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«Published by the Center for African Studies, University of Florida ISSN: 2152-2448 African Studies Quarterly E Staff Elizabeth Beaver Lin Cassidy ...»

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22. Pelani Siwawa-Ndai, "Some facts and Figures about the Quality of Life in Botswana", in Doreen Nteta, Janet Hermans with Pavla Jeskova, Poverty and Plenty:The Botswana Experience. Botswana Society, Gaborone, 1997, p. 28; Botswana Institute for Development Policy Analysis (BIDPA), Study of Poverty and Poverty Alleviation in Botswana, vol.1, Ministry Finance and Development Planning, Gaborone, 1997, p.21.

23. Laishley, "Botswana:new", p.20.

24. Catherine Hill and D. Nelson Mokgethi, "Botswana:Macroeconomic Management of Commodity Booms, 1975-86", in The World Bank, Successful Development in Africa, The World Bank, Washington,DC, 1989.

25. Malcom Wallis, Bureaucracy. Macmillan Press, London, 1989.

26. Ibid, p.52.

27. Leftwich, "Bringing Politics", p.418.

28. Shawn McCormick, The Angolan Economy. The Centre for Strategic and International Studies, Washington,DC, 1994, 38-39.

29. Ibid, p.18.

30. Ibid,pp.viii,7,43.

31. Ibid, p. 7

32. Ibid, p.2.

33. Anthony Pereira, "The Neglected Tragedy: The Return to War in Angola, 1992-93", Journal of Modern African Studies, 32(1), 1994, p. 12.

34. Country Profile Angola. The Economist Intelligence Unit, London, 1995-96, p. 19.

35. McCormick, The Angolan, pp.3-4.

–  –  –

36. Anthony Pazzanita, "The Conflict Resolution Process in Angola", Journal of Modern African Studies, 29(10), 1991, p.92.

37. McCormick, The Angolan, pp.3-4.

38. Ibid, pp.7,19.

39. Republic of Malawi, Statement of Development Policies, 1987-96. Government Printer, Zomba, 1987, pp4-6; Ravi Gulhati, Malawi:Promising Reforms, Bad Luck. World Bank, Washington,DC, 3(13), 1989.

40. Gulhati, Malawi:Promising, p. 17.

41. Government of Malawi, Development Plan, 1965-69. Government Printer, Zomba, 1965, pp.5-6.

42. Gulhati, Malawi:Promising, p.8.

43. Republic of Malawi, Statement of Development, p.6.

44. Gulhati, Malawi:Promising, p.8.

45. Ibid, p.7.

46. Republic of Zambia, Zambia's Economic Revolution. Government Printer, Lusaka, 1968;

Republic of Zambia, Towards Complete Independence. Government Printer, Lusaka, 1969; Republic of Zambia, This Completes Economic Reforms: Now Zambia is Ours.

Government Printer, Lusaka, 1970.

47. Republic of Zambia, Third National Development Plan, 1979-83. Government Printer, Lusaka, October, 1979, p.9.

48. Ben Turok, Mixed Economy in Focus: Zambia. Institute for African Alternatives, London, 1989, p.48.

49. Ibid, pp.157-58; Dennis Chiwele and Christopher Colcolough, "Economic Crisis, Adjustment and the Effectiveness of the Public Sector in Zambia", in Charles Harvey (ed), Constraints on the Success of Structural Adjustment Programmes in Africa.

Macmillan Press, London, 1996.

50. Oliver Saasa and Jerker Carlsson, The Aid Relationship in Zambia: A Conflict Scenario.

The Nordic Africa Institute, Uppsala, 1996, p.42.

51. UNDP, Human Development,1997.

52. Colin Bradford, "East Asian "Models": Myths and Lessons?", in Jerry Lewis and Valerie Kallab, Development Strategies Reconsidered. Transaction Books, New Brunswick, 1986, p. 118.

Reference Style: The following is the suggested format for referencing this article:

Osei Hwedi, 2001. "The State and Development in Southern Africa: A Comparative Analysis of Botswana and Mauritius with Angola, Malawi and Zambia. African Studies Quarterly 5(1): 1.

[online] URL: http://web.africa.ufl.edu/asq/v5/v5i1a2.htm

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Abstract: At the time of independence, nearly all African countries identified capitalism with neocolonialism and therefore adopted a statist approach to economic development, with government being the major instrument of development. As a result, the size of the public sector grew through the creation of public sector enterprises. On the other hand, over the years there has been a slowdown in economic growth, especially in agricultural output. With deep internal economic crisis, shortage of foreign capital and debt obligations, many African countries adopted in the 1980s certain structural adjustment measures required by international donor organizations and creditors as a condition for economic assistance, with privatization usually being a component of the structural adjustment programs. Thus, many African countries have embarked on the policy of privatization and other market-oriented reforms. Empirical investigations as to whether or not privatization promotes development of the issue have produced mixed results.


Privatization has become an important instrument for streamlining the public sector and promoting economic development in countries around the world. Privatization refers to divestiture of public sector enterprises (PSE)---enterprises owned and operated by the state---to private owners and, more generally, the placing of a large share of the economy into the private sector. Privatization gained a major thrust in the 1980s when international donor organizationslike the World Bank--made it a major component of structural adjustment programs, established as a condition for economic assistance. Structural adjustment itself refers to "a series of economic policies designed to reduce the role of government in an economy [by] replacing government control with market incentives." 1 Structural adjustment programs were initiated as a result of the explosive debt crisis of the early 1980s. The rise to power of groups espousing neo-liberal economic ideas during the political tenure of the Reagan and Thatcher governments in the United States and Great Britain, respectively, accelerated the placement of structural adjustment on the economic development agenda during that period. While stabilization programs of earlier post-war decades achieved successful monetary, fiscal, and trade policies without economic restructuring, structural adjustment programs in the developing world during the 1980s and early 1990s were associated with the adoption of free-market policies as a condition for international assistance.

