◄UNIT 12: ECONOMIC PLANNING

UNIT 13: SECTORS OF THE RWANDAN ECONOMY:

  • UNIT 13: SECTORS OF THE RWANDAN ECONOMY:

    Key unit Competency: 

    Describe the role of informal and privatization to Rwandan economy

    Introductory activity

    An enhanced way of collaborating with the private sector will be Joint 
    Ventures. They will be aiming at a more private sector driven approach 
    to commercial investments limiting the temporal participation of the 
    government by agreeing upon clear exit and risk mitigation options. The 
    possibility to strategically withdraw from Joint Ventures forms part of the 

    concept of privatisation, which generally covers the divestiture of shares 

    in existing (partly) state owned enterprises. 

    1. Involving the private sector through PPP arrangements 
    PPPs are relatively new in Rwanda. It is the objective of Rwanda to expand 
    the application of PPPs across sectors where they demonstrate potential 
    for sustainable development gains. In this regard, PPPs are seen as a 
    suitable step to attract further domestic and foreign investors by efficiently 
    sharing inherent project risks and thereby making investment in the 

    provision of public goods and services more attractive for private partners. 

    2. Founding State Owned Enterprises 
    Founding new state-owned entities shall be an option to drive economic 
    development in cases, where public investment is needed due to 
    market failure causing the absence of private sector interest or where 
    promising business cases in strategic sectors, like transport, agriculture, 

    manufacturing, etc., are too risky to be developed by the private sector.

    Another rationale applies, when there is a need to enhance public services 
    to improve the population’s well-being (e.g. public utilities for water, 

    electricity, sanitation…). 

    The aim founding new SOEs should be to create an environment that attracts 
    and gives confidence to the private sector to invest (catalytic investments). 
    Upon the market’s readiness to invest, the State shall consider privatizing 

    the entity by selling off its shares. 

    3. Catalysing the development of private businesses through Joint 

    Ventures,

    Joint Ventures are meant to be used as an instrument to incentivize and 
    drive private investments in strategic commercial markets with foreign 
    and domestic partners, which are seen as key to develop the Rwandan 
    economy. The rationale to promote Joint Ventures is to tap into strategic 
    opportunities and to encourage knowledge and technology transfer into 

    strategic sectors.

    (Extract from National Investment Policy. MINECOFIN, April, 2017)

    Read the above extract from the National Investment Policy and use it to 

    answer the questions that follow.

    (i) What do you think is the meaning of PPPs?

    (ii) For what reason is the government interested in applying PPPs?

    (iii) For what reasons may the government opt to start state owned 

    entities?

    (iv) What do you think are joint ventures and for what reason may the 

    state decide to enter into joint venture with the private sector?

    (v) From the extract above, identify the ways that the state can use to 

    carry out privatisation.

    13.1. Structure of Rwanda’s economy

    Structure of an economy is a range of characteristics or features that 
    describe the economy of a country. These features range all the way from 
    agriculture, industry, service that may be private or public. These sectors have 
    each contributed the gross domestic product and greatly contributed towards 
    the development of the country. This unit looks at the following sectors of the 

    Rwandan economy,

    iv) The informal sector.

    v) The public sector.

    vi) The private sector. 

    13.1.1. Informal sector

    Activity 13.1

    Study the pictures above and

    vii)Describe the activities taking place in each of the above pictures.

    viii) Describe what you think are the common features of the activities 

    in the pictures.

    ix) Identify other activities in Rwanda that have similar features.

    x) In your own view how important are these activities to the economy.

    13.1.1.1. Meaning of informal sector. 

    Inclusive growth is one of the strategies of government of Rwanda to reduce 
    poverty and inequality. Vision 2020 Umurenge is a pro-poor social protection 
    programme under the country’s growth blueprint, Economic Development and 
    Poverty Reduction Strategy. The strategy that is currently in the second phase 
    aims at poverty reduction through inclusive growth in Rwanda. One of the factors 
    contributing to high poverty levels in the country is lack of formal employment 

    that has resulted into growth of a big informal sector.

