Poverty alleviation strategies lay down to avoid this kind of a scenario. In addition, this has brought to question the nature of privatization objectives of countries in West Africa that tend not to include, references to ownership, in contrast to East and southern African countries that have it in place.

Nonetheless, Case studies indicate that the principal incentives for many African countries to divest from the public corporations ,to

34

the private sector, was due to ,Political change that followed post-independence restructuring ,the conditions laid down by the World Bank, IMF and donor financial assistance, the quest for better productivity and to ameliorate the precarious state of some public enterprises. Meanwhile, maintaining employment levels; and, to satisfy vested political interests (Oliver C. Campbell& Bhatia1998:27).

An important assertion is that, despite an expressed desire to increase and facilitate ownership, in practice little has been done to achieve this objective. Apart from initial public offerings in several countries and a very small number of innovative transactions, however, several, studies show that there are few opportunities for common people to participate in the process. And this flags a serious concern on privatization’s contribution to development, this implies therefore, that unless an amicable modalities for the poorest sections of communities are instituted either to participate in the process or obtain measurable benefits from the proceeds, such as enhanced social services, privatization will benefit the rich to get richer and only in some way contribute to the fight against poverty (Oliver C. Campbell& Bhatia 1998).

2.7 Issues of Controversy and RiskThe analytical framework used implicitly assumes that SOEs are endemically inefficient whereas private sector as inherently efficient owing to the fact that privatization has been adopted against a background of extremely distressed economic scenario for the African continent ,this contributed to the gross failure to realize the desired impact in several countries in the region. As a result of these crises ,most of which externally imposed reform packages by the multilateral agencies faced insurmountable opposition on the account that it is ‘believed to empower and enrich

35

foreigners at the expense of the locals’(Pamacheche and Koma2007:11).

However, despite the uprising wave of democratization ,most regimes were autocratic and couldn’t seek the approval of the legislature and bureaucrats towards the formulation and implementation of the policies(Jerome and ariyo,1999:207-8).however, on a lighter note ,privatization has raised the overall sector rationalization and efficiency by reducing the total number of companies previously supervised by the states oversight personnel.

Nonetheless, reform packages need to be tailored to suit individual country specifics since most countries in the sub-Saharan region are severely inhibited by weak regulatory environment in an attempt to privatize and at the same time reap the benefits of privatization. This is so due to the presence of nascent capital markets, scarce financial resources, opposition to foreign ownership locally and inadequate institutional arrangement, thus raising the need to give priority on developing necessary policy and regulatory framework followed by the sequencing of these reforms to fit in the privatization program, (Nellis and kikeri, 1989:669).

Furthermore, according to Samuel Adams (2006: 295) argument that the transfer of SOEs to the private entities, has grown to be a universal economic policy tool in competitive economies of the world.. The trend toward privatization, however, has been crippled with controversies. Indeed, the debate that has taken centre stage is between the economic viability of the private and public sectors over the past four to five decades.

Moreover, Walsh and Shirley (2001) as cited in (Adams 2006: 296).conducted a review of 52 empirical studies on the debate between the economic supremacy of SOEs and private enterprises. As a result 35 outcomes favoured the private firms, with 14 giving

36

indefinite results and only 5 indicating that SOEs were economically superior. Although , both the theoretical and empirical studies did not in its entirety settle the debate , the discussion seem to have justified private ownership, for all the reason that there was enormous and rising government debt, unabated macroeconomic instability and generally a declining world economy that was experienced in the 1980s.

In the meantime, widespread adoption of privatization and the positive economic assessments of what privatization could do, has raised a number of critics-sometimes including the general public-have expressed strong reservations about privatization's fairness and sometimes its efficiency impact. Fuelled by some recent problematic and highly visible cases, this scepticism continues, despite the growing number of empirical assessments concluding that in the main privatization improves profitability and efficiency and increases returns to shareholders, particularly for firms in competitive or potentially competitive markets. For these reasons, questions have been brought forward on, what are the strands of the anti-privatization argument? (Adams 2006: 295).

2.7.1 Institutions and Structures of Regulation First of all, Institutional frameworks are weak in many African nations. As such, imprecise property rights, regulation have complicated privatisation processes. The theory of regulation attempts to describe and predict social and economic outcomes of the process of privatization process in situations where changes in the distributive structure take place (Alhussaini and Molz 2009:394). Therefore, regulation purposes to achieve specific public interest outcomes where the market fails to deliver (Baldwin and cave, 1999:19).

37

(i) Institutions of regulationThese include “bodies that act on behalf of the central government but not central departments of the state” (Baldwin and cave,1999:69).such agencies are; self regulators, local authorities, parliament, courts and tribunals, central government departments, regulatory agencies and directors general(ibid:63).these institutions have limited bureaucracy distant from political interests and having expertise with relevant skills to execute the formulation of rules ,enforce and evaluate better than the public department (Alhussaini and Molz 2009:395).

(ii) Rationale for regulationIdeally, to protect the interest of the public the setup institutions facilitate a level playing ground to address matter that may amount to market distortions in the process of liberalization. Therefore, regulation will check monopolies from raising prices and lowering output, promote benefits of scale economies, transfer benefits of excess profits to taxpayers, externalities; that compels producer not to transfer entire cost of production to consumers, information asymmetry of market operations, avert anti-competitive strategies of phasing out competitors, allocation of scarce public commodities, standardization that’s aimed at securing efficiency that will lower transaction costs that limits market economies. Planning aimed at protecting and coordinates future altruistic motives (Baldwin and cave, 1999:17).

Nonetheless, the process of privatization and liberation at some point requires the intervention of regulatory institutions(Alhussaini and Molz 2009:395) This action is called for especially where privatization In the utility sector is transforms from a state and private monopoly(Parker,2003:77).there is also the pressing need for the economy to ensure that there is continuity in the accessibility of the basic services in the utility sector and to make

38

sure that enterprises stay in business(Baldwin and Cave,1999) as cited in (Alhussaini and Molz 2009:395).

(iii) Strategies for implementing regulation

According to Baldwin and cave (1999) as cited in (Alhussaini and Molz 2009:395) these strategies fall in three levels Command and control: here the regulatory agencies determine the quality of service, and standards for penalties arising from noncompliance.

Incentive based; this is done through price capping that entails the agencies negotiations with the enterprise management on the maximum possible product price and motivating them to maximize profitability by scaling down production cost(Parker,2003) as cited in (Alhussaini and Molz 2009:395).

Self regulation; may not be efficient at post privatization period since the profit maximization attitude will defeat the purpose of social welfare benefit objective (Alhussaini and Molz 2009:395).

2.7.2 Social and Economic Effects of Regulation on Privatization Outcome

Regulation agencies can directly deal with issues on product price, accessibility, and quality standards. Nonetheless, to be all inclusive the government can design a privatization contract that accommodates for social impact of the privatization outcomes as described below.

(i) Regulation and job securityThe state can institute measures to guarantee workers security of tenure by directly setting rules by regulatory institutions to condition newly privatized firms to retain a specified employee ratio over a period of time. Furthermore, provide a justification in cases of service termination; specify appropriate time for dismissal

39

notification, and proper compensation (Alhussaini and Molz 2009:395).

(ii) Price and regulationThe aspect of introducing competition is appropriate in ensuring standardized pricing systems. However, regulation institutions can further negotiate with the privatized enterprise to strike a compromise price that is suitable for the consumer and the investor, motivate the enterprises to lower costs and enhance economies of scale and transfer the benefits of price cuts to the consumer.(Parker 2003)as cited in (Alhussaini and Molz 2009:396).

(iii) Access, quality and regulationThese agencies are in a position to ensure private enterprises access the services and products to rural areas at the same price and possibly quality, a case in point is where partial privatization strategy is used to subsidise the provision of the same product price and quality to remote regions of the society. On the other hand ,the agencies ensure private enterprises disclosure of information particularly on matters related to health, water and food in an attempt to address the imperfect market information on quality(Florio 2004)as cited in (Alhussaini and Molz 2009:395).However, according Bayliss (2000:11)regulation is quite a challenging initiative in developing nations, since, its institutionally demanding given the scarcity of sufficient expertise, the presence of smaller and less competitive markets and in low income countries with the agencies in place the structure is based on the industrialized country model.

2.7.3 Corruption and Bureaucratic Malpractices’

40

According to the public choice theory, privatisation is indispensible given that the public sector consists of self-seeking bureaucrats. However, it is these self-seeking bureaucrats who are expected to implement and adopt the privatisation policy in a non-self-interested way this raises concern over the fate of the prescribed policy. However, Privatisation needs an effective public sector and the people who are vulnerable to the policy are the ones expected to oversee its implementation (Hirschmann 1999) as cited in (Bayliss 2000:14). Though, without proper regulation in place the award of concession contracts and fundamentally the process of privatisation in its entirety becomes a major loophole for corruption (Hall 1999)as cited in(Bayliss 2000:14). Thus it is apparent that the staff of both public and the private sector firms may be skewed towards pursuing their own self-interest. And instead of averting this, privatisation creates an amicable breeding ground for such activities (Bayliss 2000:14).

Alternatively, some argue that even if privatization promotes enterprise efficiency, the bulk of the benefits are accrued to the privileged few stakeholders such as ordinary shareholders, managers, domestic or foreign investors, and those linked to political elite. However the ultimate costs are borne, particularly by the taxpayers, consumers, and workers, hence reducing overall welfare trickledown effect. In addition, many are concerned that endemic corruption and lack of transparency in privatization related transactions have reduced the gains due to perennial challenges of governance. Consequently, the fundamental concern is that privatization has been implemented without considering the each country’s specific economic and social conditions, more so at the interest of external and donor community(Sunita Kikeri, and John Nellis 2004:88).

41

Chapter 3 Empirical Analysis

The empirical analysis entails the construction of data ,methodology and model specification, and the descriptive analysis results relative to the interpretation and policy implications for this regions policy makers.

