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‘African economies not fully driven by competition laws’

By Onyi Sunday   |   04 August 2017   |   4:09 am

The World Bank Group and the Africa Competition Forum say that on average African economies score 26 per cent lower than other countries globally when it comes to enforcement of competition laws. CNBC Africa’s Onyi Sunday spoke to Tembinkosi Bonakele, the Chairperson of the Africa Competition forum and Xolani Nyali, Senior Associate, Bowman Gilfillan Africa Group about the state of competition policy in Africa.

TEMBINKOSI : It is fair to say that competition policy in Africa is relatively new. You have some countries that have been doing it for a while, even Zimbabwe has had a competition commission for some time but I think as a general feature in African economies are concerned it is relatively new. This is the fastest growing region in the world in so far as competition policy adoption is concerned so right now we have about, roughly 35 countries in Africa with competition authorities but there are still big economies that are not there like Nigeria which is still talking about the Bill, and countries like the DRC are still too far off to even talk about competition policy. So you see a lot of progress particularly in Southern Africa and East Africa with groups like COMESA which is the competition agency there. So there is growing recognition that this conversation can add to both growth and development on the continent.

Xolani: How important is competition policy really and what do you make of the state of competition on the continent today?
XOLANI: I think Tembin is quite correct there’s massive proliferation of competition regimes across the continent, particularly in South Africa and East Africa, and I think the importance of this comes in because a lot of our economies are pretty concentrated and we’re moving from more state planned economies to more open economies so it is quite vital for every economy, as it liberalizes to become more market-focused to have a robust competition policy, not just a competition law in place but also a competition policy that underpins the implementation of that law, so that consumers can really see the benefits of a market economy. There should be low prices, it’s open, there’s more innovation, there are lower prices, less cartel activities, so all of that is designed with the idea of increasing consumer welfare. At the end of the day, you and I, we like to have the niftiest gadgets and we like to be able to buy things at the cheapest and most affordable prices. The structure of our economies means that if it really works we the consumers here will actually feel it more than I think consumers in more developed economies.

Tembinkosi let’s really try to understand this better. What does competition policy really entail, should we try to have competition policy across board or do you think that there should be one interpretation, what should it entail?
TEMBINKOSI: The idea is quite universal in the sense that competition should lead to lower prices for consumers as more firms get into competing with one another. So that’s a general idea, the idea of efficiency that competition brings. But in Developing countries, there’s another element. We have been doing a lot of work and studies on the impact of development in things like lowering inequality as well as reducing poverty and there is now evidence that competition in addition to growth and efficiency does contribute to meeting the developmental objectives such as reducing poverty and creating jobs. This is why many African countries, and developing countries are embracing this policy area. Let me give you an example. In South Africa there’s a study that the World Bank did that shows that through the tackling of cartels and things like price fixing, more than a quarter of a billion people have been lifted out of poverty through these policy instruments. I think that once you use creative policies in competition and industrial policies, you are likely to see not just results in growth but in development as well.

But Tembinkosi how do we begin to tackle this issue. Most African economies are import dependent economies. With this type of structure already in existence how well or how far will competition policy go?
TEMBINKOSI: There are many sectors where African economies are likely to be strong and competitive, but often we want to overly protect them. If you are coming from a protected environment you will never be fit to compete. So part of what we need to do is to open up certain markets, particularly where we are strong, to more competition. Let me give you one example. All African countries have a need for public transport but it’s largely informal. In those industries you may think that there’s no need for competition to get involved so you get the most inefficient guys with the oldest technology. With things like Uber coming in we are beginning to see that actually, even the African continent becomes very important , but you need to open up the markets to competition so that people can innovate and embrace technology. Governments can also support their own local industries to become more dynamic. So I think that yes, in many areas we are vulnerable in the sense that our industrialization is still lagging behind that of many countries so we may think that we are not able to compete. But, for example, Africa has a large labour force which is likely to be cheaper than other parts of the world. This means that if this input is used wisely, our input is likely to grow, and be more competitive. So manufacturing is another area where I think that instead of protecting it, if we were to open it up, we might find that we are strengthening it.

XOLANI: Do you think that it’s not about protecting local industries but rather opening up the markets. If already local industries do not stand a chance and you are import dependent, how much of a difference can competition policies make?
XOLANI: I think Tembin is quite correct in the sense that obviously what you want out of this whole thing is that there need to be entrants into the markets but you do not want to depend on imports but the point is that even if there are imports you should not have one seller of the products. So that from a consumers perspective, you want people to have access to a wide array of quality, affordable products.

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