Broadway Sweets had started as a small family business almost fifty years ago. It had two factories and employed 500 people. The purpose of the submission was to give the Committee insight into the difficulties that small players experience in the sector. Big retailers hugely dominated the sector. Small suppliers could not negotiate properly. Businesses could not grow because big businesses controlled the market. The big businesses like the Pick n Pays made it difficult for Broadway Sweets to be a supplier. Big retailers would simply not do business with you and would give no explanation. You simply got the “we will get back to you” line. Big retail outlets had established relationships in the old Apartheid era and had international connections. The playing field needed to be equalised. Members were provided with insight into the rules that chain stores had which suppliers had to comply with. On the Pioneer Foods collusion there was no prosecution of the directors. No criminal action was taken. SA’s economy had high levels of concentration and was very exploitative. It was very dehumanising and government had to step in. Broadway Sweets supported the Bill.
Members asked about Broadway Sweets’ association with Small, Medium and Micro Enterprises (SMMEs) in its sector. Members appreciated the submission but it would have helped to make inputs on specific provisions in the Bill. Broadway Sweets was asked what type of assistance it had received from the Departments of Trade and Industry (DTI) and Economic Development (EDD) in the promotion of its products. Would Broadway Sweets be willing to meet with the Gauteng Portfolio Committee on Finance to assist it with the difficulties that it was experiencing? Members suggested that Broadway Sweets approach the Competition Commission. Was Broadway Sweets able to access the Competition Commission and Tribunal when unfair practices were observed? If accessed, what was their level of service? Members said that the submission had shed light on what it was like in practice. SA had a monopolistic economy with oligopolistic firms. It was difficult for small business to penetrate the market.
The National Labour and Economic Development Institute (NALEDI), the research arm of COSATU, endorsed the Bill and, like COSATU, commended the intention to address the challenges of economic exclusion and high levels of concentration as well as the racially skewed ownership and control of the economy to ensure economic transformation. It appreciated that the public interest was recognised as key in competition legislation. Market inquiry provisions in the Bill were welcomed as it would assist with changing the profile of ownership and control in SA. The removal of yellow card provisions was welcomed. NALEDI was concerned that section 18A “Intervention in merger proceedings involving foreign acquiring firm” gave the President the power to intervene over mergers involving a foreign acquiring firm that had potential adverse national security implications. This could lend itself to abuse and hence needed careful deliberation.
Members noted that some stakeholders were unhappy with the use of the term “national interest”. Was NALEDI pleased with its use in the Bill? NALEDI was asked for its take on the use of regulations versus guidelines. Some stakeholders had said that giving the Minister the power to intervene amounted to interference - how did NALEDI feel about this? Members did pick up that NALEDI shared COSATU’s view that regulations strengthened the Bill and did not scare off Foreign Direct Investment (FDI). A balance was needed between FDI and national interest.
The Federation of Unions of SA (FEDUSA) and National Union of Leather and Allied Workers (NULAW) fully supported the introduction of the Bill and viewed it as a means to address the challenges of economic exclusion, concentration and inequality. Some of labour’s proposals tabled at NEDLAC were not accepted. These included matters dealing with employment, the handling of mergers with public policy implications involving foreign firms, creeping concentration, fines and penalties and warning labels. The Bill focussed on transformation and on mergers that took the interests of the public into consideration. FEDUSA was pleased that trade unions and workers would be allowed to participate in market inquiries. The insertion of the new section 18A which allowed the Executive to consider national security when a merger involved a foreign acquiring firm was welcomed. FEDUSA was pleased about the increase in the maximum administrative penalty to 25% of a firm’s annual turnover in the Republic and its exports from the Republic.
FEDUSA was asked if there was anything left out on the Bill as far as non-negotiables for unions that the Committee could lobby for. Were regulations good enough to deal with business practices? If not, what modalities could be applied? The Unions were asked their views on the merger matter. Had the court judgement covered everything? How did mergers affect the position of FEDUSA? Members asked if the Bill had taken policies of beneficiation and localisation into consideration. Members observed that all the unions welcomed the participation of workers in the higher echelons of the corporate sector. How could one prevent those workers from being co-opted to the detriment of lower rung workers?
