Transcript Public_Sector_Development_LECTURE

PUBLIC SECTOR DEVELOPMENT
AD302
B . H TA D E R E R A
PUBLIC SECTOR
• The public sector is a part of the economy that includes the business of the
government at national, provincial and local levels.
• It is the government sector through which public policy is implemented and
includes ministries, departmental public enterprises, parastatals, joint-ventures,
public companies, local municipalities and the public not for profit
organizations.
• The role of the public sector is not only to implement public policy, but also to
facilitate agenda setting, formulation, assessment and evaluation (Nigro Lloyd,
1984)
• It is also the sector through which the welfare of society is catered for through
the provision of public goods and services that include civil protection (military
and police), telecommunications, transport, electricity, health, education, roads
and infrastructure.
• In some countries, the public sector also engages in business enterprises in
sectors that include mining, airline and railway operation, and banking (Jan-Erik
Lane, 1995).
DEVELOPMENT
• Development is a multi-dimensional process involving
reorganization and reorientation of political, economic, social
and technological aspects of life (Todaro, 1992; also see the
Development Theory).
• It is a reform process that involves the building of capacity and
technical innovation towards effectiveness and efficiency (Dia
1998; Rondineli, 1994).
• A transition from traditional to modern forms of life
characterized by high mass consumption (see the
Modernization Theory).
• Development is process of improving the quality of all human
lives with three equally important aspects. These are:
1. Raising people’s standard of living, income and consumption,
medical services, education, housing through relevant growth
processes
2. Creating conditions conducive to the growth of peoples‘selfesteem through the establishment of social, political and
economic systems and institutions which promote human dignity
and respect
3. Increasing peoples’ freedom to choose by enlarging the range
of their choice goods and services (Todaro, 1992).
•Development is a process of building capacity, innovation,
reform, improving performance, technical advancement,
increased social interaction and affirmative action, political
functionality, bringing about effectiveness and efficiency,
modernization and transformation.
PUBLIC SECTOR DEVELOPMENT
A reform process of bringing about:
-effectiveness and efficiency;
-innovation;
-transformation;
-capacity building;
-modernization;
-democratization and good governance;
-transparency and accountability; and
-improvement of performance,
in government ministries, departmental public enterprises,
parastatals, public companies, joint-ventures, local municipalities
and the public not for profit organizations towards the age of high
mass consumption and the attainment of public policy objectives.
THE PUBLIC SECTOR DEVELOPMENT CONTEXT
• Political
-central government ideology (left or right wing on the political spectrum);
-structure and system of governance (political parties, administrative
structures, ministries and departments, existing programmes and long term
initiatives);
-global political structure and foreign policy;
-legislative framework;
Social contexts
• Education levels, culture of citizens, employment levels, age, sex, religion,
disease trends, demographic, global trends.
Economic
• Standard of living, GNP, GDP, inflation, labour, capital enterprises, land,
economic policy frameworks.
Technological factors
• Technical expertise, technological development/ advancement,
computerization, mechanization.
• Global technological trends and advancements.
DEVELOPMENT THEORIES
1. Management Theory
-a collection of ideas that provide the framework for effective
management strategy for implementation in modern
organizations. There are two sub-categories namely the
traditional and modern:
a. Traditional Management Theory
i. Within the Scientific Approach to management are two other
sub-theories: the Administrative Approach and the Bureaucratic
Approach.
• The Administrative Approach was pioneered by Henri Fayol,
who developed his management theory in 1916, influenced by
by Taylor’s publication of The Principles of Scientific
Management in 1911. He identified five management
functions that include: planning, organizing, leading,
coordinating, and controlling.
• Planning-forecasting and determining what to do and how to
do it.
• Organizing-pooling resources together for a common purpose.
• Leading-authority to get things done, as needed.
• Coordinating- ensuring that there is common purpose and that
all tasks are done in a synchronized manner and that everyone
involved works as part of a unified team.