    Informal sector is an intermediate sector existing between the traditional and 
    the modern sector comprised of the self-employed. Informal sector is part of the 
    economy which is not accounted for through payment of taxes and also is not 
    monitored through any form of government and authority. Activities of informal 
    economy are not included in GDP. The concept of the informal sector was 
    introduced in 1972 by the International Labour Organisation (ILO) in its Kenya 
    Mission Report. ILO defines informality as “a way of doing things characterized 
    by ease of entry, reliance on indigenous resources, family ownership, small scale 
    operations, labour intensive / adaptive technology, skills acquired outside of the 

    formal sector, unregulated and competitive markets”.

    The informal sector workforce can be categorized into three broad groups: 
    owner-employers of micro enterprises; own-account workers, dependent 
    workers, paid or unpaid, including wage workers in micro-enterprises, unpaid 
    family workers, apprentices, contract labour, home workers and paid domestic 
    workers, as proposed by the ILO/International Confederation of Free Trade 

    Unions (ICFTU) international symposium of 1999.

    In Rwanda, people employed in the local informal sector include street vendors, 
    hawkers, street vendors, hawkers, taxi operators, tax washers, bicycle riders 
    and motorcyclists, charcoal sellers, domestic workers, carpenters, ironsmiths, 
    hairdressers and barbers, brick layers, and restaurants, and workers in tea 
    plantations and mines, unregistered service providers, among others. The 
    sector remains a significant contributor to the country GDP. Generally, they 

    are mainly characterized by the following;

    - Mainly produce on small scale because of the low capital employed.

    - Mainly use poor or simple technology since they cannot acquire modern 

    developed machines

    - Produce mainly low-quality goods since the machines they possess 

    cannot produce good quality output

    - Keep poor or no records mainly because they are done on small scale

    - Basically, sole proprietorship meaning they are owned by single individuals 

    and most owned by families

    - Dominated by semi-skilled or unskilled personnel

    - Use basically local resources that are provided naturally

    - Basically, produce for the local market since they cannot produce to feed 

    the entire external market.

    - Business operated in open and semi-permanent structures that can 

    easily be demolished and the business transferred to another location.

    13.1.1.2. Advantages of informal sector 

    In recent years, there has been increase in growth of young labour force 
    and informal sector has become fundamental source of income and means 
    of livelihood. Informal sector is one of the biggest employer’s in developing 
    countries, providing employment to vulnerable sections of the population, 
    including women, and youth. Almost nine in 10 rural and urban workers 
    on the continent have informal jobs, and most of these are women and 
    youth. Informal sector is thus source of generating reasonable income and 
    livelihood for people employed in informal sector in developing countries. 
    Developing countries have experienced a very rapid growth in informal 
    sector employment in recent years due to lack of formal jobs in labour 
    market. Therefore, it has played a great role in development of their 

    economies as follows:

    - Creates employment opportunities since it is labour intensive and 
    this promotes income distribution. In Rwanda, according to a report 
    by United Nations Economic Commission for Africa, informal sector 
    employment accounts for 73.4 per cent of total employment outside 
    agriculture sector. The report indicates that three out of four people in 
    Rwanda are employed in the informal sector, and percentage reaches to 

    over 80 per cent in case of women.

    - Produce essential goods that are beneficial to low income earners.

    - Provide training grounds for growth of entrepreneurs.

    - Provide revenue to the government through taxation of the business 

    activities.

    - Their growth paves way for transformation into a modern dynamic 

    sector.

    - Promotes development of appropriate technology which suits the 

    resources of the country.

    - Promotes linkages in production i.e. forward and backward and this 

    leads to achievement of an integrated economy.

    - Promotes the spirit of self-sustenance there by reducing the 

    prevailing dependence on simple consumer products.

    - Paves way for the development of small-scale industries through 

    innovation and invention carried out. 

    - Widens consumer choice since it produces a variety. This is because 

    there are many producers working under the informal sector.

    - Promotes both local and international trade since they too, 
    participate in productive activities alongside formal sector. For example, 
    A survey commissioned by Trade Mark East Africa, Pro-femmes Twese 
    Hamwe and International Alert on cross-border trade, shows that 82 per 

    cent of the cross-border traders come from informal sector.

    13.1.1.3. Disadvantages of informal sector.

    - Unexpected growth of the informal sector would risk the stability of 
    fiscal policy that depends on government revenue    . i.e. it Leads to 
    public revenue instabilities since production cannot be relied upon and 

    also high rate of tax avoidance and evasion.

    - Continuing growth of the informal sector threatens the private sector 
    that operates formally.     When the informal sector grows, it is a burden 
    for firms in the formal private sector and they are the ones paying taxes 

    providing government revenue.

