On 9th June 2022, the Minister of Trade, Industry and Competition, Mr Ebrahim Patel, announced his decision to appoint Ms. Doris Tshepe as the new Commissioner of the South African Competition Commission (“SACC”). Ms Tshepe will succeed outgoing Commissioner Tembinkosi Bonakele.
Minister Patel’s announcement comes as somewhat of a surprise to observers, given Commissioner Bonakele’s nine-year tenure and instrumentality in increasing merger and cartel enforcement within South Africa, whilst also advocating and advancing the role of the ‘public interest’ in both of these aspects. Under the leadership of Commissioner Bonakele, the SACC has been considered widely as an agency of international importance.
Commissioner Bonakele’s successor, Ms Doris Tshepe, is a well-regarded attorney with extensive experience. Her legal practice spans over 20 years, during which she specialised in constitutional and administrative law, legislative drafting, media and communication law, commercial law, competition law and employment law. Additionally, Ms Tshepe has significant investigatory experience, having been involved in the SACC’s previous market inquiries into the Liquid Petroleum Gas and Grocery Retail sectors as well as being a panel member for the recent Online Markets Inquiry. In addition to her investigative experience, Ms Tshepe also has legislative chops, having sat on a 2019 panel considering the recent amendments to the South African Competition Act. Says John Oxenham, a South African antitrust attorney: “Future Commissioner Tshepe’s long history of working with the SACC and others to shape the current enforcement approach of the agency (as well as its trajectory for the future) indicates that the Commission’s focus will remain steady and sharp. I do not foresee any wavering in the course of the SACC’s currently robust operations, due to the transition in its leadership.”
Bearing Ms Tshepe’s investigative history in mind, we can generally expect her to continue Commissioner Bonakele’s strong enforcement initiatives. Having been appointed to the panel on the amendment of the Competition Act, there is also a reasonable likelihood that we will see the SACC continue implementing, if not increasing, its long-standing public-interest agenda – particularly given the transformative socio-economic objects of South African legislation, say the competition practitioners at Primerio Ltd.
Lastly, we note that not all is over at the SACC for “Tembi” — Minister Patel has stated that there are discussions with outgoing Commissioner Bonakele regarding the delegation of an appropriate set of responsibilities that would allow him to utilize his skills and experience in competition and public policy after his departure. Again, although the details of these responsibilities are unknown, Minister Patel’s statement emphasizes the increased shift towards a public-policy centric competition regime.
Ms Tshepe is expected to assume her position as Commissioner of the Competition Commission during the course of September 2022.
APPOINTMENT OF DR WILLARD MWEMBA AS THE DIRECTOR AND CHIEF EXECUTIVE OFFICER OF THE COMESA COMPETITION COMMISSION
The COMESA Competition Commission (the “CCC”) wishes to inform the general public that the COMESA Council of Ministers at its 42nd Meeting held on 9th November 2021 appointed Dr Willard Mwemba as its Director and Chief Executive Officer.
The Commission’s Board, Management and Staff members wishes to congratulate Dr Mwemba on his well-deserved appointment. Dr Mwemba has been with the CCC since January 2013 being its first Head of the Mergers and Acquisitions Department until his appointment as the Acting Director and Chief Executive Officer on 1 February 2021. He has acted in this capacity until 9 November 2021 when his appointment was confirmed. Prior to joining the CCC, Dr Mwemba was the Director of Mergers and Monopolies at the Competition and Consumer Protection Commission (CCPC), Zambia.
Dr Mwemba has been instrumental in the enforcement of competition and consumer laws both at national and regional level. At national level, he has assisted a number of national competition authorities in developing and operationalising their mergers and restrictive business practices divisions. At regional level, he has been instrumental in implementing and reforming the COMESA Competition Law regime. He has written extensively on competition law and is widely consulted on the subject at global level.
Dr Mwemba holds several qualifications among them Bachelor’s degrees in Economics and Law from the University of Zambia. He also holds a Master’s degree in Competition Law from Kings College London. He further holds a PhD from the University of Cape Town specializing in competition law.
The Board of Commissioners, Management and Staff members of the CCC have great confidence in Dr Mwemba’s capabilities and wishes him well as he executes the mandate of enhancing intra-COMESA trade through the creation of competitive markets.
The COMESA Competition Commission has announced that it is accepting applications for the position of Director of the CCC until the end of October. Says Andreas Stargard, an antitrust practitioner with Primerio Ltd.:
“The post is currently held by Dr. George Lipimile, the agency’s first and, therefore by definition, most influential chief. Dr. Lipimile has certainly steered the comparatively young Commission into the right direction during its formative years, notably overseeing a complete makeover of the merger-notification procedure early on in the process, after much criticism of the initial system.