3.1 The Data and Variable Description

The main objective of this research is to evaluate the role of, privatization policy choice on private sector investment participation in primary infrastructure in the context of sub-Saharan Africa region. A time series data analysis running from (1990-2008) is used in capturing investments in four main primary infrastructure sectors that includes; transport, energy, telecommunication, water and sewerage. In addition, private sector participation has been categorized into four main investment portfolio levels of concession, divestiture, Greenfield, management and lease contract respectively.

The data used is sourced from the World Bank group on private participation in infrastructure Projects (P.P.I) Database (May 2010) it reflects the social and economic context in which specific privatization policy takes place within the selected sub-Saharan Africa regions. The data further includes primarily the medium-sized and large projects as reported by the media and other public sources. Small-scale projects are particularly not included due to lack of public information. Additional investment in some projects may have been omitted for the same reason. Investment data are reported in 2008 U.S. dollars, using the U.S. consumer price index and 2008 as the base year (World Bank,2009 PPI database. http://ppi.worldbank.org/reports).

42

The conceptual framework use has captured the multi-dimensional relationship that privatization as a policy interrelates with the concepts of property rights, public choice and the agency theory. The above mentioned variables are explained in details

3.2 Descriptive analysis

This section of the research will analyse the correlations of the variables, and further discuss the relationship between privatization policy choices and the subsequent primary infrastructure investment portfolios with the aid of graphical presentations. In answering the main research question of how privatization policy choice has played a role of influencing private sector participation in primary infrastructure investment, the study breaks down the pattern of investment into portfolio choice and the subsequent primary infrastructure projects.

In Table:1 below the relationships between total investment in primary infrastructure sector and the investment portfolio, which in this case exhibiting a 5% significant level. Therefore a strong and positive correlation between investment and concession, divestiture and Greenfield exists with an exception on management and lease contract project type respectively.

Table 1: Correlation Coefficients

43

Watersewar~e 0.3160 0.3374 0.0549 0.5175 0.2948 0.2589 0.3619 0.3871 -0.0568 1.0000 Transport 0.5408 0.6582 0.6915 0.3035 0.6376 -0.0693 0.3874 0.4709 1.0000 Telecom 0.4245 0.9699 0.4564 0.7962 0.9665 -0.0121 0.5756 1.0000 Energy 0.7837 0.6566 0.5614 0.6108 0.5834 -0.0839 1.0000 lease 0.1750 -0.0332 -0.0053 0.1363 -0.0811 1.0000 Greenfield 0.4346 0.9844 0.5035 0.7029 1.0000 Div 0.6075 0.7720 0.2254 1.0000 conc 0.6195 0.5896 1.0000 investment 0.5521 1.0000 Newproject 1.0000 Newpro~t invest~t conc Div Greenf~d lease Energy Telecom Transp~t Waters~e

Figure 1: Investment Commitment in Primary infrastructure sector(1991-2008)

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

0

3

6

9

12

15

EnergyTelecomsTransportWater and sewerage

Primary Sector

2008

US$

Billi

ons

Source: Adapted from the World Bank Private Participation in Infrastructure Database.The telecom sector registered the most successful sector,

attracting 75% of the regions investment giving an indication that the sector is competitive in terms of private investment commitment

44

compared to transport 14%, energy 11.23% and water at 0.321% respectively. However, the shocks and inconsistencies in the subsequent period can be attributed to the cancelled/distressed projects due to nullification, non-renewal and possible withdrawal from the contract agreement, in the preceding year.

Figure 2: Investment Commitment in Primary Infrastructure Project (2005-2008) Implementation Status

20052006

20072008

2005 2006

2007 2008

2005

2006

2007

2008

2005

2006

2007

2008

0

3

6

9

12

Investment in new projects, 1st semester Investment in new projects, 2nd semesterAdditional investment in existing projects

2008

US$B

illio

ns

Energy Telecoms TransportWater and sewerage

Source: World Bank Private Participation in Infrastructure Database.

In the first semester, virtually all the sectors registered a declining trend except telecoms with a positive rise in the investment in new projects. Therefore, this is an indication that the initial stages of implementation faced lots of administrative and structural challenges for the investors in the primary infrastructure sector.

The second semester experienced increasing investment commitment levels owing to the fact that most investors had solved many of the challenges faced during their initial period of investment. Its also an indication that is confirmed by the upsurge in the additional investment over time.

45

Figure 3: Infrastructure Projects with Private Participation (1990-2008) PPI

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

5

10

15

20

25

Concessions DivestituresGreenfield projects Management and lease contracts

Project type

Num

ber o

f New

Pro

ject

s

Source: World Bank Private Participation in Infrastructure Database.

Greenfield projects type had 55% of the total number of new projects in the region, concessions project operators accounted for 73 which translates to20% of the total, subsequently management and lease contracts and divestiture registered a low of 15% and 5% respectively. There is quite a significant rise in the new projects under the Greenfield portfolio arrangement.

46

Figure 4: Investment Commitment to Primary Infrastructure with PPI (1990-2008)

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0

3

6

9

12

15

Concessions DivestituresGreenfield projects Management and lease contracts

Project Type

2008

us$

Bili

ons

Source: World Bank Private Participation in Infrastructure Database.

Concession project had an investment commitments accounting for 10.2% of the total regional investment .however, a significantly high investment increment were registered in 2005 and 2008. However, the portfolio is generally had some investment incentive to the investors over the time period.

Divestiture project had a total of investment commitments accounting for 22.7% of the total regional investment. Though, a significant and increasingly gradual but unstable investment trend was registered indicating some investment incentive to investor across the period

Greenfield project type investment commitments accounted for 66.9% of the total regional investment .this is indicative of high level of competitiveness and returns that the investment portfolio offers to the investor which also motivates and attracts a significant level of investment in the private sector.

Consequently, management and lease contract posted the least investment commitment levels in the entire region total investment.

47

This is quite unpopular investment portfolio with a very the least investment incentive in the region.

Figure 5: Investment Commitments to Primary Infrastructure with PPI (2005-2008) Implementation Status

2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 20080

0.5

1

1.5

2

2.5

3

3.5

4

Investment in new projects, 1st semester Investment in new projects, 2nd semester

Concessions, Divestitures, Greenfield Projects

2008

US$

Bill

ions

Source: Adapted from the World Bank Private Participation in Infrastructure Database.

The second semester, records a significant increase in the level of investment commitment in divestiture, concession and Greenfield projects respectively with a stabilized trend towards the end of 2008.initial stages indicates low investment enthusiasm relative to the later stage. Possibly the rewards of the former stage may have caused the upsurge in the trend, coupled with changes in the macroeconomics levels

48

Figure 6: Investment Commitments to Primary Infrastructure With PPI(1990-2008) Project Status

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

02468

101214

Operational Merged DistressedConcluded Canceled

years

2008

us$

Bill

ions

Source: Adapted from the World Bank Private Participation in Infrastructure Database.Operational status in new projects, which provide services to the

public have significantly, maintained a rising trend in the level of investment. Whereas, investment in merged projects over the period was quite insignificant, Concluded projects investment were generally low and stable along the years. Distressed projects were also significantly, low on investments over the period. Finally, cancelled projects were relatively insignificant on investment over the years.

49

Figure 7: Total Projects By Primary Sector and Subsector (Us$ Billions)

Elec

trici

ty

Natu

ral G

as

Tele

com

Airp

orts

Railr

oads

Road

s

Seap

orts

Trea

tmen

t pla

nt

Utilit

y

Energy Telecom Transport Water and sewerage

010,00020,00030,00040,00050,00060,00070,000

Total/inv

Primary & Subsector

US$B

illio

n

Source: Authors own creation

Generally, much of the investments in the energy sector are inclined to electricity generation indicative of its high utility demand it commands in the region. Though, telecommunication commands the highest investment given the competitive industry that’s driven by high level of technological input. Furthermore, under the transport sector, railway and seaports have a relatively higher investment value compared to roads and airports due to the non competitiveness in the sectors. This also applies to water and sewerage, treatment plant and utility sectors as well.

50

Figure 8: Total Projects By Primary Sector and Type (Us$ Billions)

Conc

essio

n

Dive

stitu

re

Gree

nfiel

d pr

ojec

t

Man

agem

ent a

nd le

ase

cont

ract

Dive

stitu

re

Gree

nfiel

d pr

ojec

t

Man

agem

ent a

nd le

ase

cont

ract

Conc

essio

n

Dive

stitu

re

Gree

nfiel

d pr

ojec

t

Man

agem

ent a

nd le

ase

cont

ract

Conc

essio

n

Gree

nfiel

d pr

ojec

t

Man

agem

ent a

nd le

ase

cont

ract

Energy Telecom Transport Water and sewerage

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Total/Inve

primary/Type of PPI

US$B

illio

ns

Source: Authors own creationApparently, the Greenfield project type commands the highest

incentive for investment commitment in the telecom and energy sectors. Divestiture and concession investment portfolio command a stronger commitments in the telecom and transport sectors respectively than the other portfolios. Hence, further investigation is required to establish the reason as to why concession, divestiture, management and lease contract are giving distorted investment patterns in one project and a distinctive result on the other.

51

Figure 9: Cancelled and Distressed Projects (Us$ Billions)

Conc

essio

n

Dive

stitu

re

Gree

nfiel

d pr

ojec

t

Man

agem

ent a

nd le

ase

cont

ract

Dive

stitu

re

Gree

nfiel

d pr

ojec

t

Man

agem

ent a

nd le

ase

cont

ract

Conc

essio

n

Dive

stitu

re

Man

agem

ent a

nd le

ase

cont

ract

Energy Telecom Transport

0

200

400

600

Total Investment

Primary/Type of PPI

US$

Billi

ons

Source: Authors own creationApparently, concession and divestiture present a notable amount

of disinvestment across the board an indicator that investors may not be secure with the returns to investment as they would have in the Greenfield project. Another, observation is that the more competitive the sector the lesser secured is the investment hence, the higher the disinvestment.

52

3.3 Methodology and Model SpecificationIn this part the researcher is obliged to elaborate further on how the main and sub questions are going to be addressed using the most suitable techniques that brings out a precise and conclusive results with policy implications.

