EDITORIAL: Government stifles competition
Wider participation in the economy is prevented, say the retail, health-care and data markets
We wrote in praise this week of the Competition Commission’s recommendation that exclusive lease agreements between grocery retail chains and mall owners should come to an end immediately as they are damaging and inherently anticompetitive.
What we did not write about is the government’s destructive role in stifling competition and wider participation in the economy, the common thread running through recommendations of at least three major inquiries in the grocery retail, private health-care and internet-data markets.
In this week’s 650-page retail inquiry report, an entire chapter of findings details how opaque state regulation makes life very difficult for spaza shops to operate legally or expand.
Applying for rezoning is complex. The process is unclear to applicants. It so expensive and time consuming that a single informal trader has to give up days of trading to deal with paperwork. And municipalities have different bylaws which often are enforced erratically and require bribes from shop owners to survive.
The inquiry shows liquor-licensing authorities benefit big players offering them longer hours and keeping trading hours for the small guys so short they can't take advantage of workers who need to shop after work. The inquiry also finds many health regulations without health purpose that do not address storage and handling of food. Regulations that do matter to health are not enforced due to a shortage of local government health inspectors
The detailed explanation of regulation lunacy echoed chair of Consumer Goods Council of SA and Pick n Pay Gareth Ackerman’s complaint that regulation stifled the retail sector.
Ackerman said: “The large volume and frequency of new and revised policies results in considerable uncertainty among government officials in implementing policy and related regulations.”
Ackerman said regulations enabling policy are also often not fully understood or resourced by officials, nor by business, and are frequently and substantially changed before being effected.
There is also evidence of contradictory policy and regulatory level objectives across government departments. This is creating a culture of distrust between the government and business sector when there should be national consensus on how to move the country forward.
The health-market inquiry was much more scathing of the health department, which asked for the inquiry, saying the government had shown “inadequate stewardship” of the sector.
Former chief justice Sandile Ncgobo singled the department out at the launch of the health report, saying: “There is failure to hold regulators sufficiently accountable [and] as a consequence the private sector is neither efficient nor sufficiently competitive.”
The commission’s high data costs panel final report is due on Monday. In the draft findings, the commission said it was “common cause” that the radio-frequency spectrum needed to increase access to the internet was not released by government.
This means industry needs to build more base stations and develop infrastructure to stretch existing spectrum capacities, which costs money.
Calls for more spectrum have been persistently made by NGOs and the industry. But instead a market inquiry was set up to find out what industry and telecoms experts already new. The draft recommendations have included a request that government release spectrum.
“This should then be followed by the urgent assignment of high demand spectrum and cost orientated access to a broader range of facilities to reduce infrastructure costs,” the inquiry said.
One last point: when data, health care and food are overpriced and small business is squeezed by bad laws, the poor suffer the most.
The commission is right to look into the damage brought by dominant market players in the private health-care market, where patients are often subjected to unnecessary and expensive medical procedures, in grocery retail and the mobile phone industry, where consumers are robbed of choice and pay some of the highest data prices in world.
But when it lays the blame at the door of government, President Cyril Ramaphosa’s administration should take a long hard look at fixing regulations that stifle competition and wider economic participation.