Madeleine Wackernagel : Taking Stock
When Alec Erwin presented his document on competition policy to the trade and industry chamber of Nedlac last week, the only surprise was in the timing. After three years of broken promises, one had almost given up on it.
As if to make up for its tardiness, the policy is now being fast-tracked. Representatives from business, labour and the government have three months from January to discuss the principles while working in parallel with a group of legal and technical experts from the Department of Trade and Industry, which will draft the legislation. Another three months have been set aside for comment and Erwin expects to have the policy in place by September.
But that’s only the beginning. To bring other bits and pieces of legislation into line with the new policy could take up to two-and-a-half years. Erwin is taking an holistic approach so the Securities Act, Companies Act and Insolvencies Act will all have to be reconsidered.
That might keep the lawyers happy but not everybody is convinced. The initial framework gives the impression of trying to be all things to all people. There are references to the dangers of conglomerates, but at the same time, acknowledgement that to compete on a global stage, big is sometimes not only better but necessary. Very pragmatic but potentially problematic. Companies will no doubt jump to the conclusion that to survive internationally they have to be dominant locally – and will lobby the authorities accordingly.
The document is also too vague on how black economic empowerment will be tackled under the new competition law. The temptation for companies to get away with restrictive practices or monopolistic behaviour just because they have hitched up to an empowerment deal must be avoided. It would lead to tokenism, without extending any greater economic power to the previously disadvantaged. Far better to encourage new players into the market by breaking down the barriers to entry.
Management has also been hampered by the tendency for one super-group to control a myriad subsidiaries via a majority shareholding, limiting a company’s ability to make decisions in its own interests – rather than those of the ultimate head office, which may have no understanding and even less interest in the operation. Market dominance has become an end it itself, regardless of the economic considerations.
The concentration of power in South Africa’s economy is virtually unrivalled anywhere else in the world. Anticipating the new order, some conglomerates acknowledged their limitations and are making headway in restructuring and unbundling. Plenty more, however, carry on regardless. In Europe and the United States, the 1980s fad of bigger and more diversified corporate structures has long proved pass. Now companies are leaner, concentrating on their core operations and what they do best in a few related areas.
The pyramid structures, cross-shareholdings and concentration of ownership that characterise the South African corporate world all serve to limit the efficacy and efficiency of this economy, as even die- hard Anglo American fans must acknowledge. At the same time, this modus operandi has actively discouraged potential foreign investment, according to the 1997 World Investment Report of the United Nations Conference on Trade and Development. The competition authorities, says Erwin, will have to facilitate links between foreign investors and local partners that increase the competitive environment.
Just how that will be done is unclear, however. Dictating who will divest themselves of what, and how, could undermine confidence in the economy, locally and internationally. On the other hand, merely resorting to subtle hints may not be sufficient.
Competition policy cannot be applied in splendid isolation, and Erwin has gone far beyond previous attempts at revising policy to include shareholding structures, corporate governance, the Harmful Business Practices Act, restrictive practices, mergers and acquisitions – all within the context of the growth, employment and redistribution strategy and the principles of the Reconstruction and Development Programme.
The broad goals are admirable and long overdue but achieving them will be no easy task. Erwin has stressed that the debate must be consensual; he’s not looking for a repeat performance of the Basic Conditions of Employment Bill fiasco, nor for a prolonged battle over respective ideologies. The mere fact that the document is now in Nedlac’s hands is a positive development; practical issues, not political egos, are paramount.
Business is by definition better placed to argue its corner; much now depends on the stand adopted by the labour constituency, and they haven’t been very convincing thus far. But judging from the policy outline, a battle royal looms.
BLURB: There is acknowledgement that to compete on a global stage, big is sometimes not only better but necessary