Immunity from political interference
Under privatization, the company can make the decision better without the interference of the government. This can lead most enterprises to focus on profits rather than government regulations and protocols.
Tax reduction
This means that residents will have to pay lower taxes instead of public enterprises’ government to reduce the resident’s taxes to facilitate the business’s operations.
job creation
Privatization might increase job opportunities in the area the company is situated. A good example is a mumias mill, if privatized, will help the local communities get jobs, and th
us job creation is one significant advantage. This can also be beneficial as the government can lower the taxes of residents in the region.
Increased competition
Most public enterprises lack competition and thus makes the
m lag in development. They are under the government, thus see no reason to be competitive in the products they produce. Under privatization, competition
is critical as the company focuses on making profits to finance its operations, making them competitive.
Improved efficiency
In this, the company is obligated to reduce cost and increase profit to improve its efficiency
.
Demerits
Less transparency
We associate public enterprises with corruptions case and bribery. However, privatization might lead to even greater corruption cases because they are less likely to be accountable in the
public eye. Increased corruption is one of the significant disadvantages of privatization.
Inflexibility
This means that the company can only be obliged to specific contracts that might last for a
n extended period. Thus, companies will remain in the same position for a long as the care cannot get more deals concerning their services and products.
Higher cost for the consumer
When a company becomes privatized, the company
often increases the cost of goods and
services because they want to attain maximum profitability. This means a higher cost of goods and services to the end consumer.
Problems of regulating private monopolies
Privatization provides a monopoly in t
he market and thus makes it difficult for a company to be regulated. Monopoly means that a firm might become private and industry, which means other competitors cannot enter the business with ease. They are
then not subject to government regulations and operate privately.
Government loses on potential dividen
ds.
Once a public enterprise becomes private, the government has no obligation to receive dividends and thus reduce the payout. They can only collect the taxes as per regulations, and the dividend goes to wealthy shareholders.