The South African Clothing Textile Workers’ Union (SACTAWU) has more than 110 000 members who were employed in the clothing, textile, footwear, leather, laundry, distribution and related sectors. SACTAWU was an affiliate of COSATU and supported the Bill. SACTAWU participated at the NEDLAC negotiations. The Bill was a negotiated outcome. SACTAWU was pleased that the market inquiry tool was being strengthened to deal with economic concentration and would assist with de-concentrating the economy. It supported the veto of mergers that may affect national security as currently there was no provision in SA’s legislation which provided for a legal basis for government to intervene in mergers with national security implications. SACTAWU supported the increase in penalties that firms had to pay when they were involved in cartels and collusion. On price discrimination SACTAWU was pleased that the burden of proof was shifted to the dominant firm. It was pointed out that “fair” was a term used in other legislation and that it was not an issue. The Minister would publish regulations that would speak to fair prices. The removal of the yellow card provision was welcomed.
SACTAWU was asked who the six dominant players in its sector were. Members noted if there vigorous interaction with business at NEDLAC, why had all of them not attended the Committee public hearings. Were there any changes that SACTAWU wished to make to the Bill? Did SACTAWU wish to make a recommendation about the removal of the yellow card provision? Even though fairness and unfairness was heavily contested terrain, Members observed that SACTAWU felt that Bill covered the issue of fairness. Could it be contested? Members asked if businesses were represented by lawyers at NEDLAC. What did SACTAWU make of submissions made by business? Were the submissions subjective? On consequence management SACTAWU was asked if it was covered by the objects of the Bill or could more be done. Some stakeholders thought the Bill would scare away FDI. How did SACTAWU feel about this?
The Helen Suzman Foundation is a non-governmental organisation whose main objective was to defend the values of SA’s constitutional democracy with a focus on the rule of law, good governance and accountability. The Foundation endorsed the objectives of the Bill and recognised the constitutional imperative found in section 198 of the Constitution which set out the governing principles of national security in SA. The Foundation was disappointed that none of its recommendations made during the public hearings in the National Assembly were taken into consideration. The current submission was confined to comments on section 18A of the Bill. There were concerns about the appropriateness of locating section 18A in the Competition Act, the absence of certain definitions, the lack of clarity on the appeal and review processes, the pre-decision engagement process, the list of factors in section 18A(4), notification requirements for intended merger, that the President may delegate determination in section 18A(15) and lastly the appropriate balance between national security interests and the protection of an open investment policy.
Members emphasised that all submissions were taken seriously and that differences of opinion were appreciated. If something was not included in the Bill then it did not mean that it was not important. The Committee had Parliamentary Law Advisers at their disposal to assist if there was anything amiss. Members asked if it was the Foundation’s intention to minimise punitive measures and to incentivise investors. They asked for the Foundation’s views on the skewed patterns of production and distribution in SA and noted the high unemployment rate. Was it correct that the Foundation held the view that national security should not be in the international arena of competitive law.
Sakeliga is a not-for-profit organisation representing more than 12 500 members in businesses across different sectors of the South African economy. Sakeliga had made inputs on the Bill during the National Assembly public hearings but not many of its suggestions had made it into the Bill. Sakeliga contends that the Bill would exacerbate excessive and costly interference with the market economy. Such interference was likely to hamper SA’s economic recovery and progress. At worst, an increasingly punitive competition dispensation may severely disincentivise local and foreign investment and commercial expansion in SA which was likely to harm the local business community. The proposed amendments may run foul of provisions in the Constitution, international law and existing trade agreements. Sakeliga wished to emphasise that government could attain its goals of transformation using less intrusive means to the workings of a market economy. Rather, the liberalisation of markets and the curtailment of harmful state monopolies should be the proper and urgent goal of SA’s competition authorities.
Members asked if Sakeliga was a non-profit organisation why its website stated that it represented business and acted in the interests of business. How was Sakeliga representative of the South African people? On creating new jobs, Sakeliga was asked if it felt the interventions by President Cyril Ramaphosa and NEDLAC would make a difference. Members were concerned that Sakeliga considered labour to be a resource or commodity. Members pointed out that Sakeliga was against interventionism by government in the free market economy. Did Sakeliga feel that the best interests of consumers were not being taken into consideration as it said that consumer interests were not represented at NEDLAC? Most Members did not share Sakeliga’s view that there were state monopolies. Members agreed that the SA economy was monopolised but it was not by the state but by the private sector. What did Sakeliga have to say about only 496 companies in SA controlling its entire economy? Sakeliga was asked to comment on small business being shut out by big business.
The Chairperson concluded that the Department would respond to all the submissions. Thereafter the Committee would deliberate on the submissions and responses given.
