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 car 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 car 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 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. – Reuters