• Controlling-means that all rules and regulations are followed
and adhered to.
• Also, during the time of Taylor’s Scientific Approach, the
Bureaucratic Approach was proposed by Max Weber, a
sociologist from Germany.
• Weber viewed each organization as a bureaucracy with goals
to be met at the expense of individuality or personal
contribution.
• His approach focused on hierarchical structure, which
provided clear designations of authority, giving managers a
type of legal control over their employees.
• In addition there is also the Human Relations Approach
developed in the early 1920 by Elton Mayo who observed the
importance of human interaction and personal relationships in
the work place through the Hawthorne Studies.
2. Modern Theories of Management
i. Systems Approach
•The Systems Approach to management sought to find an equal balance
between the extremely impersonal Scientific Approach and the individuallyfocused Human Relations Approach.
•It assumes that the organization is a system consisting inputs, processes,
outputs, internal and external environment. The role of management is to
ensure that there is increased interaction in the organization’s system for the
attainment of goals and objectives.
ii. Contingency Perspective
•Founded in the 1960’s, the Contingency Perspective builds upon the Systems
Approach and recognizes that there are numerous factors that may impact an
organization’s performance. The underlying assumption is that there is no one
best way to manage for everything “it depends” (Charles Kindleberg).
• The Contingency Approach recognizes that all organizational
situations are different and therefore the responses are also
different. Each event comes with its own set of problems,
challenges, and internal and external environmental factors.
• Some of these macro-environmental factors, or contingencies,
to be considered include:
- changes in technology,
- demographic shifts,
- economic conditions,
- cultural factors, and
- government and legislation.
If management is flexible, then management can respond to each
of these factors and act accordingly.
THE SYSTEMS THEORY
Inputs
-demands
-supports
-apathies
Processes
-decision
making
Outputs
-4Ps
-outputs
-outcomes
Feedback
-Results-based
monitoring and
evaluation
• A functional system interacts with its environment in translating inputs into
outputs and outcomes;
THE POLITICAL ECONOMIC PERSPECTIVE
• they are left wing theoretical arguments which draw their roots in classical
marxist theories (Seidman, 1996);
• there is a common belief in the inevitable link between politics and economics
(Olson, 1992; William, 1995; Rowthorn et al, 1993; Demezel, 1998;
Perzeworski, 1991);
• the basic assumption is that the economy operates in a political environment.
The state is at the center of everything to the extent that success in the economy
depends on the “politics of state intervention (Rawthorn et al, 1993);”
• public sector reform interventions cannot be divorced from the politics of state
intervention. Therefore development in the public sector is controlled by the
ruling elites.
•
PUBLIC CHOICE THEORY
• assumes that state failure is a possibility because the state is a neutral actor,
neither does it pursue the most rational interventions (Walsh, 1995);
• politicians do not work in the best interest of society as a whole because they
have self interests. As a result, their behavior can best be described as similar to
that of buyers and sellers at a marketplace who seek the best deal to serve their
interests (rational utility maximization);
• politicians pursue power, status, prestige and all benefits associated with public
office and therefore will engage themselves in a way that helps ensure that their
interests are protected. As a result, they engage in the “strategic culculus”
through which they make calculated decisions regardless of their implications;
• This explains why the most popular decisions are made towards elections, and
why certain irrational decisions are implemented in the name of prestige
(Buchanan, 1998). Eg continued bailing out of loss making parastatals,
RESIDUAL CLAIMANT THEORY
• assumes that public ownership of organizations not only distorts ownership
claims to profits (residue) but renders it difficult to accurately measure
individual employee effort (see Rowthorne et al);
• this undermines the incentive to maximize profits (revenue). It is proposed that
the shift to private ownership will clearly redefine ownership structures,
objectives, expected performance levels and residual claimant to profits which
will inject the incentive to maximize profits (revenue);
• further it is assumed that competitive markets such as stock markets and
financial institutions function as monitoring mechanisms that help to measure
performance. In addition, the competitive markets also provide options for
possible take over of loss making entities (Vickerst Yarrow, 1998);
• the fear for possible take over, and the claim to residue fosters efficient and
effective, and performance-driven management of public organizations.
