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LAST UPDATE: 24/9/2008 - 5:58PM EAT

Friday, August 15, 2008

ATCL to be privatized.... yet again!!!

Dear forum members,
Have we completely failed to successfully run our own companies that we have to sell everything? When we started reforms in the 90's it was only logical to privative state-run companies because as good as socialism was idealistically; it had proven to be futile; mainly due to the general feeling that everybody's property is nobody's property. Most of the investors who could afford to invest in the privatized companies were foreign companies, such as SAA who acquired 49% of ATCL shares in December, 2002.


We all know how the relationship with SAA turned out. To quote the TCAA Director General, Margaret Mungayi, "Air Tanzania was in a worse state than before it was taken over by SAA". (Apparently from the time SAA started running the company to March 31st, 2006, ATCL went TZS 24.7bn into the red). So finally, the government decided to dissolve the contract with SAA in 2007; they pumped money into the company and made some major reforms.
I don't have figures on ATC performance after that move, but I did get the chance to fly ATC from Dar-Mwz in August last year and I was impressed by the service. I had never flown ATC during the SAA era or any other time before, so I didn't really have any experience to compare it with. But from what I had heard, ATC had been some major improvements.

Now, I just came across this article from The Guardian, Govt negotiates ATCL privatization. ``Information about the ATC privatisation process is currently at government level. We are now holding talks with the Chinese firm on the possibility of taking over. We are yet to reach agreement. Members of the public will be informed of the outcome``, Infrastructure Development deputy minister Hezekiah Chibulunje said of the negotiations.

I can only hope that whoever the investor will be this time, Tanzania will benefit from this venture. It was my hope that we would learn from the SAA experience that privatization is not always the solution; and in fact, sometimes it can even make things worse. I understand that as part of the Economic Reforms, the Government decided to have minimal participation in running a lot of major corporations; however, I believe there is an alternative to outright privatization. We have had some very impressive success with letting some companies and government agencies operate in a semi-autonomous manner. With the government retaining 100% interest, but letting the management and board make a lot of the major decisions independently; including decisions on income and expenditure; with the Government only receiving some percentage of the revenue as dividend.

In my opinion, if this can be done, it is a far better option than letting foreign investors, who usually come in with interests to profit only themselves and whatever country they came from. What do you think?

1 comment:

stephen said...

I personally think that running an airline business at this moment in time is a very complicate affair, already the very big ones, have only survived because of government intervention, and some have even totally collapsed, recall swiss air, and silverjet.

That been said it is essential that Air Tanzania retains a management that is competent and well versed to meet the current challenges of the airline industry. I think some time ago they commissioned some Germany company i think Lufthansa consulting to provide advice on strategy and revival. I assume it is from their advice they decided to come out with a strategy for MWALIMU NYERERE INTL airport to become a hub for flights from Africa to Asia, particularly China. And to use those routes to grow and expand. So the first phase involved regaining local market share, through airplane acquisition and beginning operations, and this privatization venture with a Chinese company is geared to fulfill the Asian/international expansion.
I think it is a sensible move and it is probably what the Germans advised. Considering the fact that business between the two continents is growing and is only at its infancy, the market potential is big. I suspect unlike the SAA venture the government will retain a majority stake because this is a national flag carrier, and I can only hope they use the SAA experience to negotiate a deal that does not leave us short handed like before.