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Why the government can be classified as a consumer and producer

Why the government can be classified as a consumer and producer We’ll briefly discuss on this page why the South African government can be both a consumer and a producer. We will also give actual examples of the government acting as both a consumer and a producer.

When the government produces anything, it means it engages in specific economic activities and provides goods and services that private companies (the private sector) may not always provide. The government is functioning as an entrepreneur when it produces goods and services.

In parallel, the government also uses some products and services that the private sector provides.

Examples of the Government as a Producer

The Government acts as an entrepreneur when it produces goods and services that the private sector does not want to render, because there is insufficient profit to be made. Examples include:

• refuse removal
• the creation and maintenance of public parks
• starting a police force or a defence force to protect citizens against possible future threats
• building courts and jails to create a legal system in the country o public libraries
• public swimming pools
• Schools
• Hospitals

A great example of the government as a producer is when it renders large-scale services that require large capital over a long period of time. These are types of projects that many private companies can’t afford to deliver due to a lack of funds. Some of the South African examples of government as a producer:

• the building of national roads through SANRAL,
• construction of railway lines through SA Railway,
• building harbours and airports through the Department of Transport and the DTI
• providing electricity via ESKOM
• supplying clean water to the citizens of the country through SA Water

Examples of the Government as a Consumer

The South African Government employs a large number of people in the public sector. In order to ensure that each person can do his/her job, Government has to buy certain products and services from the private sector.

Source

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