South Africa Budget Review 2008

Surname: Jackson

First Names: Matthew William

Student Number:

Subject: Economics

Assignment Number: One

Tutors’ Name Mr. MC Seedat

Date Submitted: 2008.03.14

Submission: First

Postal Address: PO Box 704

Shelly Beach

4265

E-mail: matthew.jackson@worldonline.co.za

Contact Numbers: W 039 315 0151

H 039 312 0055

Cell 0832834460

Course/Intake: MBA Year One вЂ" January 2008

I hereby declare that the assignment submitted is an original piece of work produced by myself.

Matthew Jackson

= 2008.03.13

Question 1:

Use a country of your choice to discuss competition policy and its success in reducing the abuse of dominant positions in the domestic market. You are required to provide discussion with reference to cases addressed by competition authorities in the country of your choice. Your discussion must also relate to the objectives for the competition Act or antitrust law of your country. Your discussion should include among other things, the following:

• History of the competition policy

• The Purpose of the competition policy

• Benefits and drawbacks of the competition policy

• Mergers and Acquisitions

• Restrictive Practices

• Abuse of a dominant Position

• Competitions policy and your country’s competitiveness in the world market

Introduction.

McGowan (1998) states that a common set of competition policy principles, accepted and enforced by all

Countries, would go a long way to achieving a more coherent approach to addressing anticompetitive

activity at international level. This would contribute directly to greater international economic

efficiency by further facilitating the international flow of goods, services and technology. In practice, however, greater convergence necessitates common laws, common enforcement bodies and identical

administrative systems.

Hartzenberg (2004) reported to the United Nations that “South Africa’s apartheid legacy and its consequent marginalization from the global economy produced very specific market structural characteristics, and concomitant competition policy challenges. Import substitution industrial policy and capital controls, for example, promoted local enterprise development through local content programs, and limited outward investment opportunities. High levels of concentration, both in ownership and control, and conglomerate organization structures coupled with strong vertical integration were typical of many

industries and markets. Many firms had diversified their activities, investing in a

variety of unrelated economic activities, and focused, almost exclusively, on the domestic

markets, as a result of economic sanctions”.

David Lewis(2002), the Chairman of the Competitions Tribunal stated in a speech to the Investment Analysts’ Society of South Africa in Johannesburg on the Competition Policy in South Africa ” вЂ" Where has it come from and where is it going?” that the far-reaching effects of Apartheid and the policy of the pre-1994 Government can clearly be seen in their opinion of what constituted “public” interest. Sanctions forced South Africa to nationalize its rail-network and telecommunications into state controlled entities of which Transnet, South African Airways, Iskor and Telkom are examples.

Lewis(2002) has the opinion that all South African citizens have experienced the shortcomings of state owned monopolies that were and, to a significant extent, continue to be relatively unregulated, proverbial laws unto themselves.

Kampel(2003) states that Government concessions, including subsidized inputs in industries such as manufacturing and agriculture, together with strict market controls, high tariffs, low levels of foreign direct investment and high levels of government ownership, have over the Apartheid years, contributed to the creation of a highly concentrated economy

Lewis(2002) also mentions that by the same token most South Africans have also experienced the consequences of simply handing over state owned monopolies to private interests, and simply exposing protected monopolies to the market.

While state owned erstwhile enterprise flourish, it is frequently at tremendous cost to the domestic economy, particularly to domestic consumers. Even where the sector is opened up to competition, either through the issuing of new licenses or �free entry’ the erstwhile monopoly generally proves adept at excluding or limiting new entrants, thus retaining its dominant position.

In the late 80’s most economists in the World Bank were willing to advise developing and emerging states to reduce, through privatization, their role in economic activity.

As early as 1992 the ANC proposed a broad outline of the approach that the Department of Trade and Industry adopted on 27 November 1997 for its Policy Guidelines for a Democratic South Africa. It states "The concentration of economic power in the hands of a few conglomerates has been detrimental to balanced economic development in South Africa. The ANC is not opposed to large firms as such. However, the ANC will introduce anti-monopoly, anti-trust and merger policies in accordance with international norms and practices, to curb monopolies and continued domination of the economy by a minority within the white minority and to promote greater