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Some people have commented over the media that “the so-called privatisation of the government enterprises does not seem to benefit Basotho in general, but the chosen few individuals….”. I have to point out that this is a wrong perception as the restructuring policy adopted by the Government of Lesotho is for the benefit of the whole nation and is in fact, turning around the past policies that were benefiting few individuals. Let me explain why.

Limitation of State Owned Enterprises/Parastatals: I think it is important at this stage to articulate the reasons behind the Government’s privatisation policy and its benefits to the nation at large. Following the establishment of State owned enterprises in the late 1960s to provide essential services to the nation and to create jobs for Basotho, it became evident that the State owned enterprises had certain limitations in providing the required services. The difficulties of state owned enterprises were that:

a)      They could not be provided consistently with expert management to the companies as the management was often recruited from the public sector. Consequently, commercial management practices were lacking in the enterprises.

b)      They lacked access to capital inputs as they relied heavily on Government subsidies and donor funding that declined over the years. As a result the SOEs always had to approach the Government which was already over-stretched by other calls on its limited resources. The parastatals would usually get a fraction of what they had budgeted for, making implementation of planned expansion programmes almost impossible. Lesotho Airways Corporation was a case in point as the company was unable to purchase new aircraft.

c)      Performance of the SOEs was not closely monitored and over the years resulted in lax management due to “pampering” by Government. This showed itself particularly in low priority accorded to auditing of enterprises in practically all sectors. The accounts of major enterprises had not been audited on a regular annual basis as required by law, and amazingly, the Boards of Directors, tolerated this situation in their enterprises. For instance, when privatisation began in 2000, the last year for which audited accounts were available for both the former Lesotho Telecommunication Corporation (LTC) and Lesotho Electricity Corporation (LEC) was in 1995. For LEC updated audited accounts only became available after the installation of the Interim Management Task Force in 2001.

d)      Inability of parastatals to access fresh capital led to poor delivery of services as the necessary infrastructure was lacking. For instance, LEC had at least 8, 000 customers in the waiting list for installation of electricity while LTC had over 22, 0000 customers waiting for telephone installations.

e)   Employee deductions for pensions were in some instances not forwarded to the insurance companies as the law stipulates. This violation of the law was only discovered when the particular enterprise was being prepared for privatisation otherwise it would probably have gone unchecked for years.

f)     Because of the policy at independence of creating parastatals to provide jobs for Basotho, over the years the parastatals became overstaffed to the point where three to four people were employed for the job that could be done by one individual. Obviously this meant burdensome additional costs for the parastatal because the other unproductive employeeson the pay-roll. This hidden aspect of state enterprises has been very costly. Government ought to make separate provision for welfare payments rather than state enterprises to become vehicles for welfare.

g)    In some instances, there was a lot of political interference because recruitment in the parastatals was based on political considerations. In other words, only people who were members of the ‘right’ party were considered for employment. This in itself implied that employment was not based on merit thereby sidelining qualified Basotho from being considered for employment.

h)    The parastatals had amassed huge debts over the years that they were unable to pay, and these debts were covered by subsidies which took away Government’s resources which could otherwise be used for social services such as free primary education, provision of drugs and medicines in Government hospitals, and old age pensions.

Let me point out that the objectives of privatisation are the following:

(a)   To phase out Government out of commercial activity. Phasing out Government out of commercial activity implies that the budgetary burden on the Government of Lesotho will be greatly reduced so that the Government can focus resources on more deserving priorities such as fighting poverty; implementing the programme of free primary education; providing health services as there are some rural communities who have to travel large distances to access basic health services.; and building the infrastructure as evidenced by the robust construction activity to construct roads that we see in the whole of Lesotho.

(b)  Restructuring of the economy facilitates enhanced access to capital, technology, managerial expertise and know-how. Capital injection used to come into Lesotho in the form of donor funding but unfortunately this has declined drastically. Statistics indicate that between 1999 and 2000, development aid to Africa fell by 43 percent to US$16.4 billion, according to UN figures. It means that Lesotho has to adjust its policies internally to absorb the shock of declining donor aid as we have also been affected. Therefore, to attract foreign direct investment, parastatals have to be privatised. 

