DRIVERS OF MARKETISATION OF AFRICA’S ECONOMIES:

A CASE OF UGANDA

BYSimon Ross Euku and Christopher Mayanja

Uganda Management Institute

ABSTRACT

African economies are characterized by the dominance of public sector as a vehicle to economicgrowth and development. This approach limits the fundamentals of modern and feasibleeconomic growth and developmental efforts. The approach is a traditional measure to deliveryof public services, that should transform to a fully market economy by marketising Africa’seconomies1. Worthwhile noting is the inefficiency in public institution or enterprises that resultfrom both distortionary government interventions as well as the government organizationalstructures, which are bureaucratic. Marketisation of the economies therefore, is a necessary evilto reduce the resources of x-efficiency2 in public organizations’ and to allow them to respond tothe market forces and become more competitive.

Marketisation of African economies is underpinned on certain drivers/determinants that thisstudy is meant to undertake. Unless these determinants are fully espoused, the dream ofmarketising African economies will be a nightmare. The big questions await: “how Africaneconomies can be marketized?” and if the African governments are on a marketisation drive, isthe private sector ready to engage?”

The marketisation approach of the economies intertwines “A credible sustainable Public Sectorand Economic Growth,” leading to poverty eradication, which is being pursued in a quasi-market environment where the private sector remains the engine of growth and development,while Public Sector plays a facilitating role through provision of conduceive business likeenvironment in terms of policy, institutional and regulatory framework, by actively promotingand encouraging Privatisation and/or Private investments in a rational manner.

Key words: Drivers of Marketisation, African economies, sustainableEconomic growth, Public Sector reform, New Public Management, CredibleSustainable public sector, Privatisation, Poverty eradication.

i | P a g e

1 This borrows a leaf from the “X-efficiency theory” of Harvey Leibenstein (1966) that states, “Public institutions cannot fail as long as official financial and monetary policies are expansionary enough to bail them out or limit their probability of failure.”

2This is an economic theory on “the management of a firm that seeks to maximize profits by minimizing inputs…, but not compromising standards.”

ii | P a g e

Introduction

Marketisation of Africa’s economies means African governments(economies) operating under the command of the market forces ofdemand and supply. The government will demand the provision ofpublic services (which were traditionally provided by publicsector), that will be outsourced from private sector assuppliers. Marketisation of the economies is built on fivepillars: (1) Businesslike economic activities between the publicsector and the private sector; (2) Common decision making betweenthe public sector and the private sector; (3) Risk sharingbetween the public sector and the private sector; (4) Long termcontractual relationship between the public sector and theprivate sector; and (5) The public sector and the private sectortransact on equal terms. This is because the public sectorprovides conducive environment by providing enabling policies andlegislation, while the private sector providing the “bundle ofservices and goods”.

Marketisation of African Economies is a notion that isunderpinned in the public sector reforms; from the oldtraditional models of public sector/administration, withprofessional bureaucracy, organized anarchy with fully sustainedcorruption and loose management in taking care of the publicassets.

As professor Ayee (2008) puts it, the public sector in mostAfrican States since late 1950s to 1960s has generally beenregarded as pivotal to promoting socio-economic development (akey to economic growth and development). It is well noted thatthe public sector in African states is known for its basicfunction of providing goods and services to citizens based on the“realization and representation of public interests and itspossession of unique public qualities compared to businessmanagement (Haque, S., (2001: 65).

1 | P a g e

In this presentation, the author argues that private led PublicSector in Africa may not be possible unless the drivers ofmarketisation are explored by African economies. Marketisation ofAfrican Economies will be espoused under the theme: Public SectorReform. The ineffectiveness and inefficiency coupled with theeconomic crises of the late 1970s and 1980s and the apparentlessons from international experience of the success of market-friendly economies have combined to produce what some scholarshave referred to as the “redefinition of the role of the state orpublic sector(Fiszbein, A., 2000).

In this paper, administrative reform and public sector reform areused synonymously; and, Privatization, Public-PrivatePartnerships and Marketisation are used interchangeably.

As professor Ayee (2008) puts it in CODESRIA Green Book; Reforming the African Public Sector:Retrospect and Prospects

Haque, S., (2001: 65), ‘The Diminishing Publicness of Public Service under the Current Mode ofGovernance’, Public Administration Review, Vol. 6, No. 1, January/February, pp. 65-82.

Fiszbein, A., (2000): ‘Public-Private Partnerships as a Strategy for Local Capacity Building: SomeSuggestive Evidence from Latin America’, in Collins, P., ed., Applying Public Administration inDevelopment: Guideposts to the Future, Chichester: Wiley.

