Categories
Economics

Co-operative socities and Public enterprises

Meaning of Co-operative Society

A co-operative society is an association of people with a common interest, formed for the purpose of engaging in a business or providing services for the members.

Features/Characteristics of Co-operative Societies

  1. There is no limit to the size of its membership
  2. Profits are shared on the basis of patronage
  3. They have unlimited liability
  4. In most cases, the owners of the co-operative societies are the customers of the enterprise
  5. The aim of setting up a co-operative society is to help the members.
  6. It is a highly democratic form of business organisation
  7. The business is not a separate legal entity

Types of Co-operative Societies

  1. Producers’ Co-operative: It is an association of producers of a particular commodity.
  2. Consumers’ Co-operative: It is an association of consumers. They buy in bulk at wholesale prices and sell at retail prices.
  3. Credit and Thrift Co-operatives: They are formed by a number of persons with the aim of either saving money together or making it possible for them to borrow money easily from banks.

Public Enterprises

Definition of Public Enterprises

Public enterprises are government or state-owned business organisations which are usually set up by Act of legislation, with the main aim of maximizing public welfare. They go by various names such as Corporation, Authority, Commission or Board.

Examples in Nigeria include the Federal Radio Corporation of Nigeria (F.R.C.N), the Nigerian Railway Corporation (N.R.C), the Nigerian Ports Authority (N.P.A), the National Electric Power Authority (N.E.P.A) etc.

Features of Public Enterprises

  1. They are owned by the government.
  2. They are established either by decree or Act of Parliament.
  3. The government provides the capital for setting up the business.
  4. The main aim in setting up public enterprises is to maximize the welfare of the citizens.
  5. The risks of the business are borne by the government and the tax-payers.
  6. The business is controlled by a board of directors appointed by the government.
  7. A public enterprise is a legal entity or a corporate body.
  8. Public corporations are conferred with  monopoly power
  9. Workers in public corporations are public servants.
  10. The management of public corporation are accountable to the government.

Advantages of Public Corporation

  1. Public corporation provides infrastructural facilities for the public
  2. They are owned by the government and as such there is always availability of capital for expansion
  3. There is continuity i.e. public corporation can last for a very long time.
  4. Development of capital projects
  5. Avoidance of exploitation of consumers
  6. Creation of higher standard of living
  7. Accountability to the public
  8. It is legal entity
  9. It caters for the interest of workers.
  10. Provision of employment opportunities
  11. Enjoyment of large scale production

Disadvantages of Public Corporation

  1. It requires large capital
  2. Government interference: Government can interfere through the appointment of unqualified and incompetent people as board members.
  3. Inefficiency in operation: Lack of competition can bring about inefficiency.
  4. Danger of monopoly: This makes public corporation to be inefficient since there is no competition.
  5. Bureaucratic tendencies and red tapism: System of administrations is complicated and that leads to delay
  6. Corruption and mismanagement: The appointed people may misappropriate fund of the corporation.
  7. Not profitable: It is not profit oriented therefore there may not be commitment.
  8. Wastage: People tend to waste resources since there is no sense of ownership for anyone appointed.
  9. Lack of initiative: People do not bring in their skills into the business since they are not direct owners of the business.
  10. Lack of privacy: The account and the activities have to be published.

Reasons for the Establishment of Public Corporations or

Reasons for Government Participation or Ownership of Business Enterprises

  1. High capital requirement:– It requires huge capital which may be difficult for private individuals to obtain.
  2. Generation of revenue: – Commercialised ones generate revenue for the government.
  3. To prevent foreign dominance of the economy:- This is to prevent expatriates from hijacking economy through the domination of the production of essential goods.
  4. To avoid wasteful competition and duplication
  5. To provide infrastructural facilities
  6. To prevent monopolistic tendencies of the private individuals.
  7. To ensure even distribution of income
  8. Provision of essential services which may not be profitable for private individuals
  9. To ensure higher standard of services provided
  10. To generate employment opportunities
  11. To promote economic development.
  12. For strategic and security reasons- Government may engage in business to control certain key industries such as airports, seaports. Defence, the oil industry installations in which the government cannot afford competition for strategic reasons.

Specific Problems Associated With Public Corporations

  1. Political instability: Frequent change in government can affect the effective performance of public corporation.
  2. Frequent government interference: This results to inefficiency of public corporation.
  3. Lack of qualified personnel: The appointment of incompetent person can affect the performance of the business.
  4. Negative attitude of workers: Workers tend put on negative attitude because they regard it as nobody’s properties.
  5. High level of embezzlement: The top officials of public corporation cripple the business financially by stealing and diverting the corporation’s funds.
  6. Favouritism in appointment: There is favouritism and nepotism in the appointment of directors which leads to the appointment of incompetent and unqualified personnel.
  7. Political victimization: If the appointed directors are not in the ruling party, it works against the effectiveness of the corporation.
  8. Practice of sectionalism and ethnicism: This cripples the effectiveness of public corporation.

Sources of Finance to Public Corporations

  1. Loans and overdraft
  2. Internally generated revenue
  3. Grant from government
  4. Grant from international financial institution
  5. Grant from foreign countries.

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