Efficiency or equality? Dilemmas of regulation and competition policy in South Africa

As vital sectors of the South African economy are restructured, can regulation and competition policies meet the post-apartheid challenges of redressing ingrained inequality and widening opportunities to participate in the economy? Is South Africa setting up too many regulatory bodies? Are regulators, rather than elected representatives, making policy?

A report from the University of Stellenbosch looks at South Africa’s chequered progress in developing competition policy and a regulatory environment. Highlighting the importance of separating regulatory functions from policy-making, it asks whether the lack of clarity about the roles and responsibilities of regulators might not lead to market uncertainty, which could undermine objectives to restructure the economy in order to remove racially-determined distortions.

South Africa’s approach to restructuring and privatisation has been shaped by the political need to maintain the Tripartite Alliance of the African National Congress, South African Communist Party and the Congress of South African Trade Unions (COSATU). Such was the hostility to privatisation of state-owned enterprises when the ANC took power that privatisation plans of the apartheid regime were abandoned.

In some ways, South Africa has subsequently followed the French example where the state remains a majority stakeholder after partial privatisations. Very large state-owned enterprises (SOEs) remain prominent in the transport, telecommunications, broadcasting, energy and armaments sectors. Minority shares in many are held by the National Empowerment Fund (NEF), a body established to assist black empowerment groups and companies that wish to acquire privatised assets.

In 1998, a Competition Act led to the creation of a Competition Commission, Competition Tribunal and Competition Appeal Court. None of their decisions can be vetoed by ministers, nor challenged by the Supreme Court. Competition objectives in the Act are similar to those elsewhere in the world but are linked to objectives to protect small and medium enterprises and black-owned enterprises.

Sluggish growth rates in recent years and complaints from the private sector and the international financial community that the government was moving too slowly on restructuring led to the launch in 2000 of a new programme for the restructuring of the major SOEs. Sectoral regulators have been established for their economic and technical supervision.

The paper highlights:

• the profusion of bodies at central, provincial and local spheres of governments has produced hundreds of regulators – with more on the way as local public-private partnerships increase
• confusion whereby SOEs and their sector regulators regard themselves as better guardians of the public interest than the competition authorities
• deficiency of legal and accounting skills in regulatory bodies
• jurisdictional conflicts between regulators are wasting time and resources.

The report warns that regulation and competition policies can only deliver development, goods and opportunities to the disadvantaged majority if accompanied by prioritisation of less developed communities and regions and preferential access to business opportunities, procurement, education, training and employment. Policy-makers must:

• clarify the roles and responsibilities of the large number of seemingly independent regulators
• more rigorously consider socio-economic impacts in respect of black empowerment and poverty alleviation
• encourage the development of a consumer constituency which understands and takes advantages of the Competition Act
• encourage further research.

Source(s):
‘Regulation and competition in South Africa’, Working Paper No 18, Centre on Regulation and Competition, Institute for Development Policy and Management, University of Manchester, by Erwin Schwella February 2002 Full document.

Funded by: DFID, Centre on Regulation and Competition

id21 Research Highlight: 17 February 2003

Further Information:
Centre on Regulation and Competition
Institute for Development Policy and Management
University of Manchester
Crawford House
Precinct Centre
Oxford Road
Manchester M13 9GH
UK

Tel: +44 (0) 161 275 2798
Fax: +44 (0) 161 275 0808
Contact the contributor: crc@man.ac.uk

Institute for Development Policy and Management (IDPM), UK

Erwin Schwella

Contact the contributor: es@sun.ac.za

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