Group Members

• PERNINA MOTSI
• TANYARADZWA RUFASHA
• KUDZAI BURUWE
• NATASHA MATUNHURIRE
• BLESSED SAMANYAYI
 WHAT IS PRIVATISATION
• A number of definitions he been recorded in order to understand what is
privatisation. According to P Waterhouse (1996) privatisation is practise
which is adopted to enhance the performance of the organisation. Thus
making parastatals operate in more business environment. Former reserve
bank of Zimbabwe Dr Gono(2007) defined privatisation as a way of
reforming the organisation procedures so that the organisation operate on
a more profitable manner.
• The above definitions simply entail the transferee of government owned
companies to private owned. The private can be either foreign investors
or indigenous citizens. It is important to note that there is been a miss
definition between commercialisation and privatisation therefore, there is
the need to differentiate the two as the study continues. According to Dr
Gono commercialisation entails reformation of the organisation.
Commercialisation takes place before privatisation.
 OBJECTIVES OF PRIVATISATION
• The wave of privatisation hit the world from the mid1960s up to the
1990s as corruption inefficiency, political appointment to a neutral role
of the executive managers on state owned enterprises become the
order of the day. Decreasing of competition among the organisations
and this weakened the economy the country.
• In Zimbabwe, citizens lost trust in the government the organisation was
collapsing and it needed to be saved. It is important to that the
objectives differs from one country to another, however it cannot be
denied that lack of local entrepreneurs, the desire to remove the burden
on central government, stabilising the public finance are part and parcel
of the objectives of any country taking up privatisation.
 Forms of privatisation
CONTRACTING
• Contracting is when the government get into a pact with the private
sector for profit or not. Upon signing the pact the government state the
terms and conditions in which the private sector would adhere to. This
simply suggest that the government provide funds to the private sector to
render service to the public. This is one of the oldest model or form of
privatization
VOUCHERS
• Evan (2011) is of the view that vouchers are given different service
provider and those who are capable of providing the service required
would get the tender. This form of privatization would give the
government a chance to monitor and lay out its expectations whilst giving
an opportunity to the consumer to choose their own service provider.
 Forms of privatisation
PUBLIC-PRIVATE OWNERSHIP
• Evan defines this form of privatization as a way of developing a business
friendship between the public sector and the private sector. This agreement
suggest that both parties are concerned with providing service to the public
and they do it interchangeably. This form, usually works when the public
sector have human resources problems and can work together to achieve the
same goal.
FRANCHISE
• Franchise is one of the forms of privatization that never escapes mention
when one is looking at the forms of privatization. Evan (2011) views franchise
as when the private sector is awarded an opportunity to offer service a
number of consumers in a certain area, however the consumers should
choose one private sector.
 Forms of privatisation
GRANT AND SUBSIDE
• In this form the government enters into a contract with a private
company which the government would partly sponsor in bid to
reduce the burden on the government on the government. This form
does not only benefit the government but also helps the growth of
the private sector.
ASSET SALE
• The government in this form of privatization sell its resources such as
land, buildings to a private company in a quest of improving the
government in come as well as the revenue. It is important to note
that this form of privatization is very effective when the government
has an asset that is on demand.
 Forms of privatisation
VOLUNTERISM
• In this forms as Evan put it the government depends on the organization that
would be willing to offer help in form of labour, usually this form of
privatization is done by the non-profit organizations.
PRIVATE DONATIONS
• Private donations entails a situation whereby the government trust on
private will wishers to contribute in offering service to the public. The
contribution can be in a form of monetary funding, labour and equipment as
well as qualified human resource.
SERVICE SHEDDING
• Evan (2011) is of the view that in this form the government seize to give
service to the public in a way of giving a private sector an opportunity to
operate freely.
 Forms of privatisation

DEREGULATION
• Evan argues that in deregulation the government discontinue to
render service so that the private sector can offer service and this
form of privatization enhance competition amongst private sector
entities. According to Zachary (2002) this form of privatization allows
the government to remove price and it also deals away with political
interference.
Privatisation of Dairy Marketing Board
(DMB)
• The DMB now called the Dairiboard Zimbabwe was established in 1953 to
receive all milk supplied by registered producers, process and distribute the
milk.
• The government would determine the producer and consumer prices,
employee conditions of service, and would fund capital investments and
operational deficits.