Broadway Sweets submission
Mr Braam Hanekom who did corporate social work for Broadway Sweets provided some background on the company. Broadway Sweets had started as a small family business almost fifty years ago. It had two factories and employed 500 people. The purpose of the submission was to give members insight into the difficulties that small players experienced in the sector. Big retailers hugely dominated the sector. Small suppliers could not negotiate properly. At least workers had unions to negotiate on their behalf.
Mr Nazir Ahmed Osman Owner/Director of Broadway Sweets said that he was representing five businesses experiencing the same challenges as he was but that they chose to remain anonymous for fear of being victimised. The big retailers could simply not do business with one any longer and would give no explanation. You simply got the “we will get back to you” line. The Bill stated that if a business had over 15% stake in the sector then it was dominant. Pick n Pay and Checkers said that they did not have a 15% stake. It was a technicality that they relied on. He felt this to be a problem in the Bill. Businesses could not grow because big businesses controlled the market. The big businesses like the Pick n Pays made it difficult for Broadway Sweets to be a supplier. Broadway Sweets had at one point supplied 500 small hawkers in a township in Benoni but after a Shoprite opened up they had to close down. Who was to employ these persons? He asked why impact studies were not done when big businesses intended to open up shop. When a church/mosque was to be built then an impact study would be done on traffic congestion etc. These big retail outlets had established relationships in the old Apartheid era and had international connections. The playing field needed to be equalised.
After democracy one believed the playing field to be equal but the reality was that it was not. Big companies like Tiger Brands got good product placement in retail chains. He was simply told by the retail chains that Beacon supplied them with sweets. It was a free market economy so they could choose who to supply them. He elaborated on rules that chain stores had. There was firstly a rebate system that was not transparent. They wanted a 13-15% rebate on top of the best price you gave them. Even though the information was confidential he had found out that Tiger Brands was only charged a 5% rebate. Secondly the supplier had to absorb loss suffered due to margin degradation. For example, a packet of sweets sold to them for R20 which they retailed for R30 but if margin degradation meant they sold the sweets for R25, then the supplier had to pay them the R5 difference they had lost in profit. How could a supplier guarantee profit margins? If you do not abide by these rules then chain stores refuse to stock your product. Thirdly a supplier was required to buy shelf space from the chain store. So in essence the supplier was subsidising the chain store rental. For all these reasons small suppliers could not survive. Pioneer Foods had paid a fine of R1bn for the bread scandal. Thereafter the price of bread went up and so the consumer had to absorb the fine. There was no prosecution of their directors. SA’s economy had high levels of concentration and was very exploitative. It was very dehumanising and government had to step in.
Mr E Makue (ANC, Gauteng) asked to what extent Broadway Sweets had an association with Small Medium and Micro Enterprises (SMMEs) in this particular area. He appreciated the inputs made but said it would help if specifics could be had on the Bill itself. Broadway Sweets was asked what type of assistance it had received from the Departments of Trade and Industry (DTI) and Economic Development (EDD) in the promotion of its products. Would Broadway Sweets be willing to meet with the Gauteng Portfolio Committee on Finance to assist it with the difficulties that it was experiencing?
Mr Osman replied that Broadway Sweets dealt with 20 000 small hawkers, retailers and tuck shops. They were taught about mark ups. They were even provided with tips via SMS. All these activities were done in-house by Broadway Sweets staff. He said that the actions of wrongdoers at big firms should be criminalised. People that were responsible for what had happened at Tiger Brands were not prosecuted. They were still in their positions and went on as if nothing had happened. Somehow there should be a way to do this. He felt that the DTI and the EDD could do more to support small business. Small businesses struggled with finance and to come up with business plans. He served on the Small Enterprise Finance Agency (SEFA) board. He suggested that the Small Enterprise Development Agency (SEDA) and SEFA work closer together to ensure that small businesses received finance. The Industrial Development Corporation (IDC) assisted bigger businesses and had even given Broadway Sweets a loan. The interventions of government were working. He was fully in favour of meeting with the Gauteng Portfolio Committee on Finance. It would allow members of the Gauteng Provincial Legislature to hear firsthand what was happening in practice.
Mr L Magwebu (DA, Eastern Cape) referred to the shifting of the onus onto the dominant firm and said that Broadway Sweets needed to access the Competition Commission if the need arose. Broadway Sweets had stated that the Competition Commission had to be funded properly as big companies had the budget for top lawyers. He asked if Broadway Sweets was able to access the Competition Commission and Tribunal when it observed unfair practices and what was their level of service like.
