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Have changes to transfer duty rates impacted on home ownership?
Posted: 06-Apr-2018
Linton Reddy and Sarah TruenHome ownership is a goal that most citizens strive for. However, the currently constrained economic environment means that most South Africans will have to wait to own a home. The government can play a role in facilitating this endeavor through a range of fiscal and monetary policy tools. For example, recent amendments to the rate of transfer duties on residential properties may impact on the ability to purchase/finance a home. The evidence, to date, is not particularly promising.Read Article
When inclusive bank lending becomes harmful to consumers…
Posted: 29-May-2017
Ronald RateiwaWell-functioning financial systems support the functioning of all components of the economy, by facilitating transactions and the flow of resources between deficit and surplus economic units (Mishkin, 2007). A key asset of the South African economy is its well-developed financial systems. However, the regulation of such systems is a complex task, and regulatory failures in financial systems pose large risks for the wider economy. Given these concerns, it is interesting to examine some of the characteristics of the South African financial system, especially as regards consumer indebtedness.
Read ArticleTaxes and democracy
Posted: 29-May-2017
Sarah TruenWhile the annual admin of filing tax returns is deadly dull, the theory of taxation itself has some interesting side avenues. Its worth exploring these, given the current policy debate around radical economic transformation, and the appealing simplicity of the arguments that we should tax the rich more to transfer wealth to the poor. International and local experience suggests that it is unlikely to be that simple.
BITCOIN: DIGITAL INSULATION FROM SOVEREIGN RISK?
Posted: 03-Nov-2016
Alex Constantinou & Linton ReddyIt can be argued that Bitcoin has the potential to safeguard the value of your savings, depending on the relative state of each currency. The digital asset has been maturing for almost a decade and our analysis demonstrates that it appears to act as a safe haven in the face of adverse macroeconomic conditions, thus far.
Read ArticleHow much do state owned enterprises really cost us?
Posted: 30-Aug-2016
Sarah TruenSouth Africa has opted to retain state control over a large number of companies which, in many other parts of the world, have been privatised. While state intervention can have an important role to play, for example in sectors where provision of services is important, but difficult to sustain on a commercial basis, there are often ways to achieve these objectives without resorting to state ownership of the organisation delivering the good or service. This obsession with state control has exacted a measurable cost to our economy. Read Article
Will Imprisonment derail collusion or the Competition Authorities' efforts?
Posted: 30-Jun-2016
Alex Constantinou & Linton ReddyMany countries across the globe (including BRICS
countries) now have a competition enforcement regime in place. But why bother?
Why is it so important to promote competition? Economics tells us that
increased competition can lead to lower prices, increased quantities of goods
and services being supplied, greater innovation, improved quality and a wider
variety of choice for consumers. It also drives economic efficiency and
dynamism, which can stimulate economic growth and job creation, thus
contributing to broader policy goals.
So how successful have the South African Competition
Authorities been in enforcing the Competition Act and in sending out the
correct signal to current and would-be cartelists and abusive firms? Read Article
Open source but anti-competitive? A discussion of the EC’s case against Google
Posted: 23-Jun-2016
Genna RobbThe European Commission recently issued a Statement of Objections explaining its preliminary view that Google has behaved anti-competitively in the EU in respect of its Android operating system (OS) and apps. This development is somewhat counter-intuitive, given that Android is an open source operating system, which should in theory should make it easier, not harder, for competitors to develop competing operating systems based on Android. In this article, we try to unpack the EC’s objections in order to resolve this apparent paradox, and then consider some of the possible counter arguments that Google might make.
David against Goliath: does our competition law deter large firms from engaging in predatory conduct?
Posted: 15-Feb-2016
Genna Robb
In September 2015, the Competition Tribunal found that Media 24 had contravened the Competition Act by engaging in a predatory strategy in order to eliminate a small competitor in the community newspaper market in Welkom.[1] The Tribunal found that the prices Media 24 had charged prices for advertising for one of its two titles in Welkom were lower than its cost of producing the newspaper over a sustained period. As the newspapers were distributed for free to readers, advertising costs were the only available source of revenue, so Media 24 was operating the paper at a loss. The Tribunal moreover found that Media 24 had done so with the intention of eliminating its competitor, and that following the exit of the competitor it had raised prices in the market in order to recoup the earlier losses. This had harmed customers (both advertisers and readers) by reducing price competition and limiting choice. Read Article
The impact of Netflix on MultiChoice and the South African TV market
Posted: 25-Jan-2016
Alex Constantinou and Linton ReddyNetflix’s entry into the South African market has created much noise. What might this mean for competition in the South African pay-television market? This is an important question for South African consumers and incumbent rivals, but is also an interesting one for economists.