Already research has been done on the subject matter; but in thispresentation, I suggest that a number of insights have beenhighlighted to ease further public sector reforms in the subjectmatter of marketising African economies and scrutiny of theassumptions and theories promoting marketisation as public sectorreform instrument. It is worth noting that the marketisation ofAfrican Economies has to:(1) gain support and ownership from thestate, private sector and the voluntary sector; (2) defusecorruption because it hinders its development; (3) take time toyield results; (4) be patient on culture change and changemanagement; (5) flourish on a reformed public sector; and (6)finally identify the drivers for marketisation.

2 | P a g e

On economic growth, Easterly Williams, (2001), in his book –“The

Elusive Quest for Growth” indicated that the concept of economic growth

is a fundamental part of the field of macroeconomics. Easterly

powerfully depicts the real, long term economic crisis that many

countries are facing around the world and he alludes to an idea

that a combination of different factors (investment, education,

technological innovation), along with a fundamental structural

change might be the path to long term economic growth. He further

reiterates that Privatization, a method of reallocating assets

and functions from the public sector to the private sector,

appears to be a factor that could play a serious role in the

quest for growth. In recent history, privatization has been

adopted by many different political systems and has spread to

every region of the world. The process of privatization can be an

effective way to bring about fundamental structural change by

formalizing and establishing property rights, which directly

create strong individual incentives. A free market economy

largely depends on well-defined property rights in which people

make individual decisions in their own interests. The importance

of property rights is captured by an economist Hernando de Soto

(1996) as he states, “Modern market economies generate growth

because widespread, formal property rights permit massive, low-

cost exchange, thus fostering specialization and greater

productivity.” Along with creating strong incentives that induce

productivity, privatization may improve efficiency, provide

fiscal relief, encourage wider ownership, and increase the

availability of credit for the private sector. This sums up that

3 | P a g e

“Marketisation of Africa’s Economies encourage wider ownership

and influences the rate of economic growth.

Easterly, William (2001): The Elusive Quest for Growth. Cambridge, Massachusetts: The MITPress, 2001.

Hernando de Soto (1996): A dozen proportion of property rights: Private property, publicRights and the New taking Legislation (Tucker lecture, Washington & Lee), 53, Wash & Lee L.Rev. 256.

Defining the Public Sector Reform and its scope

The Public Sector is the part of the economy concerned withproviding basic government services and/or part of the societythat serves essential public purposes. According to Johnson C.W(1992), the basic public purposes vary from country to country;but generally include: (i) Protection of life, property andrights of citizens; (2) Maintenance and supply of essentialresources; (3) Support of persons unable to care for themselves;(4) Promoting steady and balanced economic growth; (5) Promotingquality of life and personal opportunity to succeed; (6)Protection of natural environment; and (7) Promotion ofScientific and technological advancement. The control andmanagement of Public Sector in Uganda may be by CentralGovernment and Local governments.

Public Sector Reform is defined as a deliberate attempt by a Countryto improve its bureaucracy in order to deliver services to thecitizenry more efficiently and effectively (Caiden, G.E 2007:47).In the words Samonte, A.G. (1970), Public Sector Reform is“to make Administrative System a more effective instrument forSocial change and a better instrument to bring about politicalequality, social change and economic growth.”

The Creation of Credible Public Sector before Reform (Karyeija,G.K. (2012) is a necessary tool for the Marketisation of Africaneconomies. Public Sector Reform (PSR) flourishes in the so called4 | P a g e

“New Public Management”, which resulted from the inefficiencies ofpublic organizations in the 1980s.

According to Johnson C.W (1992):Public Administration. Policy, Politics and Practice.Dushkin Publishing Group, Inc. New York. USA

Caiden, G.E (2007: 47): Hand Book for Whom, Public administration review, Volume 67, issue2. California. USA.

In the words Samonte, A.G. (1970): “Patterns and Trends of Administration Reform, “in H-BLee and A.G. Samonte (eds.), Administrative Reforms in Asia (Manila: EROPA) pp.278-302.Manila, Philippines.9Karyeija, G.K. (2012): Public Sector Reform in Africa: What Lessons have we learnt? Forum fordevelopment Studies, 39:1, 105-124

Karyeija, G.K. (2012): Public Sector Reform in Africa: What Lessons have we learnt? Forum fordevelopment Studies, 39:1, 105-124

