Answer to Question #131574 in Macroeconomics for Sinqobile

Question

Should the South African government implement a policy of privatisation and why

Answer 1

Yes, the South African government should implement privatisation.

In almost all forms, privatization would achieve cost savings, increased efficiency, opportunities for new entrepreneurs and largely disadvantaged people and leaders, higher tax revenues and the creation of net wealth, thereby increasing and creating jobs, i.e. privatisation will achieve cost savings through competition and better alignment of manager’s incentives under private ownership.

In the real world, privatization's efficiency gains reflect extra capital in the markets, which means increased demand, with higher wages for more jobs, even if not within the same business. There is therefore a transition from privatization-induced unemployment.

The greatest fear of privatisation is that the private sector can and will do the same job with fewer people, particularly under conditions of free competition and positive incentives which replace the perverse incentives characteristic of the government. In conclusion, implementing privatisation policy in South Africa will achieve a lot in stimulating the economy as discussed.