AFRICANUS Vol 30 No 2 ISSN 0304-615X - University of South Africa

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Revenue and ownership Ð the impact of privatisation in South Africa: lessons from the UK Charles C Okeahalam and Royson M Mukwena* ABSTRACT This paper uses anecdotal evidence from the United Kingdom to suggest that one of the most trusted ways of ensuring the long-term development and growth prospects of the South African economy is to develop the philosophy of the stakeholder amongst all South Africans via a carefully planned and implemented privatisation programme. The paper concentrates on two aspects of privatisation: the impact on government revenues on the one hand, and the impact on share ownership by employees and on the welfare of RSA citizen stakeholders on the other hand. Market-led proposals are a desirable method of ensuring long-term benefits for all of South Africa's citizens. Potential consequences of market failure are also discussed. * The authors are grateful to Professor Ron Hope of the University of Botswana for his helpful comments. 1 INTRODUCTION This paper uses the UK privatisation experience to illustrate some of the benefits and problems of privatisation and it relates this experience to the debate on privatisation in the Republic of South Africa (RSA). It suggests that determining an appropriate privatisation policy is difficult, varies from country to country, and should be influenced by the underlying objective behind the particular privatisation process. Africanus 30(2)2000 76
Although privatisation policy impacts on a variety of issues, this paper concentrates on two objectives which are important in the South African context. The first is privatisation as a source of government revenue and the second is privatisation as a method of increasing employee ownership and perceived control, so as to increase economic efficiency and labour productivity. 2 PRIVATISATION POLICY The United Kingdom has played a role in developing and implementing the ideas and practice of privatisation. Now that apartheid has been overcome, the next major challenge facing the government of the Republic of South Africa (RSA) is to improve the economic wellbeing of the many previously disenfranchised citizens. In its 1993 election campaign the African National Congress (ANC) made several welfare pledges to the electorate. Now that it has formed the government, their expectations have been kindled. Privatisation may be used by the government to raise revenues and improve fiscal balances to meet its welfare policy objectives. As the World Bank (1995) has argued, privatisation is justified on the ground that state-owned enterprises (SOEs) are invariably inefficient and therefore constitute a massive drain on limited public resources. Vickers and Yarrow (1988) and Vickers and Yarrow (1991) identify three major types of privatisation: firstly, the privatisation of competitive companies, that is the transfer to the private sector of companies operating within competitive product markets with low market failure; 1 secondly, the privatisation of monopolies, that is the transfer to the private sector of firms with significant market power; and thirdly, the contracting out of public services to the private sector. The first step in formulating privatisation policy is to decide on the objectives and type of privatisation programme. When privatisation takes place via state asset disposal, the government has to decide on the objectives of the exercise. The objective might be to dispose of a loss-making enterprise to reduce the negative impact on tax payers. Another objective might be to place governmentmanaged concerns within a market environment, in other words without government subsidy. This would result in increased efficiency, better rates of financial return and improved management. Accordingly, decisions on the nature of privatisation policy in South Africa need to be seen as part of an overall economic strategy to improve the performance of the economy. Veljanovski (1989), amongst others, highlights the success of privatisation in the developed market economies where active, dynamic capital markets exist. However, it should be obvious that privatisation policy may not yield the same 77
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AFRICANUS Vol 30 No 2 ISSN 0304-615
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Journal of Development Administrati
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Book Reviews Can the poor influence
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peared internationally. The purpose
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Informal collection: a matter of su
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Thus, despite the Government's Reco
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age (table 1). The youngest collect
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Collectors estimated that they earn
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their head. Three women sold their
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Figure 3 Number of collectors recov
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would facilitate their work. Collec
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AFRICANUS Vol 30 No 2 ISSN 0304-615X - University of South Africa

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