R/€ = 14.90
R/$ = 10.73
Au 1339.50 $/oz
Pt 1482.00 $/oz
Oct 15, 2008
Promote greater competition, economist urges policymakersBack
Johannesburg|South Africa|South African Chamber Of Commerce|Chris Hart
© 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
Other Video News
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 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...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...
Three Memorandums of Understanding (MoUs) were signed between South African and Malaysian companies at the Malaysian High Commission in Pretoria on Friday. These MoUs are part of the indirect offsets programme South Africa is providing in return for Malaysia’s...
The South African new vehicle market may well dip to 640 000 units in 2014, says Toyota South Africa Motors (TSAM) sales and marketing senior VP Calvyn Hamman. This is the first prediction that anticipates a drop in the market. To date economists and industry bodies...
Nissan will re-enter the South African minibus taxi industry in March, when the new NV350 Impendulo goes on sale. The 16-seater has been specifically tailored to meet the terms of government’s Taxi Recapitalisation Programme, which aims to replace South Africa’s...