Weak governments love to bitch and moan, blaming others for their own failings. One month the media, the next the judges. Strong governments get on with the business of governing, reserving their bile for those whose power permits them to frustrate government policy.
Take the intersection between growth and competition. As is well understood now, the government’s strategy on growth has shifted towards a more assertive industrial policy. But good intentions are hard to turn to gold. Market conditions can be unyielding.
Domestic industry relies heavily on flat steel. Local steel production is super-dominated by one corporation — ArcelorMittal — that, in effect, has its own industrial policy such is its control of the price.
Since South Africa is a producer of iron ore, government expects — not unreasonably — that the steel manufactured here should provide a benefit to downstream industries, prompting economic activity and rendering local businesses more globally competitive.
Instead they have been subject to an almighty rip-off. So says the Competition Tribunal. Its watershed judgement last week has attracted the attention of competition lawyers far beyond these shores. The record fine of R692million is one thing, but the tribunal’s willingness to fashion a creative and practical set of ”behavioral remedies”, including specific information disclosure around pricing, is especially noteworthy. It will also please the department of trade and industry, whose impatience with Mittal has grown exponentially in recent years.
Poised as it is to appeal the ruling, Mittal is hardly likely to concur with this assessment, but the tribunal judgement represents a thorough market analysis and a profound appreciation for the socio-economic implications of unfair competition.
The department has sought to engage Mittal on the different formulae it has applied to defend its price. The tribunal found that the company had ”selected a price and … adjusted the amount that it, the super-dominant player, supplies to the domestic market so as to ensure it achieves the preselected price”.
Hence, while the judgement affirms the department’s view that Mittal’s dialogue with it was ”essentially a sham”, it also supports its fundamental contention that by exploiting its virtual monopoly and fattening profits, Mittal was causing the reallocation of scarce capital away from a downstream steel industry that uses relatively larger quantities of abundant supplies of unskilled labour.
In other words, Mittal’s shareholders were benefiting at the expense of the unemployed.
The relationship between greed and socio-economic justice is something that modern South Africa appears unwilling to acknowledge. Recent University of Oslo research conducted by Professor Kalle Moene claims that South Africa is the stingiest society in the world — based on the factual assertion that of all countries it could most easily eradicate poverty by redistributing income from the wealthiest to the poorest.
But South Africa appears to be no more willing to have this debate than anywhere else at the moment. Taxing the rich more is apparently a no-go area, politically and ideologically. You don’t even hear Cosatu or the SACP talking about it, let alone the opposition.
Sandton get shinier by the day, but the walls around our middle-class homes get higher. There are important things to admire in what the former symbolises in terms of First World South Africa’s confidence and competence, but we don’t appear to comprehend quite how the latter trend renders it so vulnerable and unsustainable.
The Mittal judgement should trigger more than the appetite of competition lawyers. It should also make other monopolists shudder and reconsider their attitudes lest they attract similar levels of opprobrium in those parts of government where the ANC is not yet so torn by corporate conflicts of interest that they cannot see the wood for the trees. Amendments to the competition laws, partly provoked by the Mittal case, are apparently being prepared.
It also signals once again the resilience and sophistication of South Africa’s legal system. The Mittal case brings together law, policy and political economy, which would be impossible without credible courts. I suspect that we do not fully appreciate how lucky we are in this regard, even if Dali Mpofu feels compelled to add the principle of the rule of law to his list of frigid European freedoms — especially if he has shares in Mittal, in which case, if you will forgive the pun, he probably ought to steel himself for more pain.