The Role for Competition Policy in Economic Development: The South African Experience

Competition policy is part of the new international orthodoxy in economic policy and, at the same time, was viewed in South Africa as a crucial element of economic transformation. This article reviews the role of competition policy in economic development and the experiences of developing countries such as Brazil and South Korea. It then assesses the effects of competition policy in South Africa after 1994, with the main focus being on the performance of the new competition institutions established in 1999. The case of the steel industry is used to assess the approach and impact of the institutions in a concentrated sector that has simultaneously undergone processes of liberalisation and domestic consolidation.

The opening-up of the economy through trade liberalisation has also seen increased concentration in many sectors. This is a result of consolidation, with inefficient firms closing down or being taken over, and of closer focus by companies on their core activities. Economies-of-scale arguments have also been used in several sectors to support mergers and acquisitions.

This article focuses on three key groups of issues. First, it briefly discusses the role of competition policy in economic development and in developing countries. Secondly, it examines the ways in which competition measures have been applied in practice in South Africa and the development of the institutions under the 1998 Competition Act (South Africa, 1998) compared with the old Competition Board. Thirdly, it analyses recent cases and current competition issues in the steel sector to explore the issues of industrial development and competition policy in more detail.