Read ArticleThe case against OTT regulation
Posted: 24-Jan-2016
Yash Ramkolowan and Genna RobbRegulation of Over-The-Top (OTT) providers may just be raising another barrier to competition in the telecommunications sector, rather than protecting consumers from harm. Read Article
Can mobile money drive competition in financial services in South Africa?
Posted: 16-Nov-2015
Genna RobbAnyone who has recently spent time in Kenya, Zimbabwe or Tanzania could not help but notice the pervasive influence of mobile money on everyday life. Mobile money has changed the nature of payments in these countries, lowering transaction costs, driving financial inclusion and providing consumers and small businesses with easy, cheap and safe ways to transact. Even a cursory comparison reveals that South Africa is lagging far behind in terms of both uptake and innovation. A number of attempts to launch similar solutions in South Africa have failed, although more recent efforts such as MTN’s mobile money offering appear to be more successful. Is South Africa’s divergent experience a result of its sophisticated banking system and different customer demographics? Or is a highly restrictive regulatory environment to blame? This blog, based on research done with the Centre for Competition, Regulation and Economic Development at the University of Johannesburg, attempts to unpack this complex market and analyse some of the reasons we are so far behind our regional peers.
Read ArticleSARS cannot afford not to pursue transfer pricing matters
Posted: 28-May-2015
Alex Constantinou and Andrew SylvesterTransfer pricing is a business practice that, when abused, can result in substantial lost tax revenue for any country. In South Africa, tens of billions of Rands are lost due to abuse of this practice. Given the cost to the country (relative to the cost of enforcement, SARS cannot afford to under-enforce firms who might be engaging in this abuse.
Read Article
‘Brand Match‘ may look appealing, but end up robbing customers of the ability to pit retailers against one another
Posted: 26-Nov-2014
Andrew SylvesterPick n Pay’s new strategy called Brand Match collects weekly prices of their major competitors and drops Pick n Pay’s prices instantly in the event that any competitor has a lower price. This is a power information gathering exercise and signalling tool to competitors which undermines their incentive to drop prices. This change in the competitive dynamic is likely to result in harmful and coordinated outcomes despite no explicit agreement or meeting between competitors. Read Article
How much damage did the construction cartels inflict?
Posted: 06-Jun-2014
Alex Constantinou, Andrew Sylvester and Sifiso MhlabaRecent revelations of collusion in the construction sector in South Africa have led to widespread anger and debate. In June 2013, the Competition Commission of South Africa reached settlement agreements with 15 of at least 21 construction companies implicated in the cartel. Much less has been heard on the matter in recent months, but this apparent quiet might just precede the storm to come. There are strong indications that various parties are preparing legal action to claim damages against specific cartelists, the quantum of which could be substantial. Our estimation finds that total harm arising from 300 construction projects could be as high as R12.3bn.Read Article
Cartels shielded from public outrage still have to worry about damages cases
Posted: 26-Feb-2014
Andrew SylvesterThe massive publicity
surrounding the bid rigging cartel in the construction industry has done much
to highlight the important work being done on a day to day basis by the
competition authorities in South Africa. The public outrage confirms that
society at large buys into the need for competitive markets. With any luck,
further impetus will be given to cartel deterrence by the successful pursuit of
civil damages suits, ideally with damages ultimately benefitting those who were
truly harmed: the poor and marginalised, including learners whose schools did
not get adequate funding to upgrade ablutions and families who continue to live
in informal dwellings.
