Economics

The Competition Act of 1998 came into force in South Africa on 1 September 1999, and enabled the establishment of three bodies: the Competition Commission (the Commission), The Competition Tribunal (the Tribunal) and the Competition Appeal Court (CAC). The Commission’s main responsibility would be to investigate mergers and anti-competitive behaviour. Most cases would be decided in the Tribunal, while the mandate of the CAC was to review any decision of the Tribunal or consider an appeal arising from the Tribunal. The CAC was able to make judgements or give orders, including to confirm, amend or set aside a decision or order of the Competition Tribunal or remit a matter to the Tribunal for a further hearing on any appropriate terms.
 
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In July 2005, the BA/Comair (Comair) executives were eagerly awaiting the Competition Tribunal’s decision in the case brought by the Competition Commission against South African Airways (Pty) Ltd (SAA), South Africa’s dominant domestic airline. The case had been brought on behalf of the Nationwide Group, a domestic air travel rival to SAA. Nationwide lodged its complaint in October 2000, contending that, since 1999, SAA’s incentives schemes to travel agents were so attractive as to force travel agents into selling SAA domestic travel tickets to the exclusion of Nationwide. Comair had lodged a similar complaint in October 2003, starting from the same period, but alleging that the incentives were continuing. Its case was yet to be heard. Would the Tribunal judge SAA’s schemes as anti-competitive, thus paving the way for Comair’s case?
 
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On 31 October 2006, executives at the Council for Medical Schemes (CMS) and private hospital group Netcare were eager to hear the Competition Tribunal’s decision regarding the acquisition of the New Protector Group hospitals by Phodiclinics (Pty) Ltd (a division of the Medi-Clinic Group) and DHJ Defty. Phodiclinics had made the bid in 2005 after New Protector had been placed under provisional liquidation in late 2004. On 3 March 2006, the Competition Commission had recommended to the Tribunal that the transaction be approved without conditions.
 
However, the CMS was concerned that, if the acquisition went ahead, it would increase concentration in the private hospital market and thereby fuel already-unacceptable price increases in the market. Dr Simon Roberts, chief economist at the Competition Commission, noted that the key to the “competitive dynamics in this sector was understanding who the sellers and who the buyers are – that is, the sellers are the private hospitals and the buyers, essentially the medical schemes”. He added, “Fundamentally, the medical schemes, faced by an oligopoly, would want more competition in the sector.” Netcare, on the other hand, as he pointed out, was a competitor to Medi-Clinic, and was more concerned about its competitive position in the sector that was dominated by itself (30.4% share), Life Healthcare (27.7% share) and Medi-Clinic (24.5%).
 
At a pre-hearing in March 2006, the CMS, private hospital group Netcare and medical scheme administrator Supreme Health indicated that they wanted to intervene to argue against the acquisition. Permission was granted and the subsequent hearings took place during September and October 2006. Awaiting the Tribunal’s ruling, the CMS and Netcare now reflected on whether the Tribunal would support their contentions.
 
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Despite the fact that the summary of the Tribunal’s deliberations, with non-confidential information only, ran to some 63 pages, its decision was straightforward. The Tribunal considered that New Protector was a failing firm – “or more precisely, a failed firm, within the meaning of the Competition Act 1998” – at the time of the merger transaction. It considered further that the failing firm consideration outweighed any potential loss to competition that may arise as a result of this transaction.
 
No. Pages: 2
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2005 – The Tribunal’s Decision
 
The Tribunal found SAA in contravention of the Act, that is that its incentive schemes had been exclusionary and that it had abused its dominant position in the market. The Tribunal also noted while it wasn’t necessary to consider the consumer to prove the case: “…it is highly likely that this foreclosure has had adverse effects on consumers… consumers are likely to have made wrong choices of airlines, chosen the wrong prices and, essentially, it has led to the wrong set of outputs.” SAA was ordered to cease the incentive schemes and fined R45 million . At the time, this was the highest penalty yet imposed by the Tribunal.
 
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In 2007, Jan Potgieter, chief executive of Massdiscounters, a division of Massmart, had steered Game, one of its general merchandise discounters, into investing far more vigorously in Africa. By June 2010, Game had shown significant growth in both turnover and profit, but Potgieter wanted the company’s operations in Africa to become even stronger, in anticipation of the entrance of an international player. Potgieter, therefore, had to find ways to protect Game against new players entering the African market.
 
