In South Africa today, institutions designed to foster competition and growth have become some of the biggest obstacles to economic progress. The Competition Commission, in particular, has evolved into a burdensome regulatory force.
The recent blocking of Vodacom’s acquisition of Maziv by the Competition Tribunal highlights the flaws in South Africa’s current economic policy regime. This decision hampers economic opportunities urgently needed by the poorest South Africans.
Lost opportunities for South Africa’s poor
Vodacom’s proposal to expand fibre infrastructure into low-income areas was a practical step toward bridging the digital divide. This gap holds back millions of South Africans from education, job opportunities, and local business growth. The Vodacom-Maziv merger was set to create jobs and deliver infrastructure to neglected communities, providing access to essential economic opportunities.
Imposing Ideology over investment
The Commission has shifted its focus from promoting competition to enforcing ideological goals, creating a costly regulatory burden that has little to do with market competition. The Burger King South Africa sale provides a clear example: the Commission initially blocked the sale not for antitrust reasons, but because it would reduce ownership by historically disadvantaged persons (HDPs).
In Vodacom’s case, it cited “market concentration” concerns, despite the clear social and economic benefits.
An expensive system of control
Ten years ago, the Competition Commission cost taxpayersR199 million (their total budget).By the 2022/2023 financial year, this had more than doubled to R399 million. Over the same period, the Commission’s powers expanded significantly, imposing ever greater costs on businesses through legal fees, mandatory reporting requirements, and drawn-out regulatory processes.
Penalties for non-compliance can reach 10% of a company’s annual turnover, with fines often amounting to hundreds of millions of Rands. These costs deter investment and innovation and force businesses to deal with compliance rather than focus growth. The result is a system that is more about control than competition.
Sidestepping the Rule of Law
At the heart of the issue is the Commission’s authority to act as prosecutor, judge, and jury, through its internal court, the Competition Tribunal. The Commission bypasses the established judicial system, imposing penalties without the transparency, impartiality, and oversight that ordinary courts provide.
Worsening the situation is the lack of external recourse; businesses can only appeal to the Competition Appeal Court. This arrangement leaves businesses without the option to challenge penalties or rulings in a general court of law.
The heavy cost of interventionism
The Competition Commission’s repeated interventions have done more harm than good for South Africa’s economy. Blocking mergers, enforcing ideological mandates, and imposing regulatory demands have deterred investment, raised the cost of doing business, and killed growth.
In an economy where unemployment is high and the cost of living continues to rise, the Commission’s actions create unnecessary obstacles to economic progress, particularly for South Africa’s poorest citizens.
Reining in the Competition Commission to restore economic freedom
The unchecked authority of the Competition Commission has contributed to South Africa’s economic stagnation. The Commission’s interventionist policies stifle the efficiencies and opportunities that a free market naturally provides.
Blocking mergers, enforcing ideological mandates, and adding regulatory hurdles have not protected the economy. Instead, they choked investment, raised business costs, and curtailed growth.
If South Africa is to address its high unemployment and rising cost of living, it must focus on allowing an open and competitive economy.
Limiting the Commission’s powers, restoring adherence to the rule of law, and eliminating arbitrary interference in business dealings would be essentials steps towards achieving this goal.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
If you like what you have just read, support the Daily Friend
Image by dumcarreon from Pixabay