Impact of divestiture on the performance of selected state-owned enterprises

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After independence, Ghana, like most developing countries, adopted state-led economic strategy of development - the development philosophy at the period. Consequently, public ownership and control of “commanding heights” of the economy was given special emphasis. This led to the establishment of many state-owned enterprises (SOEs) particularly in the early 1 960s. In spite of the heavy investment in the SOEs, the overall performance has been poor in terms of profitability and efficiency. To address the problems facing the SOEs, the divestiture programme was launched in 1988. The programme among other things was intended to reduce the size of the public sector and improve the performance of SOEs by mobilising private sector management and capital. The study was undertaken to assess the performance of divested SOEs. Questionnaire was used to collect data from 10 divested SOEs for the study. Analysis of the data revealed that divestiture has led to increased investment, employment, output and capacity utilisation; among others. The study further revealed a number of challenges to divested enterprises. These include over liberalisation, which has resulted in unhealthy competition; high interest and exchange rates, and inadequate bank credit to the private sector. On the basis of the findings, recommendations have been made for policy consideration. The study concluded that, though divestiture has led to the development of the private sector, there is the need to address the challenges of divested enterprises if they will continue to perform creditably. It is believed that if the recommendations are adhered to, then the prospects of divested enterprises look brighter.
A Thesis submitted to the Board of Postgraduate Studies, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfilment of the requirements for the degree of Master of Science in Development Policy and Planning, 2000