This question was also attracted a lot of candidates most of whom scored relatively high marks. Candidates were asked what state-owned enterprises were, state the reasons for the establishment of state-owned enterprises and the problems associated with them. Most candidates had a good understanding state-owned enterprises and were able state the reasons for their establishment in the (a) and (b) parts of the question but were unable to fully elucidate their points in the (c) part of the question. Candidates were expected to answer thus:

(a)        State - owned enterprises are business organizations established by law, financed and controlled by the state for the benefit of society.

(b) (i)   To provide social amenities such as water and electricity at affordable/reasonable prices.
(ii)   To protect the people from exploitation by private firms through the establishment of similar firms.
(iii) To control private monopoly through nationalization.
(iv) To raise revenue for government for developmental purposes.
(v)   To provide public goods which are not normally provided by the private sector.E.g.Defence.
(vi) To create employment this helps to raise the standard of living of the citizens.
(vii) For strategic reasons since certain industries cannot be left in the hands of the private sector e.g. ammunition production.
(viii)Where huge initial capital is involved, government steps in when the private sector   cannot provide it.
(ix) To diversify the economy, leading to growth and development.
(x)  To ensure even development across the country.

(c)(i)    Red-tapeism/bureaucracy: There is a lot of bureaucracy and administrative difficulties in state enterprises which tend to make quick decision- making very difficult.
(ii)    Lack of initiative: Bold and progressive policies are very important for the success of every business. This is however lacking in state - owned enterprises because they are to account to the public and to parliament. The fear of failure may not allow them to take such decisions.
(iii)   Less competition and inefficiency: Public corporations may not be competitive and efficient in their operations because they are usually monopolies without competitors, so they may not actually strive to be efficient.
(iv)       Lack of personal interest: Management and workers of state corporations may not have the needed personal interest in the work since it belongs to the state.
(v)    Loss of consumer sovereignty: Since most public corporations produce under monopolistic conditions, the customers may not have a wide variety of goods to choose from. Their sovereignty is lost.
(vi)       Political influence: The appointment of managerial staff affects morale and efficiency where such appointments are not based on merit.
(vii)   Corruption and misappropriation of resources result in inefficiency.
(viii)   Inadequate funding of state enterprises poses a challenge to their ability to operate efficiently.
(ix)     Pricing policy: Governments often interfere in the pricing policy of goods and services in state-owned enterprises.
(x)      Some management staff lack the necessary managerial skills to handle large-scale operations.
(xi)      There is tribalism and nepotism in the appointment and promotion of staff in state-owned enterprises.
(xii)     Changes in policies due to changes in government affect the smooth operations of state-owned enterprises.