Over the past decade, the government of Burkina Faso has been withdrawing from direct involvement in productive sectors as part of a broader package of policy changes agreed to with the international financial institutions. While the results of some privatizations have been positive, there have also been problems. In some cases, new jobs were created; others brought job losses which sowed discord between the government and employers on one side and the workers and trade unions on the other.
Before the first structural adjustment programme in 1991, state enterprises performed poorly despite direct and indirect government subsidies. In 1990, the 13 largest state enterprises recorded losses of $31 mn and were a large drain on public revenues. Restructuring these enterprises to improve performance and enhance competitiveness was therefore seen as unavoidable.
The government agreed with the International Monetary Fund (IMF) and the World Bank to sell off most or part of its shares in such enterprises to the private sector. The programme stipulated that state-owned shares would not exceed 25 per cent although in some cases they could remain somewhat higher, especially in public utilities and mining enterprises.
Of the 44 state enterprises listed for divestment, 22 were privatized by the end of 1999, bringing the government CFA 10.5 bn francs ($18 mn) in revenue. Another seven enterprises were on offer, 12 had been liquidated or were in the process of liquidation and three had been transformed into research institutes and put under the Ministry of Higher Education. This shift away from public enterprises stimulated investment and other private sector activity. A World Bank-funded Private Sector Assistance Project (PSAP) is seeking to improve the infrastructure and legal environment for private companies.
According to Ms. Geneviève Compaoré, coordinator of the PSAP, the first cases of privatization experienced numerous difficulties. The unions were not involved and little attention was paid to retraining or finding new positions for workers who lost their jobs.
From the beginning, therefore, the unions denounced privatization for its "anti-social" consequences. They also argued that many public enterprises performed poorly not because they were state owned but because of political interference in the selection of directors, which brought waste and mismanagement.
According to Ministry of Commerce and Industry figures, by the end of 1996 privatization had cut 120 jobs overall. This, however, did not include jobs eliminated when enterprises were restructured prior to privatization. The unions have since put overall job losses as high as 1,200.
In 1991, the government agreed to consult with the trade unions over any privatization but Mr. Richard Tiendrébéogo, assistant general secretary of the Burkina General Confederation of Workers (CGTB), one of the country's larger labour federations, told Africa Recovery that the agreement has not been respected.
Prime Minister Kadré Désiré Ouédraogo acknowledges some of these problems. He says that while most workers agree that adjustment measures are needed, they want above all to preserve their jobs and ensure that the benefits of privatization do not go to a tiny minority only. "We can't have a situation where some tighten their belts, while others loosen them for their own profit," he says.
During the first phase of Burkina's privatization programme, sales had to pass through a number of stages. Initially, an enterprise was evaluated and a tender for purchase offers was issued. Various offers were then weighed and discussed by the cabinet. Often, further negotiations took place with potential buyers before a final agreement was reached and the shares transferred to the new owner. In most cases, the process lasted between one and four years. The shortest was 10 months -- for the privatization of the Brakina brewery in 1992 -- and the longest was nearly five years for the national bus company, which finally passed to private ownership in March 1999.
These experiences revealed a number of shortcomings, including
excessive government involvement which contributed to delays.
There was no real policy to keep the public informed, no strategy
for specific industrial sectors, nor any distinction made between
large and small firms. Shares in an enterprise tended to be sold
to a single buyer; small shareholders were not involved. The privatization
commission, moreover, was short-staffed and under-budgeted. A
parliamentary inquiry found in 1996 that several privatizations
had been carried out in a "discriminatory" way. It argued
that the frequent reliance on secret negotiations favoured corruption.
Sold to a Dutch company in 1995, the Cimat cement company enjoys protection through high tariffs on cement from neighbouring countries.
Photo: Paul
Compaoré
The privatization of the Cimat cement operation was particularly controversial. Bought by a Dutch company in 1995, it was accorded a production monopoly and received government protection in the form of high tariffs on cement imported from neighbouring Côte d'Ivoire and Togo. With such support, it now produces about 300,000 tonnes annually, about three-quarters of national demand. Some critics accuse the government of displaying "favouritism" toward the firm.
Mr. Tiendrébéogo of the CGTB union federation noted that while government support for the development of national productive capacity should be encouraged, it should be done in a way that facilitates broader involvement in the construction industry. Alluding to high cement prices as a result of the tariffs, he said that if such a policy "penalizes the consumer, then it becomes anti-social and must be fought."