Mr Osman replied about the provision placing the onus on dominant firms by explaining that the small firm did not have the capacity to argue the case. The dominant firm was required to prove that it was being fair. It was important for dominant firms to account to government. He felt more legislation was needed to hold them accountable. He had not laid a complaint with the Competition Commission. He was of the opinion that going to the Competition Commission was like laying a charge with the South African Police Service (SAPS).
Mr B Nthebe (ANC, North West) noted that Broadway Sweets had crystallised what Members were saying all along. There was a monopolistic economy with oligopolistic firms. He made reference to a small construction company working on a project when the big boys in construction had instructed cement suppliers not to supply the small company with cement. It was difficult for the small guy to penetrate the market. How was the small guy expected to survive? He appreciated the input but felt that Broadway Sweets had stopped short of speaking to practicalities that it wished to be inserted in the Bill.
Mr Osman replied that the example of the small construction company was the way in which big business forced the small guy to close his doors. He felt that big business should be forced to show how they assisted small business. On practical measures, he said that some laws would be bypassed by chain stores. The reality was that small business was shut out. Big business was accountable to no one. Chain stores only reserved shelf space for the likes of Simba and Willards brands. The small guy did not stand a chance due to the many pre-conditions prescribed to them. He said Pick n Pay had donated R10 000 to a blind school but it had spent close to R100 000 on advertising the donation.
Mr Hanekom said that the scenario could be likened to that of David and Goliath. There was a need to confront the injustices. Broadway Sweets did have capacity as it produced around 2m Stumbo lollipops per day. Broadway Sweets was however ignored by retailers. The product was exported to Nigeria and Zambia but was ignored by local retail stores. The Bill provided some teeth even though it was not perfect in all respects. Broadway Sweets supported the Bill.
National Labour and Economic Development Institute (NALEDI) submission
Ms Hameda Deedat, NALEDI Acting Executive Director, stated that NALEDI as the research arm of COSATU endorsed the Bill. Like the COSATU, NALEDI applauded the amendments proposed in the Bill and commended the intention to address the challenges of economic exclusion and high levels of concentration as well as the racially skewed ownership and control of the economy. NALEDI endorsed the fact that the main focus of the Bill was economic transformation. It appreciated the fact that public interest was recognised as key in competition legislation. This bode well for labour as could be seen on the Walmart merger when an unfavourable merger was prevented when it was found to be wanting and not in the public interest. NALEDI was pleased that through the Bill the Competition Commission would have the teeth to make the necessary impact as high levels of market concentration could negatively impact economic inclusion. The Bill fostered competition amongst businesses which was good for new participants especially black entrepreneurs. Market inquiry provisions in the Bill were welcomed as it would assist with changing the profile of ownership and control in SA. The powers granted to the Competition Commission on market inquiries were appreciated. SA was merely following best practice and NALEDI fully endorsed the approach. There were two amendments in the Bill that affected collusion which NALEDI welcomed given the extent of collusion uncovered and the likely use of different strategies of firms to collude in ways which would be more difficult to identify. The removal of yellow card provisions was also welcomed. On mergers and acquisitions the Bill introduced section 18A on “Intervention in merger proceedings involving foreign acquiring firm.” The provision gave the President to power to constitute a committee which had to be responsible for considering whether the implementation of a merger involving a foreign acquiring firm may have an adverse effect on the national security interests of the Republic. NALEDI was concerned that the provision could lend itself to abuse and hence needed careful deliberation. The Competition Appeals Court would now allow the Minister to make representations and since the Minister represented public interest the voices of the marginalised would now be heard.
Mr Makue appreciated the information that NALEDI provided. He asked if NALEDI had anything new to add to the Bill. Some stakeholders were not pleased with the use of “national interest”. Was NALEDI pleased by its inclusion in the Bill? What was NALEDI’s take on regulations versus guidelines?
Ms Deedat responded that the NALEDI submission did identify things in the Bill which could be improved on. Essentially there was a need for mechanisms to facilitate the process. The Bill could be a good bill. NALEDI would have liked the Bill to be stronger. At the moment NALEDI was pleased with the Bill. At NEDLAC there had been a great deal of contestation about “national interest”. NALEDI was pleased if there was a common understanding. She said that the Minister of Economic Development should be responsible for regulations and guidelines. Who would regulate? It all depended on the roles and responsibilities of the Minister. It needed to be teased out. NALEDI supported regulations as they were binding and guidelines were not. There was a need for a regulator. The regulations needed to be clear. There was best practce that could be looked at.
