THE announcement of a $65 million cattle and hog slaughter and processing plant in Saskatchewan last week was welcome news, showing faith in a shaken industry.
Welcome too was news the plant would be built without government help.
Too often, such announcements come with a list of government loans, special deals and even direct investment. The trend is evident in many places, but it is particularly so in Saskatchewan.
The government’s role in the economy is sure to be an issue in the provincial election campaign.
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More than in her sister prairie provinces, Saskatchewan governments have seen fit to directly invest in business, from utilities to the film industry.
This involvement grew out of Depression-era frustrations, when it seemed nothing would be developed in the province unless the people, through their government, did it themselves.
The Cooperative Commonwealth Federation, forerunner to today’s NDP, became actively involved in utilities and over time a number of crown corporations were created. It wasn’t only the NDP that invested in business. The conservative government in the 1980s bought a 49 percent interest in a fertilizer plant built by Cargill.
But such investments exploded in the last 10 years. In agriculture alone, the government holds or has held ownership in hog and potato production and meat and organic food processing.
What is the need for this investment? Is it simply a matter of the government filling in because traditional sources of equity ignore Saskatchewan? Or do equity investors avoid the province because the government is so involved?
There is argument for both positions.
But the experience in Alberta and Manitoba, where economic development is usually funded by the private sector, suggests that government need not be so directly involved, especially outside of the utility sector.
Direct government investment creates an uneven playing field. Companies with government investment have an advantage over those that must satisfy less patient investors.
And sometimes, to advance political objectives, public money is poured into companies with flawed business plans.
For these reasons, government investment in business is often a bad idea.
However, the problem remains that traditional equity investors rarely rush to put money into rural and agricultural businesses no matter what the province or political party in power.
If rural communities are to provide homes to the next generation of farmers, this problem must be solved.
The solution begins with creating an environment that welcomes investment and treats all businesses equitably.
Tax regimes must be competitive. Tools are needed that encourage citizens to invest in local ventures.
In all this government must be involved, but it is best when it acts as a facilitator, not an owner.