PROPERTY RIGHTS THEORY
• it is closely related to the Residual Claimant Theory and postulates that where
management and ownership coincide, the “manager-owner” has direct interests
in cost minimization as rewards would be directly related to performance
(Pejovic et al);
• in other words, where rights to ownership and profits are clearly defined, an
organization is bound to perform better. In public organizations however, rights
to profits are diffused and uncertain as ownership and management are separated
• as a result, owners have limited control over management, which pursues self
seeking concerns such as risk aversion and protection of personal interests
(Hartley and Parker, 1996)
DISPERSED KNOWLEDGE THEORY
• Assumes that the nature of human knowledge is that it can never be fully codefined and transmitted to others (Hayek, 1982);
• Due to this limited transferability of knowledge, the state (public sector) is
always more ignorant than individual private owners.
• Decision making will therefore be more efficient if it is left in the hands of
private owners and agents.
THEORY OF CONTESTABLE MARKETS
• Explains the role of competitive forces in constraining the behavior of
apparently dominant firms;
• It primarily focuses on the threat of competition in a contestable market and
details how this threat generates the profit motive and better performance
(Adams, 1994);
• The assumption is that a firm is compelled to perform better (met consumer
wishes with maximum efficiency) to avoid other firms taking over their
business.
NEW PUBLIC ADMINISTRATION
• The emergence of NPA can be traced back to the late 1960s.
• It emerged out of the realization that Old Public Administration gave
significance to “administration” rather than “public” emphasised “principles‟
and “procedures‟ rather than “values‟ and “philosophy;” efficiency and
economy rather than “effectiveness” and “service efficiency.”
• As a result, public organizations were made of good people trapped in bad
systems and structures that lacked capacity to serve their purpose as required
and to the expectation of the public.
•
ASSUMPTIONS OF NPA
1. CHANGE: NPA stated that public administration should be change oriented
and respond to the various socio-eco-political changes occurring in the society.
Operational flexibility and organizational adaptability should be in built in the
administrative system to meet these changes.
2. RELEVANCE: Every society has different set of problems. Therefore, public
administration should consider only country-specific, area-specific, culture–
specific, ethno-centric changes, or only the socially relevant changes. NPA
suggests the inclusion of rationality of the people too in the process of policy
formulation.
3. EQUITY, FAIRNESS, and JUSTICE: NPA found social equity as the most
common vehicle for guiding human development.
-Social equity means administrators should become the champions of the
underprivileged sections of society. The distributive justice and goal of equity
should be Public Administration’ s basic concern.
-The goal of administration should be to bring about social equity, fairness and
justice thereby promoting harmony and integration in the society.
4. VALUES: To achieve all the above objectives, the ideology/ philosophy of
public administration should be changed.
-The administrative system should be value-oriented so that there is commitment
to ideology and philosophy of the state.
-It openly rejected the value-neutral position taken by behavioral political
science and management-oriented public administration. Value-neutrality in
public administration is neither possible nor desirable. It stresses central role of
personal and organizational values or ethics and personal commitment of
administrators towards the goals.
NEW PUBLIC MANAGEMENT
• The problems in the response of which NPA had emerged continued in 1970s &
beyond;
• Robert Behn defines the New Public Management as “. . .the entire collection
of tactics and strategies that seek to enhance the performance of the public
sector. . .;
• To Guy Peters the new public management includes a range of reforms that
include more participation, flexibility, and deregulation internally, and the use
of market mechanisms externally;
• NPM connotes organizing and running public organizations in a “more
management – oriented” way as that of private organizations, so as to achieve
more citizen satisfaction and societal welfare. The basic theme of NPM is to
allow public managers manage;
•
The various factors behind the emergence of NPM are:
•Knowledge revolution
•Technological revolution (IT or e – governance) and communication revolution.
