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FM AMEMBASSY NIAMEY
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INFO RUEHAB/AMEMBASSY ABIDJAN 0243
RUEHUJA/AMEMBASSY ABUJA 0114
RUEHBP/AMEMBASSY BAMAKO 0284
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RUEHLO/AMEMBASSY LONDON 0108
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RUEHFR/AMEMBASSY PARIS 0434
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RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS NIAMEY 000515 
 
SIPDIS 
 
 
 
SIPDIS 
 
SENSITIVE 
 
C O R R E C T E D COPY (CAPTION ADDED) 
 
LONDON AND PARIS FOR AFRICA WATCHERS 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV PGOV KPRV XA NG
SUBJECT: NIGER:  THE LATEST ON PRIVATIZATION 
 
REF: A.) NIAMEY 1302 NOV 05 
 
¶1.  BEGIN SUMMARY.  Econoff Gage met with representatives of 
the Government of Niger (GON), companies and the World Bank 
(IBRD) to produce the following status report on 
privatization in Niger.  GON privatization efforts have 
advanced since 1996, when Niger codified in law the desire to 
 
 
 
privatize 12 firms with a share held by the state.  Four 
firms remain that have varying levels of ownership by the 
GON.  However, excepting a hotel, these firms are unlikely to 
be privatized in the near future.  Rather than rush to 
privatize, the two most economically important firms, the 
national electrical company (NIGELEC) and the petroleum 
distribution company (SONIDEP) will attempt to restructure, 
with a reluctant blessing by the World Bank (IBRD).  END 
SUMMARY. 
 
---------- 
BACKGROUND 
---------- 
 
¶2.  (SBU) In the 1960s, shortly after Niger's independence, a 
number of companies were created by the GON.  These state 
owned entities functioned effectively, in some individuals' 
opinions, until the 1980s.  However, other allegations of 
mismanagement and misuse of companies' operating funds were 
used as justifications to push for privatization, or even 
liquidation, such as occurred with the Bank of Development of 
the Republic of Niger (BDRN).  From 1993-1994, the GON and 
the World Bank (IBRD) began targeting the structure of 
remaining state owned enterprises.  In 1996, Niger passed 
legislation to privatize 12 state owned firms, which occurred 
at a steady rate through 2002, after which privatization 
stalled. 
 
------------------- 
WHAT WAS PRIVATIZED 
------------------- 
 
¶3.  (SBU) In 1996 Niger passed legislation formally providing 
for the privatization of 12 GON owned firms.  Not all 12 have 
been privatized, with one being removed from privatization 
efforts through legislative mandate, another being liquidated 
and, as listed previously, others not attracting sufficient 
outside interest.  Also, other firms were added to the 
legislative list for privatization subsequent to 1996.  Ten 
years after Niger formalized via law the concept of 
privatizing several enterprises with a share held by the GON 
the following firms have been successfully privatized. 
 
a)  Cement Company (Societe Nigerienne de Cimenterie - SNC) 
 
b)  Milk Company (Office du Lait du Niger - OLANI) 
 
c)  Public Works Company (Societe de Location de Material des 
Travaux Publics - SLMTP) 
 
d)  Textile Company (Societe Nigerienne de Textiles - 
SONITEXTIL) 
 
e)  Phone Company (Societe Nigerienne des Telecommunications 
- SONITEL) 
 
f)  Water Company (Societe Nationale des Eaux - SNE) 
 
g)  Transport Company (Societe Nationale des Transports 
Nigeriens - SNTN) 
 
------------------- 
COMPANIES REMAINING 
FOR PRIVATIZATION 
------------------- 
 
NIGELEC (Societe Nigerienne d'Electricite): 
 
¶4.  (SBU) As Niger's primary electricity provider and 
producer, NIGELEC receives approximately 85-90% of its power 
from Nigeria.  Compared to other West African companies, 
NIGELEC does a decent job of providing service to urban 
communities; nevertheless, customers complain about high 
rates and frequent power surges and cuts, particularly during 
the hot season.   NIGELEC's privatization is problematic, 
with each of the two bidders seeking the contract posing 
different sets of problems (the same two firms have been the 
only participants in two separate tender offers).  While the 
French multi-national Vivendi has probably the better 
technical package, civil society and the opposition would 
probably chaff at a French takeover of NIGELEC.  Of greater 
 
 
 
concern to the GON would be fear of a backlash by the rival 
bidder, the Nigerian National Electric Power Authority 
(NEPA), who already supplies most power to NIGELEC at 
subsidized "fraternal" rates, were Vivendi to win the 
contract. 
 
¶5.  (SBU) Moreover, the entire question of privatizing 
electrical power distribution is politicized, with opponents 
(including inside the GON) arguing that keeping NIGELEC under 
state control is in Niger's strategic interest.  Many average 
Nigeriens fear that with privatization, prices will only go 
higher and planned rural and secondary cities' 
electrification projects will stop.  NIGELEC's Secretary 
General (SG) reports that the IBRD has some sympathy to GON 
concerns, and thus is not pushing hard for early 
privatization of the company.  The IBRD recognizes that Niger 
can obtain outside loans for increasing the size of its 
electric grid  but is also conscious that there is a point at 
which it might have to provide financial support directly to 
the GON. 
 