New Public Management (NPM)NPM is a modern management practice with the logic of economicsof retaining core public values (Samaratunge, Alam and Teicher,2008), which are not a static phenomenon but evolving one. Thetraditional concepts of public administration have beentransformed to cope with the emerging geo-political 2 New PublicManagement: Emergence and Principles; and economic challenges.Indeed, the greater role of the government until the 1960s insocio-economic transformation, market oriented reforms,production, provision and regulatory activities came under severecriticism as there were fiscal crisis, imperious bureaucracy,poor performance and lack of accountability in publicorganizations, wide spread corruption, changes in public5 | P a g e

expectation and emergence of better alternative forms of servicedelivery (Minogue, 1998) that have given rise to the emergence ofNPM (Sarker, 2006). After appearance, NPM becomes a leverage ofmanaging public sector organizations with two key features forexample, one is the separation of policy formulation fromoperation (Implementation) and secondly, the importance ofmanagement inspired by private sector management.

As Aucoin, Peter (2008) put it, New Public Management is aphilosophy used in governments to modernize the traditionalpublic sector/administration or getting things done better in thepublic sector as a culmination of various reforms: (1)marketisation (market competition into the public sector); (2)disaggregation (decoupling policy and executive functions); (3)Incentivism (linking incentives to performance); (4) reductionand deregulation of bureaucracy; and (5) devolution ofresponsibility downwards and outwards in organisations.

.Marketisation of Africa’s Economies (the case of UgandanEconomy)The discussion of Marketisation of Africa’s economies is limitedas the main concern of this paper is identifying the Drivers ofMarketising Africa’s Economies.

Marketisation of Ugandan economy is a change in thecharacteristics in the way government (public sector) transactsbusiness by fully marketising transactions in which actor choicesare made purely on the basis of price, the good or service inquestion is standardized, exchanges are frequent, and competitionis open to a wide range of participants.

Samaretunge Ramanie, Alam Quamrul and Telcher Julian. 2008. The New Public Management Reforms in Asia: A Comparison of Southeast Asian Countries in International Review of Administrative Sciences, Vol. 74 (1).

Minogue, M., Polidano, C. and D. Hulme (eds.). .1998. Beyond the New Public Management. Cheltenham: Edward Elgar. 6 | P a g e

Sarker, Abu Elias. 2006. New Public Management in Developing Countries: An Analysis of Success and Failure with particular reference to Singapore and Bangladesh in International Journal of PublicSector Management, Vol.19, No. 2.

Aucoin, Peter (2008). New Public Management and the Quality of Government: Coping with theNew Political Governance in Canada, Conference on “New Public Management and the Quality ofGovernment”, SOG and the Quality of Government Institute, University of Gothenburg, Sweden, 13-15 Nov 2008, p.14.

The concept of marketisation is attractive because it is framedas a strategy to empowering citizens and providing room foradministrators to be business-like (developing, producing andsupplying a good and service) that: (1) Utilises unit costs; (2)Links costs with expected output/outcome (Value for money); (3)takes stock of client needs, demand, and satisfaction on aregular basis; (4) Holds personnel accountable for performance;and (5) demonstrates accountability to stakeholders (Citizen, taxpayers, shareholders) by monitoring and evaluating governmentfunctions in order to yield better results.

The trace of marketisation of Ugandan Economy is from the 1980sand early 1990s when the Structural Adjustment Program (SAP) wasintroduced to reform the public sector, through privatization ofsome (or all) of the public companies and corporations.Marketisation has however taken shape, though some failures havebeen registered in some of those privatized companies.Marketisation of the public sector has had varying degrees ofsuccess. There are those with very excellent performance such asthe former Uganda Electricity Board (UEB).

In the face of it all marketisation intertwines“ A sustainable PublicSector and Economic Growth,” leading to poverty eradication, which isbeing pursued in a quasi-market environment where the privatesector will remain the engine of growth and development, whilePublic Sector will play a facilitating role through the provisionof conducive policy, institutional and regulatory framework, byactively promoting and encouraging Privatisation by privatizingall or some of the public sector companies and corporations,7 | P a g e

Public-Private Partnerships, and contracting out in a rationalmanner. Public sector can only be sustainable if it is credible(Karyeija, G.K. (2012) and reformed.

Privatisation of the energy sector (Electricity)Privatization is the transfer of the publicly owned and tradedcompany to make it privately owned, usually described as privateequity. Privatisation is the art of marketising the public sectororganisation, as the market forces of supply and demand are thedeterminants of its operations.

The Uganda Electricity Board (UEB) Now is broken into threedistinct and independent “Public Limited Companies”:(UgandaElectricity Distribution Company Limited- UEDCL, UgandaElectricity Generation Company Limited-UEGCL and UgandaElectricity Transmission Company limited-UETCL (D’Ujanga, S.(2008).Since the privatization of Uganda electricity Board (UEB),the 3 established limited companies purely operate under marketforces.