•Increased competition nationally and internationally in providing goods and
services.
•Aspirations of the people from government/ administration have increased. Now
they demand value for their money. Hence quality and cost of services provide
by state should be competitive.
•Reduced financial resources of government led to managerial rethink to
optimally utilize the scarce resources
•International dimension ie Increasing globalization
The main features are:
1.) NPM aims at management and not policy. It views public administration from
the managerial angle and applies management solutions to problem, concerns and
issues of public administration;
2.) It deals with converting public bureaucracies into agencies which deal with
each other on a user pay basis;
3.) Performance Improvement: It emphasizes on output and providing monetary
incentives for increased performance. It demands quick corrective measures, and
rewards both organizational and individual performance.
4.) Client focus: It emphasizes the role of public managers in providing highquality services that citizen‟s value. The consumers are reconceptualized as
active customers and not just passive recipients. Public sector organisations are
setting performance targets, measuring performance and publicizing results for
the wider public.
7.) Flexibility: Greater flexibility in working conditions such as contractual
appointments, work place bargaining etc. is being permitted to make use of more
expertise, employee creativity and allowing exploration of more cost effective
delivery systems.
FOCUS OF NPM
•Achieving three essentials: Efficiency, Economy and Effectiveness- a triangle
with three essential on each pillar.
•It focuses on management, not on administration, because administration
connotes certain degree of superiority, hierarchy, control etc. while management
is more participative in nature. Thus there should be Public Management and not
Public Administration.
•Consumers interests, stakeholders‟ interest, quality of service.
•Entrepreneurial role of public organizations. It means that the public
•organizations should work more like private organizations.
•Synergizing relationship between public sector, private sector, NGOs, voluntary
organizations, civil society etc now it moves from static to dynamic
organizations.
E-GOVERNMENT
• E-government is a generic term for structures and systems of web-based
services from agencies of local, state and central government. In e-government,
the government uses information technology and particularly the Internet to
support government operations, engage citizens, and provide government
services.
• The interaction may be in the form of obtaining information, filings, or making
payments and a host of other activities via the World Wide Web (Sharma &
Gupta, 2003, Sharma, 2004, Sharma 2006).
• The World Bank defines E-Government as the use by government agencies of
information technologies (such as Wide Area Networks, the Internet, and
mobile computing) that have the ability to transform relations with citizens,
businesses, and other arms of government.
• These technologies can serve a variety of different ends: better delivery of
government services to citizens, improved interactions with business and
industry, citizen empowerment through access to information, or more efficient
government management.
• The resulting benefits can be less corruption, increased transparency, greater
convenience, revenue growth, and/or cost reductions.”
E-GOVERNANCE
• E-governance, meaning ‘electronic governance’ is using information and
communication technologies (ICTs) at various levels of the government and the
public sector and beyond, for the purpose of enhancing governance (Bedi, Singh
and Srivastava, 2001; Holmes, 2001; Okot-Uma, 2000).
• According to Keohane and Nye (2000), “Governance implies the processes and
institutions, both formal and informal, that guide and restrain the collective
activities of a group. Government is the subset that acts with authority and
creates formal obligations. Governance need not necessarily be conducted
exclusively by governments. Private firms, associations of firms,
nongovernmental organizations (NGOs), and associations of NGOs all engage in
it, often in association with governmental bodies, to create governance;
sometimes without governmental authority.”
• The UNESCO define E-governance as the public sector’s use of information and
communication technologies with the aim of improving information and service
delivery, encouraging citizen participation in the decision-making process and
making government more accountable, transparent and effective.
• It is the application of e-government.
• E-governance involves new styles of leadership, new ways of debating and
deciding policy and investment, new ways of accessing education, new ways of
listening to citizens and new ways of organizing and delivering information and
services.
• E-governance is generally considered as a wider concept than e-government,
since it can bring about a change in the way citizens relate to governments and
to each other.