¶6.  (SBU) Thus the IBRD is focusing on improving NIGELEC's 
governance and international management controls. According 
to the SG, NIGELEC has been able to pursue business goals in 
recent years without much GON interference because President 
Tandja has made it clear on a number of occasions that under 
no circumstances are NIGELEC's operating funds to be touched 
for the private gain of government officials.  NIGELEC has 
also begun to crack down on private consumers who illegally 
access NIGELEC's grid, and the SG estimates NIGELEC has 
recovered 700,000,000 CFA (approximately 1,300,000 USD) by 
pursuing those who steal electricity.  Thus, from 2000-2005, 
NIGELEC's profits increased by 87 percent and its value as an 
enterprise increased by 56 percent, according to the SG. 
Moreover, NIGELEC has spent nearly 60 million USD on rural 
electrification investments during the same period.  The SG 
foresees significant future demand pressures to increase 
power generation to supply secondary cities as well as large 
scale rural irrigation projects.  To generate such 
electricity the GON is considering building a coal-powered 
plant in the city of Tahoua.  Its showcase project, however, 
would be to build the Kandaji dam northwest of Niamey, which 
many critics view as economically unfeasible and potentially 
environmentally unsound. 
 
SONIDEP (Societe Nigerienne des Produits Petroliers): 
 
¶7.  (SBU) SONIDEP is the national petroleum products 
distribution company and sole licensed fuel importer and 
depot operator in Niger.  With privatization, the hope was 
that the monopoly SONIDEP holds on fuel importation and 
storage would end.  The Director General (DG) of SONIDEP 
estimated that the goal of privatization was to put 70 
percent of fuel importation and storage in private hands. 
Approximately 51 percent of SONIDEP was to be sold to 
institutional, private interests, 10 percent to 
non-institutional, private interests, and 5 percent to 
employees.  The remaining 34 percent was to be retained by 
the GON. Tamoil, a Libyan oil company, and Total, a French 
concern, are the only two remaining, professional, private 
companies with a presence in Niger that might purchase a 
sizable portion of the 51 percent of SONIDEP set aside for 
purchase by clients of this type.  Unfortunately, neither 
firm seems interested.  Total is owed money by the GON for 
fuel sales.  Stock in SONIDEP is unlikely to be exchanged to 
eliminate this debt.  Tamoil claims to be making little 
profit in Niger and thus might have limited interest in 
taking on greater obligations in the country.  Nigerien 
companies have bought 6 percent of SONIDEP's stock.  Included 
in this group is the local fuel retailer, Tahirou Sikieye 
enterprises, an Ex-Im bank loan recipient. 
 
¶8.  (SBU) Despite these challenges, SONIDEP remains a 
somewhat more likely candidate for privatization than 
NIGELEC, not only because its domestic defenders are far less 
influential than NIGELEC's but also because the IBRD has 
pushed the GON harder to privatize SONIDEP.  In 2000, SONIDEP 
and the GON agreed with the IBRD to allow SONIDEP to keep its 
importation and storage monopoly for the time being, if in 
return SONIDEP would sell stock in the company and 
simultaneously make itself attractive for investment by 
lowering debts and fixing management problems.  The DG of 
SONIDEP seems to be making good on his agreement with the 
IBRD, as he has received a number of awards for his 
management including a decoration in December 2005 by the 
President of Niger.  Also SONIDEP's future plans include 
upgrades to its Information Technology (IT) systems and 
International Standards Organization (ISO) certification. 
Should these reforms occur, and if the GON removes its 
remaining (comparatively low) fuel subsidies; meets Total's 
or Tamoil's contractual concerns; and cracks down on illegal 
fuel imports from Nigeria, then SONIDEP's privatization 
attractiveness will increase. 
 
HOTEL GAWEYE (Societe Proprietaire et Exploitante de l'Hotel 
Gaweye - SPEHG): 
 
¶9.  (SBU) The Gaweye is the premier hotel in Niamey, albeit 
in an uncrowded field. The GON owns 95 percent of the Gaweye, 
with 5 percent of the hotel held by private and public 
companies such as NIGELEC, Sonibank, etc.  The hotel was 
constructed during the uranium price boom of the 70's and 
early 80's.  The Gaweye's parent company SPEHG lacked hotel 
management experience and contracted running of the hotel to 
Accor, a French multinational, who managed the Gaweye from 
1981 to 2003.  However, occupancy rates dropped to between 
30-40 percent, losses mounted for SPEHG, and the contract 
with Accor was not renewed.  Since 2003 the Gaweye has been 
managed by a Nigerien Army Colonel, Amadou Halidou.  Also in 
2003, the Gaweye hosted the Community of Sahel-Saharan States 
(CENSAD) summit conference, and was refurbished.  The GON 
footed the bill for refurbishment, but did not completely pay 
its primary contractors, a Croatian firm INGRA and a 
politically well connected Nigerien businessman, Moussa Dan 
Fulani.  According to a senior SPEHG officials, the off-books 
repayment of these outstanding credits to Dan Fulani and 
INGRA is but one of several complicating factors behind the 
Gaweye privatization. 
 