    - Informal sector distorts the natural competitive process as firms 
    operating in that sector enjoy an unfair cost advantage through tax 

    avoidance.

    - Some informal firms reduce their scale of operation in order to 

    remain undetected by the government which makes them less efficient.

    - Informal sector drags the development process of a country

    because it subsidizes employment in less productive activities.

    - Wasteful competition leading to duplication of goods and services 

    and wastage of resources.

    - Pollution and its effects to the environment leading to degradation 

    and hindering development.

    - Causes congestion in the semi-urban areas with its associated 

    problems like prostitution, slums, theft etc

    - Leads to underemployment and unemployment hence labour 

    capacity to produce goods is not fully put to use.

    - Produces at excess capacity and end up exploiting consumers

    through high prices.

    - Informal sector limits informal employment, productivity, and as 

    consequence, economic growth is retarded.

    - Produce low quality goods and this leads to low standard of living of 

    the people and low-income earnings

    - High administrative costs on the side of the government and this 

    leads to increased government expenditure.

    Application activity 13.1.

    Analyse the pictures above.

    (i) What activity is taking place in the pictures above?

    (ii) What do you think can be done to improve the economic activities of 

    the people involved in such businesses?

    13.1.2. Public sector:

    13.1.2.1. Meaning and characteristics of public sector.

    Activity 13.2.

    a) Write the following in full.

    i) RURA. 

    ii) RSB.

    b) Based on their operation, under what sector would you categorize 

    them? 

    c) Identify other organisations or enterprises in Rwanda that fall under 

    such a category as the above mentioned.

    d) What are the distinguishing features of the sector given in (b) above?

    e) What hinders their effective effort towards spearheading Rwanda’s 

    development process?

    13.1.2.2. Meaning of Public sector

    Public sector is part of the economy that is owned and operated by the 
    government. The government owns and carries out the major economic 
    decisions. Government enterprises include public corporations/enterprises 
    which provide specific services for free or reduced prices, government 
    parastatals which are nonprofit making and local authorities which provide 
    essential services. Rwanda’s Public Sector appears to be the main focus of 
    much of the capacity building support in the country. In Rwanda’s Public Sector 
    significant resources are being devoted to human resources development in 
    form of short-term training, seminars and workshops. In Rwanda, it’s the role 
    of Ministry of Public Service and Labor to supply the Rwandan Administration 
    with efficient organization and Human Resource structures to fit the objectives 
    of finest public services deliveries at the best possible costs. 

    Rwanda, through Rwanda Public Sector Law 19th October 2000, enacted a 
    new law on public sector creating an independent body to regulate competition 

    in the sector particularly telecommunications, water and electricity.

    13.1.2.3. Characteristics of the public sector

    -Development oriented i.e. aims at developing the nation

    -Characterized by bureaucracy and red tape. This involves arrange of 

    procedures so as to achieve what someone wants

    -Normally takes on projects which require large capital that cannot be 

    taken up by the private sector

    -Medium and large-scale industries dominate.

    -Employs a large size of the population however with the present trend, 

    its contribution is reducing

    -Normally organized on monopoly basis as it provides services which 

    are vital to the people

    - High levels of external influence in decision making and 

    implementation of the plans since foreigners fund the projects

    - Limited flexibility as it is for private sector in the production of goods 

    and services

    13.1.2.4. Advantages and disadvantages of the public sector.

    Activity 13.3.

    Make research and discuss the view that it’s the public sector that can 

    drive the economy towards economic growth. 

    a) Advantages of public sector.

    - The public sector controls major and essential sectors of the 
    economy     which are risky to put into private hands e.g power production, 

    water and sanitation.

    - The public sector mobilise finance to start large enterprises that the 

    private sector firms may not easily manage e.g construction of dams.

    - The public sector is essential in establishing natural and state 
    monopolies     that provide essential services that cannot be left under the 

    private sector.

    - The public sector controls strategic industries that are risky to 
    be handled by the public sector.     For instance the security related 

    industries.

    - Public sector firms create employment opportunities in all regions 
    and sectors.     This helps to reduce the level of inequalities in incomes, 
    sectors and regions. Thus the public sector brings about a balance in 

    regional and sectorial development.

    - Public sector firms earn revenue for the government. Some of them 

    are profit making and so bring in income for the government.