(c)   The other rationale for restructuring the economy is to increase efficiency and provide the services to the public at large. Coupled with this is the foreign direct investment that will be  invested in the country. Foreign direct investment directly affects the growth of the economy, referred to as GDP. To get out of the poverty situation that we are in, Lesotho’s economy has to grow at a rate of around 8 percent and this can only be fuelled by foreign direct investment.  I am sure most of us will recall that during the good old 90s, our GDP growth rate sometimes recorded 7 percent from investments associated with the Lesotho Highlands Water Project.

(d)   Privatisation of Government owned parastatals also eliminates rampant corruption that is always associated with state entities that provide the services to the nation. It further depoliticises the commercial sector such that decisions are based on commercial considerations.

People always ask about the successes of privatisation and it would be remiss of me not to highlight some successes that have been brought about by the process itself.

Ø      Since its privatisation in 1999, Lesotho Bank has been installing ATMs all over the country to inprove its services to the customers. Currently all districts have ATMs installed with the exception of Maseru which has about 14 ATMs in total. Two ATMs are located at the National University of Lesotho; three at the cathedral area which is open 24 hours;  one at the Railway Station area; four at the main branch; and four have just been installed in Thetsane.

In an effort to combat long queues all civil servants are being paid directly into their accounts with the exception of teachers. Most of  the employees of garment factories are also being paid directly into their accounts.

Ø      The Interim Management Task Force that took over the management of the operations of LEC in February 2001 has so far addressed the backlog of 8, 000 connections. Over and above that, 4,000 have also been connected. Audit accounts for financial year from 1996/97 to 2000/01 were prepared and finalised; reestablishment of financial reporting systems and consistent production of management accounts were put in place; a comprehensive customer meter survey was undertaken and a customer database of approximately 23, 000 customers is currently being established; all credit meters have been replaced with prepayment meters;

In November last year LEC notified the public that vending machines can be accessed for purchase of electricity units in 7 districts and 9 places located in Maseru. The vending machines are a convenient way of buying electricity at any time of the day and so help to avoid long queues.

Ø      The backlog of 20, 000 telephone connections has been addressed by Telecom Lesotho and these also have also been connected and currently the company is undertaking installations of customers who applied following the overwhelming response from the public to get telephones installed for M185. Already we see the evidence of lowered costs which ultimately benefits the public at large.

Ø      To control the rampant theft of fuel that is taking place in Government vehicles, Imperial Fleet services installed a computerised system called Fuel-O-Mat which links Engen Filling Stations with Imperial Fleet Services. When filling the petrol, the system immediately indicated the Department/Ministry to which the vehicle belongs; the last date of refuel; and the number of kilometres traveled. Attempts have already mad by Government drivers to tamper  with the system. Tampering causes the computerised system to jam, resulting in inability to refuel the vehicle. When the Imperial Fleet Services notifies the transport officer of the ministry in charge about the tampering, the system is once again enable s and the costs incurred are borne by the Ministry to which the vehicle belongs. The system has resulted in huge savings on the part of Lesotho Government account on petrol consumption.

To take an example at the regional level, in 1994 Mozambique was ranked as one of the poorest countries in the world following decades of war that ravaged the country. Since then, more than 900 enterprises have been privatised and there is a greater private sector involvement in transport, telecommunications and energy sectors. Since then, growth has been recorded at an alarming 10 percent in 1997-1999 and is currently averaging 13 percent mainly because of the country’s restructuring policy (Sunday Times Business Times 1 December 2002).

Despite opposition to the privatisation process, it is hard to imagine how else programmes to combat the current levels of poverty, HIV/AIDS, provision of health services and free primary education can be implemented when Government continues to utilise scarce resources to subsidise loss making enterprises that benefit very few people at the expense of the whole nation.