Karyeija, G.K. (2012): Public Sector Reform in Africa: What Lessons have we learnt? Forum fordevelopment Studies, 39:1, 105-124

D’Ujanga, S. (2008): Power Sector Reform in Uganda. Member of Parliament and State Minister of Energy and Mineral Resource’s, presentation to Parliament. Kampala.

Drivers and/Determinants of Marketisation

The quest of this paper is to identify drivers of MarketisingAfrica’s Economies. Drivers are the factors thatinfluence/motivate/enable governments to transform public sectoroperations to business like operations of the private sector.These factors are but not limited to the following:-

(i) New Public Management (NPM)

8 | P a g e

Marketisation of public sector is founded on the rise of NewPublic Management underpinned by the two prominent theories ofPublic Choice and Principal-Agent.NPM is a driver of change thataims at transforming public sector to transact like a marketoriented private sector.

Public choice theory In the view of (Larbi, George A. (1999), the doctrine of NPM isassociated with increasing popular and intellectualdisenchantment with the growth and role of government andincreasing taxation and, consequently, pressures to curb theexpansion of government and shift towards privatisation (Hood,1991). In the same vein, public choice theorists (such asNiskanen 1971) have criticized the Weberian bureaucratic model aslacking cost-consciousness because of the weak links betweencosts and outputs. The rewards system in the public sector is notoriented towards improving performance and consequently there areno incentives for politicians and bureaucrats to control costs.There is waste and over expenditure, with public managersfocusing more on delivery than on productivity and efficiency.Public choice theory also argues that public bureaucracies arenotoriously slow to respond to changes in the environment, aswell as being unresponsive to service users. This theory gave theinsights that highlighted African governments to seek reforms inthe public sector.

Principal-agent theory Larbi, George A. (1999), further asserted that the “Principal-agenttheory” also argues that the public (as principals), on whosebehalf politicians and bureaucrats (as agents) are supposed togovern, is unable to hold the latter accountable because ofinsufficient information (information asymmetry), theincompleteness of the contracts of employment, and the problemsof monitoring behaviour (Walsh, 1995; Lane, 1995-2000). Thepublic sector under performs because state officials pursue theirown narrow self-interests rather than the public interest. It is9 | P a g e

difficult to extract accountability and good performance frompublic servants (agents) because of the monopoly characteristicsof public services, imperfect information about the services, andabout the abilities and interests of public employees, and thehuge transaction costs that would be involved in efforts to writeand monitor complete contracts. One solution to the problem ofthe public sector is to expose the public services to greatercompetition – The market character.

Larbi, George A. (1999):The New Public Management Approach and Crisis States.UNRISD Discussion Paper 112, Geneva: United Nations Research Institute forSocial Development.

Hood, Christopher (1991): ‘A Public Management for All Seasons’. Public Administration, 69(1): 3-9. Walsh, Kieron (1995) Public Services and Market Mechanisms: Competition, Contractingand the New Public Management, London: Macmillan

Lane, Jan-Erik (2000):New Public Management. London: RoutledgeThe result of the above drivers for change is that the role andinstitutional character of the state have been under increasingpressure to be more market-oriented and results management-oriented, with emphasis on ‘doing more with less.’ Thetraditional model of organisation and delivery of publicservices, based on the principles of bureaucratic hierarchy,planning, centralization, direct control and self-sufficiency isbeing replaced by a ‘new public management’ (NPM) model.

(ii) Government Policies

10 | P a g e

Government policies include such actions as to end armedconflicts, improve macro-economicconditions for economic stabilization, and to undertake themicro-economic reform to create a better businessenvironment/climate. As a result of Public Sector Reform and NewPublic Management policies, Africa’s economies grew healthier asgovernments reduced the average inflation rate from a doubledigit of 22% in 1990’s to a single digit of 8% in 2000. Thischange of policies trimmed their foreign debt by one-quarter andshrunk their budget deficit by two-third (Acha Leke, et al,2010).To further their impetus, the African governmentsincreasingly adopted the policies to energize markets – and thusmarketising their economies through privatizing their State ownedEnterprises (SOEs), increased the openness of trade, strengthenedregulatory and legal systems, lowered taxes forinvestors(particularly foreign investors for the case of Uganda)who bring in more foreign currency, create employmentopportunities, increase in industrial development, improving thephysical and social infrastructure. The policies also encourageprivate entrepreneurial development, ownership, operation ofhighways related assets. These policies also allow the reductionin size of the public sector and the substitution of privatesector resources and personnel.

