Public Sector Reform and the Introduction of Neoliberal Capitalism in African Socialist States: The Case of Zambia

1. Introduction

The last four decades have seen the adoption of public sector reforms (PSRs) in African socialist states. The term “African socialist state” refers to a political system that relies on the African culture to promote equality. It emphasizes selflessness, collective interest, extended family, central planning, and nationalization of businesses (Akyeampong 2018). This type of state was preferred by a number of the newly independent African countries in the 1950s, 1960s, and 1970s. Zambia is one of the countries that had adopted this type of state. However, in the 1980s, Zambia decided to implement PSRs. The term “PSR” can be defined as “the total overhauling of government administrative machinery with the aim of injecting real effectiveness, efficiency, hard-core competence and financial prudence into the running of the public sector” (Omoyefa 2008: 17). It involves reducing the cost of running public institutions and ensuring responsiveness in service delivery. This is envisaged by changing the role of the state in economic and social development. Instead of being the major service provider, the state becomes a partner and facilitator (World Bank 1997). This allows private sector actors to play a major role in service delivery. By having multiple service providers, competition among market participants is enhanced. These participants include service providers, consumers, and workers. Through market competition, efficiency in service delivery is promoted. This is because each participant is protected against exploitation by the existence of alternative sources of supply. For instance, if consumers are not satisfied with a given service provider, they are free to choose another provider. Similarly, workers are free to change employers and vice versa (Friedman and Friedman 1980).

The implementation of PSRs in Zambia has been done through programs such as Structural Adjustment Program, Public Service Capacity Building Program, and Public Service Management Program. The implementation of these programs has resulted in Zambia embracing the ideology of neoliberal capitalism. This ideology emphasizes the effectiveness of market forces in promoting economic and social development. However, the adoption of this ideology has generated contradictory consequences. On the one hand, Zambia has recorded positive economic growth for a long period of time. Since 2000, Zambia’s economy has been growing at an average rate of around 6 percent per annum (Republic of Zambia 2017). On the other hand, the levels of poverty in the country are still high. At national level, the rate of poverty is 54.4 percent. Poverty levels are higher in rural areas at 76.6 percent than urban areas at 23.4 percent (Central Statistical Office 2016). This situation therefore raises a question: What is the role of PSR in the introduction of neoliberal capitalism in African socialist states?

The purpose of this paper is to analyze the role of PSR in the introduction of neoliberal capitalism in African socialist states. To achieve its purpose, the paper begins by reviewing relevant literature on PSR. It then presents the theoretical framework guiding the analysis. This is followed by an examination of the growth of the African socialist state in Zambia and its performance. The paper then explains how PSRs are used to dismantle the African socialist state. This is followed by an analysis of the introduction of neoliberal capitalism in the former African socialist state. The paper then analyzes the reconfiguration of the former African socialist state into an agent of neoliberal capitalism. Thereafter, the exploitation of citizens is explained. Finally, a conclusion is given.

2. Literature Review

The literature shows that PSRs introduce market forces in the delivery of public services. They do so by adopting strategies such as downsizing the public bureaucracy, decentralization, performance management, capacity building, commercialization, privatization, outsourcing, and public-private partnerships (PPPs) (Ayee 2008; Dzimbiri 2008). These strategies have been adopted in a number of African countries such as Algeria, Egypt, Ethiopia, Ghana, Liberia, Malawi, Mozambique, Rwanda, Tanzania, Tunisia, Uganda, and Zambia, among others (see Akolgo 2018; Dillman 2001; Iversen and Begue 2017; Khisa 2019; Malisase 2016; Mugisha and Kitamirike 2017). The categories of public institutions that have been reformed include central and local governments as well as state-owned enterprises (SOEs). Some positive results have been recorded following the adoption and implementation of PSRs in Africa. They include rapid economic growth. For instance, between 2000 and 2010 the average gross domestic product (GDP) growth rate in sub-Saharan Africa was above 5 percent. In the later years, the region’s growth rate was around 4 percent. This rate of growth led the Economist magazine to change the label of Africa from the “Hopeless Continent” to “Africa Rising” (Khisa 2019; Mkandawire 2014). The sectors that have recorded rapid growth include information and communications technology, mining, roads, wholesale, retail, banking, insurance, hospitality, and real estate (Akolgo 2018; Khisa 2019; Mkandawire 2014).