We are curious to see who will replace him in March 2021, as Dr. Lipimile’s term expires at the end of February. Will it be a true competition-law expert, or will it be a politically-motivated appointment made by the COMESA Secretariat, pushing for someone who is more of a trade lawyer or, worse, economic protectionist. What the CCC needs now to continue gaining international recognition and respect (from its peer agencies, as well as from commercial parties!) is a qualified antitrust attorney who understands the law & economics aspect of competition practice, and who will apply these principles neutrally throughout the COMESA region!”
“If the CCC steps up its enforcement game in the non-transactional arena, it could become a true force to reckon with in the West. I can envision a scenario where the CCC becomes capable of launching its own cartel matters and oversees a full-on leniency regime, not having to rely on the ‘follow-on enforcement’ experience from other agencies abroad. The CCC has great potential, but it must ensure that it fulfills it by showing principled deliberation and full transparency in all of its actions — otherwise it risks continued doubt from outsiders.”
It remains to be seen who the Director’s replacement will be and which of these topics will dominate her or his agenda, if any. The Director’s term is for 5 years, offering a salary of between $70,000 and $83,000. Details on the opening can be found here. Only Member State nationals can apply. Interestingly, COMESA member states’ antitrust enforcers likewise posted the announcement on their individual web sites:
Our friends at W@Competition invite you to submit nominations by 25 November:
You know or you have worked with – either within your organisation or otherwise – notable women competition professional in their 40s in Africa? The survey will feature 40 outstanding professionals aged between 40 and 49 in the competition field in: Competition Law – Private Practice, Bar & Academia
Filling in this simple online nomination form will only take a minute. There is no limit to the number of women you may nominate.
All eligible nominees will be invited to participate in the second round. An initial list will be drawn up by an independent jury on the basis of anonymised submissions by nominees and input from referees will be sought as appropriate.
In a milestone enlargement of the (now formerly) 19-member COMESA region, Tunisia and Somalia have acceded to the trade bloc at the 20th COMESA Summit on 19th July 2018, creating #COMESA21 – Africa’s largest free trade region.
Their application to join had been pending since 2016. Under the Treaty, the new members will be bound by the provisions of the Treaty and must deposit their formal instrument of acceptance of the terms of admission with the Secretary General, together with an instrument of accession pursuant to Articles 194 and 195 of the Treaty with regard to a State admitted to full membership. Says Primerio’s Andreas Stargard, “with the privilege of membership comes the obligation of agreeing to abide by the antitrust rules promulgated under the COMESA Treaty. This includes the Competition Commission’s procedural and substantive rules and notably its merger regulations. It remains to be seen how the still weakened bureaucratic structure of the Somali Republic will be able to implement the strictures of a working competition-law regime…”
Indeed, the CCC’s recent Notice No. 2/2018 provides that “the provisions of the COMESA Competition Regulations of 2004, and its accompanying rules, shall be enforceable in the territories of the Republic of Tunisia and the Federal Republic of Somalia with immediate effect.”
Personnel News 2018
In addition to gaining two new member states, COMESA also underwent personnel changes, adding an experienced antitrust practitioner, Zimbabwean Competition and Tariff Commission director, Ellen Ruparanganda, as one of the nine CCC commissioners, for a term of three years. Besides Ms. Ruparanganda, Francis Lebon (Seychelles), Ali Hamadou Ali Kako (Djibouti), Thembelihle Dube (Eswatini, formerly Swaziland), Danson Buya Mungatana (Kenya), Michael Teklu Beyene (Ethiopia), Charlotte Wezi Malonda (Malawi), Islam Tagelsir Ahmed Alhasan (Sudan), and Brian Muletambo Lingela (Zambia) were also sworn in.
Information-sharing, investigative assistance, and capacity-building at forefront of MoU
As reported by the Swaziland Observer, the Seychelles Competition Commission and COMESA’s Competition Commission have entered, on 20 April 2016, into a Memorandum of Understanding that aims to deepen the cooperation and coordination between the two agencies (as well as the Seychelles Fair Trading Commission). Republic of Seychelles has been a member of COMESA since its accession to the common market in 1997.
The MoU creates positions of “desk officers” in each agency to ensure that the institutions will cooperate on investigations and share relevant information to ensure enforcement. It also foresees policy coordination, technical assistance and capacity-building programs.
FTC Seychelles CEO Georges Tirant pointed out that the MoU merely formalises what has already been a day-to-day reality, with the aim of legislative harmonisation and ultimately regional integration. “I have a dream that all African member states should work together for a better Africa,” he said. COMESA Competition Commission Board Chairman Mattews Chikankheni said that it would “improve efficiency in day to day processes, remove entry barriers create an enabling ground for small businesses and medium enterprises which will enable economic growth, job creation and reduce poverty.”