It is relatively easy to
understand the damage done when schools don’t have toilets and families don’t
have homes. Cases which impact directly on these kinds of products, which are
consumed by the man on the street and are well known, typically attract a large
amount of public attention. This was also seen with the bread cartel. However,
when the product concerned is an obscure intermediate input higher up the value
chain, less outrage seems to be forthcoming from the public, and there is no
indication that customers are planning to sue for damages. Good examples of
this can be found in the construction sector itself.Read Article
Parenting and working
Posted: January 27, 2014
Sarah TruenHaving babies is a necessary part of sustaining economic growth. Without replacement labour force participants, its pretty obvious that economic systems would eventually grind to a halt. But the process of having a baby is incredibly costly – parents must lay out an enormous amount of time, effort and money to make a child into a productive member of the labour force (full disclosure: this is a topic close to my heart, as Truen junior is now just six months old). Read Article
Comparing apples and oranges – the case for regulatory impact assessment
Posted: October 07, 2013
Brent CloetePolicymaking is difficult. It involves opportunity costs, trade-offs, and unintended consequences. Ideally the process should be open and transparent, and should include a vigorous debate on all aspects of the policy being developed: its purpose, cost, mechanics, alternative designs, the likelihood of success, and the like. This is the only way to ensure that fair and balanced policies are developed that take into consideration the welfare of all South Africans and not only that of narrow interest groups. In South Africa the policymaking process often does not live up to these ideals. Luckily there is a tool that can assist with these complex policy decisions, providing a transparent and impartial way of weighing the expected costs and benefits of new policies. This tool is the regulatory impact assessment (RIA). Despite Cabinet having approved the use of RIAs as far back as February 2007, however, RIAs are still relatively rare in South Africa. Read Article
Inferring dominance from market power: a road less travelled
Posted: October 07, 2013
Alexandros Constantinou and Sifiso MhlabaIn South African competition law, dominance is usually associated with high market share (greater than 45%) in the relevant market. While this is intuitive, it may not necessarily always be the case. This is because even with low market share, if a firm can be shown to possess market power, it can also be defined as ‘dominant’. This article explores the potential usefulness of inferring dominance from market power when the boundaries of the market are not clear or difficult to define. In particular, in those cases where market definition is strongly susceptible to being challenged, we believe inferring dominance from market power may be a credible option worth exploring. Read Article
Rising costs in the healthcare sector – who’s to blame?
Posted: October 04, 2013
Fouché Venter, Alexandros Constantinou and Zulaikha BreySouth African medical costs have increased at an average rate of 8.6% per annum between 2010 and 2012. This has led to all sorts of accusations in the media and from the Government - but who exactly is to blame? Our first response is to point a finger at the insurer. The insurer in turn points to the private health care sector who then points to the costs of their inputs and suppliers. This leaves us guessing as to where these cost/price increases truly originate. To answer this question, the entire healthcare value chain would need to be unpacked and methodically scrutinised. As a means of doing this, the Competition Commission (Commission) has released a draft terms of reference for a market inquiry into the private health sector. This inquiry is expected to take years to complete. In the absence of these findings, we consider some of the contributing factors that the Commission will need to investigate.Read Article
Bills for big business
Posted: April 22, 2013
Yash RamkolowanTwo bills published for comment this year paint a highly contradictory path of economic development policy in South Africa – or may actually point to where the government’s real interests lie.On the one hand the Special Economic Zones Bill aims to replace the stunted Industrial Development Zone programme in an attempt to foster growth and development. On the other hand, the Licensing of Business Billl (replacing the Businesses Act of 1991) proposes adding another layer of administration and business regulation on firms. The introduction of these two bills strongly suggests that despite continued rhetoric around the development of SMMEs (and the informal sector) it is often big business that is favoured by government policy, with small firms often paying a higher cost for the unintentional consequences of business regulation and policy. Read Article
Bread consumers should be compensated for bread cartel
Posted: April 04, 2013
Alex Constantinou and Sarah TruenIn December 2006, the
Competition Commission was informed of a potential bread cartel in the Western
Cape. The offending firms were
penalised by the Competition Tribunal for their behaviour. The penalties
imposed by the Tribunal are collected by the National Treasury, so they function
mainly to punish the firms, rather than to compensate market participants for
the damage caused. However, an interesting development in this case has been
that a private collective action by end consumers has also been initiated
against the offending firms. The case has the potential to establish an important principal
about the right of consumers to directly seek redress for the damage done by
firms who abuse the competitive process, and as such, DNA Economics is pleased to be involved in this case. The class action is currently being heard in
the South African courts.