¶10.  (SBU) The bigger factor preventing privatization is that 
the GON still wants to maintain overall ownership of the 
hotel while privatizing its management. The GON has made two 
attempts to privatize the Gaweye since Accor ceased managing 
the hotel.  In the first GON call for bids for Gaweye 
privatization, only Accor and INGRA responded.  For the 
second call for bids, only Accor and a Malian concern made 
offers.  Both bids up to now have not been acceptable to the 
GON, probably because it has set unrealistic conditions for 
the bidders, namely that they pay a yearly rental fee as well 
as provide funding for periodic renovation of the hotel. 
 
NIGERIEN RICE COMPANY (Societe Le Riz du Niger - RINI): 
 
¶11.  (SBU) Although farthest along in the privatization 
process, RINI is THE least viable of the four firms still on 
blocks for privatization.  RINI is a partially privatized 
concern, with the GON still holding 30 percent of its stock. 
The remaining shares are distributed amongst the employees, 
35 percent, cooperative rice producers, 30 percent, and 
private investors, 5 percent.  However, selling the remaining 
GON shares in RINI will be difficult.  Financially, RINI is 
suffering.  RINI needs 4 billion USD a year to buy the rice 
harvests, to provide financing to individual rice producers 
or cooperatives for the purchase of seed and fertilizer, and 
to process the rice itself.  With no agricultural banking 
system in Niger, prohibitively high commercial lending rates 
and little time between the two rice growing seasons, RINI 
has been hard pressed to find this funding. 
 
¶12.  (SBU) There also are lingering unresolved legal 
questions as to the ownership of the land of one of the three 
RINI plants.  Of more concern, these three plants produce at 
under 20 percent of their capacity.  At least a million 
dollars would be required to refurbish the RINI facilities, 
and it appears that local traders have effective networks to 
purchase Niger's modest rice harvests directly from farmers 
and use rice processing factories in Nigeria and Burkina Faso. 
---------------------- 
THE WORLD BANK AND 
NIGERIEN PRIVATIZATION 
---------------------- 
 
¶13.  (SBU) The IBRD has financed an 18.6 million USD project 
that began in June 2005 and will end in December 2006 to aid 
in the privatization of remaining Nigerien companies.  Much 
of these credits, however, will not be spent on 
privatization.  The IBRD did provide for the continued 
funding of the Privatization Coordinating Cell (CCPP) within 
the structure of the GON.  Some IBRD funding was also 
provided for general support to the private sector, 
specifically, to help address areas rated in the most recent 
IBRD report titled "Doing Business."  The aspects rated in 
this report include:  a) starting a business, b) regulation 
of the construction sector, c) property transfer, d) getting 
credit, e) protecting investors, f) business taxation, g) 
international trade, h) contract execution, and i) closing a 
business.  One million USD will likely be reprogrammed for 
GON efforts to control avian influenza (AI). 
 
¶14.  (SBU) According to the IBRD Country Representative, 
support still exists in his organization for privatizing the 
management of the Gaweye.  However for SONIDEP and NIGELEC 
the focus is no longer privatization but restructuring. 
SONIDEP needs to improve its performance and pursue ISO and 
other certifications.  In addition, the IBRD Representative 
noted the GON will have to aggressively court prospective 
buyers of SONIDEP stock as long as both Total and Tamoil 
remained uninterested interest.  Like SONIDEP, NIGELEC needs 
to study and improve its performance.  The IBRD 
Representative acknowledges that NIGELEC has a preferential 
contract arrangement with Nigeria and that privatization 
efforts would have a difficult time addressing this 
relationship. 
 
------------------------- 
COMMENT:  SUPPORT OF 
PRIVATIZATION WANING 
------------------------- 
 
¶15.  (SBU) Public and GON support for privatization has 
definitely waned.  In the eyes of some Nigeriens, 
privatization has not delivered what it promised:  lower 
prices and better service.  Many hold up the example of 
Sonitel, the national phone company, now owned by Chinese and 
Libyan interests, as proof that privatization has gone wrong. 
 Sonitel's service problems are apparent with repeated line 
cuts, interference and inability to complete dialed calls. 
In addition, Sonitel is notorious for billing irregularities 
and when questioned often responds with little or no 
justification for charges.  Privatization also did not lead 
to the creation of a shareholding class of any significant 
size in Niger. 
 
¶16.  (SBU) The small formal private sector has a clear vision 
of what steps it thinks the GON should take to encourage 
investment, and privatization is not high on that list. 
Instead, the private sector would like the GON to rationalize 
its tax structure, ease bureaucratic red tape, and establish 
transparent mechanisms to promote land ownership. 
 
ALLEN