CCC Chief Executive Officer George Lipimile emphasised the need to create jobs and “link industries,” as well as explain the agency’s mission: “We are going to work hard so that competition laws make sense to the people, because a law that does not benefit people is useless.”
Numerous in personnel, yet still displaying a dearth of actual case-law development even in merely the one area in which the COMESA Competition Commission has been active — mergers — the agency recently appointed two new (indeed, additional, as the number grew from 9 to 11) Commissioners for the standard term of three years.
Competition practitioner John Oxenham, a director at Africa consultancy Pr1merio, identified them as Trudon Nzembela Kalala from the Democratic Republic of the Congo, and Kowlessur Deshmuk, Executive Director of the Competition Commission of Mauritius. Oxenham notes that neither country enjoyed representation between the April announcement of 4 new commissioners and December 8 (see also April 15 AAT story on the agency’s prior appointments).
The Public Protector, in theory, was designed and created to strengthen the constitutional democracy within South Africa along with the other Constitutional Institutions established under Chapter 9 of the Constitution of the Republic of South Africa. In order to strengthen this constitutional democracy, it is imperative that the Public Protector be independent from any governmental branch or agency, as making it accountable to the exact organs it seeks to protect society from renders it ineffective and voiceless. What follows is an elaboration on the role of the Public Protector within a constitutionally democratic South Africa and whether its purpose and effectiveness has in essence fallen into redundancy by making it accountable to Parliament.
Establishing a constitutionally democratic Public Protector
The unfailing oppressiveness and secretiveness of the Apartheid government lead to a distrust of such a government and one which was consequently not open and accountable. State organs could and often did act ultra vires, doing whatever they wished regardless of whether such powers were given to them, and would not need to be accountable for any such actions.
However with the dawning of a constitutional democracy in 1994, the need to divide the once monopolised parliamentary power among all branches of government and the implementation of checks and balances ensuring that all branches of government became accountable towards one another became imperative in securing the ideal of a democratic nation once founded upon racial oppression and impunity. With the implementation of the 1993 Interim Constitution, in terms of principle 29, the office of the Public Protector was first established and by including it the Constitutional Principles, secured its existence within the final Constitution.
The Public Protector was designed to assist in the transformation of an oppressive society into an open and democratic society, creating an accountable and credible government through the re-establishment and respect of the rule of law. No longer was government above the law nor could they do a they wished, rather the government was in theory, accountable to the people of the nation, echoing the entire theory of the social contract. Consequently the office of the Public Protector was ideally to act as a check between the Executive and Legislative branches of government and to provide a link between the citizens and such branches.
The powers, functions and duties of the office of the Public Protector
The Public Protector is an institution established to investigate purported or supposed indecorous behavior of state affairs, whereby upon the decision to investigate such, which is at the discretion of the Public Protector, the Public Protector must report on such conduct and if applicable the taking of appropriate remedial action must occur.
The Public Protector may not investigate judicial decisions, as this is the function of the Judicial Services Commission as well as owing to the fact that the Public Protector acts as a check between the Executive and Legislature. The Public Protector may also not investigate human rights issues as such issues fall within the jurisdiction of the South African Human Rights Commission. Once the Public Protector has an affirmative finding of misconduct, such a finding is then referred to the Director of Public Prosecutions.
What follows is a determination of the ability of the Public Protector to accurately fulfill the role of its office. Such capability is determined by means of the independence which is afforded to it.
How independent is the Public Protector?
In order to hold the Executive and Legislative branches of government accountable, the Public Protector requires a “sufficient” amount of independence. This leads to predominant issues of what constitutes sufficient independence and the issue of over independence of such institutions which would then lead to an abuse of such independence.
Independence is a characteristic, which is established objectively in terms of whether a reasonable person would perceive such an institution as being independent. Thus the impact that the Public Protectors perceived independence upon the reasonable person would in hindsight affect the Public Protector to fulfill the role of its office.
In order to accurately understand the independence which the Public Protector is afforded, its independence needs to be divided amongst five aspects namely a prima facie contradiction that exists between sections 181(2) and 181(5) of the Constitution, financial independence, administrative independence and finally, the independence of appointments and dismissals of the Public Protector.
Amid section 181(2) and 181(5) of the Constitution, there exists a prima facie conflict of these two provisions in the sense that section 181(2) holds Chapter 9 institutions to be independent and only subject to the Constitution whereas 181(5) holds such institutions accountable to the National Assembly. This inconsistency was settled in Independent Electoral Commission v Langeberg Municipality  whereby the court held in accordance with section 239 such institutions are not governmental departments which the Cabinet may have stimulus over, rather they are independent from government. Thus by holding such, the court made it clear that although the Public Protector is accountable to the National Assembly, it is not accountable to government nor is it afforded the same independence as the judiciary.