Read Article
Risky seed merger rulings
Posted: November 28, 2012
Alex ConstantinouHistorically, the South African maize seed market has been dominated by three major players, namely the two multinationals Pioneer Hi-Bred International Inc. and Monsanto and the local South African company Pannar Seed. In 2010, Pioneer made an offer to acquire Pannar, and subsequently applied to the Competition Commission for approval. The Commission and Tribunal recommended that this merger be prohibited, but on 28 May 2012, the Competition Appeals Court reversed and allowed the merger to proceed with conditions provided by the merging parties. It also issued an unprecedented cost order against the Commission. This case has raised numerous serious concerns that will linger well beyond the transaction itself and may influence the way in which Competition law is applied in South Africa.Read Article
SAA and Qantas - sharing the pain
Posted: November 27, 2012
Matthew SternSouth African Airways has applied to the Competition Commission for permission to have its long-standing codeshare agreement with Qantas extended for a further three years. In terms of this codeshare, SAA and Qantas have carved up the routes between South Africa and Australia between themselves - with SAA flying to Perth and Qantas to Sidney - thereby circumventing the need to compete with each other. No other airline flies directly between the two countries.
SAA readily acknowledges that this practice is prohibited by law and it is for this reason that they are required to apply for an exemption from the Commission. My objection to this extension is two-fold. Firstly, there is strong evidence to suggest that SAA has taken advantage of this exemption to charge abnormal fares on the routes governed by this agreement, to the harm of all passengers flying between these two countries. Secondly, the grounds under which SAA has applied for this exemption do not hold in this circumstance, and in fact, the opposite would seem to be the case.Read Article
Liquor licensing in South Africa - improving credibility and compliance
Posted: November 27, 2012
Sarah TruenThe liquor industry occupies an interesting policy position, in the crossroads between industrial and health policy. While the domestic industry plays an important role in providing employment and export opportunities (particularly as regards the wine industry), which should be supported, the costs of alcohol abuse to health, human capital development and social stability are significant and need to be minimised. South Africa has a relatively well developed regulatory system in liquor. However, its efficacy has been damaged by the legacy of apartheid and the legal systems which preceded it, and not enough has as yet been done to repair such damage.Read Article
Moving the Moola: Remittance flows from South Africa to the SADC region
Posted: June 22, 2012
Sarah Truen and Stephen ChisadzaSouth Africa is a hub of economic activity in the SADC region, and many migrants move to South Africa in search of a better opportunities and a better life for themselves and their families. The money and goods that these migrants send to their countries of origin are an important source of income for many households in those countries, but for undocumented migrants in particular, there are few formal options to get money home. As a result, migrants often rely on informal channels, such as sending money via taxi drivers, which take an unpredictable amount of time, are fairly expensive, and sometimes result in the loss of funds. Read Article
Waiting for the bus
Posted: February 15, 2012
Sarah TruenLate last year I had a project which required a number of meetings at the National Treasury building in Vermeulen Street. As I live in Johannesburg, it made sense to take the Gautrain to these meetings - the Gautrain bus stop is just outside Treasury, so it should be pretty convenient. In practice, the commute was distinctly less than pleasant. Read Article
Walmart, Massmart and the benefits of competition
Posted: February 24, 2011
Contributed by Sarah TruenWalmart's proposed acquisition of Massmart has been met with howls of fury across many sectors of civil society. The unions are worried about jobs losses, suppliers are worried about the international chain's ability to source product more cheaply offshore, and local retailers are worried about increased competitive pressure. Many of these parties were hoping that the Competition Commission would serve as the first line of defence against Walmart, and have been sadly disappointed by the Commission's recent decision to recommend the merger. Read Article
Riding on innovation to gain market share: The case of EcoCash
Posted: 27-Feb-2019
Mmamoletji ThosagoZimbabwe has three mobile money providers, NetOne, Telecel, and the Econet Wireless group. Telecel is wholly owned by the government with a market share of 1.6%, NetOne is partly-government owned and has a market share of 1.6%, while Econet Group is privately owned and has a market share of 96.8%. This articlebriefly explores the structure and evolution of the mobile money sector in Zimbabwe and considers whether EcoCash’s market dominance should be cause for concern. Read Article
