Public enterprises - SS1 Commerce Lesson Note

Public enterprises refer to businesses or organizations that are owned and operated by the government at various levels, such as federal, state, or local authorities. These entities play a significant role in providing essential goods, services, and infrastructure to the public.

Public enterprises are government-owned entities that operate in different sectors of the economy, including energy, transportation, telecommunications, healthcare, and education. The primary objective of public enterprises is to fulfill the needs of the public rather than solely focusing on profit generation. They often prioritize providing affordable services, promoting social welfare, and supporting national development goals.

Formation:

Public enterprises are established through a legal framework, which varies depending on the country and its specific laws and regulations. Typically, the government creates legislation that empowers it to form and manage these enterprises. This legislation defines the purpose, governance structure, and operational guidelines for public enterprises. The government may establish new enterprises or acquire existing private entities through nationalization or other means.

Management:

Public enterprises are managed by a board of directors or governing body appointed by the government. The board sets the strategic direction, oversees operations, and ensures compliance with regulations and policies. The day-to-day management is usually carried out by professional managers and staff employed by the enterprise. The government provides oversight, monitoring performance, and holding the management accountable for achieving the enterprise's objectives.

Sources of Capital:

Public enterprises obtain capital from various sources to finance their operations and investments. These sources include:

·         Government Budget: The government allocates funds from its annual budget to support the functioning and development of public enterprises. These funds can be used for capital investments, operational expenses, and infrastructure development.

·         Borrowings: Public enterprises may borrow money from domestic or international financial institutions, such as banks or development agencies. These loans are typically used for capital investments or to bridge funding gaps.

·         Revenue Generation: Public enterprises generate revenue through the provision of goods or services to the public. The income generated from user fees, tariffs, or sales can be reinvested in the enterprise or used to fund ongoing operations.

·         Subsidies: Governments may provide subsidies to public enterprises to offset operational costs or make services more affordable for the public. These subsidies can be in the form of direct financial support or indirect assistance, such as reduced taxes or favorable regulatory treatment.

·         Public-Private Partnerships (PPPs): In some cases, public enterprises collaborate with private investors through PPPs. Private companies contribute capital, expertise, or technology in exchange for a share in the enterprise's operations and profits.