Two reasons exist at the outset for such accountability. Firstly the Public Protector is said to be accountable to the National Assembly, as through representative democracy, the National Assembly represents the population of South Africa, their opinions and ideologies, and thus by making the Public Protector accountable to the National Assembly, it is in essence making the Public Protector accountable to the public.
Financial independence of the Public Protector was too dealt with in Independent Electoral Commission v Langeberg Municipality whereby the Constitutional Court affirmed such Chapter 9 institutions need a degree of financial independence but it is not to say that such institutions may set their own budget. Rather Parliament as opposed to the Executive has the obligation to provide sufficiently reasonable funding in order for the Public Protector to fulfill its functions.
Appointments of the Public Protector are made by the President through a shortlisting of candidates, by the National Assembly, whom the Public nominated. Therefore there exists a grave deficit in terms of public participation, as the public does not participate beyond the nominations stage.
It is too the National Assembly who may dismiss the Public Protector with a two-thirds majority vote. Such a majority is to ensure a simple majority does not unjustly dismiss the Public Protector.
In theory, affording the Public Protector this amount of Constitutional independence at first glance, seems to allow it the ability to perform its functions. However, over the past couple of years, grave injustices have been committed towards this Chapter 9 institution that raises doubts as to whether the Public Protector can effectively fulfil its office, and whether the continued lack of the required independence renders the office of the Public Protector redundant.
The Constitution can be said to afford the Public Protector “sufficient” independence. However I posit that sufficient independence does not mean effective independence, and it is evident that the Public Protector as a chapter 9 institution is fundamental in the supporting of a democratic South Africa, representing a mechanism of holding the Executive and Legislature accountable, but such an office is not effective for as long as those whom the Public Protector seeks to hold accountable are the exact persons who have the power and ability to dismiss the Public Protector and furthermore have the ability to dictate the funding it therefore receives. With the recent cries for funding by the Public Protector, and the closing of its Mpumalanga office with others following suit, the question arises of whether the Public Protector has been reduced to a mere symbol of a ideology of democracy, unable to protect the public. Furthermore the manner in which the Nkandla Report was received in Parliament shows its inability to effectively exercise its powers and functions. Not being able to protect the public renders the Public Protector a useless feat.
I therefore posit that the theoretical independence afforded to the Public Protector is not enough to allow it to effectively fulfil its powers and duties. Therefore all efforts must be made to afford the Public Protector such effective independence in order to fulfil its role and allow it to effectively protect the public.
 Constitution of the Republic of South Africa, 1996 section 181(1)(a).
 Pierre de Vos ‘Balancing Independence and Accountability: The Role of the Chapter 9 Institutions in South Africa’s Constitutional Democracy’ in M Danwood, M. Chirwa and Lia Nijzink ‘Accountable Government in Africa Chapter 10’ (2012) 160 at 160.
 Ibid; Iain Currie and Johan de Waal The New Constitutional & Administrative Law vol 1 (2013) 46 to 50.
Public Protector v Mail and Guardian Ltd and Others 2011 (4) SA 422 (SCA) paras 5 & 6; C. Thornhill ‘Role of the Public Protector’ (2011) 2 Case Studies of Public Authority at 87.
 C, Murray ‘The Human Rights Commission et al: What is the Role of South Africa’s Chapter 9 Institutions?’ (2006) 2 PELJ 122 at 123 & 124;Ex Parte Chairperson of the Constitutional Assembly In Re: Certification of the Constitution of the Republic of South Africa, 1996 1996 (4) SA 744 (CC) certification case 1996 (4) SA 744 para 161.
In our latest instalment of our Meet the Enforcers series, we speak with South African Competition Commissioner Tembinkosi Bonakele on the topic of hosting a series of academic & practitioner platforms to discuss cases and developments in competition-law enforcement.
This week, the South African Competition Commission and the Competition Tribunal successfully organised the 9th Annual Conference on Competition Law, Economics & Policy (as part of the 4th BRICS International Competition Conference), taking place in Durban, South Africa.
Commissioner Bonakele, the head of the SACC, discussed hosting the conference with AAT’s contributing author, Njeri Mugure, Esq. According to his biography, Mr. Bonakele has been with the Commission for the past ten years. He briefly left the Commission in March 2013 and came back in October 2013 as Acting Commissioner. He has been in this position until his appointment as the Commissioner. Bonakele has occupied various positions in the Commission’s core divisions. He was appointed Deputy Commissioner in 2008, and prior to that worked as head of mergers, head of compliance and senior legal counsel respectively.