Despite PSRs being associated with the above-mentioned benefits, they also have negative consequences. Malisase (2016) argues that public services have become more difficult to access in Zambia following the implementation of PSRs. The affected services include water, education, and healthcare. He attributes this outcome to poor design of PSRs whose aim is to promote the interest of the private sector rather than the public interest. The notable reform strategies that have negatively affected the general public include downsizing of the public bureaucracy, privatization of SOEs, and reduction in government expenditure. Through these strategies, very few resources are allocated to social services. Furthermore, the reform of the public sector in Africa has been characterized by an increase in the levels of corruption. This has been reported in countries such as Zambia, Uganda, and Ghana (Akolgo 2018; Malisase 2016; Mugisha and Kitamirike 2017). The failures of PSRs are also felt in the area of job creation. Uganda is one of the countries where unemployment and underemployment have been increasing despite rapid economic growth being recorded following the implementation of neoliberal policies (Mugisha and Kitamirike 2017).

Trade unions have also been negatively affected by PSRs. For instance, strategies such as downsizing, decentralization, and privatization fragment both the public sector and the labor movement. This is the case in Zambia where SOEs have been privatized, public servants retrenched, and union membership lost. The loss of membership has, in turn, weakened the unions. They cannot bargain for improved terms and conditions of employment (Madimutsa and Pretorius 2017). Trade unions have been further weakened by the adoption of PPPs. Through PPPs, managers of public institutions rely on the private sector to help them solve service delivery problems rather than promoting social partnership with trade unions. Consequently, workers are susceptible to exploitation by employers (Madimutsa and Pretorius 2018). Khisa (2019) asserts that ordinary Africans have not benefited from the positive economic growth recorded in recent years because of the structure of the global capitalist economy. The global economic structure is seen exposing African countries to exploitation by advanced economies in a manner similar to the eras of colonization and slave trade. This has made Africa to continue being underdeveloped and dependent on the developed world even in the era of neoliberalism (Khisa 2019; Taylor 2016).

Although the literature sheds light on PSRs implemented in Africa and their consequences, it is not comprehensive. It does not explain the experiences between socialist and non-socialist states in the reform process. This is the gap this paper seeks to fill by analyzing the role of PSR in the introduction of neoliberal capitalism in African socialist states. The analysis is based on the experiences of Zambia.

3. Theoretical Framework

This paper is guided by the assumptions of governance network theory. This theory views policy problems as being complex because of different influences that act upon them. As such, public policy makers find it difficult to solve them on their own (Huppé, Creech, and Knoblauch 2012; Osborne 2006). According to Klijn (2008), public policy problems are addressed through a network of interdependent actors who include the state and non-state actors. The interaction of these actors occurs at various stages of the policy making process. Through this network, the actors put their resources together to make policies and solve societal problems (Huppé, Creech, and Knoblauch 2012). Huppé, Creech, and Knoblauch (2012) argue that the interdependency of network actors is anchored on social capital, which enables them to trust each other and focus on achieving common goals. In line with this argument, it is expected that the state and non-state actors work together to formulate and implement PSRs. For instance, the strategies of privatization and PPPs enable the government to transfer some of its responsibilities to private companies. Similarly, decentralization allows the government to transfer its responsibilities to stakeholders at the lower levels including ordinary citizens. Relatedly, the strategy of commercialization makes consumers pay user fees thereby reducing government expenditure on subsidies.

Klijn and Koppenjan (2012) assume that policy networks are complex and difficult to manage because policy problems are viewed differently by the actors. They further assume that the functionality of a policy network depends on the actors negotiating with each other and making rules to regulate their behavior so that set goals can be achieved. The rules that are made by network actors take the forms of professional codes, agreements, and protocols (Klijn 2008). Based on these assumptions, we believe that the formulation and implementation of PSRs is guided by rules agreed upon by various stakeholders who include the state and non-state actors.

