Push for more state intervention in business in South Africa – BusinessTech
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2024 marks 25 years of competition authorities enforcing competition law and policy in South Africa—and the Department of Trade, Industry and Competition (DTIC) wants even more government interventionist policies to come to the fore.
While the government says progress has been made since competition laws came into effect in South Africa, there are calls for expanding competition policies to “enhance efficacy, address market concentration, and ensure inclusive economic growth.”
Deputy Minister at the Department of Trade, Industry and Competition (DTIC), Zuko Godlimpi delivered the keynote address on behalf of Minister Parks Tau at the 18th Annual Competition Conference on 4 September.
The conference “invites us to reflect on the historical context that necessitated the promulgation of competition legislation in our country [and] to think about ways of learning from the experience of the past 25 years of competition law with a view to improving the efficacy of our competition policy,” said Godlimpi.
When South Africa transitioned into a democracy in 1994, the new government outlined a high level of economic concentration in the country, with certain big businesses already monopolising the market and controlling certain strategic sectors.
Godlimpi said that “the apartheid regime had allowed anti-competitive practices by South African big businesses without hindrance [as] a strategic response to the economic sanctions imposed on the country pre-1994.”
This was seen as a way to represent South Africa as a productive and thriving economy despite international sanctions, masking the true state of economic concentration and lack of competition.
As a result, the Competition Act was enacted in 1998, while competition authorities, like the Competition Commission, began operation in 1999.
The preamble of the Competition Act reads that “apartheid and other discriminatory laws and practices of the past resulted in excessive concentrations of ownership and control within the national economy, inadequate restraints against anti-competitive trade practices, and unjust restrictions on full and free participation in the economy by all South Africans.”
The view is that this impacts not only SMMEs but also the consumer by allowing big businesses to be “an arbitrary price setter,” which, according to a study by the World Bank, disproportionately impacts low-income and previously disadvantaged households.
Thus, the promulgation of the competition law, along with the establishment of the relevant enforcement authorities, was done, as Caveat Law describes it, as attempts “to maintain competition in all markets by guarding against anti-competitive conduct by companies.”
“It allows for the investigation, control and evaluation of restrictive practices, abuse of dominant positions, and mergers [and] is not only focused on competition issues – it includes public interest and social issues such as the promotion of small businesses, the interests of employees and black economic empowerment,” added the group.
What has happened since then?
Sharing the Commission’s work over the last 25 years, Commissioner Doris Tshepe said that it has enabled greater levels of participation over time by “challenging the most powerful firms in the economy to secure market access, prevent exclusion, and meaningfully change the business conduct that has unnecessarily excluded many from the economy and restricted competition.”
The deputy minister said that the Competition Commission’s “welfare dividends” are what maintain its place in the country, particularly its focus on sectors crucial to poorer consumers.
“Many of the Competition Commission’s investigations, interventions and initiatives have targeted essential goods and services such as food, healthcare, telecommunications, retail products, energy and transport.”
“These interventions have benefitted low-income households, thus contributing to poverty alleviation,” citing a 2016 World Bank study found that the Commission’s actions “against four cartels in the maize, poultry, pharmaceutical, and meat markets” positively impacted poverty reduction
Godlimpi further encouraged the Commission to continue and even further pursue its mandate.
“We need to be creative in the deployment of legislative tools not only to punish but also to redirect the operations of big players so that their conduct can increasingly become progressive in the transformation of the economy, and the public interest remedies have been one of our most notable and commendable interventions in that regard,” he said.
The deputy minister also touted expanding the interventionist scope, which is an inevitable debate among GNU partners whose policies are less interventionist.
“We need to have a conversation about how we expand the interventionist scope of the Competition Commission, and this is despite the fact that business itself is quite irritated by the work of the [Commission].”
“If they had their way, they would be saying; ‘why are we not phasing out the Competition Commission and allow the free market to do as it pleases’.”
However, he said that competition policy and enforcement are viewed as critical in driving “inclusive economic growth” and reducing inequality, emphasising that fair competition is a cornerstone of a healthy economy.
Going forward, the DTIC deputy minister said that South African businesses need to embrace the world as a market as “this shift would not only open new opportunities but also improve the competitiveness of local industries.”
Looking ahead, Tshepe said the rise of digital markets and the recent explosive growth of artificial intelligence have created more powerful and entrenched global tech firms whose resources can completely reshape markets.
She said that this emphasises “the need” for competition regulation and law to continue to address the needs of evolving markets.
Read: Major red flags for some of South Africa’s biggest cities
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