3.3.1 Quantitative TechniqueThis technique is suitable in finding out the main contentions of the research questions, therefore, the use of a quantitative comparative analysis technique between investment in primary infrastructure and private sector participation in project type that attracts equity ownership. This analysis aims at reviewing investment policy in the primary infrastructure sector (energy, railroad, telecom, water and sewerage) to clarify the extent to which the private sector has committed their funds relative to how the investment portfolio appeals to prospective investors.

In achieving the desired results, several tests has been conducted on the available data information, one such test is done on the establishing the significance of correlation coefficient between all the investment variables. Furthermore, a confidence interval test is conducted to justify the degree of significance, at 95%. This goes a long way to establish whether a positive or negative nature of relationship exists relative to private sector participation in infrastructure investment.

(i) Correlation estimates

This is to establish the reliability of the relationship that exists between the investment portfolio and the primary sector projects relative to investment. Furthermore, to what significant level can we be able to justify the relationship as statistically positive or negative at predicting whether the data is reliable for drawing an

53

acceptable result from a sample population. Besides, its major weakness is that it’s misleading in suggesting the existence of more co variation than it exists in the real sense, and gets vague as the correlation approaches the zero.

(ii) Confidence interval estimatesApparently, this is a tool that clarifies the shortfall of correlation

technique, since, it consists of a range of parameters constructed to have a specified chance of including a true value of the parameter, usually, the 95% level means that the range should at anytime contain the true value of the average variable. This, test caters for any variation from a sample mean that may be used to describe the behaviour of the entire population. so this is a supplementary test to confirm the level of significance.

Confidence interval checks first whether the study is unbiased, by answering the question of “what is the range of real effects that is compatible with these data?” This allows us to take two steps. First, in a case where the confidence interval embraces the mean value then the findings are non-significant. If the confidence interval does not embrace the mean value, hence the findings are said to be statistically significant. However, the upper and lower end of the confidence interval explains how large or small the real effect might be and yet still give us the observed findings by chance (Crombie and Davies 2009:4).

3.3.2 The dynamics model

This model describes the process through which the government identifies the appropriate privatization levels or forms of ownership structure to adopt based on how the pre-existing macroeconomic situation.

54

In reference to the diagnostic approach to reform, the policy choice model embraces the countries specifics in determining how private sector will participate according to the contract specifications, though it limits investments commitments to profitability, employment and productivity relative to the level of technology. It breaks down the possible implication of each project type chosen by giving justifications how its relevance to country specifics, this practise ensures that only private investments in the main sectors are prioritized at a particular point in time ,with specific expectations attached to each.

Ideally, the model identifies the optimal privatization level to be adopted relative to the sector specifics. This translates into determining the preferable pattern of investment portfolio that appeals to the private investor with regards to the management utility function, and the objective alignment between the government and the pivate management. As elaborated further in the Appendix:B.

55

Chapter Four Interpretation of the Findings

4.1 Analysis of the FindingsThe main idea that cuts across in the study is the theory of property rights, with a conceptual framework based on the dynamics of privatization model .apparently, the private sector investment participation in primary infrastructure takes shape in many forms that ultimately translates to portfolios of investment that meet the demands of social and economic needs of the SSA region.

Ideally, privatization policy choice has had a relatively mixed impact on the level of investment that it has elicited in the primary infrastructure sector, going by the outcome of the comparative analysis performed on the available data we realize that the government pays a pivotal role in regulating the nature of the investment portfolio that ultimately generates maximum government utility of social welfare alongside the interest of the private sector. Therefore the table below indicates the analysis of outcomes from the private participation data inTab:A1

Table 2: Total Investment Commitment (%) of Region

Concession Divestiture Greenfield project

Management and lease contract

Total %

Energy 2.289% 1.579% 7.354% 0.006% 11.229%Telecom 0.000% 20.942% 53.780% 0.000% 74.722%Transport 7.843% 0.204% 5.631% 0.051% 13.729%Water and sewerage

0.092% 0.000% 0.160% 0.069% 0.321%

10.223% 22.725% 66.925% 0.125% 100.000%

Table 3: Total Disinvested Commitment (%) in the Region

Concession Divestiture Greenfield project

Management and lease contract

Total %

56

Energy 0.608% 0.000% 0.392% 0.000% 0.999%Telecom 0.000% 0.691% 0.612% 0.000% 1.303%Transport 0.057% 0.200% 0.000% 0.000% 0.257%Water and sewerage

0.000% 0.000% 0.000% 0.011% 0.011%

Total % 0.664% 0.891% 1.004% 0.011% 2.570%

Note: This represents the total value of projects cancelled /distressed over the period.

4.1.1 Telecom Sector

The telecom sector attracted a resounding 75%of the regions total investment this can be attributed to the liberalization of mobile telecommunications market that attracted more market players and users in a span of 6years,from(1998-2003),within which competition spread from (4 to 30) countries(Jerome 2004:24).besides, the existence of a competitive setting in the sector posted the most lucrative results, since competition replaces what would have been a private sector monopoly however, the sector is equally in a competitive industry with massive technological input(parker and Hartley 1991) as cited in(Omran,2004:1023). On this premise the Greenfield project type constituted 53.7%, of the total investment share in the industry ,this can be attributed to the fact that merchant sub-type of PPI, attracted most telecom investment commitment given that its characterized by the least public choice and agency related drawbacks in the management of the enterprises. Furthermore,

African governments found that disposing -off shares in the local telecommunications firms to foreign investors was the best option of accessing new levels of technology and investment capital meant to modernize and expand their systems. Hence during (1995 to 1997) a section of telecommunications enterprises in 6 sub-Saharan

57

countries were disposed off to the new owner’s cum-partners who later declared further plans for additional investments in the sector( Harsch, 2000:9).this is evidenced by the additional investments recorded in fig:2.

However, divestiture at 20.9% and management and lease contract 0% of the investment indicate the factoring in of social welfare objectives of the government in the contract agreement that may have directly reversed the rising trends. However, in Tab 3 projects cancelled or distressed in this sector constituted 1.303%of the total disinvested value, with divestiture at0.69% and Greenfield project type at0.612%, of the disinvestment value respectively. This in effect, indicates that the sector optimized on the policy choice as indicated by the investment commitment share. This point of view is acknowledged further by D’souza and Megginson(1999) as cited in(Omran,M. 2004:1023) that privatized enterprise in a competitive industry like telecommunication would yield significant economic returns without macroeconomic distortions. However, in my opinion the sector has proved otherwise by posting positive outcomes even in economies that have had perennial macroeconomic distortions like Sudan, and Zimbabwe.

4.1.2 Transport SectorThe transport sector accounted for 14% of the total investment

commitments; however, a strong public intervention in this sector has been justified for local, political and strategic reasons despite the poor quality services offered by public enterprises, in an attempt to guarantee accessibility to the market for goods and the population. Nonetheless, Governments legitimacy for doing so is to ensure remote regions can catch up with the urban region as well as protecting national security concerns especially at the entry

58

points of airports and ports. However, on the demand side the governments have acknowledged that transport users are highly exposed to risks due few or no substitutes making the demand for transport service a preserve of the providers at the expense of the users .these captive users are literally exposed to exploitation by monopolistic service providers. Although, this may not be sufficient reason to justify state control as proposed by (Estache and Gines 2000:6).

Apparently, on another note the same authors assert that most of the highly demanded transport services are politically sensitive to the state due to the fact that they amount to private goods status, that are exclusive to users and are also characterised by rivalry condition that may leave other users indifferent due to their high demand if left in the hands of the private sector. Such include bus services, congested roads, ports and airports. Likewise, in the PPI project type concession project attracted 7.8%, compared to divestiture at 20.4%, Greenfield at 5.6% and finally, management and lease contract at 5.06% of the total investment commitment respectively. Nonetheless, disinvestment accounted for 0.257%of the total, with divestiture at 0.2% recording the highest compared to concession 0.057% and management and lease contract at 0%, disinvestment value respectively. However, as a result of reforms in this sector the potential role of the private sector in line with the technological changes have altered the nature of the supply side of the transport sector since its promoted a substantial level of competition. However, technological constraints limit full competition in the sector due to the new regulatory strategies involved thus replacing regulators (public monopoly) by smaller and specialized private monopolies that are limited by the existence of well established cartels, and mergers. Hence ,the main challenge of the reform package is anchored on the course of specific reforms,

59

the extent of entrenching competition and the choice of particular private sector participation strategy that is relevant(Estache and Gines 2000:8-9).

4.1.3 Energy SectorThe energy sector accounted for 11% of the total investment ,traditionally, electricity utilities in the region has been under monopolistic hold over the national electricity industry and this is purported to have grossly contributed to underperformance in the delivery of electricity services(Karekezi and Mutiso,2000)as cited in(Jerome 2004:19)this has degenerated to unreliable power supply, low capacity, deficient maintenance, high transmission and distribution losses. However, the region has lagged behind at implementing reforms which in most cases has been limited to concessioning of utility management to private foreign power utility operator. furthermore, the process constituted the deregulation of prices ,creating market systems for trading electricity in wholesale and retail outlets and privatizing of the existing supply industry(Jerome 2004:20).

However, Greenfield project drew 7.35%, compared to concession at 2.3%, management and lease contract at 0.6%, and divestiture at 1.58% respectively. Nonetheless, concession project type accounted for 0.608% of total disinvestment, compared to divestiture at 0%, Greenfield at 0.392%, and management and lease contract at 0%, disinvestment level respectively. Generally, dominant contract arrangements in this region are in the management and lease contracts with concession element to private entities over a period of as many as 20years which happens to be consistent to public ownership of assets and price regulation. However the emergence of independent power producers (IPP) a

60

form of private sector participation increased as a result of privatization which increased the private sector involvement in the supply side. On the other hand, the emphasis on profitability has adversely slowed down expansion of the electrification projects to the rural areas as a priority item (Jerome 2004:21-22).