However, Lester and Reckhow (2012) assume that governance networks can be captured by privileged and powerful actors to promote their own interests. According to Strange (1994), there are three sources of power in a political economy. These are force, wealth, and ideas. Power emanating from these sources can be acquired by actors in governance networks such as the state, financial institutions, and private investors. In line with this assumption, we believe that PSRs can be captured by government officials, politicians, financial institutions, and private investors. The power of government officials and politicians can be illustrated by the fight for access to government resources between the ruling party in South Africa, the African National Congress and its alliance partners (Plaut 2010). The power of financial institutions especially international donors is demonstrated by the conditions attached to their financial assistance. These include demands that the benefiting country should reform its economic and institutional structures so that financial support is given (Heeks 1998). For private investors, they can capture the reforms by demanding for the adoption and implementation of policies that enable them to make profit out of their investments (Simutanyi 1996). This implies that most public policies in liberalized economies are meant to promote the interests of market players rather than those of the general public (Holcombe 2012). Nonetheless, developed countries are able to protect the rights of citizens because they have strong democratic institutions. This is not the case in developing countries especially in Africa (see Transparency International 2019).

4. The African Socialist State and Its Performance

After gaining political independence in 1964, the United National Independence Party (UNIP) government led by Kenneth Kaunda decided to establish an African socialist state in Zambia based on the ideology of humanism. This ideology placed the human being at the center of all political, economic, and social activities. To establish this kind of state, economic reforms were instituted. The first were the Mulungushi reforms adopted in 1968 with the focus of nationalizing private companies in non-mining sectors. The second were the Matero reforms adopted in 1969 to nationalize mining companies. By 1991, there were around 280 parastatals (also known as SOEs), accounting for 80 percent of economic activities in the country. The central and local governments took up close to 20 percent of the economic activities (Kaunga 1993). The private sector accounted for less than 1 percent of the total number of enterprises in the country and operated mostly in the banking sector (Fundanga and Mwaba 1997). Furthermore, economic policies focused on central planning including control of prices of goods and services.

In addition to economic reforms, political reforms were introduced. In 1972, Zambia was declared a one-party state. This left UNIP as the only recognized political party in the country. The main reason for introducing this type of political system was to eliminate political conflicts and promote communal decision making. This political system was called one-party participatory democracy and was believed to reflect the African culture. Under this system, all organizations were required to support government policies (Nyirenda and Shikwe 2003).

The early years of the socialist state in Zambia managed to yield positive results. These included the provision of formal employment. Between 1965 and 1980, the number of public service employees increased from 45,000 to 110,000 (Fagernäs and Roberts 2004). By the early 1990s, the central and local governments had around 180,000 employees (Republic of Zambia 1993) while the parastatals had over 100,000 employees (Simutanyi 2011). This means that the public sector as a whole had over 280,000 employees. In the early 1990s, the labor force in Zambia was around 3 million (Kingombe 2004). This implies that the public sector employed about 9 percent of the labor force in the country. This was against a national population of 8 million people (Kingombe 2004). Positive results were also recorded in terms of economic performance. Between 1964 and 1974, the economy grew at an average rate of 2.3 percent per annum (Rakner 2003). The government was also able to provide highly subsidized goods and services to citizens. To a large extent, the positive performance of the socialist state was due to the high prices of copper (i.e., Zambia’s main export), which provided the necessary revenue for government investment and service delivery. At that time, the price of copper was above $7,000 per metric ton (Simpasa et al. 2013).

However, the later years of the socialist state were characterized by socioeconomic and political challenges. The country began experiencing economic recession in the mid-1970s. From 1975 to 1990, Zambia lost 30 percent of her real per capita growth (Rakner 2003). Inflation was also high (more than 100 percent by 1991) and the government failed to supply goods and services to the people (Krishna 2006). The International Monetary Fund (IMF) and International Development Association (IDA) (2000) indicate that by 1991 the level of poverty in Zambia was 69.7 percent. The poor performance of the socialist state was due to both external and internal factors. Externally, the prices of the country’s main export (i.e., copper) fell, making it difficult for the government to pay wages and deliver services. The fall in copper prices was from above $7,000 per metric ton in the early 1970s to below $3,000 in the mid-1980s (Simpasa et al. 2013). Internally, the public sector had become very large and too expensive to manage. By 1993, personal emoluments accounted for 43 percent of government recurrent expenditure. This resulted in less money for capital expenditure and service delivery (Republic of Zambia 1993). This means that the African socialist state had lost its capacity to deal with developmental challenges facing it. As such, it had to be reformed in a manner that would not only reduce its financial burden but also improve the performance of the economy.

