R/€ = 13.15
R/$ = 11.65
Au 1283.66 $/oz
Pt 1240.50 $/oz
Oct 15, 2008
Promote greater competition, economist urges policymakersBack
Johannesburg|Africa|Industrial|Systems|Africa|South Africa|Solutions|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)
Other Video News
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
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.
This Week's Magazine
The international Square Kilometre Array (SKA) radio telescope – which is to be jointly hosted by South Africa and Australia with, later, outstations in other countries – may not yet exist, but international scientific working groups are already deciding what...
A free Web-based solar power plant capacity-planning tool offers project planners and developers, as well as governments, a means to assess the solar energy potential of thin-film solar PV power over an area of land. The tool was developed by thin-film solar...
As yet, no specific methodology, timeline or costs have been finalised to remedy the water ingress, excessive to contractual specifications, into the Gautrain tunnel between emergency shaft two (E2) and Park Station, says Bombela Concession Company technical and...
The “seriously disruptive” electricity outages in South Africa have cost packaging group Astrapak more than R2-million in “irrecoverable downtime costs”, the company said on Monday, adding that the power cuts were negating some of the benefit of energy saving...
Bakkies and more affordable cars dominated South Africa’s new vehicle market in 2014. Unaudited data from the Department of Trade and Industry (DTI) shows that South Africa’s most popular vehicle in 2014 was the Toyota Hilux, selling 37 562 units.