LETTER: SA’s market concentration is a big flaw

Peter Bruce’s recent column refers (“SA’s biggest industrial flaw: the Patel availability factor”, February 15).

The economy is concentrated because it is kept so through trade policies protecting large entrenched producers. The single largest user of SA’s anti-dumping instrument is a monopoly more than 100 years old. This creates a low innovation environment.

Clothing producers are protected with a 45% duty and large subsidies are paid to them, yet employment in that sector has halved in the last 15 years.

The auto industry contributes 2% to GDP but consumes the equivalent amount in subsidies. If we are going to produce electric vehicles (EVs) locally the subsidies will have to be increased significantly to compensate for the large EV subsidies in other countries.

Enormous overinvestment in the scrap mini mills has transferred billions from the productive manufacturing sector to the mini-mills, which cannot survive without perpetual support.

The Industrial Development Corporation’s investment in mini mills is R14bn. The total market cap of ArcelorMittal, which produces 50% of the steel in SA, is R1.2bn.

The master plans should be reducing imports, yet imports are at the highest percentage of GDP in  more than a decade.

You can’t concentrate the market through trade policies and then try to reverse this impact through competition policy interventions. Now we have two problems instead of one.

Donald MacKay
Via BusinessLIVE

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