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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