(a) What are state-owned enterprises? (b) State any three reasons for the establishment of state-owned enterprises. (c) Highlight any four problems associat...
Question 1 Report
(a) What are state-owned enterprises?
(b) State any three reasons for the establishment of state-owned enterprises.
(c) Highlight any four problems associated with state-owned enterprises.
Answer Details
(a) State-owned enterprises (public corporations) are business organisations established, owned, financed and controlled by the government to provide goods or services to the public, for example a national electricity or water company.
(b) Three reasons for establishing them:
- To provide essential services (water, electricity, transport) that the public needs but which private firms may not supply adequately.
- To prevent private monopoly and exploitation in strategic industries by keeping them under public control.
- To provide services that require very large capital which private investors may be unable or unwilling to raise, and to promote development and employment.
(c) Four problems associated with them:
- Inefficiency and mismanagement arising from the absence of a strong profit motive.
- Political interference in appointments and decisions, which lowers performance.
- Losses and heavy reliance on government subsidies, which burden public finances.
- Corruption, bureaucracy and red tape, which cause waste and slow decision-making.
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