4.1.4 Water and Sewerage SectorThis sector accounted for 0.321% of the total investment, with a

significantly low investment commitment over the period. This is attributed to contract withdrawals due to bad relations between government and investor and negotiation breakdown during contract renewal (Jerome 2004:18).moreover, these items can be attributed to the intense and effective resistance campaigns against water privatization in the Sub-Saharan region notably in Ghana, Kenya and south Africa(Hall et-al,2002)as cited in (Jerome 2004:18).Likewise, in the PPI project type management and lease contract had low levels at 2.069%, concession at 9.2% and Greenfield projects at 0.2%, investment levels respectively. Since, this service entails construction of heavy and costly infrastructure and the fact that it’s a natural monopoly oriented sector. It therefore, follows that in delegating the operations of its distribution and production to the private sector and setting aside the construction of the major equipments in the hands of the state, will go a long way to break the natural monopoly by through creating competitiveness thus attracting more investment commitments in this sector (Adhia 2004:11).

However, creating competition in the market for water services is essentially cost inefficient and problematic given that factors such as technology of water provision, nature of product, cost of

61

organising long-term concession contracts and weak regulatory capacities, that hinder the possibilities of making the industry more competitive at the expense of motivating the private investor(Jerome 2004:31). apparently, this sector exhibits a natural monopoly characteristics and the government will tend to maximise on the social benefit objective to address some of the underpinnings of socio economic outcomes of privatization that may arise out of a situation where the it would have otherwise been privatized(ibid:11).

4.1.5 Correlation and Confidence Interval Estimates In conducting further analysis, the data available was run

through a correlation procedure in an attempt to establish whether the variables exhibit a statistical dependence or independent relationship from the values indicated on the correlation matrix.

Therefore, the correlation between concession project type and primary infrastructure sector projects such as energy (0.5614), telecom (0.4564), transport (0.6915),water and sewerage(0.0549),is such that the energy and transport exhibit a slightly strong positive and statistically dependent relationship indicating some incentive for investment commitment. However, water and sewerage indicated a much weaker private investment possibility.

Secondly, in divestiture related project type the statistical relationship is such that, energy (0.6108), telecom (0.7962), transport (0.3035), water and sewerage (0.5175), had a positive statistically dependent relationship. This is indicative of the presence of a strong incentive for private investment in the sectors above hence a good policy item for consideration.

Thirdly, in Greenfield type of project the correlation coefficient for respective primary sector exhibits a strong statistically positive

62

relationship except for water and sewerage, which had a weak value. The levels of correlation were as follows, Energy (0.5834), telecom (0.9665), transport (0.6376), water and sewerage (0.2948).indicating a strong incentive for private investment with a very low incentive in the water and sewerage.

Finally, the management and lease contract project types had the least level of relationships between the variables with the sectors recording a statistically negative dependence relationship, except for water and sewerage that depicts a positive value. As a result, the values for the variables are as follows, energy (-0.0839), telecom (-0.0121), transport (-0.0693), water and sewerage (0.2589).the estimates confirms the fact that a relatively low private investment incentive though a slight indicator in the water.

In conclusion, the correlations of variables are generally high indicating the presence of multicollinearity. Ultimately, further procedures using confidence interval measurement on the same variables indicate that the mean value for all the variable are statistically non-significant this in effect suggest that the data is consistent within 95% confidence interval and can be used to draw a reliable sample result that is reflective of the entire population.

4.2 Interpretation of Private Investment Participation

4.2.1 Management and lease contractApparently, this is the type of PPI had the least positive impact on infrastructure investment, since it accounted for 0.127% of the regions investments in the primary infrastructure sector. This can be attributed to the fact that, the investment portfolio appeals to the non-competitive industry that is naturally a monopoly, mainly because of the nature of the product which amounts to a social

63

welfare good. However, the government through the dynamics model ensures that it regulates the involvement of the private investor by transferring the benefits of excess profits to the tax payers. However, the major role of this investment portfolio is to propagate the mainstream objectives of social welfare alongside the incorporation of the private sector participation to harness the expertise and innovation without necessarily having fiscal benefits to the state which undertake all financial and investment responsibility for that matter(Estache and Gines 200:8).

This in effect adversely affects the investor commitment on the right to own property and regulate the resources at will according to the concept of property rights, and from the analysis the level of investment commitment indicates that the policy on this investment portfolio cannot adequately revitalize the level of infrastructure in this sector unless a radical redesigning of this package is enacted. Furthermore, for reasons of political interference chances are that the politician’s interest might conflict with the efficiency of the enterprise which will ultimately degenerate to low levels of investment commitment. However, it addresses the social welfare aspect by adequately optimizing the utility function of the government.

Management contract system is unpopular in enhancing PPI, given the bureaucracies involved in the contract arrangement. However, in accordance to the dynamics model the investment portfolio promote the optimization of social welfare benefits at minimal cost with a regulatory approach on the operational managements utility and objectives functioned aligned to that of the state in a shared supervision and monitoring arrangement with the public (Fluck at-al. 1996:281). Nellis and kikeri,(1989:667)also acknowledge that the government’s attempt to address the social and economic outcome of divestiture such as unemployment,

64

reduced foreign ownership, plant closure and price distortions through specific policy choice that enhance the implementation of the desired reforms as explained in (chapter 2:20).

Lease contract appreciates exclusivity concept more elaborately compared to management contract. Moreover, the principal and agent’s related conflicts are essentially low though the political environment may indirectly downplay some of the operational management initiatives. This can be evidenced from the low proceed on the quite insignificant investment in the water and sewerage (0.069%) transport (0.051%) and energy (0.006%) respectively. Notably, the contract period for most of the project is one year and at most two years. Furthermore, Pamacheche and Koma (2007:3)acknowledge that many water privatization attempts in the region failed due to unexpected price increases of improved services, that resulted to increased cost in the accessibility of this basic commodities for the poor. However, this was attributed to the fact that privatization objective of countries in the west African reform framework did not include ownership claims as the east and south African countries had(chap2:26).

The investment portfolio is predominantly a disincentive to private investment participation due to the non-competitiveness of the nature of product and massive government intervention in the management of the enterprise. This however, can be essential for in situations where there is market failure.

4.2.2 ConcessionsThis investment portfolio appeals to the transport, energy and water sector given that the public sector has predominantly maintained their share of ownership to promote the ideals of maximising on the social welfare function of provision of welfare

65

goods and services at minimum cost to the public. Therefore, the absence of a competitive environment or industry has grossly contributed to low private investor commitment since their objective function of profitability may not be adequately captured in these infrastructure sectors. Given that the public monopoly status will overshadow any meaningful private investment that may want to enter the industry.

Tab: 2and 3, clearly indicates under the concession investment portfolio the transport sector is the most competitive compared to the energy sector since it has also registered a relatively lower proportion of cancelled projects at 0.057% than the energy sector at 0.608%.this further explains why the energy sector has been under public monopoly for a long time given the low investment commitment coupled with a higher distress level compared to the transport sector. This in effect is attributed to the safeguarding price, regulation and accessibility of product to the general public.

Essentially, the performance of this investment portfolio is rated after Greenfield and divestiture project types with a 10.223% proportion of the entire investment, thus raising questions on its viability as a policy item in promoting investments participation, since, its hardly 50% to be able to be justified as valid for future implementation. On the other account its competitiveness in drawing more participation alongside the other portfolios is highly controversial given the monopoly characteristics. Hence, there arises a need to embrace some of the reform agendas that reflect on the need to equalize the objective functions of both the state and the private management in order to address the wide variation that exists between the two and further, incorporate the competitiveness in the water sector.

66

4.2.3 Greenfield Projects

Apparently, this happens to be the most relevant investment portfolio that has accommodated the interest of the private sector investors owing to the widespread competitiveness that cuts across all the sectors except in the water sector. Therefore, the policy reform strategy has inherently revitalized private participation especially in the telecom sector. Apparently, this form of privatization (under merchant sub-type project ) thrives well in a competitive industry environment with a focus on achieving the highest level of efficiency since competition increases monitoring which is an incentive for productivity than in the SOEs. In Which case, in a non competitive industry with natural monopoly characteristics privatization outcome wouldn’t be optimal (Boubakri and Cosset 1998) as cited in (Omran 2004:1028).

However, its viability rating is above average which makes the policy reform an incentive to private sector investment given its scope that captures the objective of social welfare benefit of price regulation, employment creation as a result of a competitive environment that allows many players. Though this situation remains on condition that the industry retains the competition, otherwise, the social benefit will cease to exist once the market turns monopolistic (dominated by few players) who exercise control over the market. However, better outcome may not last given that an enabling environment is relative, since, most countries in the region may not have proper institutional capacities, experience low income levels and a varied socio-economic circumstances as argued by Nellis(2005:18)in page 23.nevertheless, this is contrary to the evidence given on the levels of cancelled projects in transport(0%) ,energy(0.392%) ,telecom(0.612%),water and sewerage(0%) sectors respectively which are depicting low

67

disinvestment levels regardless of the macroeconomic situations in most countries in the region.

The investment portfolio has the highest incentive levels as can be evidenced from the 66.9% of the entire investment commitments making these a very significant policy agenda item that appeals to all the primary sector projects

4.2.4 Divestiture This investment policy portfolio secured 22.725% of the entire

investment out of which 20.942% is in the telecom sector. Surprisingly, the energy, transport and water sectors had a dismal investment commitment; however, this can be attributed to the nature of competitiveness in the sectors in terms of the structure of the policy, which in this case allows for full privatization on one account and partial on the other. Moreover, the former may have highly contributed to the high private investment turnout due to the exclusion of any sort of public intervention in the management which is an incentive to the private sector but on the contrary, the partial divestiture captures the social welfare function given the governments’ direct control of the ownership shareholding capacity.