The AAT-exclusive interview follows:
AfricanAntitrust.com: South Africa has been participating in the BRICS International Competition Conference (“BRICS ICC”) since 2011, a year after she officially became a member of BRICS. This November the country will host the 4th of this biennial meeting in Durban. What are your goals for this year’s conference?
The theme for the BRICS International Competition Conference 2015 is “Competition and Inclusive”. This theme will enable the conference to explore the relationship between competition and growth, competition and employment, competition and inequality and competition and poverty. As with the previous conferences, the aim of the conference is to strengthen cooperation amongst BRICS countries in the area of competition regulation by creating a platform for sharing experiences. We also aim to use the conference to discuss a proposed Memorandum of Understanding between BRICS competition agencies. Finally, the conference is also a platform for both developed and developing countries to discuss competition policy and enforcement issues.
AfricanAntitrust.com: Speaking of Durban, some might have expected for the 9th Annual Competition Law, Economics and Policy Conference (“Annual Competition Conference”) and/or the BRICS ICC to be held in Pretoria, the capital city of South Africa. Could you tell us why you chose to hold the two conferences in Durban?
We wanted a venue that would provide world class facilities for the conference as well as enjoyment for the delegates, and Durban ticks both boxes. The Kwazulu-Natal province, where Durban is situated, is home to rich natural resources, including Africa’s Big Five game and beautiful mountainous landscapes.
Durban itself is a diverse African city providing cultural diversity as well as a natural paradise known for its beautiful coastline beaches and subtropical climate. The City is also host to the largest and busiest harbor in Africa. The Inkosi Albert Luthuli International Convention Centre (Durban ICC), where the two conferences will be held, is the largest indoor conference facility in Africa.
The Commission has previously partnered with the KwaZulu-Natal Provincial Government, eThekwini (Durban) Municipality and the University KwaZulu-Natal on various activities.
AfricanAntitrust.com: In addition to hosting the Annual and the BRICS competition conferences, the South African Competition Commission (“the Commission”) along with Cresse and the University of Kwazulu-Natal will hold a joint workshop exploring areas such as collusions and cartels, unilateral and coordinated effects in mergers, the economics of exclusionary conducts, and use of economic evidence, among others. What do you hope this workshop will achieve?
The economic understanding of competition policy is constantly evolving. In the last two decades economists have developed new theories of harm and traditional views have changed significantly. The workshop will bring top quality instruction on the economics of competition to agency officials in South Africa and more broadly Africa, competition practitioners, academics and policy makers. I hope that everyone attending the workshop will walk away having learned something new about the economics of competition.
AfricanAntitrust.com: Speaking of the this year’s events, planning the joint workshop, the Annual Competition Conference and the BRICS ICC was a great undertaking, could you tell us why you decided to have the three events back to back and what audience each event is tailored to suit?
With the BRICS conference coming into South Africa was a great opportunity as so many people were interested to come. So many opinion makers, academics and practitioners were going to be in the country, so we organized all these events to take advantage of their presence, and the response was very positive. We also thought logistically it makes sense to have our annual conference organized back to back with BRICS, so we don’t get conference fatigued. In the end, all the events flow into each other.
The Joint Workshop is a technical training and knowledge sharing platform, looking at the latest thinking on various aspects of competition enforcement.
The conference is an annual academic platform to discuss cases and developments in competition law enforcement.
AfricanAntitrust.com: Turning to the BRICS International Competition Conference, in what way has this year’s agenda been informed by the previous three conferences? What impact do you think the previous conferences have had on antitrust discourse in BRICS and non-BRICS countries?
The previous conferences, hosted by the Federal Antimonopoly Services of Russia in 2009, the State Administration for Industry and Commerce of the People’s Republic of China in 2011 and Competition Commission of India in 2013, created a solid platform on which we can deepen our relations in the field of competition regulation.
South Africa has focused the conference on the relationship between growth and inclusivity. Furthermore, this year’s conference aims to institutionalize BRICS cooperation on competition matters, and move it beyond conferences. There is a proposed Memorandum and Understanding, as well as a joint research initiative.
AfricanAntitrust.com: There’s been a lot of debate surrounding public interest factors in merger review. What do you hope to achieve by including the topic to this year’s conference agenda?
It is important that BRICS countries weigh-in on this important debate. There is a divergence of views amongst many antitrust practitioners on the compatibility of antitrust issues with public interest issues, but everyone accept that there are public interest issues. The conference will deepen and broaden perspectives on the matter.
AfricanAntitrust.com: How do these engagements such as the BRICS conference and competition law enforcement in general benefit the ordinary South African?
The South African competition authorities were established as a package of reforms to transform the unequal South African economy to make it economy inclusive and ensuring that those who participate in it are competitive.
