Wednesday, June 12, 2024

Privatization requires patience


Experts recommended that the government follow a proper and alternative based privatization process for its mega enterprises that it recently disclosed would be fully or partly sold to the local and foreign private sector.
A regional conference and exhibition entitled ‘Privatization and Stock Market, an Imperative for Ethiopia’s Economic Development’ held on Tuesday September 17 at the United Nations Economic Commission for Africa (UNECA) attempted to recommend the best way for the government to implement privatization and a national stock market. They did this by going over the experience other countries as they privatized companies.
In his opening speech, Teshome Tafesse, State Minister of Finance, appreciated the initiative of HST and Capital in organizing the valuable and timely discussion, “these types of discussions will help Ethiopia obtain more experience about how to go about privatization and stock market.”
Since the country is a new comer on this path Teshome said that the country should benefit from the late comer advantage and learn the lessons from others in the process of economic reform and implementing privatization.
The government has decided to liberalize the economy by starting to privatize some big enterprises like Ethiopian Airlines, Ethio Telecom and the logistics sector.
In his presentation, Getachew Zewdie, Director of Strategy and Innovation at HST Consulting, said that privatization is not always the medicine so the country should continue to discuss and debate the issue.
He said that it is not a must to copy from others, “the public should know the privatization process clearly. Otherwise it will be vulnerable to corruption and other ill doings,” he stressed. “The privatization process should be a clear roadmap since we (Ethiopians) are stakeholders,” he added. He also emphasized the importance of appointing professional leaders and disregarding politicians’ involvement in commercial decisions.
The government has formed an independent board comprised of Ethiopian experts working in local and international institutions, politicians and the business community that evaluates the process of the privatization. Getachew advises looking at the experience of China to make its enterprises competitive with each other like private firms.
Alice Tomdio, Director of Capital Market Services, PwC Nigeria, said that if you go to the initial public offering (IPO), you should make the company ready with international standards and sound employee capacity.

(Photo: Anteneh Aklilu)

Tomdio said the country places a priority on making enterprises prudent and makes sure of their profitability rather than just categorizing them as public or private.
She shared the experience of the privatization process in other African countries.
Getachew Beshahwred, Managing Director of the London based GB and CO, who came to Addis to share his experience at the regional conference like Tomdio, asked; is the foreign ownership preferred? In his elaboration he said that the national interest should be considered first.
He gave the example of British Airways which had shares sold to a Spanish company IAG in which Qatar Air is the major shareholder. “We have to be very careful when we allow foreign companies to invest here. We don’t know who will end up being an owner,” Getachew explained.
He said that one of the motivations of privatization is efficiency, but ownership is not the main factor for efficiency. “Government owned companies can be efficient as well,” he added. Ownership is not the main reason for efficiency it is rather management and competition, according to Getachew.
He also stated that there is not an absolute free market so it should be regulated and the development of regulation has to be undertaken carefully.
As the government laid out its plan for the privatization of mega enterprises about 16 months ago the debt stress of the country might be slashed since the country shall generate foreign currency from privatization that can repay the debt.
“Debt reduction should not be used as an excuse to privatize a company,” he stressed. Getachew noted that privatization should not be considered as the only option.
Presenting the United Kingdom’s experience with privatization, he suggested that the government should arrange the required support for all state owned companies to restructure themselves and become efficient and competitive.
He also mentioned that the nation should have strong financial, training institutions, up-to-date companies’ legal structure and an independent judiciary system.
In his opening speech, the State Minister said that there are three challenges that the country currently faces: a debt burden, foreign currency crunch and inflation. The government officials argued that privatization might relax the debt burden and access to foreign currency in the short term strategy.
During the panel discussion, Beyene Gebremeskel, Director General of Public Enterprises Holding and Administration Agency, said that most of the businesses in Ethiopia are family owned. He said diverse ownership in business in Ethiopia is rare but privatization shall rearrange and allow several individuals to own a single company.
“In the process of privatization it should be changed and several individuals should be involved as owners of a single company,” Beyene, who has 28 years of experience in the privatization process said.
“A stepped approach should be applied,” he added.
“When and what should be privatized is the first step. We should definitely take time,” Beyene said.
He also stressed that the country should not be pushed to sell its assets, “pressure should not be an excuse to sell prized assets.”
Ethiopia has privatized about 380 state-owned enterprises in the past 27 years and generated close to 50 billion birr, despite the fact that the privatization process is criticized by experts.
The organizers of the event HST and Capital, said that they will conduct a series of discussions on the two issues in the recent future. HST is a well-known local consultancy firm with international competency that has provides services for the private and public sector for over 15 years. Capital has provided informative economic news in print and online platforms for 21 years.

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