Mr Nthebe said that some submissions felt that giving the Minister of Economic Development the power to intervene amounted to interference. How did NALEDI feel? It was clear NALEDI shared COSATU’s view that regulation should be tightened and that the Bill would not scare off Foreign Direct Investment (FDI). A balance was needed between national interest and FDI. Many lessons had been learnt from the Walmart merger.
Ms Deedat pointed out that there was no evidence to show that FDI leads to growth. It did lead to unemployment and underdevelopment of which SA was a case in point. She felt that SA was being raped. There were tons of illicit flows amounting to trillions of rands. FDI investors were not interested in creating employment. SA needed to ensure that FDI had to comply with the country’s terms and conditions. It all depended on how FDI was negotiated. Foreign investors were not in favour of the Bill. NALEDI would provide the Committee with written feedback on the Walmart judgement.
The Chairperson said that Clause 4 stated that the Minister must make regulations in terms of section 78. The Bill mentioned the process involved in the development of regulations. There should be consultation and comment on the draft regulations.
Federation of Unions of SA (FEDUSA) / National Union of Leather and Allied Workers (NULAW)
Mr Ashley Benjamin, FEDUSA Vice President: Education and Training, stated that FEDUSA fully supported the Bill and viewed it as a means to address the challenges of economic exclusion, concentration and inequality. He pointed out that some of labour’s proposals tabled at NEDLAC were not accepted. These included matters dealing with employment, the handling of mergers with public policy implications involving foreign firms, creeping concentration, fines and penalties and warning labels. Some of the commentators who stand opposed to the Bill argue that the amendments would deter investment and growth. FEDUSA did not share these views. In fact economic concentration, collusive behaviour and anti-competitiveness were an international problem and the Organisation for Economic Cooperation and Development (OECD) had designed interventions to reduce the harm arising from anti-competitive practices and mergers. FEDUSA believed that the Bill would undo the concentration in the economy, promote investment, lead to a reduction in prices with a greater focus on jobs and promoting worker ownership. The Bill focussed on transformation and mergers and took the interests of the public into consideration. FEDUSA was pleased that trade unions and workers would be allowed to participate in market inquiries. It welcomed section 18A which allowed the Executive to consider national security when a merger involved a foreign acquiring firm. FEDUSA was pleased about the increase in the maximum administrative penalty to 25% of a firm’s annual turnover in the Republic and its exports from the Republic during the firm’s preceding financial year. FEDUSA endorsed the provision which allowed the Minister to appeal merger decisions, under certain circumstances, to the Competition Appeal Court when the Minister believed public interest issues, including employment, were not duly considered. It welcomed the amendments which made changes to the price discrimination section affecting Small, Medium Enterprises (SMEs) and black owned businesses who were often the victims of price discrimination which inhibited their increased growth and participation in the market economy.
Mr Nthebe asked if there was anything left out of the Bill that were non-negotiables for Unions which the Committee could lobby for. Were regulations good enough to deal with the business practices? If not, what modalities were there that could be applied? He asked the Unions for their view on the merger provisions. Had the court judgement covered everything? How did mergers affect the position of FEDUSA?
Mr Benjamin replied that organised labour was united if things were in the national interest. Even with business there was agreement on some things if it was in the national interest. On non-negotiables, he conceded that sometimes you win and sometimes you lose. Some priority issues for FEDUSA were fines and warning labels. There was a need for a strong and tight penalty regime. As things stood the penalty regime was not strong enough. Additionally, there needed to be stronger focus on warning labels. If you collude once, then you should be penalised severely. There was an aspect of self regulation where an appeal was made to business not to collude. He felt that the Act created a loophole for collusion to take place. If people knew what the penalty was, then it was no big deal. The profits to be made far outweighed the penalty to be paid. This should be strengthened in the regulatory regime.
Mr Makue asked if the Bill had taken policies of beneficiation and localisation into consideration as well. All the unions seemed to welcome the participation of workers at high echelons in the corporate sector. How did one ensure workers were not co-opted to the detriment of lower rung workers?
Mr Benjamin replied that the Bill would create greater equality. Unions had a greater say. The focus was on the protection of jobs and not necessarily shareholding. The Bill was creating an enabling environment.
