Tackling the structure of the economy has been a long-standing policy position of the current government. The latest policy tool applied to challenge industry is the newly signed Amended Competition Act 18 of 2018.
Such reasoning presupposes that new market entrants are inherently competitive and able to achieve allocative efficiencies. In practice, this is not always the case. Furthermore, the notion that concentration is bad has been contested and found wanting in various economic camps. In fact, the global trend has been towards large-scale manufacturing to achieve economies of scale that are beneficial to consumers and create competitive advantages for the country in which the industry is based.
We believe the dearth of broad-based economic transformation in the economy has less to do with market concentration than with a lack of focused industrial policy. Essentially, we see the new act as a zero-sum policy favouring political objectives at the expense of SA’s manufacturing sector. The German Wirtschaftswunder in the 1950s was largely SMME driven, relying on a deconcentrated base of small family-owned businesses with access to a high skills base. SA does not have this infrastructure, and therefore will struggle to create investment at a scale sufficient to drive large-scale job creation.
The most common frustration voiced by an SMME is difficulty in accessing markets and finance . The importance of working with existing large business should not be ignored. This offers the chance to identify and integrate opportunities for new entrants across value chains.
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