THE World Bank’s update on the South African
economy highlights anticompetitive behaviour by industrywide cartels as
a major impediment to economic growth and poverty alleviation. It notes
the role competition authorities play in breaking up cartels, which
serve the interests of large players dominating their markets and cosy
supply chains favouring long-standing supplier relationships.
The
bank found that more competition reduces input costs and improves
productivity, creating space for lower prices to consumers. But while
the Competition Commission, Competition Tribunal and appeals court all
serve a purpose, on their own they cannot tackle the causes of
anti-competitive behaviour.
At the root of the problem is the overconcentration of our economy in the hands of a few large players in each sector. The World Bank cites the food, agro-processing, cement and telecommunications sectors as particular culprits, where four or five firms lock up to 90% of the market for goods and services supplied to end-users. This situation is often encouraged by trade associations, which were found to be behind many of the cartels tackled by the competition authorities.
SA’s past isolation from international competition created the incentive for firms to integrate vertically and consume smaller rivals. This was reinforced by apartheid policies.
The legacy is that many sectors are dominated by a few large players who rely on a few dominant suppliers. As a result, small and medium enterprises (SMEs) play a proportionately small role in the economy. This reduces competition and stifles innovation.
Small businesses can be critical drivers of competitiveness because they are forced to innovate constantly in order to survive. In an inclusive society, this innovation is transferred to the broader economy, resulting in improved competitiveness and the ability to access global supply chains. This in turn drives economic growth and employment.
However, under the African National Congress government, small businesses have been stifled by red tape, ill-conceived interventions and punitive labour regulations. Transformation and job creation gains have stalled. The broad-based black economic empowerment (BEE) codes have been unsuccessful in driving enterprise and supplier development because they have created a culture of overregulation and crony enrichment.
Small businesses require a conducive operating environment and access to financial and non-financial support interventions. Larger businesses must recognise that SMEs are important sources of innovation in their own products and seek to integrate them more effectively through inclusive supply-chain practices. Supported correctly, SMEs can act as important catalysts for generating growth and employment opportunities, contributing to poverty alleviation. Without increasing competitiveness, SA’s economy cannot grow or transform.
The depreciating rand has improved competitiveness possibilities, but factors such as the regulatory environment discourage companies from investing. While most of the nation’s workers are not globally competitive, education shortfalls can be mitigated through supply-chain supported know-how sharing. Supply-chain inclusion is a fresh approach to tackling exclusion and anticompetitive behaviour.
It combines the disciplines of strategic sourcing and economic development to remove impediments and provide tools to improve supplier performance.
Where traditional broad-based BEE supplier development approaches have focused on low value, low complexity and non-core categories, a key focus of supply-chain inclusion is to assist SMEs participating in higher value, higher-complexity functions to access larger value chains.
Supply-chain inclusion is a comprehensive, elegant set of tools ideally designed to meet SA’s core challenges. The solution delivers high returns on capital and effort without placing reliance on the government. Because the focus is on commercially viable solutions that leverage existing assets, it provides companies with an attractive alternative to box-ticking BEE compliance.
SA’s economic growth is reliant upon large companies working with small companies with each specialising at what it does best. Blending co-operation and competition has been central to the rise of Asia. South Africans are an innovative people whose political divisions have been exacerbated by factions seeking to control natural resource wealth.
After hundreds of years, that era looks to be passing.
SA’s future as an inclusive society rests upon a broad expansion of employment opportunities. Such a future is within our grasp. Those who enjoy the privileges of positions of responsibility must accept an obligation to work at building the economy.
This requires collaborating with diverse groups of people. SA does not lack talented people. Nor is there a shortage of regulations. What is needed is less regulation and more effort by policy makers to remove the obstacles that constrain talent and ambition.
SA can unlock the nation’s growth potential by aligning the strengths and resources of large companies with the creativity and vigour that is housed in under-resourced smaller companies.
• Chance is a Democratic Alliance MP and shadow minister for small business development
At the root of the problem is the overconcentration of our economy in the hands of a few large players in each sector. The World Bank cites the food, agro-processing, cement and telecommunications sectors as particular culprits, where four or five firms lock up to 90% of the market for goods and services supplied to end-users. This situation is often encouraged by trade associations, which were found to be behind many of the cartels tackled by the competition authorities.
SA’s past isolation from international competition created the incentive for firms to integrate vertically and consume smaller rivals. This was reinforced by apartheid policies.
The legacy is that many sectors are dominated by a few large players who rely on a few dominant suppliers. As a result, small and medium enterprises (SMEs) play a proportionately small role in the economy. This reduces competition and stifles innovation.
Small businesses can be critical drivers of competitiveness because they are forced to innovate constantly in order to survive. In an inclusive society, this innovation is transferred to the broader economy, resulting in improved competitiveness and the ability to access global supply chains. This in turn drives economic growth and employment.
However, under the African National Congress government, small businesses have been stifled by red tape, ill-conceived interventions and punitive labour regulations. Transformation and job creation gains have stalled. The broad-based black economic empowerment (BEE) codes have been unsuccessful in driving enterprise and supplier development because they have created a culture of overregulation and crony enrichment.
Small businesses require a conducive operating environment and access to financial and non-financial support interventions. Larger businesses must recognise that SMEs are important sources of innovation in their own products and seek to integrate them more effectively through inclusive supply-chain practices. Supported correctly, SMEs can act as important catalysts for generating growth and employment opportunities, contributing to poverty alleviation. Without increasing competitiveness, SA’s economy cannot grow or transform.
The depreciating rand has improved competitiveness possibilities, but factors such as the regulatory environment discourage companies from investing. While most of the nation’s workers are not globally competitive, education shortfalls can be mitigated through supply-chain supported know-how sharing. Supply-chain inclusion is a fresh approach to tackling exclusion and anticompetitive behaviour.
It combines the disciplines of strategic sourcing and economic development to remove impediments and provide tools to improve supplier performance.
Where traditional broad-based BEE supplier development approaches have focused on low value, low complexity and non-core categories, a key focus of supply-chain inclusion is to assist SMEs participating in higher value, higher-complexity functions to access larger value chains.
Supply-chain inclusion is a comprehensive, elegant set of tools ideally designed to meet SA’s core challenges. The solution delivers high returns on capital and effort without placing reliance on the government. Because the focus is on commercially viable solutions that leverage existing assets, it provides companies with an attractive alternative to box-ticking BEE compliance.
SA’s economic growth is reliant upon large companies working with small companies with each specialising at what it does best. Blending co-operation and competition has been central to the rise of Asia. South Africans are an innovative people whose political divisions have been exacerbated by factions seeking to control natural resource wealth.
After hundreds of years, that era looks to be passing.
SA’s future as an inclusive society rests upon a broad expansion of employment opportunities. Such a future is within our grasp. Those who enjoy the privileges of positions of responsibility must accept an obligation to work at building the economy.
This requires collaborating with diverse groups of people. SA does not lack talented people. Nor is there a shortage of regulations. What is needed is less regulation and more effort by policy makers to remove the obstacles that constrain talent and ambition.
SA can unlock the nation’s growth potential by aligning the strengths and resources of large companies with the creativity and vigour that is housed in under-resourced smaller companies.
• Chance is a Democratic Alliance MP and shadow minister for small business development
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