ZIMSEC O Level Commerce Notes: Reasons why Parastatals are turned into Public Limited companies (privatised)
Reasons why parastatals are converted into public limited companies.
- To reduce the burden on the taxpayer for example parastatals are often subsidised using tax-payer’s money.
- To improve efficiency of the company through competition.
- To reduce state monopoly by competing in the supply of goods and services with companies already in the private sector.
- To improve the quality of products.
- To free the firms from political interference and thus allow the new company to:
- pursue profit pricing.
- So they can reap the rewards of success.
- Shoulder results of failure.
- To raise revenue for the government through the sell of the government’s stake in the parastatal.
- An example of a parastatal that was privatised is Dairibord Zimbabwe.
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