Competition Commission threatens to implement measures to dismantle big companies
Competition Commissioner Tembinkosi Bonakele. (File, Bloomberg)
- The Competition Commission told Parliament that several critical sectors were still dominated by big business – and that it would introduce measures to address the imbalance.
- Possible measures would be to attack dominant firms by dismantling oligopolies and imposing divestments.
- The report found that the top 10% of agriculture businesses received 81% of industry revenue, while the bottom 50% earned just 1.3% of industry revenue.
The Competition Commission told Parliament’s portfolio committee on trade and industry that several critical sectors of South Africa’s economy were still dominated by big business – and that the regulator would introduce measures to address the imbalance.
Possible measures would include tackling dominant firms by breaking up oligopolies and imposing divestiture – where a dominant firm with consolidated power could be forced to sell a subsidiary or investments, as set out in the 2020 Amendment Act. competition.
The Competition Commission informed the commission of its report on the merger on Tuesday morning. The report found that continued concentration in sectors such as agriculture, retail and pharmaceuticals has driven up prices and undermined job creation.
Data sources for the Merger Report included information from the South African Revenue Service (SARS) database of small, medium and large companies as well as annual reports for listed companies.
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Competition Commissioner Tembinkosi Bonakele said the report found that a lack of competition in South African product markets is likely to constrain the economy in the medium to long term.
The Competition Commission’s chief economist, James Hodge, said 70% of the more than 80 companies in the report fall into the category of highly concentrated industries. Hodge said 60% of companies only become more focused, while only 19% of dominant companies become less concentrated.
Hodge said small and medium-sized enterprises (SMEs) tend to have more employees than larger companies, but Organization for Economic Co-operation and Development (OECD) economies generate an average of 60% of total revenue SMEs, and that South Africa represents only half of them.
The report found that the top 10% of agriculture businesses earned 81% of industry revenue and the bottom 50% earned only 1.3% of industry revenue. Hodge said the concentration in agriculture was also undermining the government’s economic ambitions for land reform.
Hodge said a recent retail study found exclusive leases kept small grocers out and retail leases required developers to guarantee that 75% to 80% of leased space to national channels.
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Hodge said the Competition Commission would strengthen market investigations to allow competition authorities to impose remedies, including divestiture, and other interventions that promote competition.
He said ministries and public entities could help break concentration in sectors by prioritizing purchases from SMEs and paying them for their goods and services on time.
DA MP Dean MacPherson told the delegation that briefed the committee that the more the Competition Commission tried to enforce competition, the more it failed. MacPherson said the commission wants to become a super-regulator that forces companies to change the way they operate.
Another DA MP, Matt Cuthbert, urged the commission to urge big companies to facilitate consolidation “instead of crowding them out”. He said surrender was only appropriate when it came to sanctioning companies from countries that commit human rights abuses.
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