DEVELOPMENT

STUDIES
[19]
MODULE 7: THE PRIVATE
SECTOR

MATER SPEI COLLEGE

 TOPIC GENERAL SPECIFIC OBJECTIVES THE SOLE PROPRIETOR
OBJECTIVES
Learners should be able Learners should be able to:
to:
As the name implies ownership of such a business is in the hands of just one
The Private Understand the nature -identify types of private sector; person.
Sector and impact of the private -account for the existence of the Features of the Sole Proprietor
private sector in Botswana;
sector on development in  It is a business owned by only one person who provides all the
-discuss and assess the role and
Botswana and the capital needed to set it up and run it, and takes all profit as his or
impact of the private sector on the
Southern African development of Botswana and other her reward.
Development countries in the SADC region;  It is the simplest and most common type of enterprise.
Community (SADC) -compare government and private
sector strategies for development in
 The owner uses his or her labour, assisted perhaps by one or two
Botswana. workers or the family members.
 The business tends to be small in size although this is not always
the case.
 This type of enterprise is not confined to the retail trade.
THE PRIVATE SECTOR
The Advantages of the Sole Proprietor
Private sector refers to businesses that are privately owned by individuals or
 It is easy to set up, control and manage.
by a group of individuals.
 It requires a small amount of capital to set up.
 The owner makes independent and quick decisions on how the
TYPES OF PRIVATE SECTOR IN BOTSWANA
business is to be run.
 The owner has personal contacts with his or her workers and
customers.
 This enables him or her to try and provide them with personal
services, which is lacking in larger shops.
 Satisfaction and interest is gained by being self-employed.
The Disadvantages of the Sole Proprietor
Fig.2
 The owner’s personal assets are at risk because the business has
The main forms of business ownership in the Private Sector are: unlimited liability. This means that if the sole trader borrows
money from any institution, he or she must pay back the whole of
a) The Sole Proprietor it, whether the business succeeds or fails.
b) Partnerships  The business cannot do without the owner, in fact it might end or
c) Co-operatives stop functioning when the owner dies.
d) Multi-national Companies

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  Shortage of capital prevents the sole trader to modernise and The Disadvantages of Partnership
provide services such as credit, delivery and other amenities to his
or her customers.  Decisions may be delayed by disagreement among partners.
PARTNERSHIP  The partners have unlimited liability and are, therefore, personally
liable for the debts of the business. This puts their personal assets
A partnership is a relationship that exist between two or more people who at risk.
have come together to do a common business with the view to making  Lack of capital may limit expansion.
profit.  If one partner leaves or dies a new partnership agreement is
required.
The Features of a Partnership  It is usually not easy to find a suitable partner.

 It can be formed by between two and twenty people.

 The capital of a Partnership is raised by the contribution of each CO-OPERATIVES
partner. This contribution does not necessarily have to be equal for
each partner. Co-operatives came as a result of people putting their resources together to
 In a Partnership ownership and control is not separated. It is owned cut the high costs of production per person. Profits from this enterprise are
and controlled by Partners themselves. either re-invested or shared out between the members of the co-operatives.
 Partnership has no separate legal entity. This means that the
liabilities of the partners, just like for the sole proprietors or The Advantages of co-operatives
traders, are unlimited.
 Each and every partner is entitled to be involved in the running of  It has more buying power than individuals because it is a large
the business. organisation.
 A co-operative can give its members access to cheaper raw
The Advantages of Partnership materials because it buy in large quantities.
 Members sell their products through the co-operatives, thus saving
 It is easy to set up or establish. It does not involve long, costly and on the costs of marketing.
time consuming procedures.  Because larger amounts are sold, the co-operative can often
 More people are involved in the business so more capital can be negotiate and get better prices for its members.
raised than in the case of the sole trader who is alone.  Members can bring in expert advice to help them.
 Division of labour is possible as there are many people involved.
 Expenses and management of the business are shared.
 Decision making is consultative. As a result the quality of
decisions tends to be better than that of a sole trader.
 A partnership is not required to publish its account annually, so
there is privacy in the business.