Uganda privatized over 100 SOEs between 1989 – 2005, for exampleand over 100 new Foreign Direct Investments (FDIs) in industrialdevelopment and other sectors between 1990s and 2010. Thesepolicies enabled a private sector business to emerge – thusmarketisation of the economy. Marketisation has acceleratedAfrica’s growth, and improving the socio-economic welfare ofAfrica’s people by a reduction in poverty levels. In Uganda forexample, the poverty levels have reduced from 56% in the 1990s to34% by 2010 (Ministry of Finance, Planning and EconomicDevelopment policy statement, 2010), and the per capita incomerising from$393 in the 1990s to $563 by 2010.

11 | P a g e

Acha Leke, Suzan Lund, Charles Roxburgh and Arend Van Wamelen (2010): What is drivingAfrica’s growth? McKinsey & Company. Insights & publications.

(iii) Donor Community/Development Partners

Marketisation as a public sector reform instrument in Africa isnot an indigenous ideology(Fastile, Jacob Ofulemi, Adejuwon andKehinde David, 2010). It is influenced by international bodiessuch as the World Bank and the International Monetary Fund (MF).In Uganda, marketisation resulting from the privatization of SOEsand the change of public sector policies to market economy wasconceived in 1989 from the Structural Adjustment programmes(SAPs). This was a World Bank initiated programme, which was tobe adopted and implemented without question and in return to beextended financial support to restructure and reform the publicsector. Trends in reforming the public sector in Africa show thatthey have been influenced by both economic liberalization anddemocratization. It is perceived that donors, rather than ‘home-grown’ forces have driven them. Each trend placed emphasis onaccountability and improved service delivery. One significantoutcome is that the reform trends show mixed results, mainlybecause public expectations of the state in Africa differfundamentally (Fastile, et al, 2010).

(iv) Inefficiencies of the Traditional Public SectorAdministration

The Inefficiencies of the public organisations led to the 1980semergence of the so called “New Public Management “with the maingoal of a new innovation to introduce implicitly in publicsector/administration the functioning principles of private

12 | P a g e

firms. The New Management aimed at marketising the Africaneconomies by reinventing the institutional structure, modernizingthe State, and improving the management of public enterprises.The emergence market economy was inspired by need to reducepublic spending and inefficiency and to overcome the lack ofmanagerial skills in public organisation.

Public sector administration is the “entire activity ofgovernment, exclusive that of the legislature and purely judicialwork of courts” (E. Lynn Jr. 22006:6); “the work involved in theactual conduct of government affairs regardless of the branch ofgovernment concerned” (Fairlie, 1935:25). The Public sector isthe part of the economy concerned with providing basic government(Public) service to the citizenry, but inefficiency,ineffectiveness and the uneconomical way of such service deliveryis the driving force for African governments to marketise theireconomies. Inefficiencies in Public Sector results from both thedistortion of government interventions and typical bureaucratictendencies of the public servants.

Fastile, Jacob Ofulemi, Adejuwon and Kehinde David, 2010): Public Sector Reform in Africa:Issues, Lessons and Future Directions. Journal of Sustainable Development in Africa (volume12, No. 8, 2010). Clarion University of Pennsylvania.

Lynn, L.E (2006:6): Public Management: Old and New. Routledge, New York and London

Fairlie, (1935: 25). “Public Administration and Administrative Law.” In Charles G. Haines andMarshall E. Dimock, eds., Essays on the Law and Practice of Governmental Administration:Essays in Honor of Frank Johnson Good now. 3–43. Baltimore, MD: Johns Hopkins UniversityPress. Fenwick, Charles G. 1920. “Democracy and Efficient Government

The hallmark of marketisation of Africa’s economies iscooperation between the public sector and private sector players,not competition. Expanding the private sector roles allows thepublic sector agencies, now privatized to tap the private sectorefficiencies such as technical, managerial and financialresources in new ways to achieve certain public agency objectivessuch as greater cost and schedule certainty. While the private

13 | P a g e

sector can tap its business opportunities, expandingresponsibilities, risks and earn profits (return on capitalinvested).

(v) Government Constraints

Marketisation allows the public sector to consider the otherwiseunaffordable public sector projects, by filling the so calledinfrastructure gap between what governments can afford and whatpeople need. In Uganda for example, the government could notafford to satisfy the electricity need of the public and theformer UEB was marketised to satisfy this need. Marketisationtherefore, allows public sector to leverage its financialresources by using the private sector as an intermediary (Kopp,1997). This has enabled the public sector to allocate limitedpublic financial resources to worthy – albeit less commerciallyviable – projects (Williams, 1992).The central philosophy behindmarketising the public sector is to combine the strength of thepublic sector and that of the private sector to improve on thedelivery of public services such as in education, health,utilities. In Uganda for example, Privatisation of the educationsector has enabled combining the strength of the public sector(government) and the private sector (Private providers) toprovide competitive education in Universities, TertiaryInstitutions, Post primary and primary education to educating thecitizens.

