DA on parastatals

In a recent feature article by Politicsweb, Dion George of the Democratic Alliance writes about the principles underlying the DA's 2010 budget:

1. Competition
2. Choice
3. Personal responsibility

While a substantial part of the article contains needless waffle and mistruths about the ruling party, I am encouraged to see that competition and accountability feature so prominently in ths list. Competition is seldom recognised by the ANC as an important social good when constructing policy.

On parastatals
The DA argues for the privatisation of parastatals over time. Names like Eskom, SAA and the SABC have become synonymous with inefficiency, wastage of public finances, mismanagement and corruption, even though the SAA has recently turned its financial position around.

The failure of parastatals worldwide is understandable from a microeconomic perspective if one accepts that the incentives facing such institutions predispose them to failure. A public entity, unlike a private entity in a competitive environment, has little incentive to structure its operations efficiently or to employ its financial resources to add the greatest value to its customers. On the contrary, with government underwriting its activities, public corporations are incentivised to take a disproportionate amount of risk, and on failure to request additional capital - a 'bailout'.

In South Africa, where state accountability and management expertise is limited, the government as majority shareholder has little incentive or ability to ensure the proper functioning of state-owned corporations. As South African citizens we should inform ourselves of the issues surrounding privatisation and we should make our voices heard.

Next up - nationalisation of mines or nationalisation of the Reserve Bank?

The reader can find a relatively balanced article on privatisation of parastatals on Wikipedia.