Nicola Mawson
Statistics South Africa (Stats SA) has found that several sectors of the economy continue to be dominated by a handful of companies, despite amendments to the Competition Act in 2020 and interventions made to increase diversity by the Competition Commission.
In a recently released report, Stats SA said the ocean fisheries sector was the most concentrated industry in the country out of 14 sectors recently surveyed. This comes as the five largest companies in the sector accounted for just more than two-thirds of total income.
Stats SA also noted that several transport and storage industry activities exhibited high ratios of concentration, including transport via pipelines, railway transport and cargo handling. Air transport held the ninth spot in the list of concentrated sectors.
However, retail sales of fuel in the motor trade industry, medical and dental practices, as well as restaurants and coffee shops recorded the lowest concentration ratios when it comes to the competitive environment. Agriculture recorded the lowest concentration ratio, indicating a more equal playing field, its report said.
Statis SA publishes these reports every three to five years in a staggered cycle because of the size and complexity of these surveys. This, it said, ensures that information is collected at a high level of detail, an advantage that it has above most other industry-related surveys.
The figures are, however, not necessarily directly comparable because some of the information was collected in different years. In this instance, data sets came variously from between 2018 and 2023.
Another way to gauge dominance in an industry is to explore the distribution of small businesses, said Stats SA.
“Small and micro businesses play a vital role in the food and beverages sector, accounting for 59% of total income generated and 60% of the labour force,” it stated.
Small and micro businesses also provide jobs to more than half of those employed in accommodation, motor trade, wholesale trade and construction.
“Small businesses have increased their influence across parts of the formal business sector, although this influence has waned slightly since 2021,” it noted.
In 2022, the Competition Commission briefed the Trade, Industry, and Competition Parliamentary Monitoring Group on its Economy Concentration Report Tracker. The Commission noted that, 15 years after the Competition Act was promulgated, high levels of concentration in terms of businesses and ownership continued to dominate the market.
The Commission’s first Economy Concentration Report Tracker covered 178 industries and various levels of the value chain and was set to provide a baseline for further studies.
Some 40% of the market was found to be highly concentrated with a presumptively dominant firm, while less than 10% of the economy was not concentrated.
The bulk of companies in South Africa, at 95%, are small, medium or micro but contribute only 24% of the tax bill for companies. The top 10% of firms share 86% of total turnover. The bottom 50% of firms share 1.6% of turnover, it found.
Amendments to the Competition Act in 2020 strengthened market inquiries to enable the competition authorities to impose remedial action, including divestiture, and interventions that promoted competition and introduced structure, in addition to conduct firm conduct, as a focus for the competition authorities. It provided for more stringent regulation of creeping mergers, the Committee heard.
Some of the steps the Commission had taken to increase competition in South Africa included the addressing concentration and participation in the auto after-market to open up service/repair to independent entities.
It also entered into settlement agreements with the two largest grocery retailers to end exclusive leases and held a market inquiry into online commerce platforms for consumer goods, delivery, holiday rentals and smart phone applications to address barriers to participation and concentration.
The Commission did, however, note that the law on its own was insufficient to transform economic structures and a government-wide competition policy was required to ensure a coordinated and systematic approach to competition policy.
BUSINESS REPORT