In light of such shortcomings, Prime Minister Ouédraogo announced a new privatization strategy in 1996 that aimed to correct some of the problems by making the entire privatization process less bureaucratic and cumbersome. Different criteria would be used to evaluate large- and small-scale enterprises. More attention would be paid to their specific roles in the economy and to the criteria for selecting potential buyers. The new strategy also emphasized follow-up -- ensuring that those who buy the enterprises meet their contractual obligations on staffing levels, benefits and investment plans.
The World Bank, meanwhile, has placed greater emphasis on the qualifications of potential buyers and the minimization of job losses. According to Ms. Compaoré, the Bank does not unilaterally dictate a privatization programme but seeks to help a country develop its privatization policies. "The discussions are always open," she maintained, and the only pressure from the Bank concerns the programme's timing.
With the new approach came a bigger privatization commission which now includes a trade union observer. This should help ensure greater transparency, says Mr. Christophe Ilboudo, the commission's permanent secretary. Other key factors guaranteeing a more open process include emphasizing competitive bidding and the evaluation of potential buyers' offers in a public session. "The selection of a buyer is not the affair of just one institution, whether the government or the privatization commission," Mr. Ilboudo told Africa Recovery. "It must take into account the advice of all those involved in the privatization process."
The unions remain skeptical that real transparency exists yet. According to Mr. Tiendrébéogo, some privatizations or liquidations are carried out in ways that favour the purchase of assets by high-level "cronies."
In some cases, however, union involvement has made a difference. Mr. Tiendrébéogo notes that before the privatization of Sonapharm, the national pharmaceuticals supply enterprise, its management claimed that it was operating at a loss. But the union, working with the auditors, demonstrated that it was actually turning a profit. Management was obliged to heed the workers' salary and benefits demands. In principle, workers should also be able to acquire shares in the firm but this has not yet happened.
Workers were able to obtain 3 per cent of the shares in the
privatized national insurance company, Sonar. Mr. Félix
Ilboudo, the company's administrative director and chief accountant,
says that privatization brought no job losses, but a slight increase
in staff. The company's turnover has increased since privatization.
In 1997, it paid shareholders CFA 1.2 bn francs ($2.1 mn) in dividends;
subsequently, it also raised employees' wages by 10 per cent.
Workers own a 3 per cent share in Burkina Faso's privatized national insurance company, SONAR.
Photo: Paul Compaoré
According to Mr. Ilboudo of the privatization commission, in enterprises that have been privatized since the shift in approach, "workers are more at ease," both in terms of remuneration and staffing levels. They have acquired shares in some companies and have a voice in managing them.
Even when privatization is judged to be relatively successful, however, problems related to market volatility can later arise and jeopardize the future of the business. The Sugar Company of Comoé (Sosuco) is a case in point. Employing 1,715 workers -- making it the largest industrial employer in the country -- Sosuco was sold in July 1998 to a consortium led by an Abidjan-based company belonging to the Aga Khan, the spiritual leader of the world's Ismaili Muslims. Union concerns about jobs were answered by a pledge to maintain current staffing levels and to improve the enterprise's performance through new investments. However, no sooner had Sosuco been privatized than the domestic market was flooded with cheap, smuggled sugar. Sosuco took heavy losses. This led to a confrontation with the unions which had been expecting salary increases and other benefits.
Minister of Commerce Idrissa Zampalégré stepped in to try to save this important enterprise. He ordered an additional tax on imported sugar and required customs officials to enforce quality controls more strictly. This was not a reversion to protectionism, he argued, but a "legal intervention to ensure healthy and fair competition." During 1999, sugar imports began to come down somewhat.
The privatization commission is now keeping a watch on privatized firms to ensure that the new owners live up to their commitments. However, it has met resistance from some companies which view government monitoring as interference in their business affairs. Some have not maintained staffing levels or made the additional investments they originally agreed to make; others are in arrears to the government on their purchase payments.
Mr. David Fayama (of the technical secretariat for the coordination of government development programmes) says these companies need to understand the importance of fulfilling the conditions under which they were allowed to buy the enterprises.
Despite such concerns -- and even before the shift in the approach to privatization -- overall investment is rising. The level of investment in these firms rose from CFA 2.3 bn francs in 1992, before privatization, to CFA 5.6 bn francs in 1996, according to Ministry of Commerce statistics. By the end of 1999, they had risen to CFA 19 bn francs.
Local private-sector involvement has not been broad-based,
however. A survey of business attitudes found that while many
potential investors are interested in privatization, they feel
that it benefits only a small group which has sufficient finance
to buy large blocs of shares. In response, Mr. Fayama suggests
that small-scale businesses form consortia so that they can take
a bigger share in privatized firms.
