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State four problems that a country may suffer when the government becomes a major investor in business activities.

State four problems that a country may suffer when the government becomes a major investor in
business activities.

Answers

gideon
Demerits that a country may suffer when the government becomes a major investor in business

(i) Discourage private investment. The move may discourage private investment due to unfair competition and acquisition of monopoly powers/unfavourable laws.

(ii) Poor quality goods and services. The quality of goods and services may be compromised due to lack of competition. Government employees also lack enthusiasm since there is no pro?t motive.

(iii) Limited choices for consumers. Where the government is the only provider of good/service, consumers may be denied a variety to choose from.

(iv) Inef?ciency. Leading to low/poor productivity/continuous loss.

(V) Burden to tax payers. The investments may drain public resources by increasing government expenditure in situations where the enterprise is not able to sustain itself (burdening tax payers).

(vi) Lack of accountability/transparency/corruption. Managers of government-run businesses tend to misappropriate and embezzle public funds/ misuse public funds.

(vii) Unstable management. Government-run businesses are prone to frequent changes in their management occasioned by changing political leadership.

(viii) Political interference/patronage. Appointment of cronies/nepotism and unethical practices may lead to social discontent.

(ix) Bureaucracy/red tape. Leading to rigidity/slow response to market changes

OR

- Discourage investment due to unfair competition
- Poor quality goods/ services due to lack of competition
- Limited choices for consumers
- Inefficiency leading poor productivity
- Burden to tax-payer due to continuous losses
- Lack of accountability/Transparency
- Unstable management/frequent changes in their management.
- Political interference leading to unethical practices.
- Bureaucracy/ Red-tape leading to rigidity.
gideon1 answered the question on September 30, 2017 at 11:01

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