Privatisation is an “economic blunder”

PRIVATE MATTERS: Dr Christoph Hermann and Prof Christopher Malikane answer questions posed by audience members. Photo: Lameez Omarjee

PRIVATE MATTERS: Dr Christoph Hermann and Prof Christopher Malikane answer questions posed by audience members.
Photo: Lameez Omarjee

Economic thinkers came together to discuss the impact of privatisation in South Africa after 20 years of democracy and the things that could have been done differently, at a seminar hosted by Rethink Africa and Young Economists for Africa (YEA), at the Origins Centre last night.

Guest speakers, Dr Christoph Hermann from the University of Vienna and Wits Professor Christopher Malikane unpacked the effects of privatisation in Europe and South Africa to highlight the “economic blunders” that came about by these actions.

Privatisation in South Africa

Malikane explained how colonialism led to the unfair enrichment of a minority, leaving the majority of South Africans in unequal economic circumstances.

The big companies in South Africa have been founded on the colonial dispossession of South Africans.

“South Africa has a historical problem which it needs to resolve,” he said.   The majority of people were dispossessed of a means of survival. “The big companies in South Africa have been founded on the colonial dispossession of South Africans,” he said.

The problem with privatisation is that many people in the country may not have the means to acquire privatised assets, according to Malikane.  He highlighted three examples of companies where privatisation failed, these being ISCOR, Telkom and SASOL.

The failure of privatisation was that to maximise profits, privatised companies set up monopolies where they charged exorbitant prices.

Through privatisation, South Africa had given up the capacity to manufacture steel, to drive telecommunications and to produce petro-chemicals, according to Malikane.   The sale of strategic assets was simply “a blunder, an economic blunder.”

Malikane suggested that the solution would be to consult the Freedom Charter, “People shall share in the country’s wealth”.  Banks and monopoly industries should be transferred to South Africans, he said.

Privatisation in Europe

Dr Christoph Hermann gave examples from Europe to indicate public services are provided through markets, as opposed to the state, which often fails to do so adequately and with good quality. However, private organisations resort to maximising profits.  Hermann suggested they should be regulated with legislation.

Siyaduma Biniza of the YEA ended off the discussion by stating that there is no clear economic theory to justify privatisation. It can only be justified by the state’s shortcomings, due to political agendas. Efficiency is crippled by the drive to make “exorbitant amounts of profits,” he said.   The ideal situation is for perfect competition, whereby prices are set by the rules of supply and demand, and not by suppliers chasing high profit margins.

The evening ended off with a question and answer session and an opportunity for the audience to network.

This article was featured in the Wits Vuvuzela

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