This portfolio is essentially viable due to the alternative it offers to those investors with huge capital investment and through public offer where the individuals and companies can subscribe to shareholding capacity. This is also argued by Harsch (2000:9) that African governments chose to sell the shares of the existing telecom firms to foreign companies as an option of accessing new levels of technology(h) and investment resources to modernize the enterprise which expanded the telecommunication sectors in Gabon, Cameroon, Kenya, Mali, Niger and Nigeria between(1995-1997). This is also evidenced by the 20.942% share of investment commitments of the total 22.725% of the total portfolio investment

68

commitment. However, most intellectuals and officials who are dissatisfied with this form of privatization assert that it stand the risk of empowering and enriching the foreigners at the expense of the indigenous citizens as demonstrated in the telecom industry where most competitive firms in the industry are in the hands of foreign investors (Pamacheche and koma 2007:11).

This perception is shared by Stovring (2004:12) assertion that the implementation of privatization and deregulation produced weak results in Africa compared to Latin America and south East Asia. On the other hand it’s a desirable portfolio on the account of promoting both widespread and domestic ownership through public offer of share subscription (Nellis and Kikeri, 1989:667).this view is also supported by Pamacheche and koma (2007:6) ‘that public enterprises are usually a drain on government operating budget, hence divestiture is desirable since it has the potential to stop the negative flow.’

69

Chapter 5 The Policy Implications of the Study

5.1 General Policy ImplicationsPrivatization reforms have followed a trail of challenges which has transformed the public sector perception and systems of performing business in the sub Saharan Africa setting. Furthermore, the policy choices that have so far been successfully implemented have had far reaching outcomes that attest to the fact that improvement in efficiency ,productivity and profitability is attainable given the right macroeconomic environment and a suitable regulatory and institutional framework..

The study has categorically, identified the two phases of reform packages that were formally prescribed by the IFIs, where the first phase of the Washington consensus advocated for limited government interventions with price control in mind within a liberalized market. However, the second phase routed for the state intervention in facilitating the efficient operation of the private market economy. Therefore, the two phases of reform packages appreciated the fact that without state intervention the market operations may not be as effective compared to when the state is actively involved. Subsequently, the diagnostic approach to reform accommodated the country specifics in effectively transforming the public sector at minimal administrative cost.

Therefore, the concept of policy choice has played a great role of essentially identifying the appropriate portfolio that fits into the specific primary infrastructure sector needs in the region .ostensibly, the idea of privatization policy choice influenced to a greater extent the level of investment commitment in the primary projects as follows; the

70

5.1.1 Divestiture related projects

This portfolio has one characteristic with high private sector investment commitment incentives, since; the full and partial divestiture options perpetuate both widespread and domestic ownership through public offering at the stock markets. Therefore, the government should privatize further to attract more investment commitments in the transport, energy, water and sewerage sectors .although; these are basic utility sectors the contract can be redesigned to accommodate for the social welfare benefits at a regulated price to enhance service delivery and quality standards without necessarily scaring away the investors.

5.1.2 Concession

It’s an investment portfolio that registered a relatively steady but low levels of investment commitment ,especially in the telecom ,water and sewerage sectors, therefore, the government should relax the terms of the contract to reflect on the aspirations of the

Developer especially when the macroeconomic environment seems not favourable so as to create more investment incentives for the existing and prospective investors. This is an appropriate portfolio given that it appeals to the non-competitive industries such as transport, energy and water.

5.1.3 Greenfield

It’s the most appealing portfolio for the competitive industry in the economy; however, it captures the non-competitive industry investment commitments quite significantly. Therefore, the

71

government should create an enabling environment that ensures investors with low capital levels can participate in this nature of investment through equity share holding in public offering. These option will further address the needs of small scale investors without necessarily infringing into the private developers privileges especially ,on the part where the government provide revenue subsidies ,it should allow for public subscription to access that capital through public borrowing.

5.1.4 Management and lease contract

These portfolio arrangement should be redesigned to accommodate the private developers, operations risk by delegating sections of the contract that are not sensitive to public service delivery to sub-contractors , because this will make the portfolio more competitive at delivery of services, doing so will create more room for high risk potential investors which in effect will translate to a monopolistic competition market orientation that deals with close substitute products that are also price sensitive relative to market needs.

5.2 Conclusions

The study was focused on the role of policy choice on the private sector investment in primary infrastructure projects with a bias on the concession, divestiture, Greenfield and management and lease contract project types respectively. It has answered the questions on what role the policy choice has played in promoting PPI in the region on two different accounts. First and foremost, the theoretical conceptualization followed by the analytical view of the concepts put forward.

The element of policy choice plays a key regulatory role of determining the most optimal project type that would suit the

72

country specifics with regard to the investment climate of particular countries, however, certain choices promoted the opposite of what was expected such as low private investor commitment turnout with increased socio-economic outcomes relative to the macroeconomic conditions. Furthermore, the investment portfolio discussed directly captured both the objective function of the government and that of the private management quite extensively.

The study found out that some of the socio- economic outcomes of the first phase of the reform agenda characterized by increased layoffs and product price were effectively addressed by the competitive and non-competitive sectors in which investors participated in evidenced by the increase in the investment value over time .

The analytical part indicates the consequences of the policy choices and shows how the investment portfolios have directly channelled resources from private investors to the primary infrastructure sectors. Ideally portfolios contracts with more elaborate private property right characteristics of exclusivity appeared to have more incentives for private sector investment commitment than those without, especially in the Greenfield project type under merchant and in the full Divestiture related projects .this portfolios exhibited less of the agency and public choice related issues, and promoted the delegated management’s optimal utility function. However, the other investment portfolios were indicative of operating under partial government regulatory controls with shared objectives functions that factored in the prospect of optimal social welfare gains. As such the government played a pivotal role of controlling their portion of shares under the pretext of monitoring the overall activity of the private developers.

This indirect regulatory approach to privatization has largely contributed adversely to the level of investment commitment in the

73

energy, transport, water and sewerage. Apparently there appeared to be more government motive to maximize on the provision of social welfare benefits of subsidizing the prices for basic utility services, enforcing privatization contract that only allows enterprise to maintain a desirable proportion of employee, and propagate continuity of provision of utility services without artificial shortages. The portfolios that were affected by this kind of engagements were management and lease contract, concession and Greenfield related projects.

Greenfield investment portfolio had a positive and significant incentive for private investment commitment attracting potential investment from both highly competitive and non-competitive industries hence it has successfully addressed to a larger extent the utility functions of the public and private sector respectively in essence the governments objective and its regulatory measure capture some of the possible socio-economic outcomes associated with the reform packages.

Divestiture and concession investment portfolios generally indicated a significant outcome but most of the investment commitments were conditioned to transport, energy and water which are natural monopolies in that they are subjected to government regulatory measures to ensure the interest of the public are protected in the provision of social welfare goods. Hence, it played the role of creating an incentive for the private sector to partner with the government in the ownership and management of the enterprise. However, in management and lease contract, investment incentives were the least of all the other portfolios in terms of accommodating the interest of the private sector, though, much of the infrastructure that appeals to this kind of portfolio are

74

non competitive sectors due to the difficulties involved in marketing these nature of products such as water services which is naturally a monopoly both in the hands of the public and private sector.

Generally , there has been a widespread level of private sector investment commitment in both the competitive and non-competitive industries hence fulfilling one of the privatization objective of distributive allocation of resources, rather, than concentrating resources to a particular monopolist in the industry.

The theories put forward and the conceptual framework to has been given a strong backing in the study such that in the presence of a well established regulatory framework that protects the interest of the public from monopolies, imperfect information of the market and price distortions, only then will the consumer reap the full benefit of privatization, however, the level of private sector investment thrives in a relatively clearly laid down rules of the game as prescribed by the regulation bodies/agencies with respective state intervention that are designed to interpret on the nature of privatization contract to be adopted in accordance to country specifics.

The aspect of policy choice implicitly captured the main social economic underpinnings that characterized the outcome of reform implementation, such that under Greenfield PPI, with sub type BOO, BOT, gives the state a leverage to institute it social welfare objectives on a rather equal footing with the private developer. This also applies to the concession PPI, with sub-type ROT, RLT and BROT. Furthermore, partial divestiture propagates the transfer of the benefits of excess profits to the tax payers since the regulatory role of the state interventions in privatization ensures the primary role of social welfare of job security, price control, accessibility and quality services are supplied without exploiting the public.

75

The study may not have addressed into detailed other factors that may have contributed significantly to the trend of investment commitment such as the income levels of the investors, the information accessibility of these kinds of investments and the rate of return to investments which play a crucial role in promoting the investment levels. So I would suggest further research to fill this gap in the future.

76

Appendices

Appendix A: The secondary data obtained from the private participation in infrastructure Project database (the World Bank Group) as at May 2010 Table A1: Number of Projects by Primary Sector

Financial Closure Year

Energy Telecom Transport Water and Sewerage

Total

1990 1 0 1 0 21991 1 0 1 1 31992 0 3 0 1 41993 3 3 2 1 91994 4 3 2 0 91995 3 10 2 1 161996 4 9 4 1 181997 6 17 5 0 281998 5 15 7 1 281999 7 13 6 5 312000 5 18 5 1 292001 7 16 2 4 292002 3 3 1 2 92003 7 9 9 1 262004 4 10 5 0 192005 12 6 21 1 402006 11 10 7 2 302007 7 15 2 2 262008 7 3 3 2 15Grand Total 97 163 85 26 371

Source: World Bank Private Participation in Infrastructure Database.

Table A2: Investment in Projects by Primary sector(US$ Billions)

Investment Year Energy Telecom Transport Water and Sewerage

Total Investment

1990 40 0 0 0 401991 0 0 0 0 01992 0 20 0 0 201993 0 1 0 0 11994 76 553 49 0 6781995 77 677 63 0 8171996 428 961 28 20 1,4371997 754 1,755 469 0 2,9781998 715 1,467 336 0 2,5171999 537 2,846 1,087 82 4,5532000 451 2,787 181 31 3,4502001 713 4,049 484 3 5,2502002 484 3,635 78 0 4,1962003 1,297 4,715 280 9 6,3012004 56 4,512 223 0 4,7922005 1,359 4,918 2,472 0 8,7492006 616 7,028 4,179 0 11,8232007 1,192 10,336 205 121 11,8532008 522 11,727 1,255 0 13,504Grand Total 9,315 61,988 11,389 266 82,958

Source: World Bank Private Participation in Infrastructure Database.

