This study also measures the effects of privatization in Lesotho in terms of its contributions to the welfare of shareholders and the performance of individual companies, focusing on the theoretical background of the topic and the opinions of the directors, management and employees of the selected companies regarding the critical performance of the change that occurred in the period before and after privatization from the late 1990s to the present day. Although the study did not show their individual financial results, it highlighted the effects of privatization on these companies in an economic way.
INTRODUCTION
- Introduction
- Problem Statement
- Historical Background -Lesotho's Economy
- Background to the Study
- Research Objectives
- Importance of the Study
The private sector employs the majority of the workforce in Lesotho, contributing greatly to the economy. Nevertheless, the country has implemented several IMF structural adjustment programs and inflation declined significantly during the 1990s.
CHAPTER TWO
PRIVATISATION: THEORY AND LITERATURE
Introduction
What Does Privatisation Mean?
Utt believes that in much of the world privatization is synonymous with divestment – the process by which a well-defined state-owned and operated commercial enterprise such as a shipyard, telecommunications company, agricultural property or airline is transferred to private owners and operators. Public assets have been sold to the private sector through outright purchases of other companies.
Theories on Privatisation
In addition, it is argued that principal-agent relationships7 in the private sector are simpler than in the public sector, as shareholders. Public choice theory supports what the property rights approach has to say about relative inefficiency in the public sector by focusing on the behavior of politicians and bureaucrats.
Why Privatisation?
- The Arguments for Privatisation
Proponents in Europe have also argued that privatization promotes the growth of the stock market (Clutterbuck e) Creates competition in the market. Privatization seeks to reduce the dominant role of the government in the economy by transferring state-owned enterprises into the private hands of the public, as they are believed to be suitable persons to manage them.
Privatisation in Less Developed Countries
According to Ramanadham, the most common cause of economic inefficiency in public enterprises is political interference. This shows that privatization does not necessarily guarantee better performance compared to the public sector.
The Status of Privatisation Globally
- Developed Countries
- The Arab Countries
- The sub-Saharan African Countries
- South Africa
For example, according to The Economist (1999), in South Africa the government estimated that 27,000 jobs would have to be cut at Transnet, a transport company, and 10,000 jobs at Telkom, a telecommunications company. The union's statement said: “COSATU remains opposed to the government selling off state-owned companies that provide essential services to the community.
Research Studies on Privatisation
- Studies with Uncertain Results
In their study entitled The Impact of Privatisation: Ownership and Corporate Performance in the UK, Martin and Parker (1997) reviewed a number of international studies comparing public and private sector companies and found that although the evidence is mixed, there are several studies that show greater efficiency in the public sector. The authors also examined UK comparisons between public and private sector companies.
CHAPTER THREE
PRIVATISATION AND PRIVATE SECTOR DEVELOPMENT IN LESOTHO
Indirect Participation: Establishment of the Lesotho Unit Trust
This refers to the promotion of local participation in share ownership of expropriated state funds (investment fund) through the Lesotho Unit Trust for the nation. The Lesotho Unit Trust was duly established and inaugurated on 16 August 2001 under the Central Bank of Lesotho (Collective Investment Scheme) Regulations 2001 which allowed the Basotho to purchase shares in privatized companies. The Lesotho Public Sector Reform Project (LUSRP) is part of the economic restructuring program of the government of Lesotho.
The sale excluded assets related to land properties that remained under the ownership of the Government (Privatisation Unit, 2001; 3).
Lesotho Flour Mills (LFM)
Imperial Fleet Services (Lesotho)', as it is now known, has leased a number of government workshops and the government has sold off those that are no longer needed. Since the Lesotho government owns 20 percent of the shares in Imperial Fleet Services, it is therefore entitled to a benefit in the profits the company makes. The purpose of the interview was to find out what benefits the privatization of the former PVPS has brought to the Lesotho government and how the new company, Imperial Fleet Services, is managed.
AON (Lesotho) formerly Minet Kingsway (Pty) Ltd formally commenced an employee share ownership scheme for its employees in Basotho in fulfillment of the share sale agreement between the Government of Lesotho and AON Holdings BV in April 2002.
Lesotho Telecommunications Corporation (LTC)
The bank's financial restructuring cost the GOL approximately €612.0 million, of which €15.0 million was used to secure the government's 30% share in the new Lesotho Bank. Lesotho Bank was privatized in August 1999 by divesting 70% of its shareholding to Standard Bank, with the Lesotho government retaining 30% in the new 'Lesotho Bank 1999 Limited'. Fifteen (15%) percent of the thirty (30%) shares held in trust by the government for Basotho were sold to the Lesotho Unit Trust. On August 2, 1999, when Standard Bank took over the management of Lesotho Bank, 460 employees were rehired and the company continued with the management of the old bank (Nchake, 2000).
