Picture: 123RF/Ginasanders
Picture: 123RF/Ginasanders

You have price makers and price takers in markets. Consumer protection and competition laws are there to protect the public from suppliers abusing market power by setting unreasonable prices.

But what happens when the customer is the price maker and abuses its market power to set unreasonable prices? It’s not an academic question as this is what the ANC government’s middleman-based Covid emergency procurement policy has done.

It is not that suppliers are driving markets. It is the government as the biggest customer that is doing that. Logically, a powerful customer should drive prices down. But this is not the case if the end-user is the taxpayer and government officials are seeking to enrich themselves at taxpayer cost.

In such cases the government has a vested interest in driving prices up, especially when this maximises the profits of a middleman supplier whose business is based on paying kickbacks. In such cases unreasonably high prices increase the size of the kickback.

It should come as no surprise that the consumer protection laws do not apply in the case of supplies to the government. It should also come as no surprise that the government has refused to buy direct from manufacturers, or that it has set its tender specifications to exclude products manufactured locally.

This enables well-placed middlemen, sometimes so well placed that they are the children of the political elite, to sell products to the government at vastly inflated prices.

No-one tells a gold producer that it cannot take advantage of a high market price because there has been no corresponding increase in the cost of production. That would be absurd. But this is exactly what the Covid pricing regulations have done.

We are told that this is to prevent price gouging but that is rubbish. It is to enable corruption by distorting the market and punishing others who would naturally take advantage of that distortion. It is what the crooks call a sweet deal.

Ian Cox
Via e-mail

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