In their recent publication "Unleashing
Rivalry", to celebrate ten years since the introduction
of the Competition Act, the competition authorities observe that
they have played a pivotal role in reducing the high levels of
concentration in the South African economy inherited in 1994.
This concentration was evident in the patterns of ownership and
control of companies listed on the Johannesburg Securities Exchange
(JSE). The authorities point out that in 1994, Anglo American
controlled 43.3% of the market capitalisation of the JSE and that
the top four firms, namely Anglo American Corporation, Sanlam, SA
Mutual/Old Mutual and Rembrandt/Remgro accounted for 76.5% of JSE
market capitalisation. Such figures support the view that apartheid
South Africa was characterised by high levels of economic
concentration and market power.
In 2009, the picture on the JSE is very different: Anglo
American controls 10.6% of the market capitalisation and the top
four firms, together, account for a mere 18.4% of the JSE market
capitalisation. The question that arises is whether this
deconcentration is solely attributable to competition policy and
legislation, or whether it is also a result of South Africa's
macroeconomic policy and reintroduction to the world stage?
The Competition Act was promulgated in 1998. In the four years
between the first democratic elections in 1994 and the time at
which the Competition Act was promulgated Anglo's share of JSE
market capitalisation decreased by 60% to 17.4% and the "big
four's" control had decreased by 40% to 46.3%. The level
of foreign control had, however, increased from 2.2% of the JSE
market capitalisation to 3.9% over the same period.
The decline in ownership concentration over the following 11
years was not as dramatic: between 1998 and 2009 the share of
control by the "big four" had decreased by 60%. Yet the
level of foreign ownership had increased by 750% to 33.1%.
It is therefore evident that opening South Africa up to the
world stage played a significant part in reducing ownership
concentration on the JSE. It has also resulted in South African
companies, such as Anglo American, being able to invest in
international markets instead of diversifying into non-core market
segments in a limited South African market. It is therefore evident
that macroeconomic policy and South Africa's emergence from
isolation resulted in increased competition and greater
diversification of ownership on the JSE.
Nonetheless, the competition authorities have played –
and must continue to play - a vital role in making the economy more
competitive. The success that the competition authorities have
achieved in merger review has resulted in large companies
considering the implications of any acquisitions on competition.
Similarly, firms have become increasingly aware of the negative
consequences of engaging in anti-competitive conduct such as
excessive pricing, price fixing and resale price maintenance.
Despite the competition authorities' efforts to date, there
are still high levels of concentration in the South African
economy, with numerous markets being supplied by a limited number
of companies. The Commission continues to be inundated with
complaints about anticompetitive behaviour in concentrated markets
such food, construction, intermediate industrial products and
telecommunications. Given the existing high levels of concentration
it makes sense that the South African competition authorities have
changed their focus from merger review to rooting out
anti-competitive practices. Recent amendments to the Act, such as
the formalisation of market inquiries and new powers to tackle
complex monopoly conduct, will be valuable weapons in the
authorities' fight to unleash rivalry in South Africa.
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11 April 2013 was an important milestone for the Mozambican economy, with the publication of Law no. 10/2013, which establishes the legal framework for competition in Mozambique and creates the Competition Regulatory Authority ("ARC"), which will enforce it.
The Competition Commission recently found a dual distribution restraint to amount to a market allocation agreement between competitors, which is outright unlawful under the Competition Act, 89 of 1998.