    - The public sector caters for long term need of the country. It aims at 

    national interest and development but not private interest.

    - The public sector starts enterprises and sells them to the private 
    sector.     This usually happens in areas where the private sector is slow to 

    invest either because of the risks involved or less profitable.

    - The public sector provides public goods/services like roads and 
    street lighting     most which are non-profitable but essential to the 

    population.

    - The public sector caters for the future generations by ensuring 
    sustainable use of the available resources. It minimizes over exploitation of 
    the country’s resources. For instance REMA ensures the protection of the 

    environment during the production process.

    - The public sector regulates the production of commodities that are 

    taken to be vital to the society for instance medicine.

    b) Disadvantages of the public sector.

    - Under the public sector there is no consumer sovereignty. Consumers 
    do not have the power to determine what to producer i.e they can only 

    purchase what is brought on the market.

    - There is no variety of commodities on the market. This is because 
    resource allocation is in the hands of government organs only implying 

    one or few producers.

    - There is an element of monopoly. This creates scarcity of commodities 
    in the markets, leads to increase in prices, reduces competition and 

    efficiency in production..

    - There is production of low quality output because of lack of 

    competition due to monopoly tendencies in the public sector.

    - The public sector increases the government responsibilities and 

    expenditures. This may become a burden to the government.

    - It is usually inefficient. This is because of lack of the profit motive in 

    production to drive stimulate efficiency.

    - The public sector is usually dominated by corrupt and embezzlement 

    practices. This is because of lack of close supervision.

    - Because of high government interference through selecting top 
    management and constant change of officials among others management 

    may be inactive.

    - The public sector is always influenced by bureaucratic red tape

    which slows down decision making and implementation.

    13.1.2.5. Problems faced by the public sector.

    - Limited finance due to narrow tax base and this limits expansion.

    - Corruption and embezzlement which has depleted funds which 

    would be invested

    - Persistent inflation in the country increases the cost of production 

    and amount of risks

    - Inadequate skilled man power due to poor man power training policy 

    and this has led to dependence on foreign labour which is expensive

    - Foreign influence by external organizations like IMF and World 
    Bank into the activities and dictating policies to be followed by the 

    country

    - Poor management because of heavy government intervention through 
    selecting top management and constant change of officials among 

    others

    - Inadequate infrastructural facilities needed for development like 
    road facilities, telecommunication among others limits coordination of 

    different sectors

    - Bureaucratic red tape which slows down decision making and 

    implementation

    - Sector runs a lot of objectives which conflict and in the end there is 

    poor performance due to involvement in un productive enterprises

    - Limited market both domestic and foreign explains the poor 

    performance of the manufacturing establishment.

    Application activity 13.2.

    Chapter i: General provisions

    Article 1: Purpose of these Regulations

    The purpose of these regulations is to establish a regulatory framework 

    for the construction, installation, operating and upgrading petrol service 

    stations in Rwanda. 

    Article 2: Scope of these Regulations
    These regulations shall apply to any person carrying out or intending to 
    carry out the activities related to the construction, installation, operation 

    and upgrading petrol and bio-fuel service stations.

    (REGULATIONS N°003/ENERGY/PSS/RURA/2014 GOVERNING THE 
    CONSTRUCTION, INSTALLATION AND OPERATION OF PETROL 

    SERVICE STATIONS) 

    a) In your own view, why is the government interested in regulating the 

    construction, installation and operating petrol stations in the country?

    b) Generally, what do you think are the objectives of the public sector 

    towards the development.

    13.1.3. Private sector

    13.1.3.1. Meaning of the private sector and its characteristics:

    Activity 13.4

    Undertake research on Private sector in Rwanda, and answer the 

    questions that follow;

    (i) Which organization uses the above logo?

    (ii) Cite some of the enterprises in your locality that work under such an 

    organisation.

    (iii) Describe features of a sector under which the enterprises given in (ii) 

    work.

    Private sector is an area of production activities that are not mainly owned 
    by the government. It may include the informal sector, farmers, self-employed 
    among others. The private is very active in a free market economy and mixed 
    economic system as compared to the command economic system. This is 
    because most of the resources are owned by the companies and individuals 
    which and who are free to take all the economic decisions like how to produce, 
    when to produce, for whom to produce, etc with no government intervention. 
    The government simply comes in to carry out regulations during the production 

    process.

