08.02.2010 Feature Article

To Privatise or not to Privatise ?

To Privatise or not to Privatise ?
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Every now and then the issue about the dismal performance of state-owned enterprises in Ghana, and in most parts of Africa for that matter, has come up for discussion. The pertinent, double-barrelled question here is: "Why do State enterprises in Africa fail to live up to expectation? Should they be privatised?" In addressing this question it would be significant to consider what purpose those enterprises were set up to achieve and, also, their relevance both at the time they were established and at present.

Take the Ghana News Agency (GNA) for example. It was inaugurated on the eve of Ghana's independence as part of a comprehensive communications policy aimed at building a viable, united and cohesive Ghana. Its significance/relevance lies in the compelling need to unify the diverse ethnic groups that came together to form the new Ghana. The GNA has, over the years, played a crucial role in promoting national unity, stability and the national development agenda by providing accurate, objective and unbiased news through its wire service. For more than 50 years now the Agency has been doing what it was set up to do, and creditably too! But what has become of this loyal servant today?

A sweeping glance at the office premises and a brief chat with any member of staff there would provide the observer with all the answers. The predicament in which the Agency currently finds itself and the attitude of Government, its sole financier, are an indication that GNA can no longer depend entirely on State subvention for its existence. This also implies that it cannot continue to operate the same old way it has been doing over the past half century. The world has moved on since 1957, and technology has imposed irreversible changes on events and concepts such as governance, business, information dissemination and, also, priorities. Therefore, the "this-is-the-way-it-has-always-been-done" theory is no longer tenable.

Not very long ago, word went round that the then government was considering placing the distressed national wire service on the divestiture list, but was that the right decision? On the contrary, and to address the question posed at the beginning of this piece, most economists would argue that in the case of most state-owned enterprises that find themselves in similar situations as the GNA, capitalisation and modernisation would be a better option.

Ha-Joon Chang, an economics lecturer at Cambridge University, cautions developing countries like Ghana against the willy-nilly adoption of economic prescriptions such as privatisation, free trade and low government spending, which he terms the "Golden Straight Jacket". In his much acclaimed book entitled "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism," Chang argues that by compelling poor countries to adopt certain economic policies they themselves never practised, today's rich nations are effectively kicking away the ladder in order to deprive others of the means of climbing up after them.

On the specific issue of non-performing state-owned enterprises, the economist cites as an example the case of the Toyoda (or Toyota) car company in the 1930s, when the Japanese government had to bail it out repeatedly with public funds even though the company failed badly in the initial stages. Thanks to the government's determined support for the troubled Toyota Company (and that country's motor industry as a whole) Japan is one of the world's leading car manufacturers/exporters today. But if the government had donned the Golden Straight Jacket at the time, Toyota Car Company would have probably been liquidated and Japan would have remained a third-rate industrial country with a lower than average income.

Chang points out that even the developed nations nurture and protect their own industries when they find it expedient. Without exception, they have all at one time or the other in the past, employed strategies such as import bans, tariffs and subsidies for the protection and nurturing of selected industries. According to him, Oxfam estimated in 2002 that European citizens were supporting the dairy industry to the tune of £16 billion per year through subsidies and tariffs - an equivalence of more than $2 per cow per day. A vast majority of the population in the developing world continues to live on less than $1 a day. One crucial piece of advice Chang offers to developing countries is that they have to learn to "defy the market" if they want to nurture their fledging industries and say goodbye to poverty.

However, taking a bold measure such as defying the market requires focused leadership and, above all, a national vision which Ghana has lacked since the end of the First Republic. With such a vision, every state-owned enterprise/industry has a specific role to play in the realization of the national dream. This, perhaps, was what distinguished Kwame Nkrumah from other leaders. He had a clear vision for Ghana and worked out calculated policies towards the attainment of that vision.

All the economic policies and textbooks aside, it is commonly obvious that any individual, organization or nation that insists on continuing to do business as usual when the geo-political landscape and market dynamics have undergone fundamental changes, do so at their own peril. Which is why the GNA cannot continue to operate the same way it has done since 1957, and why it would be suicidal for the Agency to place its existence entirely on an ever-dwindling and highly irregular subvention from Government.

It is quite a tricky situation, but for industries/organisations of strategic national importance such as the GNA, outright privatization is hardly the answer. Around 1998/1999, when the Agency was on the brink of collapse, the government at the time came up with a plan, the National Institutional Renewal Programme (NIRP), to rescue the distressed national wire service. Under the NIRP, the Agency was to undergo a major restructuring exercise which basically comprised its recapitalization and retooling over a three-year period after which it would be left to stand on its own.

In the view of this writer, that programme is even more relevant today than ever before, as a self-sufficient GNA would be in the best interest of Government, the Agency and the wider public. An immediate review of the GNA's instrument of incorporation to enable it to diversify its operations would be a convenient starting point. Next would be the computerization of the entire outfit, including its regional offices, and the provision of means of transport. With adequate work-tools and a well motivated workforce, the Agency would be capable of fending for itself, even as it continues to discharge its mandate with renewed efficiency.

Quite significantly, Chang argues that "The way economies go from being underdeveloped, anaemic and uncompetitive to becoming developed, strong and aggressively competitive is simple and straightforward - Government steps in." In the same way, strategic national institutions like the Ghana News Agency can grow from dole-dependent, cash-strapped tax burdens to successfully efficient contributors to national income if Government steps in boldly and decisively to help them rebuild their capacity to become competitive.

Credit: A GNA Feature by Mohammed Nurudeen Issahaq

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