South African Clothing Textile Workers’ Union (SACTAWU) submission
Mr Etienne Vlok, National Industrial Policy Officer, explained that SACTAWU had more than 110 000 members who were employed in the clothing, textile, footwear, leather, laundry, distribution and related sectors. SACTAWU was an affiliate of the COSATU. SACTAWU supported the Bill. SACTAWU participated at the NEDLAC negotiations. The Bill was a negotiated outcome. SACTAWU was pleased that the market inquiry tool was being strengthened to deal with economic concentration and would assist with de-concentrating the economy. It supported the veto of mergers that may affect national security as currently there was no provision in SA’s legislation which provided for a legal basis for government to intervene in mergers with national security implications. There was international best practice to support it. The role of the Executive as set out in the Bill was appreciated and supported, especially on mergers and regulations. SACTAWU supported the increase in penalties that firms had to pay when they were involved in cartels and collusion. On price discrimination, SACTAWU was pleased that the burden of proof was shifted to the dominant firm. He pointed out that “fair” was a term used in other legislation and that it was not an issue. The Minister would publish regulations that would speak to fair prices. The removal of the yellow card provision was welcomed.
Mr Makue asked who the six dominant players were. If at NEDLAC there had been vigorous engagement with business, why had business not come in large numbers to the public hearings of the Committee. He asked if there were any other changes that SACTAWU wished to make to the Bill. Was SACTAWU pleased with the yellow card provision or did it have a recommendation?
Mr Vlok named the six dominant companies as Pepkor, Edcon, Truworths, Woolworths, Foschini and Mr Price. They had a great deal of power. He could only speculate why business had not showed up in full force. He did point out that at the NEDLAC process business had agreed to a package of proposals. Perhaps there were proxies who were representing them. SACTAWU was pleased that the yellow card provision had been removed. Business had objected to it. Compromises had been made at NEDLAC.
Mr Nthebe noted that SACTAWU had a rich history in law making especially on competition legislation. It would seem that fairness and unfairness was contested terrain. SACTAWU was of the view that legislation did cover the issue of fairness. Could it be contested? He asked if SACTAWU submission was saying that at NEDLAC business was represented by lawyers. He asked what SACTAWU made of the submissions by business to the Committee. Were the submissions subjective? On consequence management, he asked if SACTAWU was covered by the objects of the Bill. Could more be done? Some of the inputs said that FDI should not be scared off. How did the SACTAWU feel?
Mr Vlok replied about fairness being subjective and noted that there were safeguards in the Bill i.e. regulations were to be published. Even if fairness was not defined, there were other areas of law where “fair” was used, for instance in labour law. On lawyers representing business, there were representatives of big business and representatives of big law firms. Whether lawyers were representing themselves or big business like MTN or SASOL, one could speculate. Were they speaking to what was best in law or what was best in their client’s interests? Were they being subjective or objective? On the objects of the Bill, SACTAWU wished for the Bill to be implemented. On the assertion that the Bill would scare off FDI, he said stakeholders were using scare tactics not to implement the Bill. Any foreign investor would take into consideration growth in SA, equality laws and poverty. There was a need to change the current trajectory. If there was concentration in a market, the investor would be concerned as it would affect the making of money. This was the view of the World Bank. Major obstacles to growth were inequality. Major business was hogging all the profits. It was incorrect to say that FDI would suffer if the Bill was passed. SACTAWU felt that FDI would increase if the Bill was passed.
Helen Suzman Foundation submission
Ms Kimera Chetty and Ms Mira Menell Briel, Legal Researchers, took turns making the submission. The Helen Suzman Foundation was a non-governmental organisation whose main objective was to defend the values of SA’s Constitutional democracy with a focus on the rule of law, good governance and accountability. The Foundation endorsed the objectives of the Bill, namely to address high levels of concentration and the skewed ownership profile of the economy, and encourages the promotion of administrative efficiency of the Competition Commission and Tribunal. The Foundation recognised the constitutional imperative found in section 198 of the Constitution which set out the governing principles of national security in SA. The Foundation was disappointed that none of its recommendations made during the National Assembly public hearings were taken into consideration. The Foundation’s concerns remained the same and were compounded by the further amendments made in the B version of the Bill.
The current submission was confined to comments on section 18A. Their concerns were the appropriateness of locating section 18A in the Competition Act, the absence of certain definitions, the lack of clarity on the appeal and review processes, the pre-decision engagement process, the list of factors in section 18A(4), notification requirements of intended merger, that the President may delegate determination in section 18A(15) and the appropriate balance between national security and protection of an open investment policy.
The Foundation felt that if the identified legislative deficiencies were remedied it would strengthen the Bill by doing away with vagueness, over-broad definitions and factors, as well as the potential for ambiguity in interpreting certain clauses. Additionally, there was a need to clarify the roles of various actors subject to the Bill, such as the Competition Commission, Tribunal and Appeal Court as well as the committee. Inputs on operations and mechanisms sought to optimise the internal working relationship between these bodies, as well as with merging parties. The Foundation took cognisance of the need to balance national security interests of SA with encouraging an economic environment that was open and receptive to foreign investment. It felt the inputs that it made allowed for these priorities to be considered in a way that benefitted SA as a whole.
