Company bailouts unwise: Manuel
9 April 2009
Company bailouts are unnecessary and unwise, South African Finance Minister Trevor Manuel said in an opinion piece in the Business Day newspaper on Wednesday.
"Bail-outs and subsidies impose real costs on taxpayers, either directly through increased taxes or indirectly through the risks and costs of future public sector or state enterprise debt, and higher consumer prices," Manuel said.
South Africa had a vast majority of companies adjusting to the global economic downturn without special government assistance ... and then it had a minority of firms asking loudly for help.
Most of these companies, Manuel said, "already benefit from major special public assistance in the form of tariff protection, tax incentives, delayed implementation of royalties, subsidised electricity and other industrial support measures."
He said that increasing the dependence of some sectors on subsidies was certainly not fair, and neither was it helpful in improving South Africa's long-term development prospects.
"We should not have a two-class private sector, with the majority of firms and workers using their efforts and entrepreneurial skills to improve their competitiveness in the market, while others rely primarily on lobbying efforts to increase their private profits at public expense."
He said the goal in providing assistance to firms, whether short-term or long-term, should be to improve the long-run competitiveness of South Africa's economy.
"This is how we can ensure the growth that is necessary to meet our economic aspirations."
Manuel said there was a critical role for the state in supporting South Africa's economic development and its adjustment to economic shocks and stresses.
"But doing so by singling out select firms for special support creates the wrong kinds of signals about how to improve competitiveness, and in the process undermines our capacity to provide broader countercyclical fiscal support to the economy as a whole."
Sapa
