The private sector is the part of a country’s economic system that is run by individuals and companies, rather than the government, usually with the intent of making a profit. A basic difference between the government and the private sector is the profitability motive. Whether it’s hiring people, establishing branches or spending money generally, the bottom-line justification in the private sector is increased profitability.
Years ago a public opinion survey was conducted in 22 Latin American and Caribbean countries, including Jamaica. The survey asked one question: “Government, more than the private sector, should be primarily responsible for creating jobs. To what extent do you agree or disagree with this statement?”
Almost seventy-eight percent (77.5) of Jamaicans agreed with the statement. Agreement ranged from 58.3 per cent in Haiti up to 90.4 percent in Paraguay, with countries such as Mexico, Chile and the Dominican Republic at 78.0 per cent, 80.0 per cent and 87.7 per cent, respectively.
Those sub-groups that showed strong support for the government as the primary source of job creation included: younger people within the 18 – 24 age group; persons living in poor households; and those seeing the economy as doing poorly. On the other hand, individuals in wealthier households significantly oppose a primary role for government in job creation.
Private sector growth has been widely acknowledged as an essential component in the elimination of poverty, as it provides more economic opportunities in any given society.
During an economic recession such as we have in Nigeria today, it is quite likely that the government will outpace the private sector in job creation at particular times in particular countries. However, when one looks at China with a GDP growth rate of nine percent in 2009, India with a 6.2 per cent growth rate and Brazil at 5.2 percent, one finds that all have vibrant private sectors.
China, with a labour force of 812.7 million, has undergone a steady transformation from a centrally planned economy to a private sector led one over the past 30 years.
India has become a world technology centre, driven by a private sector of more than 200 million persons and entities. And through its private sector.
Brazil has built one of the world’s largest retail markets, dominated by huge supermarket chains.
At this time in our nation’s economy, this is not only a welcomed idea but a need.
Private sector operatives usually have a shared interest in the countries in which they work. However, it is hard to assess this impact in any one country, because the private sector is exactly that, private. In addition, the costs associated with collecting this information are high compared to the amount of data actually collected, owing to the small size of the formal business sector in each country.
It is important to be clear that what ‘works’ for the private sector in one country will not necessarily work for private sector operations in another. A number of factors are likely to affect what type of engagement is going to be best in each environment, including national investment policies and procedures, legal frameworks and regulatory requirements for business registration and operations.
One question that has plagued countries diversifying their economy is “Is it good practice for private sector organisations to be given money from the aid budget in order to pursue ‘for profit’ activities in the hope that they will also deliver development outcomes?”
In providing answers to this question, we must first note that not all businesses need the same types or levels of support at the same time. Needs may vary according to sector, type and size of business, existing capacity, the location in the business life cycle and the type of any additional technical assistance required from external sources.
There have been some talks of modifying the challenge fund methodologies so that public subsidies are linked to results and more recently this concept has been explored within the context of Development Impact Bonds (DIB), which are about to be tried in Uganda and Rajasthan. Question is, will this work for Nigeria?
Real Estate Unite 2016
At this years’ Unite, which takes place on the 6th and 7th of October at the Eko convention centre Lagos, one of the core goals is to identify the gaps in Nigeria’s private sector and strategies on ways to fill these gaps.
Our keynote speaker is the honourable minister of Works, Power and Housing, Mr Babatunde Fashola.
To register for this event, go to www.realestateunite.com or send an email to email@example.com