Through engagements such as the BRICS conference we’re able to discuss with our BRICS counterparts how to make our economies, which are similar, more efficient, competitive and inclusive.
The Commission has, in the past 16 years investigated and dismantled cartels from different sectors including construction, bread – a staple food for many South Africans, and cement. In the cement cartel, for instance, the Commission conducted a study post the cartel and discovered that we have saved consumers about R6 billion.
AfricanAntitrust.com: Mr. Bonakele, are there other topics you would have liked to address or comments you would like to add?
We see BRICS as an important and strategic platform where we advance arguments about the relationships between competition and other policy instruments that are very relevant in our developing countries.
As a collective, BRICS competition authorities are able to provide leadership in the international antitrust community on what it means to create and enforce competition law and policy in developing economies which come with their own particular challenges and opportunities. These perspectives will serve to enrich the global knowledge base in competition enforcement.
AfricanAntitrust.com: Thank you for taking the time to speak with me, Commissioner!
Discarding any objectivity and international best practice, the Minister of Economic Development, Mr. Ebrahim Patel, has once again expressed his desire to use the South African Competition Commission (“SACC”) as an agency to actively promote the government’s industrial policies.
Speaking at a media briefing, Patel told journalists that the focus of the Economic Development Department would be to grow “black ownership of new industry in South Africa and using state funding to grow the work of black entrepreneurs”.
Patel said the intention of using the SACC to launch a market inquiry into the retail sector was to “ensure that we’ve got a competitive sector, but also an inclusive sector”. This statement and the decision to institute a market inquiry into the retail sector is, at least at this stage, problematic for two reasons. Firstly, the retail sector is arguably one of the most competitive sectors in South Africa, and any barrier to entry into the sector is a natural consequence of a highly competitive market. Furthermore, Patel identified exclusivity clauses (which are popular provisions inserted into lease contracts between mall anchor tenants and the developers) will be one of the issues that the inquiry will look into. Patel, unfortunately, overlooked the fact that there has already been an investigation relating to these clauses. At the conclusion of the investigation, the SACC found that there is not sufficient evidence of anti-competitive impact, resulting from these clauses, and thus the SACC refrained from referring the matter to the South African Competition Tribunal (“SACT”). This thus begs the question, whether it is necessary to institute a market inquiry with regard to the issue of exclusivity clauses and expose the industry to intensive and unnecessary costs?
In an article written by Mfundo Ngobese in the official newsletter of the SACC, Ngobese responds to an article written by John Oxenham and Patrick Smith, presented at the Eighth Annual Conference on Competition Law, Economics and Policy titled “What is Competition Really Good For?”. The main focus of Ngobese’s article is evaluating the merits of an argument put forward by Oxenham and Smith: that the Competition Authorities should engage in a balancing exercise between the short term impact on public interest issues (such as employment) versus the long term benefits that are associated with effective competition (such as increased economic growth which leads to more jobs created).
Public Interest Test
This brings us back to Patel’s decision to use public interest as the main ground on which a market inquiry into the retail sector should be instituted. The decision to launch a market inquiry based on the anti-competitiveness of exclusivity clauses is simply untenable in light of the SACC’s findings in respect of a previous investigation into the issue, as well as the fact that the retail industry is highly competitive. Using any ‘anti-competitive’ argument as justification for launching this particular market inquiry, would amount to nothing more than a ‘fishing expedition’ by Patel and the Authorities.
The broad public interest grounds which are increasingly becoming prevalent as Patel transcends into the competition arena, coupled with the ill-defined rationale, guidelines and justifications behind the use of public interest grounds in competition review, is contributing significantly to uncertainty in the South African economy.
Policy stability leads to political, social and economic uncertainty. Policy stability in contrast created an “investment friendly culture where every investor feels protected and free to do business”.
While businesses in the retail industry (and indeed businesses across the board) in South Africa, are desperately seeking certainty, Patel is seeking a ‘second bite of the cherry’.
The second issue with Patel’s reason for instituting the market inquiry relates to him wanting to achieve an “inclusive retail sector” and how to bring more “black South Africans into the sector”. While transformation in the economy is certainly an important issue that needs to be addressed in South Africa, it is the manner and form in which such transformation takes place, which is concerning. In this regard, the SACC is patently not the appropriate institution to ensure that there are sufficient black-owned businesses in the retail sector.
Patel seems to have, unfortunately, conflated the objectives and role of his own department, with the objectives and purpose of the SACC. This comes at a time when other political meddling has led to the resignation of the National Director of Public Prosecutions, Mxolisi Nxasana, who quit his post on Sunday, after almost a year of politically-motivated wrangling and formal investigations being initiated and ultimately dropped by President Jacob Zuma.
