Privacycling of national assets has produced great value and wealth and has reshaped the economy in many developed countries, but there have been few cases of successful privatization in emerging African countries. In many cases it is not due to a lack of will. However, this process encounters many difficulties along the way. When governments are financially constrained, privatization can provide a pathway to free capital and create a competitive environment where the private sector can compete and thrive.
First, however, we need to understand why the privatization process is complex or rarely achieves the expected outcomes, and what can be done to reverse this trend and achieve the impacts seen elsewhere.
Both the observations and efforts made to privatization suggest that privatization requires a rigorous approach where each step is important. I divided these into seven steps.
Please choose carefully
The starting point is the identification and associated assessment of sectors and businesses being privatized. Whether it is public services, infrastructure or natural resources, the choice should be based on an analysis of the status of these sectors, their current and potential profitability, and levels of debt and investment needs.
Once selected, the privatized assets or services are subject to multidimensional due diligence (technology, financial, commercial, human resources), and preparation of financial forecasts and market value determinations.
Prepared with reasonable accuracy, these financial forecasts are challenged by potential investors and experts in the sectors involved.
Legal and regulatory frameworks
A framework that supports the transition of state-owned enterprises to the private sector is important. This should include appropriate regulations in the postpaivatisation sector to protect consumer interests and increasingly environmental interests.
Stakeholder engagement
Before privatization, public consultations are needed to gather opinions from civil society, labor unions and non-governmental organizations. They also allow them to deal with fears associated with privatization, such as the possibility of unemployment and rising consumer prices. It is currently necessary to consider environmental impacts in the purposes of privatization to be necessary under environmental, social and governance standards. These consultations provide feedback to strengthen the process and regulatory framework and to alleviate fear.
Seek expert advice
One of the goals of privatization is to stimulate economic efficiency in sectors that are very different from each other. Working with sector experts is important to avoid common mistakes and to ensure that privatization achieves this.
If necessary, you can establish collaborations with foreign companies that are already performing similar tasks. It should be practical and best practices should be adopted, while avoiding the pitfalls of failure or poorly performed privatization elsewhere.
Implementation Strategy
The marketing process must be transparent and respectful of the competitive process. Local investors who meet the criteria should not be excluded from the process of selecting successful bidders.
Take a step-by-step approach
You need to take a step-by-step approach. Lessons and pitfalls need to be exploited to start with the most sensitive sectors and to properly approach privatization in more complex active sectors. Implementing a privatization program is a dynamic process. Strategic adjustments to address specific issues at a time are made throughout the project.
Monitoring and evaluation
It is important to define a set of key performance indicators to measure and assess the impact of privatization on the local economy. These include the number of jobs created, the impact on the price of goods and services, and the quality of the service.
Evaluations should be conducted regularly to analyze the economic and financial performance of privatized companies and make necessary adjustments as needed.
Publication of reports on performance in privatized sectors also helps to bring transparency and comfort to the public and civil society in the public, promoting a comprehensive approach.
The environmental and social impacts assessed along with financial performance should also be included in the evaluation criteria.
