Industry bailouts not as critical as jobs - ministers
July 1, 2009
By Donwald Pressly
The government was not keen on industry bailouts as they gave business the impression they could continue as they were before being rescued, the ministers of trade and industry and economic development both repeated yesterday.
But Rob Davies of trade and industry and Ebrahim Patel of economic development indicated that they did support interventions in industrial sectors where large job losses would result from the recession.
Davies, who was presenting his budget vote in Parliament, was questioned at a media briefing ahead of the vote in an extended public committee on why the government tended to throw money at the automotive industry.
Responding to these questions, he argued that the industry tended to perform well in good times, as it had done in South Africa when it recorded strong export expansion and solid growth. But it was prone to take a severe hit in an economic downturn.
While Davies did not shed any light on possible assistance to the Frame Group - in which the Southern African Clothing and Textile Workers' Union has an interest - he said the automotive industry was extremely cyclical.
"It is connected to a lot of value chains in the economy," he said, noting that his department was keen to encourage the production of heavy and commercial vehicles.
It was important, Davies said, to preserve the capacity of related business, including the engineering and steel industry, which supplied the automotive industry. The sector should look at producing vehicles appropriate to the major public transport upgrade, he added.
Patel told the briefing that in times of recession, some business were unable to provide services "at a commercial price". The result was that these businesses sometimes shed a "critical mass of labour".
Business and the government were in discussion on how to save jobs and retrain the workforce.
Davies said that support packages for troubled industries should not lead to chief executives receiving bonuses while workers got fired. "There will be an expectation to see changes in behaviour leading to more sustainable development of sectors and firms that are receiving support."
He told MPs that the economy remained insufficiently diversified and largely dependent on mineral exports.
"Dominant firms limit competition and restrict entry of small and medium enterprises, thus contributing to the skewed pattern of the economy's development, including in spatial and racial terms, resulting in the entrenchment of extreme levels of inequality and poverty."
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