An Associate Professor at the Regent University, Virginia, US, Prof Brian Baugus, has suggested the decision by government to support businesses is only an avenue to reward party supporters. The renowned economist indicated that there are consequences for government to support businesses as it may lead to loss of revenue to the state since the majority of these businesses, fail to pay back the money they were granted in cases where the money was given to them as loans.
In his view, “government gives out tax payer money to businesses who want to keep those politicians in power and so some of that money goes back to the politicians, it is a way for politicians to get personal use of tax payer money which is illegal if done directly in most places.”
He was reacting to the recent press engagement addressed by the Business Development Minister, Dr. Mohammed Awal, in the decision by government to give support to businesses with a 10% per an um interest. Dr. Mohammed Awal on Tuesday highlighted various initiatives embarked on by the Ministry to develop and improve the entrepreneurial capacity of Ghanaians particularly the youth in order to create jobs and wealth.
According to him, over 10, 000 young people have been impacted from the Capacity Building and funding for Young Entrepreneurs. The Minister said 4,000 jobs have been created from the Presidential Business Support Programme.
He said the government was planning to introduce a policy guideline on entrepreneurship and stated that: “The overall goal of the policy is to support economic growth through the development of entrepreneurship and innovative programmes that create more jobs, generate more income, and help to reduce poverty”
He said the policy also aims to create and strengthen an entrepreneurial environment. The minister said this was achieved through various initiatives and key interventions instituted by his ministry to improve the entrepreneurial capacity of Ghanaians, particularly the youth, in order to create jobs and wealth.
He said some of the interventions include the Presidential Business Support Programme (PBSP) which has provided structured entrepreneurship and business development training for young entrepreneurs.
Consequently, 7,000 young entrepreneurs were trained under the PBSP with 1,350 receiving funding in 2017. Dr Awal said under the second phase of the PBSP, 12,000 applicants received training and additional technical support, mentorship and business advisory services. He added that 3,000 out of the 12,000 trainees will receive seed capital of between GHS10,000 and GHS100,000 per applicant with 10% interest per annum. But commenting on this, the economist raised a number questions including why sine few Ghanaians would be given support (taxpayers money) at the disadvantage of others.
“…what do we do with those that do not get the government funding they are now at a disadvantage, is it morally right to give some taxpayer money and not others?”
He added: “…government programs give businesses incentives to lobby and get political which takes time from serving customers and developing new products and services. Four, it’s a laundering operation.”
Read Below his full post
There are many problems with government support of the business. One is that money will flow to supporters of the government, it is just natural for people to help their friends and supporters and of course if there is money available it is amazing how many businesses we suddenly become a friend and supporter of the government. Two, no one in government faces market discipline. It is a very poor system in which the government takes money that is not theirs and gives to people and then pays no price for being wrong (losses) or gains nothing for being right (profits).
Customers, by choosing, weed out inefficiency and bad service government money subsidizes such things, who needs customers if you are getting government money, which means a greater waste of precious resources. So the government replaces market incentives with political ones which are not about growth but about maintaining power. Three, government programs give businesses incentives to lobby and get political which takes time from serving customers and developing new products and services. Four, it’s a laundering operation. The government gives out taxpayer money to businesses who want to keep those politicians in power and so some of that money goes back to the politicians, it is a way for politicians to get personal use of taxpayer money which is illegal if done directly in most places. Five, it opens a whole new avenue of direct corruption. Six, why do we think the government has superior knowledge in investing in businesses? What evidence do we have that government is a better investor than private investors with training and expertise.
It is not what the government does or is designed to do. Seven, what do we do with those that do not get the government funding they are now at a disadvantage, is it morally right to give some taxpayer money and not others?
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