Budget 2019: BIG ISSUE
COMPETITION COMMISSION: Budget boost put on back burner
An additional R125m has been set aside for the Competition Commission — subject to certain conditions being met
Tucked away on page 51 of the Budget Review is a rather bizarre little note that could be interpreted as a heads-up to all those companies that were thinking of taking advantage of the Competition Commission’s recently announced go-slow.
Just one month after the commission dramatically announced it had run short of funds and was forced to scale back on key market inquiries and investigations, the Treasury has announced it has set aside R125m for the commission "to investigate cartels and anticompetitive behaviour". This is in addition to the commission’s ordinary annual budget.
But — and this is the strange part — the commission will only get the extra money in 2021. And, rather chillingly, payment will only be confirmed "after the economic development department completes its forensic investigation of previous irregularities in the commission".
The FM was unable to get comment from either competition commissioner Tembinkosi Bonakele or commission spokesperson Sipho Ngwema on Wednesday evening, after finance minister Tito Mboweni presented the budget. But it does appear that the Budget Review note is the first public reference to a forensic investigation at the commission.
Ahead of formal confirmation, legal sources suggest the investigation may relate to irregular expenditure flagged by auditor-general Kimi Makwetu in the commission’s 2017/2018 annual report. The irregular expenditure, which only became public when the report was tabled in parliament in September, amounts to R129m. The amount involved irregular procurement of forensic, economic and legal expertise used in commission cases.
In his report, Makwetu said there were numerous supply chain management irregularities and that the commission had failed to obtain sufficient guidance in relation to procurement processes from the National Treasury.
At the time the DA called on economic development minister Ebrahim Patel to establish a commission to investigate allegations that proper tender processes had not been followed. The DA’s Michael Cardo said a law firm run by a former commission executive, Anthony Ndzabandzaba, "had benefited handsomely from the commission’s coffers" and earned more than R10m for work on cartel cases.
In late January, four months after these dramatic allegations, the commission announced it had run short of funds and would have to scale back on investigations until the new financial year begins in April. At the time, Ngwema said the commission had suspended its long-running health market inquiry, slowed the pace of its market inquiries into public transport and data costs and had cut plans for new investigations.
The health-care inquiry was launched in January 2014 and originally aimed to release its final report in November 2015. Ngwema said that by early 2019 the commission had spent R196m on external consultants alone. It had been repeatedly forced to postpone finalisation of the inquiry, partly due to legal challenges and, according to one consultant, because the commission was keen to show it was listening to all stakeholders.
This is in line with its long-term experience, as the commission has frequently struggled to complete market inquiries or finalise investigations into allegations of anticompetitive behaviour in a timely manner. Much of this is attributable to companies under investigation dragging out the process by challenging the commission’s authority or overwhelming it with enormous and often unnecessary amounts of evidence.
One competition lawyer told the FM there is so much at stake for companies under investigation that it makes sense for them to throw as much money at the problem as they can. "There’s no way the commission could match the sort of unlimited spending capacity available to a powerful company," said the lawyer.
The note in the Budget Review comes just one week after President Cyril Ramaphosa signed the Competition Amendment Act.
The act, which has not yet come into effect, gives the competition authorities considerably more powers to tackle high levels of economic concentration and abuse of market power by dominant firms. It also empowers the commission to address limited transformation in the economy. In addition, it empowers the economic development minister to initiate market inquiries.
Could it be that the Budget Review has inadvertently alerted companies to the fact that they have another two years before the commission will have the financial resources to come after them with the necessary vigour?