He also cautioned against South Africa's participation in an escalating subsidy race, which was, in his view, likely to arise across the world as governments seek ways to navigate the prospect of either far lower growth, or even recession.

Speaking at the Development Policy Research Unit's annual conference, which is currently meeting in Muldersdrift, north-west of Johannesburg, Lewis said the challenge was likely to be amplified "given the power of producer and union lobbies", which were both favouring a more active and interventionist economic policy.

His remarks, which were framed under the theme "Competition Law and Policy in Bad Times", came less than two weeks after the African National Congress' (ANC's) Alliance summit, which proposed a far greater role for industrial policy in South Africa's economic-policy mix.

In fact, the Alliance partners, including the ANC itself, the South African Communist Party and the Congress of South African Trade Unions, even called for a recalibration of monetary and fiscal policy to support this new thrust.

"The correct approach here is for competition authorities to take the initiative in identifying the elements of a competition-friendly industrial strategy, rather than emphasising the in-built tensions between these important branches of economic policy," Lewis said.

Advocating a Competition-Friendly Model
Such a competition-friendly approach, Lewis ventured, would be weighted strongly to crosscutting and generic support for industry, and would eschew a model of "privileging specific firms".

"Support for human resource development, physical infrastructure or research and development - all critical constraints confronting South African industry- will rarely, if ever, conflict with competition law and policy."

But he said the competition authorities should advocate against those elements of an industrial strategy that were most likely to "engender market distortions".

"This will generally be the case where a particular firm is singled out for support - although it would be less damaging if this support excludes dominant firms in the markets in question and focuses rather on supporting those firms whose ability to enter and thrive in a market is undermined by high-entry barriers."

This was somewhat at odds with the approved National Industrial Policy Framework (NIPF), under which four sectors have been chosen for specific support, albeit on what the Department of Trade and Industry has described as a "self-discovery" basis.

The NIPF would initially provide targeted industrial development support to capital/transport equipment and metals; automotive and components; chemicals, plastic fabrication and pharmaceuticals; and forestry, pulp and paper, and furniture. Already, a revised motor industry programme has been announced to replace the Motor Industry Development Programme when it expired in 2012.

Lewis added that preferential government procurement, which could create its own distortions, would be less deleterious to competition if directed at supporting new entrants rather than "dominant incumbents".

Expensive Gesture
"But on one score there can be little doubt, and that is to get involved in an escalating subsidy race with the US and the EU [European Union], not to mention the Koreas, the Brazils, the Indias and the Chinas, is not a smart way of approaching industrial policy.

"Market distortions aside, it will amount to nothing more than an extremely expensive gesture to producer lobbies," Lewis asserted.

This view also conflicted with the current trajectory with more resources having already been set aside for industrial incentives, including a R5,6-billion tax incentive, and arguably more to come.

Indeed, the Alliance's declaration called for a "major shift and upscaling of industrial policy with significant additional resources".

Taking Aim at State Enterprises
Lewis also took aim at those seeking an enlarged role for State-owned enterprises (SoEs).

"In South Africa, the approach adopted by government to these State-owned enterprises is critical from the perspective of the credibility of competition policy, and more important from the perspective of the country's economic fortunes," Lewis asserted.

He acknowledged that SoEs in the energy, transport and telecoms environment would have to play a key role in the medium term, particularly in the context of general economic weakness. "This, despite incontrovertible evidence that certain of these institutions have, as a direct consequence of their market dominance, acted as a clear constraint to economic growth," he asserted.

But he warned that this enhanced reliance should not translate into a "national champion strategy", whereby the SoEs would be further sheltered from market disciplines.

He lamented, in particular, the extended monopoly of Telkom in the not-too-distant past, which had emerged as a result of a trade-off in favour of so-called "universal access".

"What we landed up with is an inefficient monopoly, that never met its public interest mandate, and a compromised regulatory framework," Lewis averred, pointing out that high telecoms costs had also persisted.

"I have absolutely no doubt that the returns - whether from a growth or redistributive perspective - from developing an effective regulatory framework for our telecommunications, energy and transport markets, are significantly greater than the return that will be earned from any of the range of industrial strategies that are endlessly peddled in rounds of policy documents, which all sound the same as policy documents you heard of five years ago, ten years ago, or even 15 years ago," Lewis concluded.