Back to the Future for African Infrastructure? Why State-Ownership Is No More Promising the Second Time Around - Working Paper 84

John Nellis
February 21, 2006

African state-owned enterprises, particularly those in infrastructure, have a long history of poor performance. But moves in the 1990s to rely instead on private-sector participation and ownership have yet to deliver the hoped-for improvements. Is the solution to return to a strategy of improving state firms under public management? John Nellis says no. In this paper, he argues that the prospects for success of Africa’s SOEs are no greater now than before and that private firms still have not been given a real chance. He shows that private participation in infrastructure initiatives have been comparatively few and weak. A number of those that have been launched have run into problems, to the point where both investor and African government interest in the approach has waned in the last few years. Moreover, such reforms are not popular—surveys of public opinion in 15 African countries reveal that only a third of respondents prefer private to state-owned firms.

Nonetheless, African states (and their supporters) should not jettison private participation in infrastructure. Rather, Nellis argues, they should acknowledge the limitations of such an approach, and recognize the large scope and moderate pace of the preparatory measures required both to improve the investment climate and to make private participation in infrastructure work effectively.

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