Tanzania repossessions face opposition

Tuesday August 22 2017

Tanzania's President John Pombe Magufuli.  AFP PHOTO | FILE

Tanzania's President John Pombe Magufuli. The debate on whether or not the government’s decision to privatise entities and parastatals was the right decision has raged for years. AFP PHOTO | FILE 

By ERICK KABENDERA
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Tanzania's private sector is urging the government to exercise caution as it embarks on a drive to repossess 197 non-performing companies.

The targeted companies were privatised over 20 years ago when the government introduced economic liberalisation, but have remained dormant.

Recently, the government ordered repossession of the firms, a decision that has sparked public fears of a reversion to nationalisation.

But the private sector is opposed to the government running the confiscated businesses.

“It was expected that the Ministry of Trade’s post-privatisation division would consistently monitor the progress of the privatised firms and intervene if they appeared to be failing because you do not need 20 years to identify the problem and take corrective measures,” Dr Samuel Nyantahe, chairman of the Confederation of Tanzania Industries.

President John Magufuli has constantly criticised the decision to privatise government-owned corporations, saying it would paved the way for “overseas conmen” to take them over.

The government has identified 197 idle privatised firms and called upon the Ministry of Trade and Investments to immediately repossess them.

The Minister for Industries, Trade and Investments, Mr Charles Mwijage said that the Treasury registrar was working with Regional Commissioners and respective sector ministries to repossess all the inoperative firms.

Ten corporations have so far been repossessed.

“The government will not take over these corporations. We will give them to private investors. We are targeting firms involved in cashew nut and textile industries.

“In textiles, we have a programme called ‘From Cotton to Clothing’ which aims to develop local capacity to produce clothes,” said Mr Mwijage.

Dr Nyantahe told The EastAfrican that the privatisation managed by the Presidential Parastatal Sector Reform Commission at the time of repossession was well informed and that those who bought the firms presented credible business ideas to transform the companies.

Those who bought the firms were in three categories. The first bought the industries, developed them and they started creating jobs.

The second, were investors who kick-started the businesses but their investments collapsed due to stiff competition and lack of industrial protection.

The final group were those who used the newly acquired corporations to borrow from multiple financial institutions and abandoned the firms.

“Some people genuinely wanted to do something but failed and I would be sympathetic to them. Those who succeeded in turning them around need support,” Dr Nyantahe said.

The debate on whether or not the government’s decision to privatise entities and parastatals was the right decision has raged for years.

By December 2009, the Treasury registrar’s records show the government had raised Tsh440 billion ($195 million) from privatising 331 of the 395 corporations earmarked for privatisation in early 1990s.

Those who opposed the idea claim that it marginalised the local private sector who were not given an opportunity to own most of the privatised corporations.

Some of the investors who bought the corporations stripped them of machinery and abandoned the investments, which was contrary to the government’s expectation that they would revive the units to create jobs.

Those who support the decision say most of the privatised parastatals were loss making and were a financial budget on the government and it proved impossible to sustain them.

By the end of the 1980s, Tanzania had 395 state owned enterprises majority of which were inefficient and loss-making and were only sustained through subsidies from the budget and soft or directed credit.

Ultimately, many proved unsustainable. This led the Government of the United Republic of Tanzania (the Government) to a strategic decision to privatise virtually all SOEs in a program managed by the Presidential Parastatal Sector Reform Commission (PSRC).