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 TRANS-NATIONAL COMPANIES OR MULTI-NATIONAL  These companies take back with them all profits made in the host
CORPORATIONS (TNCs/MNCs) countries. This drains away the host country’s foreign exchange
reserves.
A Multi-national Company or Corporation is an enterprise that has
subsidiaries or branches in more than one country. THE REASONS FOR THE EXISTENCE OF PRIVATE SECTOR IN
BOTSWANA
It is usually a public limited company. For example, Toyota, Coca Cola,
Phillips and Colgate. Some of the reasons for the existence of the Private Sectors in Botswana are
as follows:
The Advantages of multi-national companies
 It reduces prices and increases quality of goods and services.
 Paying taxes which boost the host government’s income.
 Providing jobs around the world.  It improves efficiency because of competition and the profit
 Bringing business knowledge, skills and technology with them to motive.
other countries.  It removes political interference in business operations.
 Bringing foreign exchange by selling their goods abroad
 Providing vital goods and services to private households as well as  It helps empower citizens where such sales are restricted to
to other countries. citizens.
 In addition they usually have world-wide contacts which the host
country can use to boost its export sales.
The Disadvantages of multi-national companies  It leads to creation of more jobs because many companies will be
built.
 They tend to exploit under-developed economies through
monopolistic practices.  It leads to self-sufficiency.
 They usually bring their own experts instead of training the locals
to participate in important decision making in MNCs that operate
in their own countries.  It leads to diversification of the economy and mass production.
 They can prevent the transfer of technology to the host country by
ensuring that research facilities remain based in their home or  It gives the community a chance to contribute to the development
parent country. of the country, thus leading to economic development.
 They are able to pay high salaries and offer better conditions. As a
result, they usually attracted most of skilled locals at the expense
of local industries.

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 THE IMPACT OF THE PRIVATE SECTOR IN BOTSWANA AND Check Your Progress
OTHER SADC COUNTRIES
1. Study Fig. 1, which shows types of enterprises in the private sector.

There are both positive and negative impacts as regards the Private Sector.

Positive impacts include the following;

i. It provides jobs, income and livelihood to many people in

Botswana.
ii. The tax paid by the company is a source of revenue for the
country.
iii. Export of goods made by companies earns the country foreign
exchange.
iv. Quality goods and services are provided to the people
Fig.1
v. Developments are made in rural areas and this contributes to rural
development especially by sole proprietor. (a)(i) State the differences between a sole trader and a private limited company.

Negative impacts include the following;  Sole trader is owned by one person whilst a private limited company is
owned by many individuals/ shareholders
i. Poor working conditions for the people, for example, low wages
 In a sole trader funding is provided by one person(owner) whilst in a
and very long working hours.
private limited company funding is provided by shareholders
ii. Damage to the environment, for example, air pollution, water
pollution and land pollution.  A sole trader operates on a small scale whilst a private limited company
iii. Depletion of land. operates on large scale
iv. Corruption, for instance in Botswana there are schemes that are
meant to assist Batswana to start their own businesses, in some  In a sole trader the owner manages the business whereas in a private
limited company shareholders choose a board of governors to manage the
cases corruption is involved as undeserving people may end up
business
using such schemes.
v. In some cases leads to massive job losses, because of use of  In a sole trader, all profit belongs to the owner whereas in a private limited
automation and high technology. business, profit is shared by shareholders.
vi. Profits go to private individuals and not to the whole nation.
 The sole trader has limited liability whist private limited company has
unlimited liability
vii. It leads to rich individuals getting richer and the poor getting
poorer.

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(ii) Describe the importance of the private sector in the development of  Licensing, for example, vehicle licences , hunting licences and business
Botswana. licences

 Employment creation  Parastatals/government businesses, for example, Water Utilities and

Botswana Power Corporation
 Skills development
 Fees, for example, hospital fees, school fees and tourism resort fees
 Technological advancement
 Loans and grants or foreign aid
 Infrastructural development
 Selling of bonds to individuals/ sale of share
 Ensuring quality production
 Privatisation (explain how)
 Sponsorship of community activities, for example, sports and social
responsibility (ii) Suggest problems that the government of Botswana might faces as it tries to
unite people in the country and build the nation.
 Relieves government of burdens of running the economy
 High population/ increasing population
 Fast decision making
 Many different tribes involved/ diversity/ multiplicity of languages
 Empowerment of the local entrepreneur
 Past conflicts between tribes
 Boosts foreign exchange/ foreign direct investment
 Exploitation of ethnic differences, for example, formation of cultural
 Pay tax/ improve government revenue groups

 Quick response to the demands of the market  Unbalanced development between regions in the country/ people in the
areas that are neglected feel betrayed by the government/ may be un
 Availability of goods and services cooperative

 Diversification of the economy  The HIV and AIDS scourge depleting funds which are required to carry
out nation building activities, for example, national celebrations
(b)(i) Describe the sources of government revenue in Botswana.

Ideas such as:

(5/5 6/4 4/6)
 Taxation

 Fines, for example, traffic fines such as for over speeding and drunken and
drive

Mater Spei College Development Studies Notes MODULE 7: THE PRIVATE SECTOR