Economic Development Minister Ebrahim Patel is adamant about cracking down on cartels that he says are pushing people deeper into poverty and raising prices of food and other goods.

He told the tenth annual Competition Law, Economics and Policy Conference on Thursday that he hoped newly introduced jail terms of up to ten years would be a powerful way of dissuading companies to get involved in collusion and price fixing. 

The law to criminalise cartels was promulgated this year, although no-one has yet been jailed for price fixing.

“Fines alone have not been an effective deterrant,” said Patel, adding that these were often discounted by companies, which took their chances and saw the benefits of collusive behaviour.

“It is critical to our economic prosperity that we should shake out . . . the deep and pervasive habits of collusion in our economy,” the Minister told several hundred delegates at the Cape Town conference.

Patel said 200 000 people could be lifted above the poverty line by tackling cartels’ overcharges.

“We cannot ask our people to work together as long as the majority sees the benefits going to others but [not] themselves.”

Patel noted that mergers and the suppression of smaller enterprises had slowed economic growth and pushed up prices on basic necessities. He also called on public officials to act firmly against corruption.

He added that the Competition Commission had been successful in its fight against dominance and monopolies and that, within the last 12 months, 133 new cartel cases had been initiated by the commission.

Patel said three major market enquiries were currently under way, including enquiries on gas, private healthcare and the retail grocery sector, which would include looking into the dynamics between local- and foreign-owned spaza shops, as well as large supermarket chains.

“The enquiries will add enormously to the understanding of competitive dynamics in value chains,” he said.

Patel further noted that, with the government’s major investment in infrastructure, an investigation into the construction industry was critical. He suggested focusing on network industries and industries where input costs were critical to competition and where the jobs impact of collusion was significant.

Competition Commissioner Tembinkosi Bonakele said the commission was uncovering “an enormous amount of cartels”.

“Enforcement in itself is not going to stamp out cartels. Policymakers, enforcers and businesses need to have serious conversations about what seems to be a rampant culture of collusion in South Africa,” he said, stating that South Africa had a particularly big problem with collusion.

He reminded delegates that two major producers dominated the food market, with bread produced predominantly by three firms.

Bonakele said more needed to be done to break the culture of monopolies in South Africa. He has called on development finance institutions to invest their money where competition is needed.

“The culture, from what we've seen, is to invest in already existing and often monopolistic firms because they are the ones that guarantee returns. It's a big shift to say how much of your funding is directed at entry, at risk, at innovation and in new markets.”

Bonakele said this kind of investment in smaller, entrepreneurial firms was essential.