• The company incurred huge operational deficits due to price controls,
which were not timeously reviewed and would always be focussed on
political balance.
• From 1978-1990 the operation deficit grew from Z$2 million to Z$60 million
Conti………
• The government decided to appoint a new Board of Directors. During the period
1991 to 1994 the new board turned the deficit into of 6million into a profit
• The government showed confidence into the new BOD and it retained the same
board to lead through the privatisation. Dairboard Zimbabwe limited was fully
commercialised and registered under the Company’s Act in july 1994 with
government retaining 100% equity.
• As a precursor to successful privatisation, it was important to establish a good
track record for the company. Upon the privatisation the government allocated
10%, 5% and 25% of the shares to large scale farmer, small scale farmers and
Government.
• In 1997 the company was listed on the ZSE
Benefit of successful privatisation of DZL
• Government is collecting corporate tax
• DZL is a net foreign currency earner
• Government is now earning dividends and is no longer financing
operational deficits as was the case with DMB
• The value addition thrust has ensured a wider product choice for
consumers
Privatisation of The Cotton Company of
Zimbabwe
• Cottco was privatized in October 1997. The company was crumbling with debts.
• It had over a million dollar in debt, the organisation had borrowed some money
to sustain it business and operations such as buying the cotton from farmers
and paying up workers
• COTTCO cited the profit sharing Scheme as something to be emulated. This, to a
large extent, assisted towards purchase of employee shares. Secondly,
employees organized Investment Trusts in 1994, and at the same time,
employees were encouraged to invest in other companies. Employees
contributed to the Investment Trust on a monthly basis and at the time of
privatization, there was a substantial amount that enabled financial institutions
to assist.
 COTTCO
•   COTTCO advised that privatization was done to raise revenue for
Government, hence the company was sold at a premium. The
government had a political objective that sought to promote
economic empowerment (workers, public and farmers). The
economic objective was that COTTCO should have a technical partner,
which in government circles, was viewed as synonymous to efficiency
required for the growth of business.
• The privatisation of the company created job thus reducing the rate of
unemployoment
Privatisation of the Zimbabwe Reinsurance
Company (ZIMRE)
• The government established the ZIIMRE in 1983 through an act of
Parliament with an issued capital of $2.5 million.
• The objective was to have local insurance industry developed and the
economy to benefit from the premium generated locally.
• The country and local insurance benefited through the building of
local capacity and the retention of local premiums for the
development of the local industry.
• This has served the country millions of dollars in foreign exchange
that otherwise could have been paid in form of retrocessions.
Conti…..
• Under the second phase of the economic reform programme-
ZIPREST- government was determined to implement parastatal
reforms as planned and in later part of 1997, the government of Zim
made a decision to make an initial disinvestment of 49% of its
shareholding in ZIMRE.
• The objective was to for the privatization was to raise money for the
Fiscus and at the same time invite the public to buy shares in the
profitable ZIMRE.
• In September 1998 the Minister of finance Comrade Herbert
Murehwa officially launched the privatisation of ZIMRE.
Conti…
• A new logo was developed to reflect the company’s new status.
• The first step was to setup a privatisation tea, which included Lead
bankers and issuing house, Financial Advisors, Banker, underwritters etc
• The privatisation was concluded in march 1999, with a presentation of
a $276 million cheque to the Minister of Finance.
• After privatisation ZIMRE continued to pursue its goal of growth
through diversity. During the year, ZIMRE added to its portfolio, three
more subsdiaries: ZIMRE Unit Trust, Zimbabwe Actuarial Consultant
Company, and ZIMRE- Zambia which will spearhead reinsurance
operation in Zambia.
Conti…….
• The company increased its profit before tax by 108% from $35 million
to $72 million in the first half of 1999.
• This followed a revenue growth of 83% from $584 million to $1 069
million
Partial privatisation of Zupco
• the government has moved to provide affordable urban transport
services by allocating $3,7 billion to the Zimbabwe United Passenger
Company (ZUPCO)
• A proposal to partially privatise the parastatal is under consideration
• Acting chief executive officer Evaristo Madangwa told the New Ziana
that “ZUPCO is about to be partially privatised so we are actually in
the process of securing a private partner”
• Zupco is reeling from a $16.1 million debt which it expects the
government to temporarily warehouse in order to dean up the
balance sheet as it pursues a partial privatisation process
Partial privatisation of Fidelity Printers
• Fidelity Printers and Refiners (pvt) was incorporated in 1978 and 100%
owned by the RBZ.
