CONCLUSION AND RECOMMENDATIONS
6.2 Conclusion and Summary
The central focus of this study was to assess the effects of privatisation, the significance of investors' ownership and the corporate performance of companies post-privatisation as compared to when they were still under the public sector. The study also examined the views given by managers and employees towards the research objective. The high rate of loss-making entities especially the government-owned ones in a developing country like Lesotho is more of a concern than other government related problems. Because the Government of Lesotho could not continue supporting non-performing enterprises financially, the Government is highly engaged on parastatal privatisation and private sector development, with the aim to improve the unstable economy. This strategy forms amongst others the primary source of growth, public share ownership and employment creation. As indicated in the previous chapter, a greater percentage of the workforce in Lesotho now comes from the private sector resulting in a huge impact on the economy of the country. The GOL has decided to privatise over fifty SOEs and has provided an enabling environment to ensure sustained economic development in which the private sector takes the lead, the Lesotho Privatisation Unit is the driving-force while the labour and the public are active participants and supporters in the entrepreneurial endeavour.
The study has examined the critical performance changes of seven top Lesotho enterprises (formerly SOEs) from different industrial sectors that experienced full or partial
privatisation from 1995 to 2004. The empirical results are based on hand-collected data and electronic data covering the period mentioned. Most of the findings for privati sed entities seem to be consistent with benchmark studies in terms of changes in profitability, operating efficiency, capital investments, public debts, remunerations, workloads and share ownership in certain industries. However, some other results tend to contrast some previous empirical findings in terms of labour productivity, employment opportunities and competition. This study examined eleven broad indicators of performance; total output, profitability, operating efficiency, competition, employment and wages; capital investment, share ownership, public debts, level of financial reporting and compliance with accounting standards.
The study indicates that privatisation had increased productivity resulting to improved profits and additional funds. The analysis shows that profitable performance through-out the privatisation period has been strong especially in the Lesotho Flour Mills, AON Lesotho, Lesotho Bank and Telecom Lesotho. Significantly, the improvement in the Lesotho Bank's performance has been greatest since 1999, when Standard Bank took over the management. Not only are these companies performing beyond the expectations but there has also been an increased level of operating efficiency. They have managed to make a break in the competitive environments, with the exception of Lesotho Airways Corporation (LAC) that struggled resulting to it being closed down. LAC operated for a few years after being privati sed and had to terminate its operations due to strong external competition early in its existence, unfashionable air transport regulations and the September 1998 civil unrest disruptions that also affected air transport.
Nonetheless, with the introduction of competition in the marketplaces, monopoly power for some entities has been eliminated. Telecom Lesotho has matured from a state-owned monopoly for fixed services, to a privatised, privately majority-owned national operator in late 2000 and is since competing in the mobile sub-sector through a subsidiary. This has lead to Vodacom Lesotho facing stiff competition from this second cellular network provider, although the company is reported to be attracting new subscribers on top of existing ones. As for Imperial Fleet Services, in early 2003 the company was alleged to
have failed to give the Government of Lesotho what the initial deal was worth. For instance, the company was accused of charging higher daily rates on short-term rentals than on normal private hire in Lesotho, and failing to issue monthly reports on time after a year of its existence. For some industries competition was unfair, resulting to certain companies complaining about foul play.
The increased efficiency translates into large gams in profitability and fresh capital investments although not much coming from abroad. There had been improved service levels, more job creations and the reduction in government borrowings. The government borrowings from external sources and subsidies on loss-makers have declined as they were affecting the economy negatively while the collection of Government revenue on profit-making entities has increased. The results show that there had been sharp cuts in the workforce and some changes in companies' management structures and procedures in the post privatisation. Most workers were laid-off during privatisation, yet production levels still managed to increase. This finding also supports the view that retrenchments and job losses attribute to high rates of unemployment and poverty as they proved to be dominant factors in the post-privatisation era.
Moreover, the natural monopoly has been terminated and then substituted by the competition that has resulted to high prices to certain essential services that are no longer being offered by the GaL. In this regard, the GaL is restricted from providing and subsidizing these essential services. Consistent with previous studies in Lesotho, most retrenched workers lost their jobs that were the sources of their households' incomes, while at the same time there had been a general increase in price levels that has complicated their lives even more. On the other hand, retained workers normally receive large increases in salaries or wages while experiencing increased workloads. In most cases, the productivity gains are attributed to better incentives to retained workers and the best recruited skilled workforce. These retained workers believe that they are capable of delivering quality services in terms of improving efficiency and production levels as opposed to recruiting new labour.
The empirical evidence suggests that the level of good accounting system in the private sector has also improved as compared to previously in the public sector. The privatised entities comply with national and international accounting standards when preparing their financial statements. The latter are audited and sent to the relevant parties even though they are still not published publicly. The companies practice good corporate governance in order to be in line with their counterparts globally though it was not easy to verify this. In addition, the companies are operating under national regulators that however need to be strengthened due to their weak law enforcements. The findings also include the opinions of respondents who claim that privatisation had weakened the country's economy in terms of not supporting local empowerment but instead attracting foreign skills and technical expertise, not supporting local infrastructure and being a short term project that is not intended to foster the African economy.