5. Dismantling of the African Socialist State

The initial approach to reforming the socialist state in Zambia was to dismantle it. This was done by implementing the Structural Adjustment Program (SAP), which was a precondition for the country to access financial assistance from the IMF and the World Bank. The conditions under SAP included liberalization of the economy, reform of the public sector, downsizing the civil service, and privatization of parastatals (Simutanyi 1996). The UNIP government accepted these conditions and started implementing them in 1983. The acceptance of SAP conditions by the UNIP government shows that the process of reforming the African socialist state could be captured by international financial institutions.

The implementation of SAP had negative effects on ordinary citizens in Zambia. These included increases in the prices of goods and services, depreciation of the local currency, and high inflation. These effects made trade unions to oppose the continued implementation of SAP. Strikes were organized across the country against this reform program. Residents in major urban areas also rioted against the program. Ultimately, the UNIP government succumbed to the pressure and abandoned SAP in 1987 (Rakner 2003). By abandoning SAP, Zambia could not get assistance from international donors. This, in turn, negatively affected the provision of basic goods and services and made the UNIP government unpopular. Citizens started demanding for the abolishment of the one-party state. Eventually, multiparty elections were held in 1991 where the Movement for Multiparty Democracy (MMD) emerged victorious under the leadership of Frederick Chiluba.

When the MMD formed government, it decided to implement SAP as agreed with the IMF and the World Bank. Under the MMD government, SAP was repackaged into two programs called Privatization Program and Public Service Reform Program. The implementation of the Privatization Program began in 1992 with the aim of transferring the ownership and control of parastatals to the private sector. The modes of privatization comprised varieties of partial and complete privatization. These included the sale of the whole or part of the parastatal, lease, and management contracts (Republic of Zambia 1996). These modes of privatization are similar to those adopted in other African socialist states like Algeria, Egypt, and Tunisia (Dillman 2001). Through these modes of privatization, the parastatal sector was dismantled. According to the Zambia Development Agency (ZDA) (2010), out of 286 parastatals earmarked for privatization in Zambia, 265 had been privatized by the year 2010. The privatization of these parastatals led to a reduction in the number of employees in this sector. While the parastatals had over 100,000 employees before the implementation of the Privatization Program (Simutanyi 2011), the number reduced to 58,581 employees in 2014 (Central Statistical Office 2015). The strategies of privatization and job cuts were implemented because the parastatal sector in particular and the public sector in general had become very large and too expensive to maintain (Republic of Zambia 1993). Therefore, downsizing the parastatal sector gave the government an opportunity to reduce its operational costs.

The central and local governments were also downsized. This was done through the Public Service Reform Program adopted in 1993. The strategies under this program focused on hiving off some units; transferring certain functions from the central government to provinces, districts, local authorities, and communities; and retrenching workers (Republic of Zambia 1993). The units that were hived off included the Customs and Excise Department under the Ministry of Finance, which became the Zambia Revenue Authority, and the Wildlife Department under the Ministry of Tourism which became the Zambia Wildlife Authority. The functions that were transferred to lower organs included the delivery of health and education services which were transferred to health and education boards, respectively. These boards were established at national, district, and local levels (Madimutsa and Pretorius 2017). Through these strategies, the workforce in the central and local governments reduced from 180,000 in 1993 to 104,000 in 2000 (Republic of Zambia 2005). Like the parastatal sector, the central and local governments were downsized so that they become cost-effective in their operations (Republic of Zambia 1993).

The implementation of the privatization and public service reform programs has resulted in the private sector being the major employer in Zambia. The total labor force in Zambia in 2014 was 6.3 million. Of this labor force, 5.8 million were employed while 469,851 were unemployed. This labor force was against a national population of around 15 million (Central Statistical Office 2015). The percentage distribution of employment in the various institutional sectors is shown in figure 1. Figure 1 shows that a majority of the people, 87.3 percent, are employed by private businesses. This is followed by private households which employ 6.3 percent of the people. The public sector as a whole accounts for only 5.7 percent of the workers in the country. This implies that the proportion of the labor force employed by the public sector has reduced from about 9 percent in 1990 to around 5.7 percent in 2014 (Central Statistical Office 2015; Kingombe 2004; Republic of Zambia 1993; Simutanyi 2011). From this finding, it can be argued that PSRs dismantled the socialist state so that the private sector could be given an opportunity to grow.

