OPINION

Competition authorities should clamp down on market dominance - Ramaphosa

DP says opening up economy would enable its explosive growth

Ramaphosa eyes 'explosive' growth for SA

Johannesburg – Competition authorities should clamp down on market dominance and open up the economy to enable its “explosive growth”, Deputy President Cyril Ramaphosa said in Johannesburg on Friday.

He was delivering an address at the Competition Law, Economics and Policy Conference at the Gordon Institute of Business Science. Ramaphosa spoke on the role of competition policy in correcting the concentrated economy inherited from the apartheid government.

A concentration study by the Competition Commission confirmed views that the South African economy remains highly concentrated, commissioner Tembinkosi Bonakele said earlier. At least 70% of economic sectors are dominated by three or four large firms, with an average market share of between 46% and 67%.

“Inclusive growth can be enabled by deconcentrating our economy,” said Ramaphosa. “Anti-competitive behaviour prevents economies from ever realising their potential.” For this reason competition policy should not just be focused on promoting market efficiency, but should be an instrument that effects fundamental economic and social change.

“Competition policy plays a pivotal role to address the injustice of the past.” Apartheid resulted in the excessive concentration of ownership and control within the national economy.

An OECD report commented on South Africa’s competition environment, stating the country set up lofty ideals for a competition policy with transformational aspirations to change the structure of the economy, as a result of the past.

“Apartheid so structured our economy that it only favoured a particular racial group to be the owners and the controllers of the economy. It did so by law, convention, by practice and everything else.”

Lessons from the US

Ramaphosa said he studied what happened in the US, when President Franklin D. Roosevelt broke up monopolies. “He did that because he concluded that the dominance of certain monopolies in certain sectors of the economy were not good for the American economy.”

The US’s oil industry was dominated by a few companies. When Roosevelt broke up these players, 40 companies emerged. “America took off, the growth was breathtaking. That defined America as a blue-blooded capitalist country where competition was the rule of the day.”

Ramaphosa said competition is to the benefit of companies it sharpens their wits. “Market concentration is not good for an economy. An economy that seeks to grow and thrive and embrace new technologies and efficiencies and consumer concentration is an economy that can work better and efficiently.”

South Africa can learn from what has happened in the US, he said. “When he [Roosevelt] opened up the sectors, they exploded with growth. Similarly, that can happen here.”

Ramaphosa said that competition policy has a role to play in undoing gender and racial economic concentration by opening up the economy. He commended South Africa’s competition authorities for being “world class” and performing at the “cutting edge”. There is space for new entrants and the competition policy can open up the space and promote inclusive growth, said Ramaphosa.

Fin24