World Bank Funded Privatizations Face Repossession

The Government of Tanzania is currently considering repossessing approximately 30 firms that were privatized through funding from the World Bank during the Tanzania economic and financial reforms of the late 1990s and early 2000s.

Reasons that have been given for the proposed repossession include the fact that the majority of the firms that were privatized more than a decade ago have effectively remained abandoned by their new owners.

According to Dr. Mary Nagu, the Minister for Industries, Trade and Marketing, who recently spoke with the Tanzania National Assembly in Dodoma, results from a study that was conducted on the eastern zone of the country in the areas of Dar es Salaam and Morogoro areas have indicated that a number of investors who took over the firms following the privatization process have not followed through with their promise of increased investment.

In addition to the lack of investment in some of the privatized firms, it has also been reported that hundreds of other firms have been left abandoned in other parts of the country the regions of Shinyanga, Mwanza, Mara, Kagera and Tabora as well as in the southern portion of Tanzania.

Dr. Nagu went on to say in a recently published East African Business (EABW) report that, in fact, only a few industries came close to reaching the level of investment that they had promised to the Parastatal Sector Reform Commission (PSRC), with the majority of investors having either abandoned the firms they took over, have under-invested in them or have used them as collateral for bank loans for other businesses.

In fact, the report went on to indicate that some of the industries that were privatized have either been uprooted and their equipment sent abroad or were turned into warehouses.

The areas that were the most affected by the lack of investment include the country’s leather and textile industries as well as various other land-related firms, which have received virtually no new investments or activities since the privatization.

The failure of the privatization of the more than 400 state-owned institutions, which had survived on an annual sum of USD 100million, resulted in the loss of jobs for thousands of Tanzanians.

Based on the numerous examples of the failed privatization process, the Tanzanian Ministry of Industries, Trade and Marketing has decided to present the cabinet with a proposal to repossess the industries and resell them to investors who would make better use of them while, at the same time, helping to raise the national income level and improve employment rates.

In an effort to solve this issue quickly, Dr. Nagu has promised the House that the cabinet will be presented with the matter soon.

In the meantime, several privatized firms are have demonstrated success in following through with their promise to continue in the same direction as the businesses had taken prior to being taken over.

Tanzania Breweries Limited, Tanzania Cigarette Company and various cement factories are among the few firms that have not only expanded, but have also employed more people and are paying taxes to the Tanzania Treasury.