"South Africa has banned Bain & Company from bidding for public-sector contracts for a decade, following the lead of the UK, after the consulting firm was accused of helping government officials degrade the South African Revenue Service's (SARS) ability to probe tax evasion.

3 National treasury said in a response to queries that the ban will last for a decade and relates to the company "engaging in corrupt and fraudulent practices related to a SARS contract". The UK in August banned Bain from public contracts for three years because of allegations related to SARS. Bain was found by a judicial commission to have had ties to illegal dealings during work restructuring Sars, where senior staff were ousted and the institution's investigative capacity was gutted."

The intervention by the South African government is that of: (4 marks) a) Market participation. b) Regulation. c) Government spending. d) Public provision of goods and services.

Government Intervention in the economy The great strength of the market system is its ability to generate very efficient outcomes in the majority of cases through a system of decentralised decision-making in which each individual participant tries to maximise his or her benefit. Not surprisingly, however, markets do not perform well in the short term when broader social goals are at stake. Much of the justification for government's role in the economy can be traced to the inability of the market system to achieve such broader goals such as equitable income distribution as quickly as the persons in power need in order to maintain their political credibility. 4.2.1 How does government intervene? Public provision of goods and services: This can be achieved by public ownership or by public financing of production undertaken by the private sector. Some services such as policing, national defence, and the justice system are seen as public goods and fall within the legitimate ambit of the state. Services such as schools and hospitals fall into an area where there are many models and different views exist as to how best serve the populace as a whole. Infrastructure is often financed by the state but built and operated by the private sector, to achieve the best results. Economics 1B MANCOSA 34 A second way in which government can try to achieve its objectives is through its role as a market participant. For example, government is the largest employer of labour in the economy and through its wage policy and other employment practices it can try to achieve certain objectives (training of technicians) and also set an example for other employers to follow in areas such as women empowerment and employment of people with disabilities. Government spending is a powerful tool. Both the level and the composition (or structure) of government spending have a powerful impact on the economy. Apart from deciding which and what quantity of goods and services to purchase, government also makes transfer payments, that is, payments for which it receives nothing in return. Examples include old-age pensions, child support grants, disability grants and various subsidies. Transfer payments are a powerful instrument that can be used to change the distribution of income. A fourth instrument at the disposal of government is taxation. Although the primary purpose of taxation is to finance government expenditure, the level and structure of taxation can be used to achieve various objectives. Taxation can be used to redistribute income, to promote certain desirable activities and to penalise other socially undesirable activities. For instance, tax incentives (possibly in the form of lower tax rates or tax holidays) are often provided to stimulate investment spending and small business development, while tobacco products and alcoholic beverages are subject to additional taxes to discourage use. A fifth important instrument that government can use to affect economic outcomes is regulation. Regulation refers to all laws, rules and regulations that affect private behaviour. Examples include the labour laws (which govern the labour market); competition policy (which governs the goods markets); the anti-tobacco law (which regulates smoking in public places); and fixing of maximum or minimum prices and minimum wages. In many cases these regulations are enforced through a system of fines and criminal penalties.