• E-governance can bring forth new concepts of citizenship, both in terms of
citizen needs and responsibilities. Its objective is to engage, enable and
empower the citizen.”
PUBLIC ENTERPRISES
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) Departmental Public Enterprises
Created through deconcentration. The focus of deconcentration or
departmentalization is to create professional and organizational autonomy for a
public enterprise within the parameters of a ministry;
The main purpose is to improve the decision making process of the enterprise;
DPEs benefit from operational autonomy and are largely rum as separate
entities or departments of a ministry;
The most significant relationship between the DPE and the parent ministry is
budgetary in nature. In essence, the parent ministry determines and defends the
DPE’s budget component in parliament;
Control by the parent ministry is financial;
DPEs are the first step towards the creation of a parastatal;
Examples include the Registra General’s Office, Attorney General’s Office in
Zimbabwe.
2.) Parastatals
• Created through an act of parliament. Unlike DPEs, parastatals have a legal
status.
• They are created through the process of delegation;
• Compared to DPEs, parastatals enjoy more autonomy in financial decision
making, pricing policies, and logistical arangements;
• There is also professional discretion especially on human resources issues that
include salary levels and conditions and service;
• Parastatals offer the state an opportunity to influence macro-economic policies.
They are a useful investment avenue for a given economy since their
operations involve high capital investment eg ZESA, SAA, ESKOM, NRZ
3.) Public Companies
• Are created to operate as private entities although majority ownership remains
with the government;
• They are created through an act of parliament and can be listed on the stock
exchange;
• Public companies have more access to capital than DPEs and Parastatals in the
sense that they can recapitalise using the stock exchange;
• They have more scope for regional and international expansion since they
operate as independent companies in the private sector…for example the
Dairyboard Zimbabwe Limited Deport in Malawi;
• Private companies enjoy access to strategic information;
• Examples include COTCO, DZL, Transnet;
• They are parastatals that have fully privatised.
4.) Joint ventures
• Strategic partnerships between the state and private operators or companies;
• Central focus is on equity share as a risk management strategy;
• In some cases, the government has the controlling share 51% or more stake;
• Joint ventures offer the state an opportunity to reduce capital exposure whilst
taking advantage of existing business opportunities;
• Government as a partner benefit profitably from the financial, technical and
marketing skills that the strategic partner brings into the business eg Delta
Corporation.
CONTROL OF PUBLIC ENTEPRISES
1.) Control by the governing body
-regular reports;
-operational parameters (defining the mission, vision and organizational values);
-policy guidelines;
-audited statements.
2.) Legal controls
-acts of parliament;
-statutory instruments;
-ammendments to existing legislation;
3.) Ministerial controls
-ministerial directives (eg GMB should be the sole buyer of grain)
-policy directives in line with ministry plans;
-appointments of top management
-ministerial privilege (diverting strategic financial resources if the need arises)
4.) Parliamentary controls
-debates in parliament;
-public accounts committee, parliamentary portfolio committee
-question and answer sessions;
-auditor general’s office (reports);
-commission of inquiry
5.) Social controls
-effected through interest group pressure;
-society plays a watchdog function and facilitates the formulation,
implementation, monitoring and evaluation of PEs policy.
CASE STUDIES
• SAA
• Delta Corporations
• Transnet
PRIVATIZATION
• Transfer of control and/or ownership of productive assets from the public to the
private sector;
• The most common type form of privatization involves ownership transfer, but it
is also possible to have privatization of control, with ownership remaining in the
public sector;
• Privatization contributes towards improvement of performance, budgetary
position, increase competition, distribution of wealth.
Methods of Privatization
• Divestiture: public floatation; private sale; management buy out
• Transfer of control: contracting out; management contract; leasing and
franchising
DECENTRALIZATION
ANALYSING THE EFFECTIVENESS OF DECENTRALIZATION
THE DECISION SPACE APPROACH