(vi) Market Conditions and Macro-economic policies

Marketisation alone is not enough as an incentive to attractprivate sector to invest in public sector organisations. Whilegovernment tries to leverage their limited financial resourcesthrough marketisation/privatization, the privates sector isguided by the profit motives. It is therefore important to notethat the profitability involved in public projects is crucial forattracting private players. Infrastructure projects generally14 | P a g e

have high upfront costs and often need time to join revenues, andas such the commercial risk of such projects is quite high, thusmarket conditions are expected to affect the incentives ofprivate firms to participate in investment. This means that thedemand for such services the private sector is to provide and themarket size are the drivers of the private sector participation.

Kopp, J.C. (1997): Private Capital for Public works: Designing the Next-Generation Franchisefor Public-Private partnerships in Transportation Infrastructure. Masters Thesis of CivilEngineering, Northwestern University, USA.

Williams, Carl, 1992, “Public-Private Partnerships in Transportation: Lessons Learned by aPublic-Sector Entrepreneur,” Public Works Financing (March), pp. 22 25.−

Attraction of private investors requires the presence of a largenumber of consumers paying market prices for profitability andyielding faster recovery of sunk costs, while taking intoconsideration the levels of income or purchasing power of thepotential customers. As with any investments, aggregate demandmay not prove sufficiently robust at prevailing market prices toensure long term profitability because it may be subject tomacro-economic shocks. The risk of macro-economic shocks are moresevere in cases where there is no infrastructure provider, thedemand is unknown and where tariffs on public services wereformerly subsidized and collection poor. Under such conditionsand risk, government should accept responsibility to motivateprivate investors, though in time of crises, where governmentcannot afford its contingent liability, it can be renegotiated(Ehrhardt and Irwin, 2004 and Thomsen, 2005).

African economies need to set a standard argument for attractingprivate investments such as establishing: (i) stable macro-economic conditions; (ii)adequate tax (tariff) regimes; (iii) atrack record of honouring commitments by governments;(iv)reasonable economic policies; (v) Exchange rate risks stability;and (vi) Demand for services provided by private sector and15 | P a g e

market size are very important. Governments must strike a balancein order to attract private investors and efficientinfrastructure service providers; because as a country’s ratingand macro-economic conditions improve, governments are able toattract better private sector providers and more financing(Dailami and Klein, 1997).Another phenomenon that affects privatesector incentives to engage in investing arrangements is theexchange rate risk. This is because most infrastructureinvestment projects in developing countries are financedsignificantly by foreign capital through equities and loans, andas such investors are not only affected by Country risks but bycurrency risks. This is well noted because debt payment anddividend payment require foreign currency and yet incomes andrevenues are normally earned in local currency – hence affectingprofitability of the project due to unexpected devaluations.

(vii) Institutional Quality and Legal System

Institutional quality and legal system has a direct influence onCountry risk. Privatisation arrangements are contractualarrangements, and as such their sustainability depends criticallyon the regulatory environment of a country, which in turn isshaped by the quality of the Institutions. In Uganda forexample, the institutional quality and legal system is put inplace to ensure that the marketisation of the economy ispossible. There is company’s Act, the Uganda Investment AuthorityAct, the Public-private partnership bill awaiting ascent from thepresident to become law, Law of Contract, law of Sale of goods,Law of Agency, name them.

Ehrhardt and Irwin, 2004 and Thomsen, 2005: Avoiding Customer and Taxpayer bailout inPrivate Infrastructure projects: Policy toward leverage, Risk Allocation, and Bankruptcy.Louisville, KY.

16 | P a g e

Dailami and Klein, (1997:21-42): Dealing with Public Risk in Private Infrastructure:Government support to Private Infrastructure projects in emerging markets. WorldBank records

Weak institutions create uncertainties in the part of investorsabout the quality of regulations and therefore increase countryrisk, as investors will have no confidence to invest in thecountry. In Uganda for example, Institutions fulfill investorsrequirements that is why Uganda is the destination for mostinvestors from China, South Africa, Asia into the various sectorsof the economy such as Banking sector, Industrial andManufacturing Sector, Education Sector, Agriculture Sector, namethem. Strong Institutions and effective rule of law are veryimportant in securing the contractual arrangement between thepublic and the private sectors, as argued by Pistor,Raiser, andGelfer, (2000),that the effectiveness of legal institutions has amuch stronger impact on the availability of external finance thanthe laws on the books.

