Tebello Radebe
Do not unbundle or break up South African conglomerates; rather hit them with heavy fines if they abuse their power, says a United States specialist.
“Breaking up a monopolist does not necessarily create competition. A small economy might not be able to support a large number of competitors in an industry which requires very large scales to be efficient. It is in these industries especially that low import barriers play an important role,” says Charles Stark of the US Government Anti-trust Division.
This controversial advice emerged at a conference on Competition Policy organised by the Afrikaanse Handelsinstituut (AHI). Stark said there is a cost to breaking up or restructuring, even though the result will always be different for different markets, so it is important to consider alternatives that might be effective in restoring competition at a lesser cost.
But, he warned, effective and ongoing anti-trust enforcement is vital. “Collusion among competitors, price fixing, bid rigging or market division can give rise to monopoly outcomes even in markets that appear from the number of firms to be competitive.”
Tony Twine of Econometrix was suspicious of any legislation aimed at sorting out a complex problem. “It’s so easy to duck and dive. No country has ever relied on the use of any one mechanism; it is often the combination of different approaches that works the best,” he said.
But he welcomed the possible further liberalisation of exchange controls as having far-reaching potential in levelling the playing field by enabling foreign companies to challenge the domination of the South African economy by a few.
But, historically, it has been very difficult for a foreign company to buy into a local pyramid structure and at the same time there are not as many local interests (including blacks) who can buy into these pyramids at market value, says Dr Pierre Brooks, South African Competition Board chair.
“In the context of both the re-integration into the world economy and the need for new competition laws in line with the rest of the world, we must aim to prevent the concentration and abuse of power which can subvert free enterprise.”
He supports the broad range of internationally accepted competition and anti-trust measures, as well as the concept of imposing huge fines to curb the abuse of power by dominant entities in the market place.
But he added that opinions were sure to differ on whether competition law should take cognisance of or address important ethical, social and political issues.
One such difference of opinion was aired by National African Federated Chambers of Commerce (Nafcoc) executive secretary general Mashudu Ramano, who said: “From our perspective we want to be co-owners, co-producers, co-creators and co-sharers in the wealth that we jointly own and produce.”
Ramano said competition policy should be more vigorous, pro-active, robust and strong and should meet the following tests:
l It should deter negative trends, but not discourage beneficial competition and co-operation;
l Be easy to administer and not impose excessive burdens on industries;
l Provide swift, effective and fair remedies to injured parties;
l Provide strong punitive measures to serve as deterrents.
Michael Spicer of Anglo American, meanwhile, called for an holistic policy to ensure that the state’s dominance of the economy through the monopolies it controls is also changed. Markets are more effective in resolving most problems.
But Thebe Investment chair Vusi Khanyile called for South Africa’s new laws to be structured to benefit the stimulation of the growth of small, medium and micro-enterprises. He maintained the present trend tended only to create new small black conglomerates such as Rail, New Africa Investments Limited (Nail) and others.
He said even the company he headed had already become a small conglomerate, although this was not the intention. “We have had to keep some companies in our stable alive beyond their actual lifespans just to protect the reputation of Thebe, typical of one of the ways conglomerates add to anti- competitiveness.”