However, the industry has seen a gradual transformation from a state-owned monopoly for fixed services to a privatized, private majority-owned national operator in late 2000, finally competing in the mobile sub-sector through a subsidiary.
Vodacom Lesotho (VeL)
The ongoing liquidation costs of some of the former SOEs have also complicated the determination of the net proceeds of privatization of SOEs as liabilities exceed assets as in the case of Lesotho Airways and the former State Banks. Privatization is an evolutionary process that requires major changes in the way the economy is managed. The country is still in the learning process and will be able to draw its own conclusions in the long run.
The next chapter deals with procedures; the research methodology and instruments used in the study and the methods of analysis described in context.
CHAPTER FOUR
RESEARCH METHODOLOGY AND INSTRUMENTS USED
The Sample and the Sampling Design
The sampling frame for this study consists of employees and managers of these privatized entities in Lesotho, formerly public companies. For the purposes of this study, a total of sixty-one respondents from the entities surveyed were included, namely; Standard Bank Lesotho (16), Telecom Lesotho (22), AON Lesotho (14) and Avis Lesotho (9) were included in the study design with their demographic data. Again, data obtained from the Privatization Unit is believed to be useful for this investigation as it could not be found within the entities themselves.
The sampling design chosen is "convenience sampling" because it is considered the cheapest and easiest to implement.
Data Collection Instruments
- The Self-Administered Questionnaire
- Personal Interviews
The last question in this section was used to determine the respondent's current position in the company. This was used to differentiate between their different occupations in the company in terms of duties and responsibilities. Therefore, this question aimed to find out whether, according to respondents, privatization had increased direct public participation in the economy.
This question was asked of the interviewee to determine whether the company had a monopoly in the industry.
Limitations
Data Analysis Methods
Descriptive Statistics
- Frequency Distributions
- Central Tendency
- Dispersion
- Cross-Tabulations
The central tendency of a distribution is an estimate of the "center" of a distribution of values. The mean is the arithmetic mean, the median is the midpoint of a distribution of data, and the mode is the most frequently occurring value in a range of data. The standard deviation is a more accurate and detailed estimate of dispersion because an outlier can greatly exaggerate the range, and therefore it is a more frequent measure of dispersion or variability of a data spread.
A crosstab is a two (or more) dimensional table that records the number (frequency) of respondents who have the specific characteristics described in the cells of the table.
Summary
CHAPTER FIVE
DATA ANALYSIS AND PRESENTATION OF RESULTS
Introduction
Presentation of Research Findings
- Demographic Details of Respondents
- Responses to the Objectives of Privatisation
- Responses to the Effects of Privatisation on Company Stakeholders
The company was taken private because it was doing poorly and was therefore approaching closure. The company wants to maintain its standards in relation to the global market (ie, to be in line with companies associated with maintaining high global standards). The annual reports are prepared in accordance with ZRS, as the company is obliged to do so by GOL and accounting authorities in the country. a) Are both financial and non-financial statements disclosed to the public?.
The company is moving in that direction because it has already sold a number of shares to Lesotho Unit Trust.
Discussion of the Research Findings
- General Information about the Respondents
- Productivity, Profits and Operating Efficiency
- Competition, Debts and Investments
- Changes in Staff and Company Policies
- Ownership, Accounting and Legislation
- Economy and Globalisation
On the other hand, respondents believed that other entities found it difficult to survive in the competitive environment. According to respondents, the level of good accounting systems has improved compared to before in the public sector. According to respondents, companies comply with the rules and regulations of national regulators, although in some cases it is claimed that regulators are ineffective.
Respondents believe that privatization brought both negative and positive changes to the national economy.
Summary
CHAPTER SIX
CONCLUSION AND RECOMMENDATIONS
Introduction
Conclusion and Summary
Significantly, the improvement in Bank of Lesotho's performance has been the largest since 1999, when Standard Bank took over. They have managed to make a break in the competitive environment, with the exception of Lesotho Airways Corporation (LAC) which experienced difficulties resulting in its closure. However, with the introduction of competition in the markets, the monopoly power of some entities has been eliminated.
The results show that after privatization there has been a sharp reduction in workforce and some changes in companies' management structures and procedures.
Recommendations
34; International Case Studies with Implications for Public Management."Privatization or Reform of Public Enterprises? British Library. Restructuring and Management of Enterprises in Transition - The Case of Eritrea." Thesis submitted to the Department of Financial Management, University of Groningen. 34; Understanding Privatization." In Kamerman, Sheila, and Alfred Kahn, eds., Privatization and the Welfare State.
UNCTAD, Final Report of the Ad Hoc Working Group on Comparative Experience with Privatization for the Board on Trade and Development, TD/B/40(2)/21 TD/B/WG Privatization in the United States.” In Ott AF and Hartley K , Privatization and Economic Efficiency, Edward Edgar Publishing Limited.