OPEN IN VIEWER

Figure 1.

Percentage distribution of employed people in Zambia in 2014.

6. Introduction of Neoliberal Capitalism in the Former African Socialist State

The dismantling of the socialist state paved the way for the introduction of neoliberal capitalism in Zambia. This was achieved by allowing private investors especially foreigners to buy most of the large parastatals. These included Chambishi Copper Mine bought by China Non-Ferrous Metal Industries; Nkana Mine bought by First Quantum Minerals Limited and Glencore International AG; and National Home Stores bought by Shoprite of South Africa (ZDA 2010). This reform measure shows that private investors were viewed as reliable partners in addressing economic challenges facing the country. This finding agrees with Huppé, Creech, and Knoblauch (2012) who argue that the interdependency of network actors is anchored on social capital. However, the process of opening the Zambian economy to private investors was characterized by corruption. This included selling the parastatals below the market value. For example, Intercontinental Hotel in Livingstone was sold to Sun International of South Africa at $6.5 million yet its market value was $26 million (Phiri 2020). Similarly, Nava Bharat Ventures of Singapore did not pay any money to purchase 65 percent shares in Maamba Collieries Limited, which were valued at $26.07 million. This is because the parastatal had liabilities of $92.6 million. In addition, Nava Bharat Ventures was given a tax holiday until the liabilities were offset (ZDA 2010). This finding shows that private investors can collude with government officials to capture PSRs for personal gain.

Although the Zambian economy was in recession when the MMD came into power in 1991, the situation worsened in the early years of implementing SAP. The worst GDP growth rate recorded during the SAP era was −8.6 percent in 1994 (Rakner 2003). At the same time, there was an increase in poverty levels. At national level, poverty increased from 69.7 percent in 1991 to 72.9 percent in 1998 (IMF and IDA 2000). This situation was due to two major factors. First, the private sector was still in its infancy. It needed organizational support including capital investment. Second, the major mines under the Zambia Consolidated Copper Mines were still owned by the government and continued to perform poorly because of low investment. To improve the situation, the major mines were privatized in 2000 (Serlemitsos and Fusco 2003). Incentives such as tax holidays were also offered to promote investment and growth of the private sector. For instance, mining companies managed to negotiate mineral royalty from 3 percent to 0.6 percent of gross turnover and company tax from 35 percent to 25 percent (Fraser and Lungu 2007). These measures enabled private companies to make capital investments. Most of the investments were above $10 million (Serlemitsos and Fusco 2003).

The capital investments made by private companies enabled some loss making enterprises to become profitable. These included the Zambia National Commercial Bank (ZANACO) which recorded a profit of Zambian Kwacha (K) 113 billion (unrebased currency) ($22.6 million) in 2010 (Musonda 2011). At that time, $1 was equal to K5,000. Similarly, the contribution of the mining sector to GDP increased from 6.2 percent in 2000 to 11.8 percent in 2005 (Simutanyi 2008). Because of the positive performance of the privatized enterprises, Zambia’s economy became stable. GDP growth rate increased from −2 percent in 1998 to 2.2 percent in 1999 (Rakner 2003). During the period 2000–2005, the economy grew at an average rate of 5.8 percent per annum. Between 2006 and 2015, it grew at an average rate of 6.9 percent per annum. Inflation also reduced from an average rate of 11.4 percent during the period 2006–2009 to an average rate of 9.9 percent during the period 2011–2015 (Republic of Zambia 2017). Similar improvements have been recorded in other countries that have undergone reform in sub-Saharan Africa (see Khisa 2019; Mkandawire 2014). This finding implies that the growth of a private-sector-driven economy depends on high levels of capital investment.

