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- The Competition Commission told Parliament that several critical sectors were still being dominated by large firms - and that it would introduce measures to address the imbalance.
- Possible measures would include tackling dominant firms by breaking down oligopolies and imposing divestiture.
- The report found the biggest 10% of agriculture firms received 81% of the sector's turnover, while the bottom 50% got only 1.3% of the sector's turnover.
The Competition Commission told Parliament's Portfolio Committee on Trade and Industry that several critical sectors in the South African economy were still being dominated by large firms - and that the regulator would introduce measures to address the imbalance.
Possible measures would include tackling dominant firms by breaking down oligopolies and imposing divestiture - where a dominant company with consolidated power could be compelled to sell off a subsidiary or investments, as outlined in the Competition Amendment Act of 2020.
The Competition Commission briefed the committee on its Concentration Report on Tuesday morning. The report found continued concentration in sectors including agriculture, retail, and pharmaceuticals drove up prices and undermined job creation.
Sources for the data in the Concentration Report included information from the South African Revenue Service (SARS) database on small, medium, and large businesses as well as annual reports for listed companies.
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Competition Commissioner Tembinkosi Bonakele said the report found a lack of competition in South African product markets is likely to constrain the economy in the medium to long term.
Competition Commission chief economist James Hodge said 70% of more than 80 firms in the report fall into the category of highly concentrated industries. Hodge said 60% of firms are only becoming more concentrated, while only 19% of dominant firms are becoming less concentrated.
Hodge said small and medium enterprises (SME) tend to be more employee-intensive than large firms, but that Organisation for Economic Cooperation and Development (OECD) economies average 60% of total revenue from SMEs, and South Africa only averaged half of that.
The report found the biggest 10% of agriculture firms got 81% of the sector's turnover and the bottom 50% got only 1.3% of the sector's turnover. Hodge said concentration in farming also undermined the government's land reform economic ambitions.
Hodge said a recent retail study found exclusive leases kept small grocers out and retail property leases required developers to ensure 75% to 80% of space leased to national chains.
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Hodge said the Competition Commission would strengthen market inquiries to enable the competition authorities to impose remedial action, including divestiture, and other interventions that promote competition.
He said government departments and state-owned entities could assist in breaking down concentration in sectors by prioritising procurement from SMEs and paying them for their goods and services on time.
DA MP Dean MacPherson told the delegation briefing the committee that the more the Competition Commission tried to enforce competition, the more they fail. MacPherson said the commission wanted to become a super-regulator that forces businesses to change how they operate.
Another DA MP, Matt Cuthbert, urged the commission to incentivise large firms to ease up consolidation "instead of crowding them out". He said divestiture was only appropriate when sanctioning companies from countries that commit human rights violations.
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