Not fit for sale

26/02/2014

Prime Minister John Key says Genesis Energy will be the last State Owned Enterprise to be partially sold by the government.

Asked why he had decided to end the sales programme if it was so successful, Mr Key said a company had to have the “right characteristics” to be part of the mixed ownership model. A company like Kordia did not fit as it was too small in value and a monopoly, like Transpower, did not fit the model.

The only other two which could be sold were Television New Zealand and New Zealand Post and neither was fit for sale.

Companies which aren’t fit for sale aren’t assets they’re liabilities.

Yet opponents of even partial sales are still clinging to the view that state owned companies are sacrosanct and that the portfolio should remain exactly as it is in perpetuity.

 

 


SOEs put govt blanace sheet at risk

01/03/2013

Opponents to the partial sale of state assets complain about the loss of dividends, they forget about the costs.

Trans Tasman points out the risks of state ownership:

. . .there is a harsh reality to be faced, not only with Solid Energy (what’s a Govt trying to do in owning coal mines?) but with other state-owned entities whose profitability has shrunk: think of TVNZ, NZ Post, Kordia. Not surprisingly, Solid Energy’s troubles have thrown into relief how the Govt’s balance sheet, already structurally weak, can be pushed into dangerous territory by businesses where all the risks have to be shouldered by the taxpayer.

Opponents to the sales complain that the government will lose dividend income when up to 49% of shares in an SOE are sold.

They forget the risks and costs of ownership which ultimately fall on the taxpayer.

I’d rather have my taxes pay for core government responsibilities like defence, police, infrastructure, health and welfare than investment in areas best left to the private sector.


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