Nevertheless, private investors especially multinational corporations are able to take advantage of weak institutions and evade taxes thereby making the government lose revenue. For example, Zambia Sugar paid a tax rate of 0.5 percent on revenue of over $200 million in 2012 rather than the expected 35 percent (Lewis 2013). The same practice obtains in the mining sector where taxes are avoided by using complicated accounting systems including transfer pricing. This problem is exacerbated by lack of institutional capacity to enforce tax laws (Mwambwa, Griffiths, and Kahler 2010). By avoiding taxes, private investors are able to make huge profits. In 2012, Zambia Sugar made a profit of K144.6 billion (unrebased) ($28.92 million), which went to the owners of the company, Illovo Sugar Group of South Africa (Mseteka 2013). Relatedly, the government does not receive a fair share of dividends in companies where it has joint ownership with private investors. For instance, despite the Zambian government holding 25.2 percent of the shares in ZANACO (ZDA 2010), it was paid K8 billion (unrebased) ($1.6 million) as dividend out of K113 billion ($22.6 million) profit recorded by the company in 2010 (Musonda 2011). This means that the government received 7.1 percent of the profit instead of 25.2 percent in accordance with its shareholding in ZANACO. This finding implies that PSRs can be captured by private investors who take advantage of weak institutions for corrupt purposes such as tax evasion.

By defrauding the government, private entities are able to accumulate capital at the expense of the citizens. This, in turn, increases income inequality in the country. This has been the case in Zambia following the introduction of neoliberal capitalism. In 1996, the bottom 50 percent of the households owned 11 percent of the total income but in 2015 the total income of this group reduced to 7.3 percent. This has enabled the top 10 percent of the households to own 56 percent of the total income in the country (Central Statistical Office 2016). Consequently, a new social structure of the rich and the poor has been created. This explains why African citizens continue to be poor despite the continent recording positive economic growth in the era of PSRs.

7. Reconfiguration of the Former African Socialist State

To consolidate neoliberal capitalism in Zambia, the former socialist state has been reconfigured into an agent of neoliberal capitalism. This has been done by implementing strategies such as capacity building and control of public expenditure. Two major programs have been used to implement these strategies. These are Public Service Capacity Building Program (PSCBP) and Public Service Management Program (PSMP). PSCBP was launched in 2000 so as to reorient the government and build its capacity to perform new roles. The new roles of the government were policy formulation and performance monitoring rather than service delivery. The government was also expected to control its establishment and expenditure. This was done using the medium-term financial framework, which sets expenditure targets as opposed to relying on cash budgets. In order to build the capacity of the government to perform its legislative role, PSCBP emphasized training of workers in the Ministry of Legal Affairs (now Ministry of Justice) and the judiciary and reviewing laws that affect accountability and transparency (World Bank 2000).

The implementation of PSCBP started the process of reconfiguring the former socialist state into an agent of neoliberal capitalism. It enabled the public service to train, retrain, and recruit workers capable of serving the interests of the private sector. With this new orientation, the central and local governments started to increase in size. Between 2000 and 2004, the total number of workers in the central and local governments increased from 104,000 to 115,000 (Republic of Zambia 2005). This number continued to increase to the extent that in 2014 the central government had 243,277 workers while the local government had 30,367 workers (Central Statistical Office 2015). This amounts to a total workforce of 273,644. While the sizes of the central and local governments are increasing, the parastatal sector continues decreasing. Before the implementation of the Privatization Program in the early 1990s, parastatals had over 100,000 employees (Simutanyi 2011). Nonetheless, the number reduced to 58,581 employees in 2014 (Central Statistical Office 2015). The reduction in the size of the parastatal sector has created a conducive environment for the growth of private enterprises.

A number of laws have also been reviewed to promote the growth of private entrepreneurship. The review process has led to some laws being repealed and replaced with new ones. For instance, the Investment Act, Privatization Act, Small Enterprises Development Act, Export Processing Zones Act, and Export Development Act were repealed in 2006 and replaced with the Zambia Development Agency (ZDA) Act. The ZDA Act focuses on economic development driven by the private sector (Republic of Zambia 2006).