(viii) Past Experience with Privatisation and Private SectorInvestments

Marketisation is affected by the reputation of the public sector(government) and the private sector’s experience in privatizationof infrastructure projects. Depending on the particular nature ofinfrastructure investments, between the parties, past experiencein running these projects is a critical predicator for asuccessful future engagement. The Public Sectors (government)reputation in honouring past privatizations and investments isvery vital for attracting future Investments. In Uganda forexample, the privatization of SOEs in the 1990s is a good pastexperience of honouring commitment on the part of government(Public sector).

(ix) Political Environment17 | P a g e

The political environment is the phenomenon that explains howethnically divided countries require a large number of projects/or public goods and services. These projects are usually neededto respond to different individual preferences, which prevent thepooling of resources for common public projects (Alesina, Baqir,and Easterly, 1999).Coupled with some level of governmentaccountability, the public sector provides various infrastructureprojects to satisfy each group separately in order to reduce thelikelihood of conflicts over common resources (or public goodsand services). The large number of infrastructure projects thatgovernment provide to the citizenry, typically puts addedfinancial pressure on public sector and requires financialprivate sector financing. As a result of the above, government isexpected to create a political environment friendly to Market-oriented policies and to be relatively more open to privateinvolvement in public infrastructure projects.

Pistor, Raiser and Gelfer, (200): Law and Finance in Transition Economies. TheEconomics of transition 8(2): 325 – 368.

Alesina, Baqir and Easterly, (1999): Public Goods and Ethical Divisions: The QuarterlyJournal of Economics, 114(4), 1243 - 1284

(x) Nature of Investment

Nature of Investments focuses of determining the type ofinvestment drives marketisation. By nature, this could be Public-private Partnership (PPP) or private sector owned enterprise(PSOE). If the nature of investment is PPP, it is important tounderstand the motivations for the different types of PPPcontractual agreements. All types of PPPs involve privateoperations and management, and most of them have privateinvestments as well. The distinguishing characteristics of thetwo different types of PPP lie in the mode of entry, unlimited

18 | P a g e

ownership, risk sharing from a normative stand point, and theduration of partnership. The nature of ownership gives rise tothe question of “what motivates types of PPP arrangements or whatdetermines the degree of private participation in such apartnership arrangement?”

If the nature of investment is ultimate ownership (PSOE), thepublic sector enables a conduceive investment environment interms of policies and the regulatory frameworks and security as amotivating instrument to the investor.

Besley & Ghatak (2001) suggest that the extent of privateparticipation in terms of resource commitments to the Investment(PPP) depends on the purity of goods and services provided.Besley and Ghatak (2001) examine the optimal ownership of publicgoods whose benefits are non-rival and non-excludable. They showthat ownership should be given to the party that valuesrelatively more the benefits generated by the public good.

(xi) Information and Communications Technology (ICT) RevolutionICT revolution impacts on public management reform in Uganda.Information technology reforms whatever it lands on, governmentinclusive. The Ugandan government employs ICT to process anddisseminate information as a crucial element in making rationaland timely decisions(F. Bannister and D.Remenyi,2000). The use ofcomputers in government makes it possible to compile and analyzeinformation on performance of an organization for greatertransparency and accountability (S. Haque, and P. Pathrannarakul,2013). Worth noting is the use of information technology (IT) toimprove organizational efficiency, effectiveness and also topromote democracy. The e-government concept captures thegovernment’s drive to facilitate access of the general public tovarious services it provides (Joseph Wright, 2001).

19 | P a g e

Besley and Ghatak, (2001): Government versus Private ownership of public goods: Quarterly Journal ofEconomics, MIT Press, volume 116(4). Pg. 1343 – 1372.

F. Bannister and D.Remenyi,(2000): “Acts of faith: instinct, value and IT investments.”Journal ofInformation Technology, 15:3, 231-241

S. Haque, and P. Pathrannarakul, (2013): “The Role of Technology in EnhancingTransparency and Accountability in Public Sector Organizations of Pakistan”,International Journal of Economics Business and Management Studies. Vol. 2, No. 1.

Joseph Wright, (2001): “Improving Federal Online Services”, FDCH Congressional Testimony.In addition to creating virtual structures, ICT leads todownsizing and creation of networks designed to break traditionalorganizational boundaries (C. Hipp & H.Grupp, 2005). In Uganda,the extensive use of IT in public offices (such as in URA, URSB,government Ministries), has led to efficient service delivery (Q.Nasim, & G. Ali Khan, (2010). ICT is a market driver; therefore,the use of ICT in New Public Management in the public sector isthe impetus that African governments strive at in marketisingtheir economies because it improves organizational efficiency andeffectiveness, and promoting democracy.

