Focus and Participation within the South African Financial system: Ranges and Traits – SACC Publishes Report

By Michael-James Currie & Gina Lodolo

On 7 December 2021, the Minister of Commerce, Trade and Competitors, Ebrahim Patel launched a report titled “Measuring focus and participation within the South African Financial system: Ranges and Traits”, accessible right here (“Focus Report”). This Focus Report is the primary of many because the Minster undertook to replace the report bi-annually from hereon out.

The theme of the Focus Report is centered on figuring out and remedying:

  • Financial ranges and traits which can be skewed and don’t mirror South Africa’s inhabitants demographic; and
  • Entrenched leaders in sure sectors, which creates “inefficient focus” by setting excessive obstacles to entry thereby decreasing competitors, which, in line with the Focus Report, can result in greater costs and decrease funding in South Africa.

The Focus Report highlights that concentrated markets are of a rising concern internationally, nonetheless, particularly within the South African context, the apartheid period created dominant companies that persist and stop traditionally excluded individuals from taking part and gaining market share.

The Competitors Fee (“SACC”) does nonetheless word that focus doesn’t routinely imply there’s a lack of competitors and there could also be many cases the place focus might be for the advantage of the patron and pro-competitive. On this regard pro-competitive focus will be seen when innovation creates elevated market measurement and economies of scale scale back costs for customers. Additional, the SACC notes that there are nonetheless gaps within the information, which might be addressed within the subsequent studies.

The Focus Report highlights that the SACC will hereinafter be concentrating its efforts on markets which were recognized to comprise a task participant that’s presumed dominant. On this regard, the sectors which were recognized as requiring elevated scrutiny are:

  • Farming inputs;
  • Agro-processing;
  • Sin (alcohol and tobacco) industries;
  • Healthcare;
  • Communications;
  • Upstream metal worth; and
  • Monetary providers

This elevated scrutiny might be seen significantly in industries that require licenses to function. That is of concern to the SACC as a result of licensing can be utilized as a mechanism to unfold out possession, which can be curtailed by a merger, and the SACC has seen elevated merger exercise significantly in industries characterised by licensing necessities.

To conclude, it’s important to take cognizance of this Focus Report as a result of the SACC has highlighted that it’ll type the premise of strategic enforcement of the Competitors Act 18 of 2018 (“Act”) and can lay the trail for coverage centered on a concentrated economic system.  On this regard, we foresee nearer scrutiny of position gamers with massive market shares within the years to return, particularly these gamers which can be presumed to be dominant or expressly talked about within the Focus Report.

An extra problem that the Fee faces in tackling perceived high-levels of focus, is balancing the clear socio-economic goals with competitors regulation targets and client welfare enhancing conduct. Though the Report acknowledges that top focus doesn’t imply the market is anti-competitive, the final coverage of the Report is clearly aimed as defending or selling a chosen group of opponents versus the aggressive course of itself. This creates an inherent coverage pressure and requires very clear, clear and quantifiable trade-offs.

Because the Constitutional Court docket just lately affirmed within the Mediclinic case, greater costs to customers shouldn’t be within the public curiosity. The converse is after all additionally true. Intervention in markets which can result in opposed results on client welfare would have to be weighed towards the target of “opening up” the market. The place wholesome and environment friendly entry is permissible, that might be client welfare enhancing but when remedial actions are deigned to easily shield inefficient market contributors then interventionist measures are more likely to quantity to nothing greater than a tax on massive gamers which both in the end will get handed on to customers or discourages funding. It’s completely important to South Africa’s economic system and to the integrity of the competitors regulation regime that the latter penalties don’t materialize.

You’ll be able to entry the abstract report right here:

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