The Nature and Concept of Public Enterprise

The Nature and Concept of Public Enterprise

Public enterprises have numerous definitions and there is no single generally acceptable definition of the concept. Sosna (1983) opined that there are many reasons why in developed capitalist countries, there is no single standard definition of public enterprises. Public enterprises were established at different periods, and each epoch naturally brought forth the types of public enterprises most clearly matching its own conditions.

It is therefore believed that the variation in definition are informed by the ideological, values, interests, dispositions and circumstances that brought public enterprises into existence. Whatever the controversy and the lack of uniformity might conjure up, we would however review the viewpoint of some scholars of public enterprises. For instance, Efange (1987) define public enterprises or parastatal as institutions or organizations which are owned by the state or in which the state holds a majority interest, whose activities are of a business in nature and which provide services or produce goods and have their own distinct management.

Obadan (2000), Obadan & Ayodele (1998) defined public enterprises as organizations whose primary functions is the production and sale of goods and/or services and in which government or other government controlled agencies have no ownership stake that is sufficient to ensure their control over the enterprises regardless of how actively that control is exercised.

The basic reason for establishing public enterprises in all economies has been to propel development. In the opinion of Obadan (2003), the case for public ownership has often been made on many grounds among which are: the persistence of monopoly power in many sectors ( meaning that certain market have the tendency to move towards monopoly power, especially when technological factors); freedom of government to pursue objectives relating to social equity which the competitive market would ignore, like employment and easy access to essential goods and services; capital formation particularly at early stages to develop Investment in infrastructure; lack of private incentives to engage in prospective economic ventures; certain goods that are of high social benefits are usually provided free or at a price below their cost and the private sector has no incentives to produce such goods hence the government must be responsible for their provision; the desire for the government to achieve redistribution by locating enterprises in certain sectors (areas) especially where private initiatives are low; and ideological motivation and the desire of some governments to gain national control over strategic sectors or over multi-national corporations whose interests may not coincide with those of the African countries or over key sectors for planning purposes.

Other factors that accelerated the growth of Nigeria’s public sector was the indigenization policy of 1972 as enacted by the (Nigerian Enterprises Promotion Decree). It was designed to control the commanding heights of the economy. The policy further provided the much needed legal basis for extensive government participation in the ownership and control of significant sectors of the economy. It also reinforced the increasing dominant of the public sector in the economy.

In spite of the impetus given to public enterprises especially in Nigeria some criticisms are leveled against them. Their problems are so enormous that even left the Nigerian public in a state of great disillusionment. These criticisms vary from lack of profitability and reliance on large government subsidies. Ogundipe (2002) once argued that between 1975 to 1999, government capital investments in public enterprises totaled about 43 billion Naira. In addition to equity investments, government gave subsidies of N11.5 billion to various state enterprises.

All these expenditures contributed in no small measure to increased government expenditures and deficits.

Similarly, public enterprises suffer from gross mismanagement and consequently resulted to inefficiency in the use productive capital, corruption and nepotism, which in turn weaken the ability of government to carry out its functions efficiently (World Bank, 1991). There are avalanche of literatures that point to the problems of public enterprises especially in Nigeria. They include, , Sanusi (2001), Obadan (2003), Jerome (2005).