Posted: May 20, 2021
More than R25 billion has been committed by major firms for investment in factories, refineries and construction in South Africa over the last five years, following agreement with Government in terms of the provisions of the Competition Act. In addition, more than R3 billion has been committed for supplier development over the same period. Moreover, billions of rands of local procurement have been enabled through measures undertaken by firms as a result of commitments to improve the domestic industrial impact of their procurement.
This was announced today by the Minister of Trade, Industry and Competition: Mr Ebrahim Patel at the release of a Policy Statement on Competition Policy for Jobs and Industrial Development.
The competition policy statement is one of a series of policy documents released as part of the annual dtic Budget Vote debate.
The statement provides clarity to the market on the conduct of competition policy and covers the context of competition policy in South Africa, and its role in achieving public interest goals in mergers and acquisitions. It provides detail on how competition policy is used to address harmful effects of economic concentration; prosecuting anti-competitive behaviour by large firms; and how it is evolving to address new areas of concern, like the rise of digital markets; cross border impact of mergers and foreign mergers which may affect national security.
“South Africa’s competition regime blends traditional competition concerns with developmental outcomes appropriate for its unique circumstances. Competition policy aims to address high levels of economic concentration and promote effective competition that supports industrialisation, builds dynamic firms, protects and creates jobs and promotes economic inclusion and transformation,” said Minister Patel.
In his Budget Vote speech, Minister Patel provided details of successes in securing agreements on worker ownership in mergers recently in SA. These covered among companies such as Coca Cola, Pepsico, Glencore, Old Mutual and Abinbev. Earlier this year, in line with provisions in the Competition Act, Government agreed with Coca-Cola Beverages South Africa for expansion of its worker ownership scheme, bringing worker share ownership in the company to 15%, covering nearly 8 000 workers, and providing for two worker representatives on the board.
This complements agreement with other major companies, in line with the provisions of the Competition Act, to increase investment in factories and refineries, create jobs, invest in supplier development and emerging farmers, ensure mineral beneficiation, and increase the procurement of locally manufactured goods.
A number of studies on the South African economy points to growing concern about high levels of concentration and its impact on competitive markets process and entry of new firms in the market. There is evidence that highly concentrated markets can stultify innovation and inclusive economic growth. South Africa’s competition policy has thus established a framework to address the harmful effects of economic concentration, through market inquiries conducted by the competition authorities, with enhanced powers to the regulators.
Anti-competitive and abusive behaviour by dominant companies is also strongly challenged under the new competition policy framework. The competition authorities have tackled cartel behaviour in sectors such as construction, primary steel and bread. Excessive pricing by dominant companies has resulted in significant administrative penalties such as the fine imposed in the steel sector, and those imposed for price gouging on PPE and other COVID essentials during the pandemic. Buyer power and price discrimination provisions introduced in the competition legislation in 2019 seek to limit abuse by dominant firms, as do the new legislative provisions on abuse of dominance.
Policy makers across the world have increasingly focused on the growth in digital markets, and the challenges that these create include market dominance by platforms, characterised by the network effects and winner-takes-all markets, intersection between competition law and privacy. The Competition Commission launched a market inquiry today into online intermediation markets like e-commerce market places.
Many countries, notably the European Union have proposed laws to enhance competition for the so-called ‘gate keeper firms’. China has ordered a separation of tech platforms and payment services; Australia is spearheading policy to force revenue-sharing between platforms and traditional media houses. Policy makers have remained seized with this matter and government has prioritised digital markets as part of its post-COVID recovery plan, with the aim of understanding the impact these have on SMMEs. These markets will be watched closely from a regulatory point of view to avoid late interventions where markets would have already reached a tipping point. This engages all areas of tools of competition policy, including mergers, abuse of dominance, market inquiries, vertical restraints and cartels.
South Africa’s competition policy thus seeks to limit abuse of dominance and proactively open the economy, stimulating development as critical tools to transform and grow a truly inclusive economy.
“We will update the policy statement in light of new trends and developments,” Minister Patel said.
the dtic’s Competition policy for jobs and industrial development can be found at the following:
Sidwell Medupe-Departmental Spokesperson
Tel: (012) 394 1650
Mobile: 079 492 1774
Issued by: The Department of Trade, Industry and Competition (the dtic)
Follow us on Twitter: @the_dti