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This submission outlines the links between competition and industrial policy, emphasizing the importance of effective competition for inclusive growth. It discusses the objectives of the Industrial Policy Action Plan (IPAP) and the need to strengthen the implementation of competition policy. The submission also highlights case studies in industries such as polypropylene, forestry, steel, and fuel, and emphasizes the importance of regional dynamics and cooperation. It concludes by proposing coordinated action across competition authorities, regulators, and government to promote more competitive outcomes and inclusive growth.
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Address to Trade & Industry Portfolio Committee on IPAP Simon Roberts 31 October 2012
Overview • Links between competition and industrial policy • Effective competition and inclusive growth • IPAP objectives linked to competition: • Industries: polypropylene; forestry; steel; fuel • Strengthening implementation of competition policy; • identification of appropriate complementary measures to improve competitive outcomes • Stronger conditionalities attached to state support • Links with trade policy
Competition and industrial policy • Relationship of competition and industrial policy? Should be complementary and mutually reinforcing • Evidence from East Asian countries – support rivals; use competition to get the most from policy tools • Conduct of large firms is critical? Competing in investing in improved capabilities, not in controlling profits • Industrial policy for ‘catch-up’ – adoption and adaptation of technologies; building capabilities and complementary investments • Opening up access to economy, this requires proactive industrial policies
Work of competition authorities • Continued focus on priority areas: food products; intermediate industrial products; construction • Settlements in construction inputs such as cement, reinforcing steel • Referral in fuel • Construction bid-rigging • Ongoing cases in polypropylene, wheat flour, mealie meal, poultry, newspapers • Investigations continuing in supermarkets, forestry, media • Established separate cartels division
Case studies • Polypropylene • Key input to many plastic products • Case referred in August 2010, after investigation at request of Min of Trade & Industry; to be heard in 2013 • By-product of liquid fuels (partially regulated); produced by Sasol from coal (subject to mining rights) • Steel • Agreement to have ‘Developmental Steel Pricing’ not implemented as DTI-AMSA deadlock on what this meant. AMSA pricing above own proposed international benchmark (‘basket’). • Forestry • Investigation after sawmills closed; state-owned KLF controls biggest log supply, not supplying independent mills on same terms as its own • Commission and IDC research report for government as shareholder • Commission finalising investigation
Regional dynamics • Important dynamics across region • Firms and anti-competitive arrangements operate across the whole southern African region • Regional cartels, and single firm dominance, for example: • Cement • Beer • Poultry • African Competition Forum established • Competitive rivalry combined with stronger value chains – linkages across countries
Where have we come from? What can we do? • Industry insiders have long established ‘ways of working’, where they maintain high profit margins, cast themselves as the ‘custodians’ • New participants are ‘cut-in’ through share ownership, not as new independent entities, who are instead excluded • Low levels of investment, not dynamic • The ways of working are part of ‘settlements’; what is the new settlement we need and how can we get there? • Coordinated action across competition authorities, regulators and government to underpin participation, more competitive outcomes • Better use of existing levers • Government as shareholder?