• The business was largely to print secure banknotes and operated as a
department of the RBZ.
• The minister of Finance and Economic Development Professor Mthuli
Ncube, in his recent mid-term budget review the unbundling of FPR was
underway and that 60% shareholding in the unbundled gold refinery entity
would be offered to producers of gold.
• 16 December 2020, the unbundling of FPR is designed to partially privatise
the gold refining business by allowing private players in the goldmining
Justification for the privatisation
• This will allow private players in gold mining and production to
acquire shareholding
• This will help secure and endear the gold miners’ interests in the
production, marketing and trading of gold.
• Being part of the decision making process will improve compliance
levels in the trading of gold
conti,……..
• The privatisation is unique in that only private players in the gold
mining and production sector shall be eligible to hold equity in FGR at
any given time.
• The RBZ shall retain 40% shareholding in the FGR and dispose 60% to
large scale and small scale gold producers.
Explain the merits and demerits of
privatizing state-owned enterprises.
Merits of privatizing state-owned enterprises.
IMPROVED EFFICIENCY
• The main objective that is brought forward is that privatization can enhance profit
and reduce the expenditure. The government is believed that it spend more than
it produces whilst private sector are profit oriented hence it increases the
efficiency of the organization.
LACK OF POLITICAL INTERFERENCE
• The way government manages organizations is normally influenced by politics and
the government as a result the service delivery is poor. It is important to note that
as it was said on earlier in the own going literature review, government is
concerned with social services, thus it employs people who are not qualified for
the job and some time in a quest to gain political mileage the government turn to
overstaff. The private sector is free from political interference and when the
private sector employees it use contracts and this deals with over staffing.
Merits of privatizing state-owned enterprises.
SHORT TERM VIEW
• The private sector focuses on offering good service to the consumer
and in that case it attracts good shareholders. It is important to note
that if the government under performs it will lose its stake holders.
INCREASED COMPETITION
• Privatization gives more room to other organization to venture into
the same business and this will stir up competition amongst
organization. Competition amongst organization means increment in
performance of the organization.
Merits of privatizing state-owned enterprises.
Tax Reductions and Job Creation
• By providing public services more efficiently and at a lower cost by
privatizing them, governments can lower the taxes they impose on
residents. In some cases, privatizing a public service like a prison can
create job opportunities for residents in an area, increasing the
quality of life for them and strengthening the local economy.
Demerits of privatizing state-owned
enterprises.
GOVERNMENT LOSES OUT ON POTENTIONAL DIVIDENDS
• Most of SOE are profitable and them by being privatized the
government would losses some income to individuals who do not
have the interest of the nation at heart.
PUBLIC INTEREST
• SOE offer important service to the public therefore profit making
should be the least of the of organization priority. Service delivery
must be the top priority of an organization .It is important to note
that privatizing of SOE meant that public interest is not considered.
Demerits of privatizing state-owned
enterprises.
PROBLEMS OF REGULATING PRIVATE MONOPOLIES
• It is important to note that private creates monopolies. These private
entities need to be monitored to guard against abuse of power
therefore the government regulation is needed.
FRAGEMENTATION OF INDUSTRIES
• Privatization may led into breaking down of SOE into small companies
this will led unclear responsibility.
Less Transparency
• One important disadvantage to recognize is the opportunities for
bribery and corruption that come with privatization. Typically, private
companies are less transparent than government offices, and this
reduced transparency paired with a drive for profit can be a breeding
ground for corruption.
Demerits of privatizing state-owned enterprises.

Inflexibility
• There is also the issue of inflexibility that can come with privatization.
Typically, governments sign lengthy contracts with private service providers.
These contracts can span for decades, locking residents into one service
provider for lifetimes. Although a private company might make itself
attractive to win a contract, its service can take a quality nosedive once it's in
place and its consumers are complacent.
Higher Costs to Consumers
• Although privatization is usually promoted on the basis that it will reduce
consumers' costs, it can also drive costs up. According to non-profit consumer
advocacy group Food & Water Watch, a proposed private water service, for
example it would cost residents 59 percent more than they were paying for
public water service.