    The private sector plays a big role in the growth of the economy. The chart 
    below shows the performance of private investment in Rwanda with domestic 

    private investments performing much better between the five years. 

    Source: RWANDA PRIVATE SECTOR DEVELOPMENT STRATEGY 2013-18. 

    Ministry of Trade and Industry (MINICOM)

    13.1.3.2. Characteristics of private sector.

    - It is mainly operated on a small scale with some few large scale but 

    expanding enterprises.

    - The private sector is largely dominated by individual producers

    (sole traders) with some limited number of joint stock enterprises.

    - It is characterized by high levels of competition because of the large 

    number of practitioners.

    - It is largely driven by the profit motive.

    - It mainly produces consumer goods and a few producer goods.

    - It largely uses labour intensive techniques of production in the 

    small scale enterprises which dominates the sector. 

    - It is mainly active in urban centers than rural areas because of the 

    ready market.

    - The sector is still small but expanding.

    13.1.3.3. Advantages and disadvantages of the private sector.

    Activity 13. 5

    Undertake research about privatisation, and thereafter;

    a) Make an analysis on the view that Rwanda needs to strengthen 
    more the private sector than the public sector in order to achieve 

    high levels of growth in the economy. 

    b) Identify the challenges faced by the private sector in Rwanda.

    Advantages of the private sector. 

    - Employ majority of the people hence reduce unemployment and this 

    increases incomes and standard of living

    - Produces goods and services hence contributing greatly to national 

    income after the sale of the goods 

    - Promotes gradual growth of the economy since it stimulates 
    entrepreneurship which leads to discovery of new techniques of 

    production

    - Contributes to growth and modernization of industry in the 
    country     through mobilizing of private savings, stimulating consumption 

    and investment.

    - Helps exploiting the local resources hence reducing excess capacity 

    that exploits consumers through high prices

    - Uses local resources hence reducing foreign expenditure or resources 

    and raw materials

    - Contributes to government revenue through taxation of the people, 

    structures and also then profits of the business.

    - Sector re-invests (ploughs back) profits hence expanding the 
    existing productive capacity which increases economic growth and the 

    size of the national income.

    - Technological development is enhanced as the sector is innovative 

    and adopts new techniques to suit the changing consumer tastes.

    - Helps to reduce the subsistence sector by monetarizing of majority 

    of the economy.

    - Infrastructure development because of its tremendous expansion 

    and this further leads to the development of the country.

    Disadvantages of private sector.

    - Mostly located in urban centers hence cause rural urban migration 
    with its associated problems like theft, prostitution and slum development 

    among others which retards development 

    - Tendency of using capital intensive techniques to increase 
    production leads to unemployment with its associated problems like 

    poor standards of living to mention but a few

    - Tends to specialize in few activities leading to consumer exploitation 
    in form of high prices since sometimes they become monopolies with no 

    competition

    - Concentrates on small scale production activities and this may 

    not enable it to generate adequate economies of scale 

    - The use of rudimentary/ outdated technology limits production 

    hence little output for the growth of the growth of the country

    - The sector is profit motivated hence it may not provide services that 

    are good for the society but nonprofit making

    - Capital outflow may occur if the productive ventures are owned by 

    foreigners and thus the country may lose foreign exchange.

    - Limited levels of diversification due to production of similar 

    commodities hence the consumers do not get a variety

    - Production of low quality goods which may fetch little when exported 

    hence low foreign exchange

    - Income inequalities may arise where a few people get engaged in such 
    activities and this may create tension in society and underdevelopment 

    of some regions .

    13.1.3.4. Challenges of the private sector. 

    - Under developed infrastructure like roads limits their movement 
    of inputs and output from their production sites to the markets. This 

    sometimes cause losses to them

    - Inadequate market both within and outside. This is because of the 
    low quality of the goods that are produced and worse still they produce 

    similar goods that create surplus at the markets

    - Poor technology. The technology is still low and this has continuously 

    led to low output and low revenues.

    - Competition. Most of them produce similar products hence calling for 
    high advertisement costs which lead to increased cost of production. 
    The inefficient firms are sometimes driven out of the business leading 

    to unemployment

    - Low prices paid by the consumers. This is sometimes due to price 
    legislation by the government. The firms earn low profits that don’t 

    enable them to develop.