No. Pages: 18
 
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In 2014, South Africa experienced its longest and costliest strike ever: a five-month stoppage in the platinum sector that cast doubt on the institutions and culture of the country’s labour relations framework.  After the strike came to an end in late June, the National Economic Development and Labour Council (Nedlac)  convened a meeting to discuss ways of preventing further violent and protracted industrial action. Among the questions confronting delegates at this gathering was whether labour unrest could be addressed by altering the laws and institutions regulating strikes. Or would any such reforms prove largely futile in the absence of political and economic change?

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At the beginning of 2016, South Africa faced what Songezo Zibi, outgoing editor of Business Day, termed a “perfect storm”. President Jacob Zuma’s December 2015 decision to replace finance minister Nhlanhla Nene with David van Rooyen, an African National Congress (ANC) backbencher, had dealt the country its biggest financial blow since the start of democracy in 1994. Nene’s dismissal caused the value of local stocks and bonds to decline by half a trillion rand, according to one estimate, while the currency fell to a record low of R15.39 to the dollar. Although Zuma agreed three days later to replace Van Rooyen with former finance minister Pravin Gordhan, the rand continued to slide, reaching a new low of R17.99 to the dollar in mid-January 2016.

No. Pages: 34

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In August 2006, Dr Richard Friedland, the chief executive officer of Netcare Holdings, which operated the largest private hospital network in South Africa, was looking at the findings of research into the opportunity that medical tourists from Africa presented for the group’s Breast Care Centre of Excellence. Traditional thought was that because poverty was so widespread in Africa, the possibility of attracting medical tourists from Africa to South Africa was minimal. Reading the report, Friedland now wondered whether this was indeed the case – and, if not, how the centre could exploit the opportunity such tourism presented.

 

No of Pages:  4

 

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In July 2013,  Siyabulela Tsengiwe – chief commissioner of the International Trade Administration Commission of South Africa (ITAC) – and ITAC commissioners met to make a final determination on a highly contentious customs tariff application. The South African Poultry Association (SAPA) had asked for increased duties across a range of chicken products, claiming that cheap imports were threatening the survival of local and regional producers.  The application was opposed by the Association of Meat Importers and Exporters (AMIE), on the grounds that it was intended to protect a sector with questionable ethics and an outdated business model.  Tsengiwe and the commissioners had to decide which argument carried more weight in light of the government’s wish to support agriculture in a frequently inequitable global trading environment, while ensuring that this support did not come at the expense of the poor.

 

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The International Trade Administration Commission of South Africa (ITAC) submitted its recommendation on the South African Poultry Association’s (SAPA) appeal for increased tariffs on 5 August 2013, and on 30 September 2013 the Department of Trade and Industry (DTI) announced that SAPA had got its wish for two of the five broiler products under consideration.  Compromise tariffs were introduced for the remaining three products (see table below).  The DTI said that it had sought to take into account the market share of imports of the various broiler products, and the extent to which domestic producers were disadvantaged by the prices of imports – all while trying to prevent poor consumers from being unduly affected by tariff-related price increases.  The department indicated that new tariffs were intended to allow for a “fair and reasonable profit” to domestic producers that would prompt further investment in the industry.

 

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In 2010, the officials of the Financial Action Task Force (FATF) were reviewing the problems of formalising informal financial systems in developing countries, and specifically addressing the hawala system in Africa. Hawala was a highly popular form of remittance transfer, especially where there were no banks or the banking system failed to offer clients ease of access and competitive costs. However, hawala was open to misuse as a means for both money laundering and the funding of terrorism. They wondered if and how the FATF could address these problems and whether its existing recommendations and interventions were sufficient.

 

No of Pages: 11

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On Saturday 13 January 2007, the South African president, Thabo Mbeki, stepped up to the podium at a mass rally of African National Congress (ANC) supporters in Witbank, Mpumulanga to deliver the annual January 8 Statement of the ANC National Executive Committee (NEC). Although its purpose was to celebrate the 95th anniversary of the ANC, the event also provided an opportunity for the ANC leadership to project a united front after a year of turmoil within South Africa’s ruling political party.
 
No. Pages: 36 
 
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