Privatization Assignment Essay Example

of monopolies and decreased efficiency due to too many small markets. (Hayden, 1997, pp.250-253)

3.Provide an example of a successful privatisation from South Africa. Why was it a success? South African Iron and Steel Corporation, Iscor was the first parastatal to be privatised. In the first place this company was already managed like a private company and therefore the task of privatisation was not difficult. Because the shareholders structure was spread as wide as possible it avoided a single company or individual to take control of South Africa’s iron and steel production. Privatisation also had no influence on the business philosophy of the company because it was structured according to the Companies Act of 1973 and it was managed similar to a private company. (Saayman 1989:36-49). A very good marketing campaign to change perceptions of the employees and the public was launched and awareness of available shares were communicated to the general public and the employees were kept informed of developments continuously and a shareholding scheme were developed for them. The success can be contributed to all these factors and in the end Iscor was sold for R3, 7 billion. (Saayman 1989:53-59).

4.Provide an example of an unsuccessful privatisation from South Africa. Why was it a failure? On the contrary and based on the same company, situations can arise when privatisation can be seen as failing because of the abusing of power as in the case of Mittal Steel SA, the former Iscor, which was a government corporation who experienced market decline in the steel business for years, almost since their privatisation. Privatised government organisations almost always, after privatisation, dominate the market and abuse this position. Steel

is a basic commodity of any economy and Mittal Steel was found guilty after abusing their power with extravagant price-fixing by the competition tribunal.

Mittal was compared to somebody selling water at exceptionally high prices and claiming the only available resource for themselves. This price-fixing is a serious offence in our country’s competitions legislation. This fixing of price ruined several small companies, who are the economy’s engine, because they couldn’t afford Mittal’s high prices. This situation is a failure of privatisation and could have been prevented if the competitions commission investigated Harmony’s initial complaint. Smaller and weaker companies than Harmony will not stand a chance against Mittal and the possibility of this happening can be seen as one of the disadvantages of privatisation. (Beeld, 2007, p. 13)

5.What is your opinion about privatisation in South Africa? How should it be implemented, if at all? I believe, like economists in favour of privatisation, that there is a social welfare benefit in privatisation because of increase of performance of the economy and development of businesses which will create more opportunities for the population to participate in a free enterprise to the full extend of their ability. (Jonker 1988:2-4) Implementation of privatisation should begin with unprofitable government organisations like the Post office and these funds can be contributed towards reducing debt and the reconstruction and development programme (RDP). The process requires deregulation to enable market economy to function freely without government restrictions. The government should first determine which assets are candidates for successful privatisation and then if privatised, use funds for RDP and debt repayment.

6.An analysis of an article in the press relating to privatisation. Telkom – Privatising (Volksblad, October

3, 2002, 05:56:063AM – (SA)

The article emphasizes the fact that the benefits of privatisation should be communicated to the public. Mr. Jeff Radebe does this by awarding 2% of Telkom to employees. Cosatu’s strike against privatisation is watered down because it falls on the same time. This paragraph further stresses the effect of tangible rewards to the public or in this case the strikers. The benefits of privatisation are recognised. The article further explains the pros and cons of privatisation and some failure of privatisation is mentioned as well as the positive of ordinary people benefiting through privatisation as in the case of Iscor in the 80’s. Examples are given in the article of smaller failures with privatisation and the fact that this will give a negative perception of privatisation in South Africa which we can’t afford. The article close with a statement that government need to promote privatisation to the public by making it tangible.