PRIVATISATION (PART 1)
This is the most common word in Zambia because everyone at one time or the other has spoken about it, starting from the politicians, supporters of certain organizations oftentimes than not they do speak about privatization. What is privatization? Privatization is a broader word but the common definition is about the transfer of own ship or control of the assets, or companies, or the industries from the public sector to the private sector. In the free market economy it is not the role of government to participate in the running of business and this is left to the private sector.
Now we can move on to this important question, why governments should choose to privatize industries, companies’? Well when the company is under the public sector, whatever revenue the company generates it goes to finance the national budget in that it also reduces on the budget deficit.
On the other hand, the company will lack competitiveness, effectiveness and efficiency, which oftentimes is the case in the privatize sector as the company priorities the creation of wealthy from maximization of profits.
The benefit of privatization can be seen at both microeconomic level and the macroeconomic as well, let us get started with the microeconomic environment. The distribution of resources is done in a more efficient way in that if the undertaking is not viable the capitalist will abandon that project and reinvest his capital on the more profitable venture. To the contrary under the public sector in order to keep the labour force, the treasury will subsidize those entities that are facing economic challenges. And this results in the increase of the government expenditure in the national budget, but the private sector when it reallocates financial resources to the profitable ventures, this result in the improved G.D.P and economic growth. On the macroeconomic environment the advantage of privatization starts right from the beginning, when companies are sold the revenue realized go straight to improve the budget deficit.
The other advantage worthy mention here is the cut of subsidies to companies, and also removing business from the government, that is the day to day supervision of business. And the ultimate goal of privatization is to create economic growth and improve the livelihood of the population. Now we come to the most important aspect of privatization which is the sequencing and pace of it.
For, example in Zambia this took about 5 years, now the question is should it take much longer long say 10 or 20 years or much shorter like 1 or 2 years. If we take the countries in Europe they were very fast to privatize while China took a very slow pace in the process. But the most unprofitable companies must go first while the most profitable may go last. But the actual time frame for the process can be determined by the government concerned.
By Kenneth Ngalamika.