OPENING a small firm in South Africa is hard.
Apart from the usual risks associated with launching a small- to medium-sized enterprise (SME), South Africa still has something of a culture of anticompetitive internal markets, which discourages the start-up of new entrepreneurial ventures.
In the last 10 days, the competition authorities have announced investigations into "exclusionary conduct" from ticketing agent Computicket and last week they lined up four companies in the cable manufacturing sector for closer scrutiny.
This follows the recent high-profile victory over food producer Pioneer and some of its competitors in the Western Cape, and investigations into the cement sector.
The message which has been sent out is quite clear: when the Competition Tribunal rules, you can expect to be hit hard.
While there is quite a lot of cynicism on just how effective the major fines of the bread manufacturing operations were, I think we focus too much on the monetary side and not enough on the longer-term benefits of some of these rulings.
Already a change for the better
After a conversation with a local entrepreneur who is involved in the bakery industry, it seems to me that the changes are already having an impact on the ground. Pricing and distribution agreements are being revisited, and the little guy is being given a look-in.
Don't get me wrong - as a capitalist I am as blood-thirsty as the next guy, but I can see a lot of long-term benefits to an aggressive and high-profile competition watchdog if I look at the small business sector.
Just like the baker, suddenly you have opportunities emerging in other sectors. If Computicket had 95% dominance in the ticketing sector and you were considering opening a small business in that space, what better time to do so?
Moves like these stimulate investment and innovation, which have a knock-on effect on the rest of the economy. If you're involved in business finance and somebody brought you a business plan two weeks ago that pitted you head-to-head to with a competitor who dominated 95% of the industry in question, would you have been wild about financing it?
Probably not. Fast forward to Wednesday this week and I guarantee you that somewhere in South Africa, there is an entrepreneur dusting off a business plan to take business from Computicket.
However, one sector which seems to be ambivalent to the increasingly aggressive Competition Commission is the financial services sector.
High finance’s silent monopoly
The banks and their regulators argue that controlling the number of new entrants to the sector has contributed to the long-term success and stability of the economy.
Fair enough; I can buy that considering that the banking crisis and our own small bank crisis is still fresh in our minds.
However, what I disagree with is the silent monopoly the JSE for example has on exchange licences.
When the JSE was allowed to merge with the Bond Exchange of South Africa (Besa), it effectively said that investors would only ever have one platform with which they could work.
I have personally dealt with two entrepreneurs who wanted to launch low-cost trading platforms - only to be turned down by regulators who insist that they work with the JSE or apply for an exchange licence, which is like gold.
The JSE may be a smart operator with good technology, but there is a reason they can afford to rent that larny building in the middle of Sandton.
So, it is my humble conclusion that we should be cheering the work of the competition authorities, and that entrepreneurs should be encouraged to speak out when they see evidence of market dominance or anticompetitive behaviour.
Our regulatory authorities take a lot of stick, but here is a case where they deserve a pat on the back.
- Fin24.com