76 cartels sanctioned in 10 years

Cluck: The World Bank says disbanding cartels in wheat, maize, poultry and pharmaceuticals means 202 000 people escape poverty. Picture: Gallo Images

COMPETITION authorities in SA detected and sanctioned 76 cartels operating between 2005 and 2015, excluding those in the construction industry, says a World Bank report.

The study cited the country’s competition policy as one of several reforms that have the potential to accelerate South Africa’s weak economic growth and reduce poverty.

Ahmore Burger-Smidt, a director at Werksmans Attorneys, says it is clear from the report that the country’s competition authorities have been highly proactive in detecting cartels in various industries and imposing sanctions.

Burger-Smidt says: “It is accepted across the world that cartel conduct ranks among the most harmful of anticompetitive behaviour as it results in firms producing less, higher prices for consumers, limited consumer choice and a reduction in incentives for firms to improve efficiencies and innovation. At the heart of competition law are two basic concepts: price and quality of product.”

The World Bank report clearly indicates and gives examples as to the impact competition regulation has had on prices paid by consumers in the local market as well as the impact competition regulation has had on the availability of products in the country.

“It cannot be denied that in South Africa, one aspect that significantly impacts on competition in the market place is the high level of concentration within the local economy. It is characterised by few players, high input costs and restrictive regulations. All of this impacts on innovation in the market place and vigorous competition that will drive prices down and result in the increased quality of products to the benefit of the consumer.”

The report analysed the impact that the competition authorities have had on GDP growth, lower transaction costs in the overall economy as well as the impact on poverty reduction as such.

Excluding the construction industry, the competition authorities detected and sanctioned 76 cartels between 2005 and 2015 with great success.

The report analyses, among others, the competition authorities’ findings of cartels in the wheat, flour and cement markets in relation to competition law enforcement.

Food constitutes a high share of households’ consumption and prices of such necessities have a crucial impact on disposal income.

The World Bank report found that spending on wheat, maize, poultry and pharmaceuticals accounts for 15.6% of the consumption basket of the poorest 10% of the population.

It is estimated by the World Bank report that by disbanding cartels in wheat, maize, poultry and pharmaceuticals, about 202000 people stand to be elevated above the poverty line because of the elimination of cartel overcharges.

It is insightful to note the World Bank report quotes empirical evidence that suggests a 10% reduction in firm pricecost margins in South Africa, has the potential to boost productivity growth by as much as 2% to 2.5% a year, which could contribute to productivity growth instead of a decline in South Africa.

Through the successful intervention of the competition authorities in 76 cartels over the past decade, cartel overcharges were eliminated in our economy which in turn reduced pricecost margins. -Sello Rabotha