✂ Fed’s first rate cut since 2020: Use our free Stock Screener to find new opportunities fastExplore for FREE

S.Africa finmin says corporate bailouts send wrong signal

Published 04/08/2009, 02:16 AM
Updated 04/08/2009, 02:24 AM
TM
-

JOHANNESBURG, April 8 (Reuters) - South African Finance Minister Trevor Manuel said singling out companies for state support sent the wrong signal and undermined the government's ability to support the broader economy.

Manuel wrote in an opinion piece in Wednesday's Business Day newspaper that helping individual companies would "destroy the incentive to create sound businesses".

"Socialising the losses of shareholders and managers is the only thing worse than nationalising firms outright."

South African banks have avoided the worst of the global financial meltdown and have not required the kind of government bailouts seen in some developed countries.

But the auto industry has been hit hard by a sharp economic slowdown, putting thousands of jobs on the line, and has sought emergency state financing.

The government, which is trying to spur growth through a big infrastructure spending programme, has said it may provide loans to certain sectors.

Trade and Industry Minister Mandisi Mpahlwa said last month the government would release details of its rescue packages within weeks, and stressed it would not give up on the auto industry.

But Manuel said companies should not require government loans because South Africa's credit markets had not seized up to the same extent as in some developed countries.

If South Africa did offer state help it should perhaps consider making it contingent on capping executive pay, or replacing management altogether, he said.

South Africa has previously said industry bailouts by rich nations, especially carmakers, could be a covert form of protectionism, skewing competition against developing nations.

Car producers including Volkswagen , Mercedes-Benz , Ford , Toyota <7203.T> and General Motors employ about 116,000 in South Africa and are key for job creation in a country where about a quarter of the labour force is unemployed. (Reporting by Rebecca Harrison; Editing by Jan Dahinten)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.