the g spot
Competition Commission bad for business?
If the Competition Commission expected plaudits for its refusal to allow Grand Parade Investments’ sale of Burger King to go ahead, on the basis of public interest, it has woefully misjudged the market. Business groups such as the Southern African Venture Capital & Private Equity Association and Business Unity SA (Busa) have sharply criticised the decision, arguing that the unintended consequences will be profound and that empowerment shareholders will in fact be hurt the most. The FM spoke to Busa CEO Cas Coovadia.
The Competition Commission denies it has overreached its mandate — what do you think?
CC: I guess it depends on interpretation. So the Competition Act was amended to give the commission a public interest mandate as well and I guess it depends on how you interpret that. The commission has been one of the institutions that have been pretty professional, they’ve been thorough in the way they’ve investigated and dealt with issues, and if they now interpret this public interest mandate too broadly and move away from the competitive issue and the impact on competition, then I think it would dilute the very good work they’re doing.
They should have looked at this from a competition point of view and if they were happy from a competition point of view, and given that the purchaser made commitments to address transformation issues, they could have left any BEE issues to the BEE Commission.
You make the point that, ironically, white shareholders wouldn’t suffer the same level of restriction on whom they can sell their shares to.
CC: Black shareholders go into these deals and they purchase shares because they want to realise value, as any shareholder would. Now this says to the black shareholders: "Well, we’re not going to allow you to realise value from your investment because we are concerned about the lack of black shareholding in the entity now." That’s totally discriminatory against the current shareholders. A deal has to be in the interest of the company that’s purchasing it if they want to continue doing business in SA.
Do you think too much emphasis is placed on BEE ownership, as opposed to other means of empowerment?
CC: I think ownership is an essential component of transformation, there’s no two ways about that. But I think that undue concentration of ownership by individuals could be to the detriment of more broader issues.
If we want skills development, SME development and larger companies to procure from black-owned SMEs — incentivise all of that because that then creates a far broader base. It brings more people into the economy, it enables more people to grow their businesses and accumulate assets. The focus and public utterances on certain aspects of transformation need to change.
So even on ownership I would prefer to see far more schemes that promote employee share option schemes and worker ownership. What we need in this country is to ensure that as many black people have a stake in this economy as possible. And those stakes happen through a whole range of initiatives.
There’s an argument that BEE has pushed up the cost of doing business in SA, and stoked fronting and dishonesty. Do the negatives outweigh the positives?
CC: During apartheid, legislative interventions were made to empower a small minority and disempower a vast majority economically — you can’t then say apartheid is over and markets must reign. Legislative intervention had to be made to reconstitute a balanced platform on the basis of which market forces could then develop.
But whether it’s BEE legislation or any other legislation, we have to ask: does this have a positive or negative impact on investment and growth? It’s not transformation that causes corruption — it’s a black person acting corruptly with a government official to enrich themselves: that person is a criminal just as a white person would be a criminal. It’s unfortunate that people in a very binary way have linked corruption to transformation.
Do you anticipate companies pulling back on SA in light of this decision?
CC: We’ve been quite consistent to say that outside of vaccines, the two most critical issues facing the country are investment and growth, and we’ve got to create an environment that says we are open for investment — no buts about it. We need policy certainty, we need political certainty, and this creates an additional hoop. And in an environment where we are competing fiercely for investment, not least with countries to the north of our borders, we have to be very alive to that.
The ratings agencies say SA is all talk, no action. Are you seeing any action?
CC: I don’t think we’re seeing action with the urgency that is required to address the economic crisis we are in.
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