Competition Policy: Impact on South Africa's Economic Development

This essay explores the critical role of competition policy in fostering economic development, defining it as government actions that promote market competition. It emphasizes the importance of competition law and advocacy, particularly in developing economies facing various market obstacles. The essay highlights the direct and indirect impacts of competition policy, such as increased efficiency, strengthened economic development policies, and improved consumer welfare. Focusing on South Africa, the essay examines how competition policy has deterred anti-competitive behavior through interventions by the Competition Commission and Competition Tribunal. Specific examples include interventions in the soda ash and concrete pipe markets, as well as the reduction of drug prices for HIV/AIDS treatment, demonstrating the positive effects on market dynamics, consumer prices, and overall economic development in South Africa. The essay uses the Competition Act 89 of 1998 as a reference, and highlights the importance of competition policy in creating a level playing field, reducing barriers to entry, and improving the quality of goods and services. The essay concludes by emphasizing the strategic focus on industries that contribute significantly to South Africa's economic development, such as agro-chemicals, food, and construction.

Competition Policy 1
COMPETITION POLICY
By (Student’s Name)
Professor’s Name
College
Course
Date

Competition Policy 2
Competition Policy Role in Country’s Economic Development
Competition describes the rivalry among the companies in marketplace and stretches to
the envisaged and potential rivalry. On the other hand, competition policy describes the
government policy that preserve or promote the competition among the players in the market as
well as promote additional government policies as well as process which allow development of
competitive environment (Lipczynski, Wilson and Goddard 2005).
Competition policy plays a key role in economic development of any economy. To be
efficient and effective in supporting the process of development, competition policy and law
(CLP) should be supported as well as compatible with additional complementary pro-
development polices which is able to bear on the country’s economic development. Competition
policy has 2 key instruments. The 1st instrument is the competition law that encompass the rules
to restrict anti-competitive market and enforcement mechanism like an authority. The 2nd key
instrument is the competition advocacy which is especially significant in interface with
additional economic policies.
The developing economies are often beset by a range of obstacles to competition. An
urgent need is required for an effective competition policy and law. Owing to a range of market
features and legal as well as challenges in enforcement, it remains harder to undertake the
implementation of competition law and policy in the developing economies than in developed
economies. The uncompetitive markets remain a greater problem in the developing economies.
The need for effective competition law enforcement remains great. Competition policy
has a direct effects of increasing efficiency. The indirect effects of competition policy is
strengthening the impact of policies promoting the economic development for example, the
indirect effects will include strengthening impact of policies promoting economic development

Competition Policy 3
including investment and FDI; financial development; international trade; economic policies
(private sector development, institutional reform, policies-health and education).
The final macro-level objective of competition policy in terms of economic development
is the sustained increases in the human welfare for as many as feasible (White 2008). The
competition law and its enforcement as one of the instrument of competition policy, lead to the
direct effect of freer competition culminating in enhanced efficiency and higher consumer
welfare.
Extent Competition Policy/Legislation Deterred Anti-Competitive Behavior in SA
Competition policy is a portion of novel international orthodoxy in the economic policy,
and concurrently, was perceived in SA as a vital aspect of economic transformation. The
competition authority in South Africa has been assisting the private sector to be a level playing
ground, free from the type pf prices and quality manipulation which keeps certain companies
thriving, whereas others struggling to make entry or make any type of headway in the industries.
The barriers to entry in SA’s markets have come down and the authority has created the
environment for prices to decline and quality to improve. For example, the intervention of the
SA’s Competition Commission and Competition Tribunal in the soda ash market culminate in
SA becoming the global lowest-priced soda ash producer. This created the soda ash consumers
influx from Kenya, America and India thereby benefiting SA soda ash industry.
The competition authority intervened in the concrete pipes industry where the prices were
influenced by a concrete pipes cartel encompassing Aveng Africa, Conrite Walls, and Southern
Pipeline Contractors. Such anti-competitive was eliminated thereby leading to a fall in prices of
concrete pipes after the tribunal intervention that disbanded the cartel in year 2007 between 25-
and 30%. This is because five novel firms made entry to the market in regions that were reserved

Competition Policy 4
initially for the members of the cartel. The former members of cartel had to expand their
geographic regions of operations thereby bringing competitive commodity choices to consumers
who were initially limited by outputs of cartel. The prices of concrete dropped by 37.0% and
27.0% in Durban and Johannesburg from mid-2009 to mid-2011. This was a typical case of
consumer being overpriced in the course of cartel existence.
The dramatic reduction in drug price for the treatment of HIV/AIDS following the
commission’s finding that key international drug firms were overpricing. The efforts of the
commission in conjunction with NGOS as well as foundation saw the improvement in QoL of
several South Africans, assisting them to remain active contributors to the SA’s economy
(Competition Act 89 of 1998). The prohibition of the merger between Pick n Pay with Fruit &
Veg by the commissions further removed the anti-competitive behaviors as can be observed
when visiting Food Lovers Market. The work of the commission has been due to strategic and
deliberate emphasis on industries with hugest potential to deliver SA’s economic development
like agro-chemicals processing, food and construction.

Competition Policy 5
References
Competition Act 89 of 1998.
Lipczynski, J., Wilson, J. and Goddard, J., 2005. Industrial organization: competition, strategy,
policy (p. 780). Pearson Education Limited, Prentice Hall, London.
White, L.J., 2008. The role of competition policy in the promotion of economic growth.