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As business interest in Africa grows and the pressure to expand and improve its infrastructure increases, the question of privatization has become a prominent concern for governments that must decide when, if, and how goods and services should make the transition from state-owned to private management.
To explore these issues, Hamza Abdurezak, a research associate at Harvard's Kennedy School of Government, led a case discussion on the Philippine's state-owned National Power Corporation (NAPOCOR). In his 1992 inaugural address, President Fidel Ramos stated, "Deregulation and privatization shall set free our industries from the apron strings of the State."
Yet pursuing a policy of privatization creates a tension between what is equitable and what is efficient, Abdurezak noted. Political and social factors must be taken into consideration along with economic concerns that include determining how to divest government-owned assets; deciding how many companies should be allowed to buy generating plants; and determining if some or all parts of the value chain should be privatized.
| If you're not careful, the privatized owner will lead the regulator by the nose. |
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— Nasir El-Rufai, Bureau of Public Enterprises in Nigeria |
"As new price-setting mechanisms come into play, you have to address the question of whether or not power will be affordable to all," Abdurezak said.
"The private sector is all about making a profit," agreed one audience member. "It's going to be hard to find a company that will want to build a distribution center in an area that won't bring in much income."
"It becomes a question of politics," said Nasir El-Rufai, director general for the Bureau of Public Enterprises in Nigeria and a member of Nigeria's National Council on Privatization. "You need to figure out how to run a service well while ensuring that it gets to everyone." In many African countries, he added, there isn't the same regulatory culture that one finds in the United States. "If you're not careful, the privatized owner will lead the regulator by the nose," he said.
The delicate political and social issues that surround privatization and the essential nature of the services involved demand particular care when governments consider which policies to pursue, Abdurezak agreed.
"A power plant is not like a cement factory," he said. "Electricity is the bloodline of the economy."
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