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State corruption and private cartels corrode public trust – Patel

Cape Town – Cartel behaviour in the private sector and corruption within the public sector are “corrosive of public trust, they unfairly distribute economic resources and they undermine legitimate enterprise”, Minister of Economic Development Ebrahim Patel said on Thursday.

Patel was speaking at the Competition Commission’s annual competition law, economics and policy conference focusing on competition policy and economic growth in Cape Town.

“Just as we expect business leaders to act within the law – and not to unfairly enrich themselves – so too public officials need to act firmly against corruption and efforts to benefit unfairly and unlawfully from access to public office,” he said.

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“The call for lifestyle audits of political office bearers and public officials are perhaps our equivalent of the market enquiry of the private sector,” he said, referring to the commission’s inquiries into the gas, banking, healthcare and retail sectors.

Explaining the importance of the commission’s work in tackling uncompetitive business behaviour, Patel cited a recent World Bank study into competition in South Africa, which noted the enormous cost of cartel behaviour on development.

“They say in the case of four cartels – in maize, wheat, poultry and pharmaceuticals – products which make up 15% of the consumption basket of the poorest 10%, conservative estimates indicate that around 200 000 people... stood to be lifted above the poverty line by tackling cartel overcharges,” he said.

Rampant culture of collusion in SA

Commissioner Thembinkosi Bonakele told the conference on Thursday that there is a “rampant culture of collusion in South Africa”.

“South Africa has a particular problem when it comes to this,” he said.

A day earlier, Competition Commission acting deputy commissioner Hardin Ratshisusu told media that cartels in South Africa are imposing price premiums that are far higher than the global average.

“Various studies have been done and there is consensus that cartels generally increase goods and services by 10% and above,” he said. “We start at a premium of 15%… and go to over 100%. Our own cartels are particularly bad for the damage that they cause.”

The commission had a major victory this year, when ArcelorMittal agreed to pay a R1.5bn fine for collusion in the steel industry and invest R4.6bn in new capital spending to upgrade its plants and improve its competitiveness.

In the light of this, Bonakele said he asked government for more resources and a new structure to further tackle cartel behaviour.

In addition, Patel said government is looking at further legislative changes to “strengthen the fight against the abuse of dominance, including in respect of excessive pricing practices”.

This will be in addition to the amendments in the Competition Act that came into effect in May 2016, which criminalise cartel behaviour and will see top executives of firms facing jail time on top of fines being imposed.

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