Mr Makue stated that submissions made by stakeholders were taken seriously. Differences of opinion were appreciated. If there was something not included in the Bill, it did not mean that it was not important. The Committee had Parliamentary Law Advisers to assist it if anything was amiss. He was not convinced that citing examples of the USA, Canada and Australia was the best thing to do. The USA was protectionist and Canada was not the best example. Trade should be fair to the citizens of SA. In the Foundation’s concluding remarks mention was made of the “committee” needing to be rational. Was the Select Committee on Economic and Business Development being referred to? He said that Members of Parliament participated as Parliament in international fora.
Ms Chetty responded that rationality was a legal concept. She was aware that Members sat on international high level panels. The high level discussions did not always filter down to the public and investors. On the examples of developed countries, the Foundation would have used developing economy examples if they were available. Even the Minister had spoken to the examples given by the Foundation.
Mr Nthebe noted that if it was the Foundation’s intention to minimise punitive measures and to incentivise investors, what its views were on the skewed patterns in SA and the high unemployment rate of 27.2%. The Foundation seemed to be of the view that national security should not be in the arena of competitive law. It suggested that section 18(A) should be taken out. The Foundation was asked if it felt that Parliament was unable to pass law on national security.
On inequality, Ms Chetty replied that the Foundation endorsed the objects of the Bill to amongst others address concentration in the economy etc. The Economic Development Department (EDD) had a role to play to balance out the inequality that was prevalent in the private sector. It was not something that the Foundation disputed. She said that investors wished to have transparency and no corruption. There was a lack of transparency. The issue was not about trusting Parliament. It was about the rule of law. The law needed to be clear.
On section 18(A), Ms Briel replied that the Foundation was not making an allegation on the broader punitive measures or the larger regulatory framework. It was suggesting that section 18(A) be removed from the Bill and placed in different legislation or if it were to remain in the Bill the amendments proposed by the Foundation would stand.
Mr Makue asked Ms Briel if the “committee” referred to in its conclusion was the Select Committee.
Ms Briel replied that the committee” referred to was the committee mentioned in section 18(A). The Foundation was not alleging that the Select Committee was taking irrational decisions.
Mr Daniel Du Plessis, Legal Analyst, stated that Sakeliga was a not-for-profit organisation registered in SA which represented more than 12 500 members in businesses across different sectors of the South African economy. Sakeliga had made inputs on the Bill when at the NA public hearings but not many of its suggestions had made it into the Bill. Hence it was making the current inputs on the Bill.
Sakeliga contends that the Bill would exacerbate excessive and costly interference in the market economy. Such interference was likely to hamper SA’s economic recovery and progress. At worst, an increasingly punitive competition dispensation may severely disincentivise local and foreign investment and commercial expansion in SA which was likely to harm the local business community. Importantly, it foresaw this broadly harming most of SA’s communities which relied on a growing and vibrant commercial environment for their employment, livelihood and exit out of poverty.
The proposed amendments may run foul of the Constitution, international law and existing trade agreements. Sakeliga wished to emphasise that government could attain its transformation goals using means less intrusive to the workings of a market economy. Rather the liberalisation of markets and the curtailment of harmful state monopolies in its estimation should be the proper and urgent goal of SA’s competition authorities. He referred them to Sakeliga’s written submission that addressed specific clauses in the Bill.
He noted that SA was disregarding labour as a resource. On mergers and acquisitions SA needed to have an open market internationally. The presumption was to protect national industries. Labour could be used for alternative purposes. The problem with competition regulation was that someone had to pay the price. The consumer was not adequately protected. On price discrimination, there was the intentional charging of different prices to different people for the same product. Price was a relative concept and SA was one of the few jurisdictions that wished to influence price through competition law. What was the incentive to a producer to produce a product if he was limited in what he could charge? Competition law was not where it should be. Industrial production in SA was at its lowest since 2008. Unemployment was high. The competition regime in SA was to be distinct in that it took into consideration the public interest. However, there needed to be an effective use of resources to lift South Africans out of poverty.