The 1980s can be regarded internationally as the decade of privatization. "From the middle of the 1970s, worldwide sales of state enterprises reached a record total of over $185 billion by the end of the 1980s." 2 Although the public enterprise sector expanded in most countries during much of the post-World War II period, this sector contracted or remained the same in most countries during the 1980s, principally due to privatization policies.3 Since 1980, worldwide

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sales of PSEs have risen faster. In 1990 governments worldwide sold off $25 billion in PSEs.4 Total sales increased to $69 billion in 1992 (5) and exceeded $175 billion over the period 1990 to

1993.6 Assets of privatized entities are projected to exceed $600 billion by the year 2000.7 While the policy of privatization may have originated in the industrialized countries, it has been rapidly adopted in the developing world. Over the years in many developing countries, there has been a slowdown in economic growth, especially in agricultural output. Increasingly, therefore, they are reducing the size of the public sector and turning to market-oriented reforms. Moreover, as a result of the declining economic growth in these countries, international donor organizations and creditors, such as the World Bank and the United States government, have required certain structural reforms as a condition for economic assistance, with privatization usually being a major component of this structural adjustment package.

Privatization has been seen by some governments and international donor organizations as a policy that will help less developed countries improve the performance of their economies by reducing the size of the public sector and enhancing the performance of the private sector. Thus, many African countries have embarked upon privatization.

The purpose of this study is to analyze the factors that led to the adoption of the policy of privatization in Africa, with emphasis on Sub-Saharan African, and to review the policy as an instrument of development. The paper begins with analysis of the contribution of the size of public sector to economic growth in Africa. Such an assessment is important, because the growing trend in the size of government has been criticized for the decline in economic growth.8 Second, with the policy of privatization perceived as a major solution to the slowdown in economic growth, the issue becomes whether or not privatization promotes development at a faster rate than would otherwise happen. This study addresses this issue through a review of empirical studies on the relationship between privatization and development. The results should provide further insights into the effects of the privatization policy adopted in SubSaharan Africa. The study concludes with some policy implications.


In the struggle for independence from colonial rule, ambivalence toward capitalism was the hallmark of most nationalist movements in Africa.9 At the time of independence, most African countries identified capitalism with colonialism rather than with entrepreneurship and free enterprise. As Bruce Bartlett stated, "capitalism in any form was identified with imperialism and therefore rejected as neo-colonialist."10 As a result, virtually every African country adopted some form of socialism or statist approach to economic development. Many external advisers and the economics profession recommended a major role for the state in economic development. Thus, governments became the principal actor in economic activities and the major instrument of development in many African countries. This has led to an increase in the size of the public sector through the creation of numerous government agencies and stateowned or public-sector enterprises.

Goran Hyden described the original rationale for establishing these enterprises as follows:

"In the absence of an entrenched class of local capitalists, many governments felt a need to resort to public enterprises as the only alternative to counteract the influence of foreign capital

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and to accelerate the development of local resources. The public enterprises would take the role played by private entrepreneurs in other countries and thus help to harness, mobilize and exploit resources which would otherwise lie idle or be developed only by foreigners. The profit generated by these bodies, moreover, would accrue to the state and thus be available for public investment and for fostering social welfare goals of the new governments. In those countries which adopted a socialist strategy of development, governments would add to this list of reasons for a rapid expansion of the public sector the objective of social equality. A dominant public sector would make equalization policies easier."11 Other points of view have been advanced for a larger role of government in the process of development. One point is that government should be assigned a critical role in the process of economic development. Another is that a large government can become a powerful engine in economic development. Arguments in support of the latter include, inter alia: "(i) role of the government in harmonizing conflicts between private and social interests; (ii) prevention of exploitation of the country by foreigners; and (iii) securing an increase in productive investment and providing a socially optimal direction for growth and development."12 Thus, since independence, the role of the state in economic activities has increased sharply in Africa through the creation of numerous public-sector enterprises. For example, in the late 1980s, "state enterprises bulk[ed] larger in proportion to total economy activity than it [did] in any other market-economy region in the Third World."13 It is estimated that about three thousand enterprises are fully or partially controlled by governments in Africa. The size of government in the economy had grown sharply between independence in the 1960s and the era of structural adjustment in the 1980s.

Although there are various measures of the size of government in the economy, the measure employed in this study is the ratio of government consumption expenditure to gross domestic product (GDP). For many countries, government consumption expenditure consists of the following categories: "1) outlays for wages and salaries of civil servants and the military; 2) outlays on nondurable goods and services, including those for public sector employees, maintenance, and all spending on military equipment; 3) interest payments on government debt; 4) transfers to subnational government; and 5) subsidies and other transfers to individuals."14 This measure, regarded as the standard specification of government size, assesses the effect of public sector expansion on the underlying growth rate.15 It provides a useful indication of the overall influence of the public sector in the economy as a whole.16 Measured as the ratio of government consumption expenditure to GDP, government size in Sub-Saharan Africa increased from about 20 percent in the early 1960s and 1970s to about 28 percent and 29 percent in the early 1980s and 1990s, respectively.17 Much of the growth during the initial period was the result of the newly independent states assuming the role of nation building from colonial states. The states tended to mobilize their physical and human resources for socioeconomic development. Countries that were endowed with natural resources, such as Liberia with iron ore, Ghana with bauxite, and Nigeria with oil, tended to use the revenue from the sales of the resources to expand their public sectors. Thus, the state became the major actor in economic activity and development.

The extent of state involvement in the economies of sub-Saharan Africa is summarized in a 1986 report by the World Bank as follows:

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