Can Denel Be Regarded As A Monopoly In South Africa?
There is no question that Denel is currently a public monopoly.
The South African government has expressed interest in the privatization of Denel, but the process has already been going on for six years with little to show. According to conventional thinking, privatizing a public monopoly does not eliminate its ability to use monopolistic power at the cost of its customers.
Thus, a monopolist may reduce output and, as a result, raise prices if there is no competition. The worry of unregulated weaponry sales and exports, particularly to fundamentalists and governments with a bad track record on human rights and the risk of job losses, are further concerns, particularly in South Africa with its extremely high unemployment rate.
Until the 1960s, South Africa primarily relied on foreign sources for its defense requirements. This position altered with the installation of several isolationist policies and a global arms embargo in the early 1960s.
The South African government was forced to become self-sufficient in terms of its defense demands as a result of this mandatory weapons embargo on the import and export of weaponry to and from South Africa, which helped lead to the founding of Armscor and subsequently Denel. If not for the global arms embargo and the following push for self-sufficiency,
Denel would not be in operation today. The State was the only stakeholder when Denel was founded as a private business on 1 April 1992 and incorporated under the Companies Act.
In today’s world of market dominance and new economies, privatization is unquestionably the rage. The classic reasons against public firms—a poor rate of return on investment, moderate productivity, dissatisfied consumers, a lack of defined objectives, and political and bureaucratic intervention in management—as well as the potential benefits of privatization, are vigorously promoted in South Africa.