The influence that Minister Patel has had on the SACC’s policy is undoubtedly evident when one evaluates the increased reliance of the South African Competition Authorities to impose stringent conditions in approving mergers.
In justifying the use of public interest grounds in competition law, the Competition Authorities may point out that South Africa’s Competition Act, 89 of 1998 (the “Act”) permits and requires public considerations to be taken into account. However, the use of public interest grounds should not, as seems to be the case, be seen as independent issues unrelated to competition which is to be considered in isolation of the purpose of the Act. The Competition Authorities’ purpose, as set out in Section 2 of the Act is to “promote and maintain competition in the Republic…”. It is likely that Patel views the following two subsections which state that competition must be maintained or promoted to:
“promote employment and advance the social and economic welfare of South Africans” (Section 2(c)); and
“promote a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons” (Section 2(f))
as the basis for his increased reliance on pushing his Department’s policy objectives through the channels of the SACC. However, placing an overly zealous reliance on these two subsections, fundamentally misconstrues the purpose and function of competition law.
Subsections (c) and (f) quoted above are not self-standing provisions; they are qualified by the general purpose of the Act. Furthermore, by viewing or placing greater reliance on these provisions as self-standing provisions, one would run into an inconceivable difficulty when considering section 2(a), which states as a further objective of the Act (and the purpose of the promoting competition) is to promote the “efficiency, adaptability and development of the economy”. At least from a Section 2 perspective, public interest considerations, at best, have to be reconciled with competition issues.
Market inquiries have often been used very successfully as an investigative tool by a number of competition agencies, especially in Europe. However, a market inquiry requires significant resource expenditure by both the SACC and the market participants and often casts a bad shadow over the relevant industry to the detriment of companies who have not engaged in any anti-competitive conduct. Market inquiries should thus be used sparingly and only when there is significant concern that a particular market is not functioning in a competitive manner. A market inquiry should certainly not be used as a means to affect change in the industry in order simply to suit the objectives of the Government.
There is a further institutional concern which must be noted, and that is that the SACC has, like all institutions, limited resources. In order to function as an efficient and formidable competition law agency, the SACC should ensure that what limited resources are available, is best utilised to achieve a competitive market environment in South Africa.
Before even engaging in policy discussions, as those that Patel is pushing for, it would firstly be necessary to ensure that the SACC has the requisite expertise to deal with policy agenda’s which are far broader than pure competition law. There are already institutions, as Patel has recognised, whose responsibility it is to promote economic growth and to address transformation within the economy. It is not the responsibility of the Competition Authorities to address these issues as directly as has been the case in recent years.
The need for transformation and the promotion of black industrialists is an issue to be addressed by the Government, however, it seems that there is a general lack of regard to competition concerns when Government departments form their policies. A good illustration of this is the significant criticism levelled at the new agreement struck between South African Airways (“SAA”) and the Department of Trade and Industry (“DTI”), which will see SAA redirect R10 billion rand of procurement spending to “black industrialists” (“SAA Agreement”).
While this may appear to be a noble policy, the question remains whether new “black industrialists” are coming into existence, or whether existing “black industrialists” are simply going to make substantial profits at the expense of true development.
The SAA Agreement, which requires, without anything more, that a certain amount of supplies (fuel) be purchased from specific suppliers (‘black suppliers’) strikes at the heart of competition. Effectively certain existing competitors are being excluded in order to favour other competitors. In no way does this promote ‘transformation’ within the industry as the existing barriers to entry remain.
From a competition point of view, the benefit of having healthy competition in the commercial aviation market seems to have been overlooked by the DTI. Apart from the direct benefit that flows from actual cheaper air tickets, the knock-on benefits of stimulating the leisure tourism seems to have been overlooked.
While acknowledging that the SAA decision taken by the DTI is not directly linked to competition law, the disregard that the DTI appears to have to competition in the aviation industry is in stark contracts to the to the Competition Authorities in Botswana who have launched a market inquiry into the aviation sector (although notably with the focus being on unscheduled flights), due to having recognised the importance that the price of flight tickets may have on the tourism industry and the benefits that would flow from boosting the tourism industry.
Considering that SAA is battling financially, and is highly dependent on State bailouts, it is baffling that the State’s primary objective is not to ensure that SAA operates viably and competitively, before risking such competitiveness in favour of a policy which is quite frankly, difficult to justify as there is no evidence that such policies actually achieve genuine transformation or promote economic growth.
One can’t help but notice the irony when it comes to the Government’s social and transformation policies. The Government, and Patel in particular, consistently ignore well established economic principles and the benefits that flow from healthy competition in the economy, in favour of promoting short-sighted top-down “transformative industrial policies”, rather than spending the scarce resources on promoting and developing South Africa from a bottom-up approach.