Mr Makue observed that if the Sakeliga was a non profit organisation why on its website it stated that it represented business interests. Sakeliga acted in the interests of business. How was Sakeliga representative of the South African people? He asked on youth and the creation of new jobs whether the Sakeliga believed the interventions by President Cyril Ramaphosa and NEDLAC would address it. On international trade obligations, Members participated in World Trade Organisation (WTO). From what Members observed, there was unhappiness at what was happening in the global trade arena. He was concerned about Mr Du Plessis referring to labour as a resource. How could labour be regarded as a commodity? He pointed out that at the end of the Sakeliga submission, the statement was made that the free market was not as free as it ought to be due to interventionism by government and that Sakeliga had could not support this type of increasingly punitive competition interventionism.
Mr Du Plessis responded that the Sakeliga was a non profit organisation created by business. Its members were in favour of a free market. What was good for business could be good for SA as a whole. The organisation was formed by the Afrikaner community. Sakeliga represented business. On the initiatives by President Ramaphosa, he said that Sakeliga was sceptical. He noted that the problem was that business and government did not control the economy. The economy was a system. There was no way that government could save it if the market did not allow it. There needed to be a proper rationale. On international trade obligations, Sakeliga was not pleased with international trade as it was. For instance, the USA had discretion to end the African Growth and Opportunity Act (AGOA) at any time. It was a unilateral trade agreement. Disregarding rules or soft policy decisions could have an impact. Of all USA’s investment only 1% went to the developing world. SA needed to be a competitive destination.
He replied that labour was a resource but that it was a resource under the control of the worker. He felt that labour as a resource had been artificially limited. Workers were not allowed to use their resource. People should be empowered to use their own abilities. Was the market free? In practice there was much contention over it. For the most part it was free. The Bill infringes on the vestiges of a free market. It limited producers and consumers. The best way to encourage freedom was to trust consumers and to trust producers.
Mr Nthebe asked if it was correct that Sakeliga believed that consumers’ best interests were not being taken into consideration. That consumer interests were not represented at the NEDLAC process. It stated that small business had its freedom to trade impeded on. The SA textile industry almost collapsed had freedom of trade not been impeded upon. He disagreed with Mr Du Plessis that there were state monopolies. Yes, the economy was monopolised but it was by the private sector and not by the state. The Committee had received information that 496 companies in SA ran its entire economy. What did Sakeliga have to say? Sakeliga’s view was the Bill would harm the business economy. Yet Members had heard how Broadway Sweets for fifty years had been trying to penetrate markets. Big retail stores were shutting them out. He asked for Sakeliga’s take on small businesses being shut out by big businesses.
Mr Du Plessis replied that consumers were not properly represented at NEDLAC. By its very definition consumers were not represented at NEDLAC. On freedom of trade impeding upon small business, he responded that the Bill was placing the interest of small spaza shops ahead of the interests of consumers. One should find the best value for the consumer. He said no matter what type of monopoly, monopolies were bad in general. He felt that the Bill did not address bringing in new entrants into the market. The Bill would not advance small business. On market penetration, he asked why a cost must be forced on a consumer in order for a business to get better market access. Why did consumers have to pay this ad hoc rate? Consumers should be able to find better value when buying from a business. Sakeliga recommended that the Committee seriously reconsider the Bill.
The Chairperson concluded by saying that the submissions reflected the ideological, legislative, political viewpoints of presenters. It could reflect the interest of workers or business. The purpose of the Bill was what was important. Public hearings were not only about ticking boxes. The submissions made were considered but Members were not obliged to take them into consideration. Sometimes inputs found their way into the legislation. The National Council of Provinces (NCOP) did not at face value simply agree with the National Assembly. The NCOP made its own decisions. On the process that lay ahead, he said that the EDD would respond to all the submissions and thereafter the Committee would deliberate on the submissions and responses.
The meeting was adjourned.
- National Council of Trade Unions (NACTU) submission
- Sakeliga submission
- Southern African Clothing and Textile Workers Union (SACTWU) letter
- Sakeliga letter
- Sasol submission
- Black Business Council submission
- Law Society South Africa submission
- Black Economic Empowerment Advisory Council submission
- National Union of Leather and Allied Workers submission
- Southern African Clothing and Textile Workers Union (SACTWU) submission
- NALEDI submission
- Dr T Mazwai's submission
- National Health and Allied Workers Union (Nehawu) submission
- Mr Mali George Buthelezi submission
- Broadway Sweets submission
- Federation of Unions of South Africa (FEDUSA) submission
- Helen Suzman Foundation submission
- Mr J Flaks submission
- Kempton Park petition
- Competition Amendment Bill [B23A-2018]
- Competition Amendment Bill [B23B-2018]
- Ms Odie Strydom submission