    - Under developed structure for production. Some of the firms 
    under the private sector don’t have permanent markets so they don’t 
    have a developed structure of production. This has sometimes led to 

    over production and wastage of resources 

    - Inadequate capital for production. This is the major problem 
    that the private sector faces. Some have few equipment that cannot 
    enable them to get loans from the banks hence their businesses have 

    constantly not constantly not changed from small scale to large scale.

    - Low levels of skills of the entrepreneurs which has led to low 

    innovations and invention leading to low quality outputs and low profit.

    - Undeveloped capital and money markets. This limits the rate of 

    mobilization of capital.

    Application activity 13.3

    From your understanding of the problems facing the private sector, what 
    do you think should be done to promote the private sector in developing 

    economies?

    13.2. Privatization 

    13.2.1. Meaning of privatization

    Activity 13.6

    Make research on privatisation, find out and explain;

    i) What it means

    ii) The different forms in which a company can be privatized. 

    iii) Examples of firms in Rwanda that have been privatized and the form 

    of privatisation that were employed.

    Privatisation of public enterprises refers to transfer of ownership 
    and control of government or state assets, firms and operations to private 
    investors. Or Privatization is the reduction of the role of the state in the 
    national economy while at the same time increasing private ownership 
    and private sector both local and foreign. Or it refers to the transfer of 

    production assets from state ownership to private ownership.

    13.2.2. Forms of privatization 

    Privatization takes various forms

    - De- nationalization (divestiture): This involves the sale of all or part of the 
    enterprise owned by the government to private people or the public. It may 

    also take the form of,

    i. Total sale

    ii. Joint venture where the government enters into agreement with 

    private firms and individuals 

    iii. Abandonment, winding up or liquidation.

    - Liberalization (De-regulation): This involves opening up entry into activities 
    which were previously restricted to the public sector enterprises only by allowing 
    private sector participation. This is meant to increase competition and good 

    quality output.

    - Contracting out: This is where the provision of the good or service is 
    transferred from the public to the private sector while the government retains 

    the responsibility to supply the good or service. It takes the following forms.

    a. Franchising. This is the right to market on behalf of the government

    b. Contract management. Here the government owns the property but gives 
    out management like maintenance, providing goods and services among 

    others

    c. Leasing or renting. Here the government contracts the private sector to 

    provide part of the service or to use/ rent its assets.

    d. Cost sharing: This is where the government retains ownership of 
    the enterprises but the beneficiaries contribute to the running costs e.g 
    in schools and universities where the government pays part of the fees and 

    the students pay the rest.

    13.2.3. Advantages and disadvantages of privatization

    Activity 13.7.

    From the research carried out in activity 13.5 above,

    i) Discuss the view that the transfer of state enterprises from 
    public ownership to private ownership is the best strategy to 

    stimulate growth of the economy.

    ii) What do you think hinders effective privatisation drive in 

    Rwanda?

    Advantages of privatization. 

    - Increased efficiency in the privatized firms leading to good quality goods 

    and services.

    - Increased output from the privatized firms because of improved efficiency.

    - Reduced corruption and financial mismanagement of the enterprises. 

    This is because of close supervision by the owners of the enterprises.

    - Reduced burden from the state to concentrate on the production of 
    essential services. It reduces the responsibility of the government to only 

    strategic functions. 

    - Increased revenue to the government realized from the sold enterprises.

    - Increased competition resulting into emergence of several firms providing 

    services which had been monopolized by the state enterprises

    - Increased private sector confidence in the country. This encourages 

    private investments and so encourages further growth of the economy.

    - Reduced government budgetary deficits by reducing government 

    expenditures.

    Disadvantages of privatization. 

    - Increased resource outflow by the new owners of the enterprises 
    through profit repatriation. This occurs when the privatized enterprises are 

    taken over by foreign firms.

    - The government loses property through transactions with dubious 

    businessmen who don’t pay but spoil the property.

    - Increased debts to the government because a lot of money is 

    borrowed to fund the process yet little may be realized after selling.

    - Domination of foreign businesses in the economy as the domestic 
    ones are reduced     because of lack of enough funds to purchase the 

    privatized firms. 

    - Poor working conditions to the workers inform of low wages, 

    longer hours of work, etc.

    - Environmental degradation through over exploitation of natural 

    resources.

    - Associated with low levels of labour absorption in some sectors, 
    underemployment and even reduction of local employment because they 

    bring in foreign labour.

