Business, CSR, Economy, Human Rights, Law, Nigeria, Poverty, Social Justice, Social Responsibility, Sustainable Development, Uncategorized

Privatisation vs. Commercialisation – The Sustainability Issue.

Developing country rules are different from established developed country rules, this is due to various factors which include, but not limited to poverty, lack of institutionalised processes, corruption, nepotism, weak institutions etc.

The question has always arisen about what is the best form of economic model to adopt in running Government enterprises, ‘Privatisation’ or ‘Commercialisation’ (especially in light of government failures in running enterprises in developing countries). The phrase “government enterprises’’ explains itself, it means a government-sponsored business activity, such as a public utility. It is an enterprise set up by the government for the provision of goods and services, for the benefit of the people. The writer has always advocated for any other model except privatisation, for developing countries.

Privatisation as a model elicits selling government enterprises to private business concerns, usually owned by very rich individuals, who are mostly motivated by profit, at the expense of the people in the country. The arguments for privatisation include that the companies would be better run, provide jobs to the benefit of the society. Inspite of the stated reasons, from hindsight, these are not enough reasons for the case, in under-developed countries. In a country with weak institutions, how do you control unbridled capitalist tendencies i.e excessive increase in prices of goods and services. America cannot be compared with Nigeria, esp when comparing GDP and minimum wage issues.

It is the opinion of the writer that the model of commercialisation as adopted in the U.K, is better for developing countries to adopt.

What is Commercialisation, in this context? Commercialization is a system of leasing out govt enterprises for a few years to the best and most capable hands. This is a better model, in the sense that government enterprises still belong to the state and those holding the leases would not take permanent control which would give them a sense of superiority, which could lead to them riding roughshod over the populace. Commercialisation is more advantageous because it can help governments protect the people by getting a better deal for the people at the expiration of a lease, before the renewal of another. Developing countries rarely learn from second hand experience i.e experience of other countries. Russia and Britain have experienced both models and have totally rejected privatisation. One of the advantages of commercialisation of government enterprises is education and technology acquisition, upgrading standards, learning new work ethics and management cultures and skills acquisition. These are important because the major problems with government enterprises, in developing countries, is motivation and job satisfaction which is lacking in most cases. Inculcating a new mind-set is fundamental to a developing country’s progress. Inevitably, this would lead to a more sustainable economic environment where both the country and people can benefit. Instead of a privatised system that creates oligarchs (a new level of super-rich) which goes against the new ethos in the world which is bridging the gap between the rich and the poor by creating a more solid middle class. It has always been the view of the writer that those who profess privatisation as a system, lack adequate understanding of sociology, motivational psychology, political philosophy and positive socio-economic theories that hinge on socio-capitalist initiatives such as social welfare, CSR and community development in a protected and better monitored environment.

It should be noted that governments that privatise their enterprises give control of their economies over to private individuals and when this happens, chaos would be the end result, because this erodes democratic ideals, where the people lose the right to run/ decide their economic destiny, because those elected lack the power to implement the people’s wishes. So the real power would reside in the owners of factors of production/ the commonwealth. If the government controlled its own enterprises and partook in the same economic environment as privately run companies, this would create competition which could spur a rejuvenation of government enterprises and the government could control prices of its goods and services which would also have an effect on prices in society, which could defeat any cartel arrangement in fixing prices to the benefit of the cartel.

In short the espoused phrase of ‘Government having no business in business’ is totally flawed and wrong for developing countries. It can even be said to be wrong also for developed nations in light of the recession of the 2007-8, where due to the collapse of major enterprises, the governments of USA and UK not only gave out bailout funds, but even bought stakes in some banks in the UK, as well. This is the result of unbridled capitalism.

It should also be noted that Foreign Direct Investment (FDI) is different from Indigenous Privatization of Government enterprises and the excuse of the issue of frustration of FDI initiatives, such as the Richard Branson’s debacle in Virgin Nigeria (Note: Not Virgin Atlantic business in Nigeria) should not be used as a yardstick for privatization in Nigeria. When individuals own all the companies in a developing country, no one can hold them back from maximising profit, over public interest. To whose detriment is this? Answer: the people, citizens and consumers.

