Minister Ebrahim Patel says that the highly concentrated economy is part of apartheid’s legacy.
The draft Competition Amendment Bill is one of the ways government seeks to bolster economic inclusion by allowing more players in the market, said economic development minister, Ebrahim Patel.
Speaking the Progressive Business Forum breakfast held on the sidelines of the ANC 54th national conference on Wednesday in Nasrec, Patel referred to a study by the Competition Commission on barriers to entry in South African markets. It found that 248 companies dominated 31 sectors in South Africa. Sectors included communication technologies, energy, financial services, food and agro processing, infrastructure and construction, mining and pharmaceuticals.
Patel said the highly concentrated economy was part of apartheid’s legacy. “We face the challenge of economic concentration, as many of our markets are characterised by very few companies dominating a particular market sector”, he said.
The draft Competition Amendment Bill has recently been released for comment and introduced to address the challenge.
The bill will expand the powers and the mandate of the commission, which is largely focused on mergers and acquisitions. Its aim is to redress market concentration and racially skewed ownership patterns. It will also ensure that opportunities are given to those previously excluded from the economy.
As such, the proposed changes address the barriers for new market entrants, he said.
However, Ros Lake, a director at law firm Norton Rose Fulbright warned that a number of “tweaks” to the bill will be required – “the compliance cost for companies is going to be extraordinary,” she said.
The cost of not dealing with economic inclusion is very high for every society, Patel warned. “Concentration is associated with high levels of inequality”, said Patel.
However, he also said that the economic concentration is not always a bad thing.
“Technology is reshaping economies and companies with deep pockets are able to mobilise resources for innovation. We need to be able to strike a balance,” said Patel.
Government economic concentration could be leveraged to achieve great economies of scale in some industries, he said. For example state-owned enterprises, like Eskom, are key players which can supply specialised bulk goods or services.
He also said that the growth of companies should not be frowned upon, as this was necessary for them to compete in global markets, particularly on the African continent.
The policy position is however clear: “we seek to promote economic inclusion, we seek to open up opportunities for more South Africans. It’s not about giving black South Africans 10% to 15% shareholding, but it’s about increasing the number of enterprises and bringing more players in, allowing black companies to be players in the market”, Patel said.