May 11, 2012
Competition vs protectionBack
© Reuse this
The interesting part of both of these investigations is that there is no longer any logical and structural platform to ensure that the concerns of both of these parties are considered in these investigations. The Competition Act has a specific advocacy clause which allows it to talk to other departments if it is felt that their decisions will have a detrimental effect on the competitive position in the country, but it seems someone else – external interested party – has to trigger this clause for any action to be taken.
This is very interesting because there also appears to be a fairly consistent profile for the company or consortium that applies for protection from Itac. There are certainly exceptions, but many of the industries seeking protection are highly concentrated, which has the very real potential to create a problem where this dominant position is abused (which is an offence in terms of the Competition Act).
There are some fairly obvious reasons why concentrated industries apply for protection, the most obvious being that it is much easier for one or two companies to cooperate than it is for eight or ten companies to do the same thing.
However, there may be some deeper reasons that talk to the fundamental lack of competitiveness in these highly concentrated (and usually primary) industries. The problem arises when a highly concentrated industry or even a monopoly requests duty protection. Very often, the import competition is the only counterbalance to the dominant player and shutting off this source of supply creates the very real risk that the dominant player will suddenly have no competition and be given the opportunity to simply push prices up to whichever level it chooses (or at least to just below the new duty-inflated import price).
This very significant risk exists, but what can be done about it? Clearly Itac and the Competition Commission require very different skills sets, but, perhaps, there should be some sort of process to ensure that information is shared between these two organisations.
The existing lack of formal structure that allows such information to flow places the burden of complaint on the offended party and in many cases that party will not even be aware of the option to take its matter to the other body. The existing enthusiasm for protection increases this risk as companies now apply for duty protection simply because they are receiving a very friendly reception.
This is not to say companies do not or should not be applying for protection, but, rather, that the competitive implications of that protection need to be considered before the protection is provided. The lack of such consideration creates the very real risk that the duty imposed may actually cause significantly more harm (and potentially cost more jobs) than it prevents. I have no idea if other countries treat this see-saw relationship between the competition watchdog and the trade policy body in a different way to South Africa, but I believe that the lack of interface between these two bodies creates an economic risk which currently is simply not managed and which has the potential to do some very serious damage to what is already a very fragile economy.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Deputy Editor
Other Pieter du Plessis & Donald Mackay News
The tough economic environment in South Africa over the past few years has served as a catalyst for protectionist pressures. Increasing import competition has further flamed calls for protection from various industries. According to the press, steelmaker...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
Additive manufacturing, better known as 3D printing, has the potential to completely change the relationships between individual consumers, professional designers and manufacturers. So argued Loughborough University Reader in Computer Aided Product Design Dr Ian...
Airbus Defence and Space: Military Aircraft has highlighted that its A330 Multirole Tanker Transport (MRTT) has significant commonalities with the Airbus A330-200 commercial airliner, upon which it is based. The South African Air Force (SAAF) once operated a fleet of...
Financial services provider Nedbank launched the second edition of its Carbon Footprinting Guide earlier this month, which is aimed at demystifying carbon footprint approaches and help readers grasp the main concepts of carbon measuring, monitoring, reporting and...
This year marks the thirtieth anniversary of Caterpillar’s first backhoe loader. This also coincides with the worldwide release of its latest-generation F2 series backhoe loader, which was launched at supply chain services company Barloworld Logistics’ Big Dig Day in...
A shortage of software engineers is leading to fewer information technology (IT) projects in private and public sector organisations. This also places a dampener on the economy, as IT is an integral part of business and civil service, says University of Witwatersrand...
Next ArticleSA should not be negotiating trade pact with India