The Privatisation Process and the Participation of Local Investors in Tanzania

Abstract

Tanzania adopted economic stabilisation and reform policies since mid 1980s, in which, the privatisation of the state owned enterprises formed one of the major economic actions towards enhanced economic growth.  Privatisation methods have been varied and participation involved foreign and local investors).  This article assesses the extent of participation in privatization process by local investors in Tanzania.  Preliminary findings show some mixed results.  The number of local investors that participated in ownership of the privatised firms has been higher than that of foreign investors.  However, in terms of investment values, foreign investors’ participation is more than seven times higher than local investors.  Local investors participation concentrated in the agricultural and related sectors mainly through outright purchase, management and employees buyout.  The foreign investors are concentrated on the financial services, manufacturing and mining industries in which they have controlling interest, having acquired it mainly through the bidding process.  Several factors have inhibited the effective participation of local investors in the privatisation process.  Several factors have inhibited the effective participation of local investors in the privatisation process including lack of access to resources from financial institutions, low income levels, limited business acumen and entrepreneurial skills and culture, lack of team spirit and business networks.  Other barriers include inefficient bureaucracies and corrupt practices and inadequate policy and government support. It has been finally argued the participation of local investors should not just be viewed in term of the direct acquisitions of the divested state owned enterprises; rather there is a need of recognizing and enhancing the local investors capacity to participate through access to financial resources, technology and entrepreneurial capacity building.  There is further the need for enhanced transparency, greater access and disclosures of information to the public in privatization of the remaining state owned enterprises.