    - Over competition leads to use of non-price competition measures which 

    include reduction in weight of goods like bread etc.

    13.2.4. Limitations of privatization.

    - Corruption in the privatization unit i.e. some officials are not 

    transparent and connive with prospective buyers

    - Opposition from the general public often delays the process of 

    privatization.

    - Poor valuation of the enterprises leads to assets being sold at 

    giveaway prices

    - Poor states of the enterprises due to poor maintenance making it 

    hard to sale them

    - Political sabotage. Opposition leaders sometimes block the sale of 

    enterprises just to frustrate the government and advance their causes 

    - Poverty among the nationals makes the enterprises to be sold to 

    foreigners leading to foreign domination in the country.

    - Small market discourages potential buyers due to limited potential 

    for expansion

    - Political instability in some parts of the economy discourages 

    potential investors from buying the enterprises.

    - Unscrupulous buyers. Some buyers who win the bids to buy the 
    enterprises are not genuine and end up not paying after taking over the 

    property.

    - Under developed capital markets. Government enterprises are 
    sold under a capital market so its underdevelopment limits the potential 

    buyers to access the enterprises.

    - Fear of nationalization 

    Application activity 13.4.

    i) How would you differentiate privatization from nationalization?

    ii) What do you think are the reasons behind government transferring 

    some of her enterprises to private hands?

    iii) Why may the government decide to nationalize private firms?

    End unit assessment

    1. Explain the role of the private sector in the growth of economies in 

    developing countries.

    2. (i) Distinguish between divestiture and cost sharing as forms of 

    privatization.

    (ii) Describe the major problems faced by the government when 

    transferring her enterprises to the private sector?

    3. i) Under what sector of the economy do you classify charcoal sellers 

    and salons?

    ii) Describe the contribution of the above sector to the development of 

    the economy.

    4. Explain the problems faced by the public sector in developing 

    countries.

    REFERENCES

    1. Mirembe E. N. (2017); Economics for Rwanda Secondary Schools Learner’s 

    Book Senior Five. Kigali: Fountain Publishers Rwanda Ltd

    2. BWEBARE N. E (2017); Economics for Rwanda Secondary Schools 

    Learner’s Book Senior Six. Kigali: Fountain Publishers Rwanda Ltd

    3. Jim, B, Safari J.B., Patrick W.,Tony G. (2016) ; Economics For Rwandan 

    Schools student book Senior four . Kigali: Longhorn Publishers (Rwanda) Ltd.

    4. Alain, A. (2008). Economics, fifth edition. Pearson Education.

    5. Asiimwe, H.M. (2009). Fundamental Economics. East Africa Edition.

    6. Asiimwe. H.M (2013), Senior Secondary Economics student books 4,5 and 6 

    MK Publishers Ltd

    7. Chrisdom M.A. (2006). Economics for advanced level, Paper one and 

    Professional Studies. Published by The General Publishing House LTD.

    8. Chrisdom M. A. (2006). Economics for advanced level, Paper one and 

    Professional Studies. Published by The General Publishing House LTD.

    9. Eleazar, C.I., Turner, P.H., and Turner, D. (1993). Economics for Senior 

    Secondary School in East Africa. Published by The Macmillan Press LTD. 

    10. Grant, S.G., and Stanlake. (2000). Introductory Economics. 7th Edition. 

    Pearson Education Limited.

    11. Harvey.J., and Jowsey, E. (2007) Modern Economics. 8th edition 2007. 

    Published by Palgrave Macmillan. 

    12. Lipsey and Chrystal. (2007). Economics. Eleventh Edition. Oxford University 

    Press.

    13. Lipsey, R.G., and Harbour, C. (1992). First Principles of Economics. Second 

    Edition. Oxford University Press.

    14. Maunder, P., Myers, D., Wall, N., and Miller, R.L. (2000). Economics Explained. 

    HarperCollins Publishers Limited. 

    15. Tayebwa, B. M.B. (2007). Basic Economics. Published by Genuine Researcher 

    and Publishers (GRP).

    Electronic Reference

    1. https://www.researchgate.net/publication/5028931 An_introduction_to_the_

    search_theory of unemployment. 20-10-2019

    2. https://www.investopedia.com/terms/f/financialinstitution.asp on 21-10-2019

    3. https://en.wikipedia.org 10/12/2019 

    ◄UNIT 12: ECONOMIC PLANNING