77

Table A3: Total Projects by Primary Sector and subsector(US$Billions)

Primary Sector Subsector Project Count Total InvestmentEnergy Electricity 91 7,254 Natural Gas 7 2,249Total Energy 98 9,503Telecom Telecom 163 61,003Total Telecom 163 61,003Transport Airports 11 495 Railroads 20 4,769 Roads 11 2,238 Seaports 44 3,904Total Transport 86 11,407Water and sewerage Treatment plant 4 133 Utility 22 134Total Water and sewerage

26 266

Grand Total .. 373 82,178Source: World Bank Private Participation in Infrastructure Database.

Table A4: Number of Projects by Type 1

Financial Closure Year

Concession Divestiture

Greenfield Management and lease contract Total

1990 1 0 0 1 21991 1 0 0 2 31992 0 1 2 1 41993 0 0 3 6 91994 1 0 6 2 91995 3 3 8 2 161996 1 1 11 5 181997 2 5 18 3 281998 3 2 22 1 281999 5 2 19 5 312000 4 4 19 2 292001 1 7 16 5 292002 1 0 4 4 92003 11 0 10 5 262004 5 1 11 2 192005 23 1 14 2 402006 5 4 17 4 302007 3 6 16 1 262008 3 1 9 2 15Grand Total 73 38 205 55 371

Source: World Bank Private Participation in Infrastructure Database.

Most infrastructure projects with private participation fit in one of these four categories. But the boundaries between these categories are not always clear, and some projects have features of more than one category. In these cases projects have been classified in the category that better reflects the risk borne by the private sector.

78

Table A5: Investment in Projects by Type (US$ Billions)

Investment Year

Concession

Divestiture

Greenfield Management and lease contract

Total Investment

1990 40 0 0 0 401991 0 0 0 0 01992 0 0 20 0 201993 0 0 1 0 11994 31 0 647 0 6781995 103 65 650 0 8171996 28 408 977 24 1,4371997 720 1,441 817 0 2,9781998 27 1,148 1,343 0 2,5171999 1,041 1,787 1,693 32 4,5532000 493 1,517 1,440 1 3,4502001 70 2,007 3,169 3 5,2502002 99 1,088 3,009 0 4,1962003 298 1,542 4,452 9 6,3012004 243 1,112 3,401 36 4,7922005 2,794 380 5,576 0 8,7492006 936 1,683 9,205 0 11,8232007 305 2,491 9,057 0 11,8532008 1,255 2,184 10,065 0 13,504Grand Total 8,482 18,852 55,519 105 82,958

Source: World Bank Private Participation in Infrastructure Database.Most infrastructure projects with private participation fit in one of these four categories. But the boundaries between these categories are not always clear, and some projects have features of more than one category. In these cases projects have been classified in the category that better reflects the risk borne by the private sector.

79

Table A6: Total Projects by Primary Sector and Type(US$ Billions)

Primary Sector Type of PPI Project Count Total InvestmentEnergy Concession 17 1,899 Divestiture 8 1,310 Greenfield project 55 6,101 Management and lease

contract17 5

Total Energy 97 9,315Telecom Divestiture 27 17,373 Greenfield project 134 44,615 Management and lease

contract2 0

Total Telecom 163 61,988Transport Concession 54 6,506 Divestiture 3 169 Greenfield project 14 4,671 Management and lease

contract14 42

Total Transport 85 11,389Water and sewerage Concession 2 76 Greenfield project 2 133 Management and lease

contract22 57

Total Water and sewerage

26 266

Grand Total .. 371 82,958Source: World Bank Private Participation in Infrastructure Database.

Table A7: Total Projects Combined Electric and Water(US$ Billions)

Type of PPI Project Count Total InvestmentConcession 3 660Divestiture 1 0Management and lease contract

8 0

Grand Total 12 660Source: World Bank Private Participation in Infrastructure Database.

This table reports projects with private participation that provide both electricity and water services. These projects are reported with energy as primary sector to avoid project double-counting in sector data and because energy services usually account for most of the committed investment.

80

Table A8: Total Projects Cancelled or Distressed by Primary sector &Type(US$Billions)

Primary Sector Type of PPI Project Count Total InvestmentEnergy Concession 5 504 Divestiture 1 0 Greenfield project 2 325 Management and lease

contract3 0

Total Energy 11 829Telecom Divestiture 4 573 Greenfield project 11 508 Management and lease

contract1 0

Total Telecom 16 1,081Transport Concession 1 47 Divestiture 1 166 Management and lease

contract2 0

Total Transport 4 212Water and sewerage 3 9Total Water and sewerage

3 9

Grand Total .. 34 2,132

Source: World Bank Private Participation in Infrastructure Database.

Table A9: Criteria for selection

Featured Indicator, 1990-2008 Value

Infrastructure Sectors Reported Energy, Telecom, Transport, Water and sewerage

Number of countries with private participation 45 Projects reaching financial closure 371 Sector with largest investment share Telecom (75%) Type of PPI with largest share in investment Greenfield project (67%) Type of PPI with largest share in projects Greenfield project (55%) Projects cancelled or under distress 34 representing 3% of total investment

Source: World Bank Private Participation in Infrastructure Database.

Appendix B: Information on the Primary Sector Projects Type

Sector Analysis

(source: Private Participation in Infrastructure Projects Database, Mailstop MC4 419, 1818 H St. NW, Washington, DC 20433 © 2009 The World Bank Group, All Rights Reserved. Terms and Conditions. Privacy Policy. | ppidatabase@worldbank.org

To be categorized in a particular sector, subsector, and segment, the project should be in that specific business, rather than simply having some

81

of those assets. Projects designed to serve a customer or group of customers exclusively are not included. PPI projects generally all into four broad sectors: energy, telecommunications, transport, or water. Energy Energy includes the activities directly related to the provision of electricity or natural gas to users as a public service. • Electricity: Activities required for the provision of electricity. It includes the segments of generation, transmission, and distribution of electricity.

o Generation: Facilities needed for production of electricity, including the power plant.

o Transmission: Facilities needed to transfer power produced from the power plant to the distribution facility, such as the grid. Excludes the cables connecting the power plant to the grid, because they are captive transmission lines. For instance, a power plant may need a secondary transmission line to transfer its electricity output to the grid. But the existence of that secondary transmission line does not imply that the corporate entity that owns the facilities is in the business of providing transmission capacity for facilities that sell electricity directly or indirectly to the public.

o Distribution: Facilities needed to transfer power transmitted from the grid to the users, such as the cables connecting the grid to the converter and the cables connecting the converter to the users. • Natural gas: It includes the segments of transmission and distribution pipelines. Excludes gas exploration and production. Note that if the gas is used as an input by a power plant, the project belongs to electricity subsector and the generation segment.

o Transmission: Facilities required to transfer gas from gas field to the main pipeline system, such as pipes, pressure regulators, etc.

o Distribution: Facilities required to transfer gas from the main pipeline system to individual users, such as pipes.

Telecommunications Telecommunications includes activities required for the transmission of information between users as a public service. It includes the segments of: • Fixed access: Networks that connect individual users for telephone service with fixed or limited mobility phones in a defined geographic area within a country. • Mobile access: Networks that connect individual users for telephone service with mobile phones in a defined geographic area within a country. • Long distance: Networks that connect individual users for telephone service located in different geographic areas defined as local areas within a country, or with individuals in other countries.

No other telecommunication services, such as facsimile, paging, radio communications, or value-added services, such as data transmission or videotex, are included. Resellers of long distance services, which usually operate by leasing circuits or capacity from long-distance carriers, are also excluded. Transport Transport includes assets or facilities required to move people or freight from one location to another as a public service.

82

• Airport includes physical infrastructure (terminal, runway, tower), but no rolling stock or stands under concession.

o Runway: Facilities required for take-off and landing of planes and air traffic towers.

o Terminal: All airport physical facilities (e.g., terminal buildings, airplane hangars, connecting transport links within the immediate vicinity of the airport), except runway, shopping, restaurant/lodging, and other services. Note: A 30-km motorway connecting city to airport would be listed under the Road subsector. • Railway includes track, terminals, rails, and rolling stock. Subway systems and/or monorails are also considered railway.

o Passenger: Provision of transport service for people and also rolling stock within a metropolitan area or between multiple metropolitan areas.

o Freight: Provision of transport service for goods and also rolling stock within a metropolitan area or between multiple metropolitan areas.

o Fixed assets: Facilities for provision of rail service within a metropolitan area or between multiple metropolitan areas, including rails, signal devices, communications equipment, etc., but not including rolling stock. • Road includes all facilities necessary for land transport, but excludes buses and automobiles.

o Bridge: Facility for elevated land crossing, including attached toll collection equipment.

o Tunnel: Facility for below-ground crossing, including attached toll collection equipment. Note: the UK channel train would be classified as Road/Tunnel, not as Rail.

o Highway: Facilities for overland transport, including attached toll equipment. • Seaport includes terminal facilities and surrounding waterway, but excludes shipping companies.

o Terminal: On-land terminal. o Channel dredging: Construction and maintenance of waterways

surrounding docking facilities.

Water Water and sewerage activities are those needed to provide potable water to users or to process or dispose of wastewater as a public service. • Treatment plant: Includes all facilities necessary for storing and delivering potable water to users or processing wastewater.

o Potable water treatment plant: Facilities for processing water for human consumption, including allocation of water resources; capacity construction for storage; bulk supply generation; and desalination.

o Sewage treatment plant: Facilities for storage, processing and disposal of wastewater, such as a wastewater treatment plant. The facilities should treat wastewater from water utilities.

o Potable water and sewage treatment plant: When the two types of plants mentioned above are included in the project. • Utility: Includes all facilities necessary for storing and delivering potable water to users, including pipes and devices for measuring consumption, for transfer of potable water to individual users.