Can this bring about sustainable progress/ development for the majority or only for a few?

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3 thoughts on “Privatisation vs. Commercialisation – The Sustainability Issue.

  1. Saburi Babalola says:

    That was a well elucidated write-up, Bernie G. Well done! The ugly fact about privatisation, as you analysed it, cannot be presented any more precisely than your viewpoint as expressed. What I appreciate the most about your write-up is the highlights of the causes as to why privatisation may not be a good business model in a developing Nation such as ours. Wobbly-structured business environment and weak State Institutions are the delight of the ravenous capitalists in the massive exploitation of the system. The real losers, in this case, are the poor masses and the government who are enormously short-changed as the society is sunk in abject vicious circle of retrogression.

    One conspicuous end-product of privatisation is a wider gulf between a handful of excessively rich capitalists who would rake in fresh rounds of excessive profits on the one hand, and the rest (the poor masses) who become poorer on the other. Privatisation will surely sink the society further in penury as more resources will be required for the addressing of the typical social malaise-induced poverty, while the fiscal budget is forcefully bloated from non-growth induced spendings. This further bashes an already weakened socio-economic wellbeing of such Nation, thereby, pushing it deeper in the unpleasant poverty circle.

    Privatisation, in my opinion, is one of the major problems that have been distracting our National economy from charting the course of progressive development, minding the colossal wastage of scarce economic resources in the process. Of all the privatised business entities that were initiated from the dawn of this 4th Republic till date, ALSCON of Ikot-Abasi, Akwa Ibom, is the most painful to me. The massive investment never operated more than a pathetic 10% of its installed capacity at its then “optimum level.” Now, the plant has been completely shut down due to some tussle between a handful of powerful greediots that are trying to outsmart one another in the process of stealing our National asset.

    But, come to think of it, Privatisation is nothing more than bureaucrats’ avenues in stealing our collectively-owned prized assets, using some rich and powerful elites as proxies in giving the racketeering some legitimacy. The pathetic story is not any different when comparing developing and emerging economies such as Nigeria, Russia, Zambia among others. Governments should never treat the issue of Privatisation and other economuc packages with levity because the capitalists, being the perpetually hungry parasites that they are, will cannibalise any economic resource that they lay their hands on. We are not unmindful of the fact that bureaucrats do intentionally create loopholes and leakages in the system so as to connive with allies in corruption to exploit the self-initiated deficiencies.

    Commercialisation, on the flipside, in as much as it is a far better option comparative to Privatisation, will most probably, not work in a peculiar economy such as ours. Why? Unless certain fundamentals and variables are fine-tuned, we shouldn’t expect outcomes any different from same of the same rot that have persistently been dumped on us. Now, assuming we had a well structured business environment and strong public institutions, learning from the German way of structuring large corporate bodies and adapting it, in conformity to our environment, is a sure winning strategy. One key aspect of this area that I love is the composition of some effectual corporate Boards of Director’s, Shareholders etc. The Board members are typically individuals carefully selected from various sectors of their society (top brains, business gurus, seasoned public administrators, renowned legal experts, etc) representing different groups such as; employees, labour union, shareholders, regulatory bodies etc. With such a well defined structure, no one can short change any group that is meant to be duly represented in the affairs of such organisation.

    The way I see it, in rounding up before turning this into a full blown dissertation, is that no matter how well structured a good-intentioned economic package is pushed into our public sphere, nothing will work, if certain fundamentals are not deeply looked into. Aside from the privatisation exercises, there are several other so-seemed good, but mismanaged, beautiful economic packages with disastrous outcomes, are as a result of the usual highjack by the gluttonous elites. Such include; subsidized fertiliser programme designed for poor farmers; Poverty Alleviation Programme; Universal Basic Education programme, Millennium Development Goals; the list continues endlessly. The most important thing in getting things right begins with the Government and it various regulatory bodies, who should be ready to wield the sledgehammer, not the big stick, on racketeering cartel.

    Liked by 1 person

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