Conclusion

In the views of Redmond (2008), the objectives of Marketisationof Africa’s economies are straight forward: While the PublicSector seeks to enter into an engagement where incentives existfor the private sector to deliver services on time and tospecific standards, the Private sector wants to earn returns ontheir investments and collective skills. In this state ofaffairs, the public sector has a common interest with privatefinanciers whose return is dependent on the delivery of qualityservices on time and to specified quality standards. The theorysimply indicates that Marketisation is aimed at deliveringincreased value for money over traditional procurement options,provision of services which otherwise may not be provided; and anincrease in the speed at which capital are brought to completion.

20 | P a g e

Involving private sector more centrally in the provision ofpublic services helps in capturing private sector innovation,commercial and management expertise. This also means transferringrisk to the party that can best manage it.

In Uganda for example, some patterns in the marketisation of theeconomy is apparent, because Uganda has not fully embraced theMarketisation philosophy and market- based reforms of the NPM.The level of interest in marketisationis low and theexperimentation based on the NPM inspired reforms is also verylow mainly due to evolutionary character of the Ugandanbureaucracy and peculiar socio-political context. Needless tosay, rhetoric and policy documents supporting marketisation (inthe NPM and public sector reform); in some key elements includingprivatisation, public-private partnership, contracting out ofpublic sector services and emphasis on results orientedmanagement (ROM) and results-based performance indicates somesigns that government is shifting towards marketisation andintends to marketise the economy.

C. Hipp & H.Grupp, (2005): “Innovation in the service sector: the demand for service specificinnovation measurement concepts and typologies”, Research Policy, 34: 517-535

Q. Nasim, & G. Ali Khan, (2010): “E-Government Challenges in Public Sector: A case study ofPakistan”, International Journal of Computer Science, Issues, Vol. 7, No. 5

But although, these attempts to shift, the competing driverswhich determine the nature, pace, and direction of changes in thepublic sector towards marketisation are challenging, because theyare not fully defined towards the marketisation policy. Thesealternative drivers are integrally related to one another and insome cases can also be seen as converging with NPM ideals. Government reforms such as privatisation of public sectorcorporations and agencies, public- private partnerships,contracting out, policy on foreign private investment drive, fair21 | P a g e

treatment of public servants, and valuing diversity etc. allpoint to the internal dynamics of public sector reforms towardsmarketisation of the economy.

As African governments (A case of Uganda) confront the challengeof marketisation of their economies, they must address thedrivers and focus on necessary conditions for crediblesustainable public sector reform and New Public Management, formarketisation is underpinned on that foundation. The authorfinally argues that private led public sector may not be possibleunless the drivers of marketisation are explored by Africaneconomies that this paper has tried to espouse.

In the Marketisation arena, as an instrument for Public SectorReform and New Public Management, Mark Robinson (2004) asserts,Uganda is widely acclaimed as an African success on account ofachievements in macro-economic reforms, poverty reduction andpolitical stability, following years of civil war, economicdecline and worsening poverty. Progress on these fronts wasaccompanied by a succession of governance reforms, ranging froman ambitious programme of civil service restructuring, thecreation of a series of semi-autonomous public agencies, reformsin public expenditure management, decentralization, innovationsin service delivery, and legal and institutional measures tocombat corruption. However, with all the strides towardsmarketisation, there are impairments in policy implementation.

22 | P a g e

Mark Robinson, (2004): The Political Economy of Governance Reforms inUganda,Commissioned by the Poverty Reduction and Economic Management(PREM) Network of theWorld Bank, Washington D.C.

Leveraging Partner’s Core Competencies to Optimize Business andDevelopment Goals

In the Marketisation of Africa’s Economies

Resulting into meeting the following

23 | P a g e

Private Sector

Financial leverage,Skills in accounting, finance, marketing,project management,production skills,

Public Sector

Strategic Coordination Institutional frame work, Legal frame work, regulatory powers,conducive

InternationalDonors

Budget support, Grants, PPP Expertise, Investment expertise,

Voluntary Sector

Legal Knowledge, Independence, Longevity of local presence, watch dog on

Development ObjectivesInternational dev’t

Objectives

Millennium development

Business Objectives

New Business InvestmentOpportunities, New products and services,

24 | P a g e

Development ObjectivesInternational dev’t

Objectives

Millennium development

Business Objectives

New Business InvestmentOpportunities, New products and services,