R/€ = 14.20
R/$ = 11.08
Au 1216.40 $/oz
Pt 1339.00 $/oz
Oct 15, 2008
Promote greater competition, economist urges policymakersBack
Johannesburg|Africa|Industrial|Systems|Africa|South Africa|Systems|South African Chamber Of Commerce|Chris Hart|Power
© Reuse this A strong industrial policy, robust fiscal policy, and sound inflation targeting, were the three instruments that could ensure South Africa achieved lower inflation, a lower unemployment rate and “a far more prosperous country”, said Investment Solutions economist Chris Hart.
Speaking at the South African Chamber of Commerce and Industry’s yearly convention in Johannesburg, Hart emphasised that industrial policy should be set in such a way that barriers to entry are lowered and playing fields are levelled.
By driving competition in this way, more people could be absorbed into the economy.
“So you achieve two things by opening up industries to competition, [because] the only way you survive is by improving productivity, that helps to suppress inflation, but you also reduce unemployment”.
Hart said that one of the problems in South Africa during the period of sanctions was that companies outgrew the economy. “So you had over-concentration of industries. And you have got big dominant players, and they have got pricing power in an industry. So if they experience a cost, well then customers can just pay for inefficiencies,” he added.
“Bread collusion, for instance, occurs when there are structural problems with the industry. And I’ve got no problems with sanctions being applied to people who collude, but collusion is only possible when there are few players,” he said.
He stated that if there were numerous competing players in an industry, prices could not simply be increased unilaterally, and there was, in fact, a “price inertia” when it came to pricing. The value pool created among industries would be shared among more people.
With regard to fiscal policy, Hart said that boosting the savings rate, which he felt could be lifted to as much as 20%, could ‘help immediately’.
“Instead of raising rates to try and boost the savings rate, you can actually use tax policy to boost your savings rate. [However] they started raising rates in 2006, because the savings rate was too low, and the credit growth was too high. I think you could have achieved a better result with fiscal policy - to boost the savings rate as a national emergency. And that meant you wouldn’t have put the currency at such risk by hiking rates, and helping to propel it weaken, which then fuelled the inflation rate,” Hart said.
He warned that the country should stay committed to its inflation targeting policy. “Our assets are completely mispriced... if we abandon our inflation targeting policy, we will have to de-rate the market and the bond market completely. That makes capital a lot more expensive to raise,” he cautioned.
“So those are the big things to watch – do we blow the budget? And, is our long-term inflation targeting policy going to remain? Those are the two key things that we need to watch out for,” he said in his 2009 economic outlook presentation..
Looking at the South African economy in the context of the global market crisis, Hart said that although South Africa had stable banking systems, the real economy would most certainly be affected. However, emerging markets were proving to be a kind of safe haven amid the turmoil.
Edited by: Liezel Hill© Reuse this Comment Guidelines (150 word limit)
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 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 network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
While Ekurhuleni-based transformer manufacturer Reliable Transformers currently designs, manufactures and tests its products according to the SANS 780 specifications for distribution transformers and other applicable transformer specifications, it is working towards...
Global endpoint security solutions company Kaspersky Lab has introduced new measures to prevent cyber criminals from accessing sensitive data, alongside its malware-signature and heuristic device analysis detection methods. Threats to mobile devices have increased...
To ensure uptake and a positive impact, Wireless Fidelity (Wi-Fi) networks in cities must be provided at schools, community centres and commercial centres to enable citizens and government to access information that will improve access to and delivery of services....
Eco-estate Monaghan Farm, located near Lanseria airport, north-west of Johannesburg, has taken a new approach to modern living and sustainability with its 517 ha development, dedicated to farm living.
Forklift and lift-truck distributor Goscor Lift Hi-Reach launched the Genie SX-180, the tallest self-propelled super boom in Africa, in Johannesburg last month. “As the official distributor of the well-known Genie range of equipment in Southern Africa, we are pleased...