In a recent interview, economist Dawie Roodt called for the closure of South Africa’s Competition Commission. From time to time we hear such critiques, often framed around the claim that competition enforcement stifles economic growth and deters investment.
We welcome this debate; we should not assume that the importance of competition and inclusion is understood by all. However, unlike Roodt — whose views were extensively cited in the interview — we recognise and respect South Africa’s economic institutions, including the Competition Commission and the Competition Tribunal, and their remarkable accomplishments.
More than 25 years since the competition project began, South Africa has developed a strong and admirable competition law framework. Its institutions have played an important role in bringing more affordable and better-quality goods and services to consumers, creating an environment that encourages economic participation and increasing the competitiveness of South African businesses.
Over this period, markets have evolved; major competition cases have changed the way we think about how they work. To put this in perspective: when the Competition Act was passed in 1998, Takealot, Uber, Facebook, Twitter and YouTube did not exist. Many South Africans did not yet own a personal mobile phone.
In this context, Roodt’s remarks provide an opportunity to reflect on what the Competition Commission has achieved over the years.
This means returning to first principles and considering the purpose of competition policy. From the outset, it was recognised there is a natural fit between pursuing both equity and efficiency. As long as the majority of South Africans remain excluded from meaningful integration in the economy, the country cannot realise its full growth potential.
At its core, the Competition Commission exists to support inclusiveness and sustainable economic growth. This necessarily means resisting an approach of unchecked freedom for incumbents at the expense of competition. The commission’s work in supporting inclusion and efficiency is a sound route towards competitive, accessible markets.
An economy that works for everyone provides a stable and predictable environment for businesses; creates conditions for new competitors, black-owned firms and industries to grow; and delivers tangible benefits to businesses, investors, consumers and workers.
An economy that works for everyone provides a stable and predictable environment for businesses; creates conditions for new competitors, black-owned firms and industries to grow; and delivers tangible benefits to businesses, investors, consumers and workers.
The Competition Commission plays a pivotal role as an informed, expert and constructive adviser to the government on making markets work for all. Consider landmark cases such as those involving the maize meal, bread and flour cartels. And the competition settlements that changed the pricing and licensing of HIV medicines — which helped society by lowering the prices of essential necessities. Other interventions, such as the Covid price-gouging cases, were crucial in protecting vulnerable consumers and rebuilding public trust in markets.
A critical feature is the judicial oversight that underpins the commission’s work. Its decisions are tested in open proceedings before the Competition Tribunal, with further review of decisions by the Competition Appeal Court. These safeguards have earned the commission a reputation for principled, independent decision-making.
The case for competitive markets is supported by a substantial body of empirical evidence demonstrating that competition drives economic growth and enhances productivity. Philippe Aghion — one of the economists awarded the Nobel Prize this year — has previously argued that increased competition could boost productivity growth in South Africa by between 2% and 2.5% a year.
There will always, understandably, be those for whom the pursuit of greater equality and inclusion through competition law poses a threat to entrenched advantages — incumbency, market power and inherited privilege. This is because effective competition policy opens markets to all. When markets are clogged by power and privilege, dominant firms can exclude rivals as well as SMEs and black-owned businesses from participating. While this harms all consumers and workers, it disproportionately harms low-income black households.
Roodt is quoted as arguing that “the only way that you can get a more competitive environment is to remove obstacles to doing business, and then the private sector will compete naturally”. The proposition is that if we remove obstacles to doing business, markets will become more competitive. This is a rather naive argument. Even if there are no obstacles to doing business, markets may not work for all due to, among other reasons, externalities (both direct and indirect), vested interests, corruption and cronyism, high switching costs and strategic behaviour by dominant firms.
While markets can encourage enterprise and efficiency — expanding consumer choice, reducing prices and improving quality — they lack clear rules of the road and do not serve the needs of all, including consumers and workers. This is where the Competition Commission plays a vital role. Its mandate is to promote competition and inclusion, ensuring that markets operate in the best interest of consumers, workers and businesses.
Roodt is further cited as claiming the Competition Commission stifles growth and should be closed in favour of a purely market-led economy. He does not offer any robust evidence of this stifling growth effect. Instead, he suggests that policymakers should focus on removing restrictive labour laws, addressing poor service delivery, and improving what he describes as a “dangerous policy environment”. On businesses colluding, he is quoted as saying, “Let them work together if they want to, let them charge exorbitant prices,” arguing that higher profits will attract new entrants and benefit the economy.
But we know and have seen what happens when competition is absent. Markets characterised by high concentration or monopolies lead to higher prices, lower quality and stymied innovation.
Twenty-five years on, there remains much work for the Competition Commission to do. Any criticism should deepen its resolve to make markets work better for all South Africans. We know the real cost of weak competition: higher prices, lower quality, limited choice and poor incentives for companies to treat customers and workers fairly. Too often, those who can least afford it — vulnerable households struggling with the cost of living, and consumers with limited ability to switch — are hit the hardest.
- Mabasa and Mncube are at Wits University; Ngcaweni is from the University of Johannesburg
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