Less State, fewer benefits

Abdoul Souleye Sow
Association pour le Développement Économique Social Environnemental du Nord (ADESEN)

While applying structural adjustment programmes in the mid-1990s the government designed and implemented a sweeping plan for the privatisation of public companies. Since 1989, 27 public companies have effectively passed into private hands. The result has been the deterioration of the education system and the public health service, the degradation of food production and security, increased unemployment and the growth of exclusion and inequalities.

Themost controversial privatisations in Senegal were those of SONEES (water),SONATEL (telecommunications) and SENELEC (energy), three sectors that for a longtime had been considered strategic.

Themain arguments put forward in favour of privatisation were increased demand forthe services and the fact that the State was unable to assume the cost of thenecessary investment in these sectors in the context of tight budgetaryrestrictions. Privatisation has so far taken two major forms. One consists oftransferring assets (as is the case of SONATEL) and the other involves leasing(as in the case of SONES, the National Senegal Water Company, with a patrimonialbody belonging to the State and a private management company).

Thispolicy fits very well into the framework of the general strategy for Statewithdrawal from marketing, production and credit functions. The mainbeneficiaries, however, have been the foreign monopolies, to the detriment ofnational capital, workers and even the public services.

Privatisationto the benefit of foreign monopolies

In1996, the Senegalese National Company for Water Exploitation (SONEES), the firstmajor privatisation, was split into three units: the Senegalese National Officefor Sanitation (ONAS); SONES, an entirely state patrimonial asset-holdingcompany; and the Senegalese Water Company (SDE), responsible for theexploitation and distribution of water and whose main shareholder, SaurInternational (the French Bouygues Group), possesses 50.5% of the capital.

Theprivatisation of electric energy is a critical issue, as there is strongopposition from the trade unions. Privatisation of the generation anddistribution of electricity was rejected several times until March 1999, when itended up in the hands of a Franco-Canadian company, Elyo and HydroquébecInternational. This party was to be responsible for meeting the demand forelectric energy, which increases by at least 5% per year, by putting a majorinvestment programme into operation. The State for its part, thanks to a specialprovision in the 1998 energy law that prohibits SENELEC (the NationalElectricity Company) from producing energy, was to authorise it to invest inorder to increase its capacity to the level necessary to cover the demand forelectric energy.

However,the new service suppliers never made the investment necessary to satisfy demand,which resulted in a shortage of electric energy and the rescission of theprivatising contract.

Alittle under a year after the failure of this first attempt at privatisingSENELEC with the Elyo-Hydroquébec consortium, the new authorities decided tore-launch the process of transferring the company to private hands, but madefundamental changes in the rules of the game. Now a total concession for a10-year period has been made, covering production, transport and distribution.Furthermore, the State decided to increase the participation of the strategicpartner. Privatisation would take place through the sale of 51% of the existingshares to a partner having a solid technical and strategic capacity. (Theparticipation of the strategic partner was only 34% following the firstprivatisation operation in 1999.) Ultimately, this privatisation did not takeplace because Vivendi, the purchaser, was unable to assume its financialcommitment.

Theprivatisation of the electric energy sector, always on the agenda, will notresolve the energy crisis. It has been presented nonetheless as a solution tothe State’s difficulties and a panacea for meeting the increased demand andreduced access to electricity throughout the country. Despite privatisation, theState objective of 60% urban electrification and 15% in rural areas, will not beachieved any time soon. The failure of this privatisation has been resounding,since this sector plays a major role in economic development. It is estimatedthat the electricity shortage has been the main reason for a drop in the 2002growth rate.

Inthe telecommunication sector, the Senegalese State transferred 42% of thecapital of the National Telecommunications Company (SONATEL) to France Cablesand Radio (FCR), a branch of France Télécom. Pressed by its foreign creditors,the State sold an efficient and modern public entity.

Thisunderlying problem with the privatisation of SONATEL has never been discussedpublicly. Some sectors, and they are not the minority, believe the governmentshould never have sold this gem of the national economy: it was a well managedpublic asset, well equipped, with up-dated technologies; its profitabilityincreased year by year and its growth was continuous.

Theonly explanation for the privatisation of SONATEL is that it was one of theconditions imposed by the World Bank, which considered that the State should notoperate in this area of the economy. However, it is ironic to note that France Télécom,the public company that bought up 42% of SONATEL capital, is a leader in themarket and first in stock exchange capitalisation in its own country, at leastup to 2002. The other paradox is that France Télécom has a debt of almost USD69,000 million, owing to its eagerness to acquire foreign telecommunicationcompanies, which endangers its own existence.

Atall events, the privatisation of SONATEL has not generated any competition inthe telecommunication market. Those who fear that private monopolies will takethe place of the State monopolies have a reason to be concerned. The privatisedSONATEL is a monopoly. It possesses the entire landline telephony networkin Senegal. When it was a State company, it was responsible for installing thewhole network of landline telephony in the country. However, that public servicerole did not survive privatisation.

Onsharing out SONATEL investments, the State and France Télécom inherited thecountry’s entire telephone network. Despite privatisation of the sector,SONATEL maintains a dominant position in the market. It establishes the rules,fixes the prices and determines access to the national and internationaltelephone network. This lack of options when choosing operators obliges theSenegalese to resort to SONATEL without considering the price and the quality ofthe services. SONATEL dominates, but it is not able to fulfil its obligations:requesting the installation of a landline can become a hard battle for aSenegalese. Is this a logistic problem or a decision to limit the landlinetelephone network, which is expensive to install? SONATEL will never reply tothis question.

Clearly,the State must find other public management options that can contribute toconsolidating national capital.

Privatisationwithout social benefits

SONATEL’sspectacular profits have also caused great uproar. Many legitimately wonder whya company assured of permanent growth and with considerable assets, establishessuch high rates for connection and use despite the citizens’ economicdifficulties and scant purchasing power. The usual reply, which justifies thispolicy by the need for reinvestment in the sector, does not sway the negativepublic opinion.

Investmentin the telecommunication sector has not yet resulted in a significant extensionof the network into rural zones, and therefore exclusion and inequality continueto prevail.

Thedoctrine of “less State, better State” has shown its limitations with theresounding failure of privatisations in the agricultural sector. Following thesudden and unplanned elimination of Sonagraines (the company responsible formarketing peanuts), the government has structured a network of 400 economicoperators in the private sector, carefully selected and certified to marketpeanuts. In this way, the government has put peanut growers in the power of theprivate sector without giving them any real capacity for negotiation,threatening agricultural production and food security.

Inthe education sector, the deterioration of the system has led the mostprivileged people to enrol their children in private schools, thus feedinginequality and generating a two-track system. This is a de factoprivatisation. For the past 15 years the World Bank has been convinced that, tosolve the deficiencies of the education system, it is necessary to open it up tothe private sector. The government, committed to paying the debt and with theimperious need to reduce budget deficits, has become incapable of fulfilling itsobligations in this sector. The multiplication of conflicts with teachers, aswell as student strikes, give further evidence of the erosion of Stateeducation.

Thesame trends are to be observed in the health sector: poorer public service,difficulties in accessing health care and drugs, and the flourishing of atwo-track system. After many years of policies of government subvention and muchtalk about participation, the reality is that the burden on family budgets hasincreased.

Inthe employment sector, we are witnessing the loss of jobs in the industrialsector, caused on the one hand by the waves of privatisation that have leftthousands of workers out of work and, on the other, by the fact that for yearsnow the economic growth of Senegal (around 5% annually) has not resulted in thecreation of new jobs. At the same time, informal or casual jobs are taking overa larger share of the economy.