83

o Water utility without sewerage: Facilities necessary for storing and delivering potable water to users, but do not include sewerage services

o Water utility with sewerage: Facilities necessary for storing and delivering potable water to users and include sewerage services.

o Sewerage collection: Facilities for intake and routing of wastewater, such as sewers, pipes, and cesspools.

84

o Sewerage collection and treatment: Facilities for storage, processing, and disposal of wastewater, such as a wastewater treatment plant. The facilities should treat wastewater from water utilities

The Dynamic Model of PrivatizationThe model equations for optimization of the appropriate level of

privatization according to be adopted is described by (Fluck et al, 1996:282) as follows.The government problem equation that need to be optimized for making appropriate decision on which privatization level is viable FOR adoption is given asMaximize rθ U(πG

* ,EG* ,h) + (1-rθ )U(πB

* ,EB* ,h)…….within (0 ≤ Ω≤ 1)

…..........….aWhere (πG

* , EG* )= arg max M(π , E , Ω)….with reference to (π ,E)

.................................bSuch that (π ,E)ϵ F (G, h)…......................................................................................................c(πB

* , EB* )= arg max M (π , E , Ω)….with reference to (π ,E)

…....................................dSuch that (π ,E)ϵ F (B, h)….....................................................................................................eWhere:Macroeconomic State of the economy given by θ=Good or BadU(π , E,θ,h) is the utility function of the governmentM (π , E , Ω)….the utility preference of the management of the enterpriseπ=the profitability, Ω= the level of privatization within the range of (0 ≤ Ω≤ 1) Since, the government is limited to the three main feasible level of optimization of S,I and P we can work out the solution to the government problem using the following methodology First, we assume that the government utility(U) in equation (a),F(G) in (c)and F(B) in(e) don not rely on history(h).also known as history independentThe possible solution to b& c given θ=G, and d& e given that θ=B, directly relies on the privatization level available of Ω=S,I,P and the state θ at a time t. therefore, in creating a solution to our problem UΩ

θ = U(πθ* ,

Eθ* ) AT θ=G or B and also where (πθ

* , Eθ* ) is positioned in equation-b and

c for θ=G and also for d and e ,where θ=B For each of the values of Ω=S, I ,PHence, we derive the following deduction or assumptions thatUS

B ≥ UIB ≥UP

B

.......................................................................................................................f

85

UPG≥ UI

G ≥US

G.......................................................................................................................gGiven an economy arriving at a bad state at time t, government will prefer adopt fully SOEs to prevent a huge layoff at the expense of lost profits. Nonetheless, on the second equation (g) on realization of a good state at a time (t) the government would recommend for privatization given that private enterprises attain higher profits and high employment levels too. .

(i) Assumptions of the Model

It’s possible for the government to vary private ownership over a range of (0 ≤ Ω≤ 1) in reality, though in my case I will focus on the three leaves of private ownership, where Ω=0,Ω=0.49, and Ω=1,which clearly sorts out the three broad methods of distributing ownership and control rights (fluck et al,1996:283).

a) 100% state owned (S) where, Ω=0b) 51% Government-owned,49% owned by investors(state

controlled(I) where Ω=0.49c) 100% Owned by private investors(full privatization)(P) where Ω=1

Therefore, given the above assumptions of the model and the history independent assumption as well, the above privatization problem in (a-d) is decomposed to the following:

Given the state of θ= G or B at a time (t-1), then it follows that

Maximization[rθ USG +(1-rθ )US

B , rθ UIG +(1-rθ )UI

B , rθ UPG +(1-rθ )UP

B ]

Finally, given θ=G or B,we evaluate the three expected utility terms above by substituting the probability values of rθ in determining the maximum. And therefore the degree of privatization that has the maximum utility is the optimal choice at [ΩG (t) or ΩB (t)] by government

86

Table B1:infrastructure projects with private participation reching financialor contractual closure in sub-saharan africa in 2008Energy Country

Project name

Project status Sub-sector

Type of PPI

Private equity (%)

Investment commitment (US$ millions)

Capacity size and type

Contract period (years)

Main sponsors

1 Angola

Aggreko Luanda Temporary Power Stations 1 and 2

Operational

Electricity

Greenfield project (rental)

100

.. 60 MW .. Aggreko Plc (100%, United Kingdom)

2 Kenya Mumias Power Plant

Construction

Electricity

Greenfield project (BOO)

100

35 35 MW .. Mumias Sugar Company Limited (100%, Kenya)

3 Kenya Rabai Power Plant

Construction

Electricity

Greenfield project (BOT)

100

155 90 MW 20 Aldwych International Ltd. (..%, United Kingdom), Mitsui Engineering & Shipbuilding Co. Ltd. (MES) (..%, Japan)

4 Togo Centrale thermique de Lome

Construction

Electricity

Greenfield project (BOT)

100

190 100 MW 25 ContourGlobal (100%, United States)

5 Uganda

Bugoye Hydroelectric Power Project

Construction

Electricity

Greenfield project (BOT)

100

35 13 MW 20 Tronder Power Limited (100%, Norway)

6 Uganda

Mpanga Hydropower Project

Construction

Electricity

Greenfield project (BOT)

100

14 18 MW 20 South Asia Energy Management Systems (SAEMS) (100%, United States)

7 Uganda

Namanve Power Plant

Operational

Electricity

Greenfield project (BOT)

100

93 50 MW 6 Jacobsen Elektro (100%, Norway)

Source: World Bank Private Participation in Infrastructure Database.

Table B2 : TelecommunicationTelecommunications Country

Project name

Project status

Segment Type of PPI

Private equity (%)

Investment commitment (US$ millions)

Capacity size and type

Main sponsors

1 Ghana Ghana Telecom Second Divestiture

Operational

Fixed access, mobile access, and long distance

Divestiture (partial)

70 900 1,400,000 connections

Vodafone (70%, United Kingdom)

2 Ghana Globacom Ghana

Operational

Mobile access

Greenfield project

100 50 .. Globacom (100%, Nigeria)

3 Uganda

Orange Uganda

Construction

Mobile access

Greenfield project

100 .. .. France Telecom (53%, France), International Investments House (47%, United Arab Emirates

87

Table B3: TransportTransport Country

Project name

Project status

Sub-sector

Type of PPI

Private equity (%)

Investment commitment (US$ millions)

Government cash support (US$ millions)

Type of government support

Capacity size and type

Main sponsors

1 Congo, Rep.

Pointe-Noire Container Terminal

Operational

Seaports

Concession (BROT)

100

735 n.a. n.a. 200 throughput (thousands)

Bollore Group (60%, France), Societe Congolaise De Transports Sarl (Socotrans) (40%, Congo, Rep.)

2 Nigeria

Lekki-Epe Expressway

Operational

Roads Concession (BROT)

100

382 n.a. n.a. 50 km Asset & Resource Management Ltd. (ARM) (..%, Nigeria), Larue Projects International Ltd. (..%, Nigeria)

3 Senegal

Dakar Seaport

Operational

Seaports

Concession (BROT)

100

134 n.a. n.a. 250 throughput (thousands)

DP World (100%, United Arab

Source: World Bank Private Participation in Infrastructure Database.

Table B4: Water and SewerageWater and sewerage

88

Country

Project name

Project status Sub-sector

Type of PPI Investment commitment (US$ millions)

Capacity type

Capacity

Main sponsors

1 Côte d’Ivoire

Société de Distribution d’Eau de Côte d’Ivoire Renewal

Operational

Utilities Management and lease contract (lease contract)

n.a. Population (thousands)

9,000 Bouygues (46%, France)

2 Mauritius

St. Martin Wastewater Treatment Plant

Operational

Treatment plants

Management and lease contract (management contract)

n.a. Cubic meters per day (thousands)

70 Berlinwasser International AG (100%, Germany)

Source: World Bank Private Participation in Infrastructure Database.

Appendix C:Data description, Summary tables and Confidence IntervalTable C1:Data Description

Watersewarage float %9.0g Water & Sewarage SectorTransport float %9.0g Transport SectorTelecom float %9.0g Telecom SectorEnergy float %9.0g Energy Sectorlease float %9.0g Management Lease ContractGreenfield float %9.0g Greenfield project TypeDiv float %9.0g Divestitureconc float %9.0g Concessioninvestment int %8.0g Total Investment CommitmentsNewproject int %8.0g number of new projects variable name type format label variable label storage display value

Table C2: Data Summary

Watersewar~e 19 14 32.56788 0 121 Transport 19 599.4211 1061.652 0 4179 Telecom 19 3262.474 3421.243 0 11727 Energy 19 490.3684 443.9027 0 1359 lease 19 5.526316 11.5632 0 36 Greenfield 19 2922.211 3304.888 0 10065 Div 19 992.2632 854.0922 0 2491 conc 19 446.4737 690.6323 0 2794 investment 19 4366.263 4319.363 0 13504 Newproject 19 19.52632 11.19707 2 40 Variable Obs Mean Std. Dev. Min Max

89

Table C3: Confidence Interval

.

Watersewar~e 19 14 7.471584 -1.697215 29.69721 Transport 19 599.4211 243.5596 87.7213 1111.121 Telecom 19 3262.474 784.8869 1613.487 4911.46 Energy 19 490.3684 101.8383 276.4142 704.3227 lease 19 5.526316 2.65278 -.0469684 11.0996 Greenfield 19 2922.211 758.1932 1329.306 4515.115 Div 19 992.2632 195.9422 580.6039 1403.922 conc 19 446.4737 158.4419 113.5996 779.3478 investment 19 4366.263 990.9298 2284.397 6448.129 Newproject 19 19.52632 2.568783 14.1295 24.92313 Variable Obs Mean Std. Err. [95% Conf. Interval]

90

References

Acquaah, M ( 2005) ‘ Economic liberalization, entrepreneurial development and manufacturing priorities in Ghana’(1) . Retrieved September 22, 2010 http://www.thefreelibrary.com/Economic liberalization, entrepreneurial development and...-a0137860502

Adam,C., W. Cavendish and P. Mistry(1992) Adjusting Privatization. Case Studies from Developing Countries. , James Curry, London

Adams.S (2006) 'The Impact of Privatization on Economic Growth and Income Inequality in Sub-Saharan Africa', The Journal of Social, Political, and Economic Studies 31(3): 295-26.