For instance, poor service delivery in South Africa has a significant detrimental economic and social impact on South Africa. Why improving service delivery does not appear to be high on the radar of the Department of Economic Development or the DTI, is surprising if the objectives of these departments are to promote ‘black businesses’, as the areas which are most severely affected by poor service delivery are generally areas where there is a high percentage of black persons living, who form part of the lower income brackets. In other words, areas where the promotion of small businesses and healthy competition would be most valuable to any social development objectives.
Unfortunately, however, a recent report issued by the Institute of Race Relations stated that the highest incidence of recent public protests in relation to poor service delivery, took place in areas were the most “fruitless and wasteful government expenditure” took place.
Recent statistics show that South Africa’s unemployment rate is increasing, bringing into question whether the policy intervention that Patel has been championing over the past 6 years, is indeed yielding the positive results envisioned by the Government. While the purpose of this article is not to evaluate and criticise all policy interventions, the point to be made is that the effectiveness of policy intervention to advance socio-economic interests in the South Africa is in no way proving effective. While there may be a number of reasons for failing policies, it appears worrying that politicians such as Patel are prepared to risk the independence, efficient functioning and objectives of the Competition Authorities, which are ultimately to promote competition in the market, in order to promote industrial policies when there is so much uncertainty whether such policies will truly ensure long term benefits for the Country as a whole.
Two recently issued reports, namely, the Boston Consulting Group (BCG) Report and the IMD World Development Report, succinctly confirm the concerns and issues which are addressed in this article.
The BCG Report evaluates the reasons for South Africa’s stagnant economic growth. The report acknowledges that it is a necessity to improve education and healthcare and reduce unemployment to advance growth; however, the report importantly states that:
“There is no hiding from the fact that short-term self-interested behaviour has been prevalent; that the emphasis in South Africa has been on cutting the pie rather than growing it.”
This statement could not be truer if one considers Patel’s disregard of well established benefits that flow from a competitive environment, in favour of promoting industrial policies. The following statement by Adam Ikdal on the poor leadership in South Africa, corroborates this papers view:
“a concerted program of execution is essential. In many instances this may mean putting the greater good ahead of the individual or institutional interests.”
The IMD World Competitiveness Report (IMD Report) not only complements the BCG Report, but essentially confirms the views of this paper, with empirical evidence. The IMD Report indicates that South Africa has dropped from a ranking of 37 in 2012 to 53 in 2015 on a list of the world’s most competitive countries. The IMD Report not surprisingly, identified South Africa’s infrastructure shortfall, poor service delivery and lack of education and skills as some of the major contributors to South Africa’s slip down the rankings.
Crucially the director of the IMD World Competitiveness Centre, Arturo Bris, identified what sets the top performing countries apart from the others. This is what Bris had to say, which is essentially, the basis upon which the criticism identified in this paper is levelled at Patel’s policy objectives:
“Productivity and efficiency are in the driver’s seat of a competitiveness wagon. Simply put, business efficiency requires greater productivity and the competitiveness of countries is greatly linked to the ability of enterprises to remain profitable over time”.
In conclusion, we note that both transformation and fostering economic growth is an objective of the South African Government. This is, however, no justification for abandoning the tried and tested benefits that flow from a competitive market, in favour of promoting short-term industrial policies such as Patel is doing. Should the SACC adopt Patel’s industrial policies as part of their policy objectives, the SACC ultimately risks its independence and may effectively become an ‘umbrella institution’ under which any industrial policy agendas are driven. This would be an undesirable and intolerable outcome, and one which the South African Competition Authorities need to carefully guard against.
 We have dealt with this aspect of merger control in more depth in previous articles, please see the following link.
 To illustrate the extent that public interest considerations are used by the Competition Authorities, the last intermediate merger that was approved unconditionally was in 2008. Since then, there have been 14 mergers that have been approved subject to conditions. As to large mergers, approximately 10 of the most recent 40 mergers that have come before the Competition Tribunal, 5 have been approved subject to conditions. It should be noted that it is the SACC that reviews intermediate mergers, while large mergers are reviewed bu the Competition Tribunal.
 Sections 2(c) and (f) of the Competition Act, 89 of 1998.
 For example the Industrial Development Corporation.
 See the AfriGroup Holdings (Pty) Ltd and Afgri Ltd merger where the South African Competition Tribunal (“SACT”) Acknowledged that the merger poses no horizontal or vertical competition law concerns. Despite reaching such a conclusion, the SACT, approved the merger on condition that an agreement reached by the parties in terms of which Afgri would contribute R90 million over four years, to a development fund for small farmers via the provision of loans, training and grain storage discounts. Similar burdensome conditions are becoming all the more prevalent in merger control, and are often self-imposed by the SACT and are not agreed upon by the parties as was the case in Afgri.