Public enterprise

Meaning: These are special organization set up by the government

Through the act of parliament, managed and controlled by the government to perform essential services to the citizens of the county.

OR

Public enterprises/corporation are businesses owned and run by the government in the public interest.

OR

Public corporation, also known as public enterprises or statutory corporation may be defined as a large scale business organization set up, owned and financed by the government of a country mainly to provide services to the members of the public.

FORMATION

Public corporation are government enterprises that have commercial functions, which are normally established at the federal level, by an act of parliament which specifically creates the corporations.

The act states the objectives and aims of the corporation specifies its powers and how it is to be run and managed.

FORMS OF PUBLIC ENTERPRISES

1. PUBLIC UTILITIES: These are government parastatals that provide essential services to the citizens at subsidized cost. This will ensure balance between social and economic objectives e.g. water corporation.
2. POLITICAL BOARD: These are autonomous establishment which execute the policies of the government within a specific area. Example is schools management board.
3. COMMERCIAL ENTERPRISES: These are government owned bodies set up to create competitive environment and make profit from their operation. They are autonomous in structure and operation e.g. NITEL.

SOURCES OF CAPITAL

1. GOVERNMENT GRANTS: This is the major source of capital to public enterprises. They receive budgetary allocation from the government.
2. LOAN FROM BANKS: public corporations can obtain loan from financial institutions to expand their operation.
3. INTEREST ON FIXED DEPOSIT: Another source is the interest received from deposit with banks.
4. INTERNAALLY GENERATED REVENUE: Public enterprises also generate revenue internally, for example Lagos state university teaching hospital generate a lot of money from patients.
5. DONATION AND GIFT: They can also receive donation and gift from friendly countries or international institutions.

REASONS FOR GOVERNMENT OWNERSHIP

OF PUPLIC ENTERPRISES

1. ESSENTIAL SERVICES: Public enterprises provide services which are vital to the citizens and which should be provided without the motive of profit for the overall good of the masses.
2. AVOIDING WASTE AND DUPLICATION: It should be more economical run water and electricity undertakings as states monopolies because laying alternate pipes and power lines across the roads and in people’s houses would be wasteful.
3. CAPITAL REQUIREMENTS: The capital needed to establish most of the public utilities is so huge that it cannot easily be afforded by private persons.
4. GOOD INFRASTRUCTURAL BASE: A good network of roads and railways, powers, communications, etc. will lay a solid foundation for rapid economic development and progress in the country.
5. EVEN DEVELOPMENT: The policy of government is to encourage even development and bring about equitable distribution of the country’s wealth. To achieve these objective the key industries and organizations should be in the hands of the government.
6. SOCIAL SERVICES: If education and health matters are left in the hands of the government, it will be possible to establish more schools and hospitals and run them for the benefit of the rich and poor alike.
7. SOCIAL SECURITY: Privatization of the commanding heights of the economy amounts to mortgaging the country to private individuals who will then wield so much economic power that the country becomes a mere pawn in the hands of profit seeking businessman. A ready example today is that if the Dangote Group sneezes, the whole country shakes.
8. NATIONAL SECURITY: For reasons of national security, the government might decide that management and control of certain industries and organizations should be in its hands. For instance, the Army and police are under the country of the federal government.
9. MUTUAL RESPONSIBILITY: Government expects citizens to pay tax as responsible citizen. The citizens on their part expect the government to fund public utilizes with the tax they pay, privatizing public utilizes they removes the basis for demanding tax from citizens.

REASONS FOR PUBLIC ENTERPRISES

1. Provision of essential and infrastructural facilities.
2. For security and strategic reasons.
3. Limitation of foreign control of the economy.
4. Safeguard economy and political interest.
5. Large capital requirement.
6. Generation if revenue.
7. Control of monopoly power.
8. Avoidance of wasteful duplication of resources.
9. To stabilize price.
10. Economic development.
11. Employment opportunities.
12. Increase in the standard of living.

ADVANTAGES OF PUBLIC ENTERPRISES

1. LEGAL ENTITIES: Public enterprises are separate legal entities distinct from the owners. They can sue and be sued in their names and can enter into contract on their own.
2. REVENUE GENERATION: The government generates a lot of revenue from its participation in public enterprises. Government can receive income from dividend rates and fees.
3. PERPETUAL EXISTENCE: There is continuity in public enterprises. Death or retirement of any member cannot bring the organization to an end.
4. PROVISION OF SOCIAL AMENITIES: They provide the public with social amenities at a reduced cost. Basic infrastructure facilities that are essential for economic development such as road and electricity are provided by public enterprises.
5. LARGE CAPITAL FOR EXPANSION: The government because of its large financial resources provides large capital. This will funds available for large-scale investment.
6. PREVENTION OF WASTEFUL DUPLICATION OF SERVICES: For instance, if two supply of pipe borne water is in the hands of individuals, there will be a lot of dams and pipes.
7. ECONOMIES OF LARGE-SCALE PRODUCTION: Combination of greater resources may help in securing economies of large scale production.
8. PREVENTION OF EXPLOITATION OF CONSUMERS: Public enterprises help to control price and ensure stability. This will prevent the exploitation of the consumers by private businessmen. Most social and essential services are provided at subsidized rate to the public.
9. ACCOUNTABLE TO THE PUBLIC: Another major advantage is their accountability to the general public through the submission of annual reports and statements of accounts to the National Assembly.
10. PROVISION OF EMPLOYMENT OPPORTUNITIES: To regulate the economy of a nation and ensure full employment of its citizens. Many public corporations provide employment for the people. The federal government is the largest employer of labour in Nigeria.

DISADVANTAGES OF PUBLIC ENTERPRISES

1. No privacy.
2. Delay in decision-making process.
3. High cost of production.
4. Corruption and embezzlement.
5. Danger of government interference.
7. Inadequacy of funds.
8. Lack of competition.
9. Not profit oriented.

ASSIGNMENT

State the reasons for government ownership of public enterprises