Adhia,N(2004) ‘Private Sector Participation in the Provision of Water,Electricity & Garbage Collection:international experiences’,CCS Research Internship Papers,centre for civil society,new delhi

Alchian, A.(1977) Economic Factors At Work, Indianapolis; the Liberty fund

Alhussaini, W. And Molz, R (2009) ‘ A post-Keynesian regulatory model of privatization’, Journal of Socio-economics, 38(2):391-398.

Ariyo, A and A. Jerome (2004) "Utility Privatization and the Poor: Nigeria in Focus”, Global Issue Papers 12, The Heinrich Böll Foundation, http://www.boell.de/downloads/global/GIP%2012%20Nigeria_Engl.pdf

Ariyo, A. and A. Jerome (1999) “Privatization in Africa: An Appraisal”, World Development, Vol. 27, No. 1.

Asian Development Bank(1997) Second Water Utilities Data Book for the Asian and Pacific Region.

Ayogu, M. (2001) ‘Debating ‘Privatization’ of Network Utilities in South Africa’, University of Cape Town, South Africa.

Azam, J.P., M. Dia and T. N’guessan (2002) “Telecommunications Sector Reform in Senegal”, Working Paper, World Bank, Washington, D.C..

Baldwin and M. Cave (1999) Understanding Regulation: Theory, Strategy and Practice.Oxford UP, Oxford

Bayliss, K (2001) ‘ Water Privatization in Africa: Lessons from Three Case Studies’, PSIRU, University of Greenwich, May.

91

Bayliss,K (2000) ‘The World Bank and Privatization: A flawed development Tool’, PSIRU,University of Greenwich.

Boubakri, N.and Cosset, J. (1998) ‘The financial and operating performance of newly-privatized firms:evidence from developing countries’, Journal of Finance, 53:1081–1110.

Campbell,O and Bhatia,A (1998) Privatization in Africa, management control to the private shareholders, Washington, D.C. The World Bank,

Cook,P. and C.Kirkpatrick(2003) ‘Assessing The Impact Of Privatization In Developing Countries’, in the hand book on Privatization .Parker,D. and D.Seal(eds)cheltenham: international Edward elgar:2009-219.

D’Souza, J.and Megginson, W (1999) ‘The financial and operating performance of privatized firms during the1990s’, Journal of Finance 54:1397–1424.

Davies,H and L.Crombie (2009) What are Confidence Interval and P-Values

Estache, A., and Fay.M, (1995). “Regional Growth in Argentina and Brazil: Determinants and Policy Options.” World Bank, Washington, D.C. Processed.

Estache,A. and G. De Rus (2000) ‘Privatization And Regulation Of Transport Infrastructure, Guidelines For Policymakers And Regulators’, WBI development studies, the world bank Washington,D.C.

Estache.A., S.Perelman and L.Trujillo ( 2005) ‘ Infrastructure Performance and Reform in Developing and Transition Economies: Evidence from a Survey of Productivity Measures’, working paper 3514.

Fare, R., S.Grosskopf and J.Logan (1985) ‘The relative performance of publicly-owned and privately-owned electric utilities’, Journal of Public Economics, 26:89–106.

Florio,M(2004) The Great Divistuture: Evaluating theWelfare Impact of the British Privatizations, 1979–1997. MIT Press, Cambridge

Fluck.Z.,J.Kose and A.Ravid (1996) ‘Privatizing in stages and the dynamics of ownership structure’. 4: 277-296.

Hall,D.,K.Bayliss and E.Lomina (2002) ‘Water privatization in Africa’, PSIRU,University of Greenwich.

92

Hall.D (1999) ‘Privatisation, multinationals and corruption’, journal of Development in Practice, 9 (5): 539-556.

Hanke, S.H (1987) Privatization and Development. California’ Institute for Contemporary Studies Press

Harsch,E (2000) ‘Privatization Shifts Gears in Africa’, Africa Recovery 14(1) United Nations.

Hartley, K.and Parker, D.(1991) Privatization: a conceptual framework: a comparative analysis of developed and developing countries. In A. Ott & K. Hartley (Eds.), Privatization and economic efficiency(pp. 11–25). Brookfield, VT: Edward dgar

Hirschmann.D (1999) ‘Development Management versus Third World Bureaucracies: A Brief History of Conflicting Interests’, Development and Change 30: 287-305.

IMF (2006) World Economic Outlook Database, September.

Jerome, A(2002) ‘Public Enterprise Reform in Nigeria: Evidence from the Telecommunications Industry’, African Economic Research Consortium, Nairobi, Kenya

Jerome,A(2004) ‘Infrastructure Privatization and Liberalization in Africa.National Institute for Economic Policy’,Sunnyside Park, Parktown 2193,Johannesburg South Africa.Email: jerome@niep.org.za,Web: www.niep.org.za

Karekezi.S and S.Mutiso (2000) Power Sector Reform

Kerf,M and W.Smith (1996) ‘Privatising Africa's Infrastructure: Promise and Challenge’,World Bank Technical Paper 337.

Kikeri,S and J. Nellis (2004) ‘An Assessment of Privatization’, Cary: Spring juornal Iss.19( 1): 87.

Kikeri,S.and J. Nellis (1989) ‘Public Enterprise Reform: Privatization And The World Bank’,World Development17(5):659-672.

Libecap,G.D (1989) Contracting For Property Rights. Cambridge University press.,uk

Mahoney,T.J. 2005. Economic Foundations Of Strategy(Foundation For Organizational Science.A sage publication series,califonia. www.sagepub.com/upmdata/5030_Mahoney_Chapter_3.pdf(on 22/july2010 6.59pm)

93

Mbongaya,A (2008) ‘ Privatization: a burden or strategy for Sub-Saharan Africa? Focusing on access to water in Wovia Village, Cameroon’, African Centre forCommunity and Development.

Narayan and Petesch.(eds) (2002) Voices of the Poor from Many Lands, The World

Nellis, J (2003) “Privatization in Africa: What Has Happened? What Is to Be Done?”, Centre for Global Development, Working Paper 25.

Nellis,J (2005) ‘The Evolution Of Enterprise Reform In Africa From State Owned Enterprises To Private Participation In Infrastructure-And Back’, The Centre For Global Development, Working Paper,WashingtonUSA.Accessed on 27 Aug 2010

http://www.feem.it/Feem/Pub/Publications/WPapers/default.htm

OECD (2004) ‘Privatisations in Sub Saharan Africa: Where do we stand? OECD, Paris. Ownership, Oxford: Oxford, University Press for the World Bank.

OECD (2004). Privatization in Sub-Saharan Africa: Where Do We Stand. Paris: OECD.

OECD (2005).Policy Insights, No. 14, October 2005Policy Insights No.14, ©OECD

Omran, M(2004) ‘ The Performance of State-Owned Enterprises and Newly Privatized Firms: Does Privatization Really Matter?’, World Development, 32(6):1019-1041.

Pamacheche,F and B.Koma (2007) ‘Privatization in Sub-Saharan Africa - an essential route to poverty alleviation’, African Integration Review journal 1(2).

Parker, D(2003) ‘ Performance, risk and strategy in privatized, regulated industries: the UK’s experience’, The International Journal of Public Sector Management 16(1):75–100.

Parker, D. and Hartley, K. (1991) Status change and performance: economic policy and evidence. In A.Ott & K. Hartley (Eds.), Privatization and economic efficiency: A comparative analysis of developed and developing countries (pp. 108–125). Brookfield, VT: Edward Edgar.

Plane .P (1997) ‘Privatization and Economic Growth: An Empirical Investigation from a Sample of developing Market Economic’, Applied Economics 29 (2): 161-179.

94

Rodrik..D(2004) ‘Rethinking growth policies in the developing world1’, Harvard University,Luca_d_agliano_lecture October 2004.Accessed on10 november2010.

Shirley,M. and P.Walsh(2000) ‘public vs private ownership:the current state of debate.world bank policy research working paper 2420.washington,DC

Stano, M. (1975) ‘Executive ownership interests and corporate performance’, Southern Economic Journal,42: 272–278.

Starr,P(1988) ‘The Meaning of Privatization’, Yale Law and Policy Review 6 : 6-41. starr@princeton.edu.

Stovring,J(2004) ‘The Washington Consensus In Relation To The Telecommunication Sector In African Developing Countries’, Telematic and Informatics 21:11-24

Thoenen,R (2007) ‘Private Sector Participation In The Provision Of Basic Infrastructure’,African trade policy centre,work in progress 66,ECA

Thomsen, S (2005). “Encouraging Public-Private Partnerships in the Utilities Sector: The Role of Development Assistance”. Overview study prepared for the NEPAD/OECD

Vickers, Jand G. Yarrow(1991) ‘ Economic perspective on privatization’, Journal of Economic Perspective 5: 111–132.

Vining, A. and Boardman, A (1992) ‘Ownership versus competition: efficiency in public enterprise’. PublicChoice, 37:205–239.

Woo,W.T( 2004) ‘Some Fundamental Inadequacies Of The Washington Consensus:Misunderstanding The Poor By The Brightest’,Hongkong Institute Of Economics And Business Strategy

World Bank (1992) Privatization: lessons of Experience. washington, DC, world bank

World Bank (2006) PPI database. http://ppi.worldbank.org/reports/customQuery Aggregate.asp, accessed September 24, 2006.

World Bank(2009)PPI database.http:ppi.worldbank.org/report

World Bank(2004) ‘ Reforming Infrastructure: Privatisation, Regulation, and Competition’, A World Bank Policy Research Report

World Bank. (1994) ‘ Infrastructure for Development’, World Development Report . New York: Oxford University Press

95

Yergin.D and S. Joseph (1998) The Commanding Heights. New York, Simon and Schuster.

96

97