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News of downgrade not unexpected - Competition Commissioner

Apr 06 2017 05:02
Lameez Omarjee

Johannesburg – Even though reports of the downgrade of South Africa's credit rating to junk by Standard and Poor's are “bad”, Competition Commissioner Tembinkosi Bonakele said South Africans have known for a long time that the economy has been on a low-growth trajectory.

Bonakele delivered an address at the Serious Social Investing Conference at Wits Business School on Wednesday, where he spoke about the role of the commission to promote inclusive economic growth by reducing barriers to competition.

He said that South Africa could no longer continue on an unsustainable path as it would not help to address high unemployment, inequality and poverty.

READ: S&P downgrades SA to junk status

“The fact that economy has been on low growth trajectory is very well known. The fact we have inequality is also quite legendary,” he said.

Bonakele added that the economy is highly concentrated, as there is a universally acceptable concept to “back the big guys”. This has been brought on by the way we have designed industry policies and regulations.

“The policy choices we make today, ultimately lead to all the ethical dilemmas tomorrow,” he said.

Using the example of the big four banks, Bonakele said that we choose to bank with them because there are regulators to protect us. However, if either of the four banks had to “fall” we would end up with a huge crisis.

ALSO READ: Competition Commission prosecutes banks for collusion

He pointed out that the collapse of African Bank, a “smaller player”, did not have major economic ramifications. Bonakele went on to say that smaller players fold all the time and it does not “collapse the economy”.

The current downgrade presents a crisis, and we have many choices to make on how we come out of it, said Bonakele. “The choices we make impact the kind of structure of the market we create for the future.”

To ensure the promotion of inclusive growth, he said big businesses should not only provide finance but mentorship to small businesses. They should think carefully of who they support to ensure development is inclusive and not skewed. “People think things to be done are so complicated and big, and yet they are so simple.”

Supporting smaller players

In an interview with Fin24 following his address, Bonakele said that regulations in the market often create barriers for small players to enter. “You really have gate keeping in the South African economy.”

He encouraged citizens to support smaller players so that they can grow. “In that way you have many; even if one collapses it is not a crisis necessarily.”

READ: Competition Commission raids fresh produce market 'cartel'

He also added that citizens should be more vigilant. The bread cartel the commission investigated resulted from a complaint by a distributor who observed that suppliers were increasing the price at a similar rate at the same time. This shows that the commission's success depends on the vigilance of people.

When it comes to investigating complaints, Bonakele said it’s not about the “number of the complaints”, but rather their substance and if there is reasonable suspicion. “You may complain about anybody, but we have to scratch and see if there is anything beyond the surface.”

He added that although the investigation of the forex collusion by banks was important, the bread cartel was one of his most exciting cases because it was important to many people in South Africa.

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