The PSMP was launched in 2005 to enhance the control of public expenditure. It emphasized payroll management, establishment control, and performance-based pay. In this regard, public expenditure was tied to expenditure ceilings specified in the medium-term expenditure framework (Republic of Zambia 2005). In essence, these ceilings were aimed at reducing the public sector wage bill and allocating the savings to other sectors of the economy. Since the Zambian government has been reconfigured, most of its revenue is used to meet the needs of private investors such as infrastructure development. In 2017, the largest share of the national budget, 31.1 percent, was allocated to economic affairs where the major item was roads infrastructure. Of the K20.13 billion (rebased currency) ($2.01 billion) meant for economic affairs, K8.64 billion ($864 million) went to road infrastructure. At that time, $1 was equal to K10. The main reason for focusing on road infrastructure is to promote economic growth and regional trade (Mutati 2016). It involves opening up new areas for investment such as multifacility economic zones. Although ordinary citizens benefit from such investment in terms of transport and social services, they are required to pay for these services at a rate that enables investors to make profit. Eventually, the services become unaffordable to poor people.

The failure to raise enough revenue through domestic sources especially taxes from private enterprises has forced the Zambian government to borrow money for its operations. This, in turn, has put the country in a debt trap. Before the implementation of SAP in the early 1980s, Zambia’s external debt was around $2.18 billion, which was equal to 61 percent of the country’s GDP. In 1991, the debt increased to $7.28 billion (i.e., equal to 180 percent of GDP) (Rakner 2003). Because of this level of indebtedness, Zambia was categorized as a heavily indebted poor country (HIPC) and was able to access relief under the enhanced HIPC initiative implemented between 2001 and 2010 (IMF and IDA 2000). By 2006, Zambia’s external debt was reduced to $635 million. This level of external debt enabled it to be removed from the list of heavily indebted poor countries (Magande 2007). However, the relief was short lived. The country started to borrow again. This has resulted in Zambia’s external debt increasing to $11.97 billion (Ng’andu 2020). This level of indebtedness has made debt payment the main function of the government. For instance, of the K17.97 billion (rebased) ($1.80 billion) meant for general public services in the 2017 national budget, K6.50 billion ($650 million) was allocated to payment of external debt and K4.97 billion ($497 million) to payment of domestic debt (Mutati 2016). This means that debt payment accounted for 63.8 percent of the money allocated to general public services. This implies that the debt-servicing trap that Zambia finds herself in is a combined effort of both financial institutions and the government. This finding agrees with Holcombe (2012) who argues that even if governments make plans, most of them promote the interests of market players rather than those of the general public.

8. Exploitation of Citizens

Because of being captured by powerful actors, the Zambian government fails to protect its citizens against exploitation by the same government and private investors. The citizens are exploited in their capacity as workers and as members of the general public. The strategies used to exploit them are discussed below.

9. Conclusion

We conclude that PSR uses a three-stage process to introduce neoliberal capitalism in African socialist states. The first stage involves the dismantling of the socialist state through the strategies of downsizing, decentralization, and privatization. The second stage focuses on the introduction of neoliberal capitalism in the former socialist state. It involves the removal of government controls and allowing private sector actors to participate in economic activities. The third stage involves the consolidation of neoliberal capitalism by reconfiguring the former socialist state into an agent of neoliberal capitalism. This is achieved by implementing strategies such as control of public expenditure and building the capacity of the state to formulate policies that promote the growth of the private sector. This finding supports governance network theory which assumes that public policy problems are complex and require the state and non-state actors to put their resources together to solve them (Huppé, Creech, and Knoblauch 2012; Klijn 2008; Osborne 2006).

However, the reform of the African socialist state creates a new social structure of the rich and the poor. The winners in this process are private sector actors, especially multinational corporations, who buy SOEs at very low prices, avoid taxes, and use the government and ordinary citizens to subsidize their operations. The losers are the ordinary citizens who are exploited by both the government and private investors. The exploitation occurs through poor terms and conditions of employment, high taxes, levies, and user charges. Ultimately, ordinary citizens are impoverished while private investors accumulate capital. This explains why African citizens continue to be poor despite the continent recording positive economic growth in the era of PSRs. This finding confirms the assumption by Lester and Reckhow (2012) that governance networks can be captured by privileged and powerful actors to promote their own interests.

The major contribution of this paper has been to show how PSRs introduce neoliberal capitalism in African socialist states and how private investors benefit from this process while ordinary citizens lose out. Nevertheless, the paper does not cover strategies of protecting citizens against exploitation in the process of implementing PSRs. This is the issue that future research can focus on.