Address to Trade & Industry Portfolio Committee on IPAP Simon Roberts 31 October 2012

Overview Links between competition and industrial policy Effective competition and inclusive growth IPAP objectives linked to competition: Industries: polypropylene; forestry; steel; fuel Strengthening implementation of competition policy; identification of appropriate complementary measures to improve competitive outcomes Stronger conditionalities attached to state support Links with trade policy

Competition and industrial policy Relationship of competition and industrial policy? Should be complementary and mutually reinforcing Evidence from East Asian countries – support rivals; use competition to get the most from policy tools Conduct of large firms is critical? Competing in investing in improved capabilities, not in controlling profits Industrial policy for ‘catch-up’ – adoption and adaptation of technologies; building capabilities and complementary investments Opening up access to economy, this requires proactive industrial policies

Work of competition authorities Continued focus on priority areas: food products; intermediate industrial products; construction Settlements in construction inputs such as cement, reinforcing steel Referral in fuel Construction bid-rigging Ongoing cases in polypropylene, wheat flour, mealie meal, poultry, newspapers Investigations continuing in supermarkets, forestry, media Established separate cartels division

Case studies Polypropylene Steel Forestry Key input to many plastic products Case referred in August 2010, after investigation at request of Min of Trade & Industry; to be heard in 2013 By-product of liquid fuels (partially regulated); produced by Sasol from coal (subject to mining rights) Steel Agreement to have ‘Developmental Steel Pricing’ not implemented as DTI-AMSA deadlock on what this meant. AMSA pricing above own proposed international benchmark (‘basket’). Forestry Investigation after sawmills closed; state-owned KLF controls biggest log supply, not supplying independent mills on same terms as its own Commission and IDC research report for government as shareholder Commission finalising investigation

Regional dynamics Important dynamics across region Firms and anti-competitive arrangements operate across the whole southern African region Regional cartels, and single firm dominance, for example: Cement Beer Poultry African Competition Forum established Competitive rivalry combined with stronger value chains – linkages across countries

Where have we come from? What can we do? Industry insiders have long established ‘ways of working’, where they maintain high profit margins, cast themselves as the ‘custodians’ New participants are ‘cut-in’ through share ownership, not as new independent entities, who are instead excluded Low levels of investment, not dynamic The ways of working are part of ‘settlements’; what is the new settlement we need and how can we get there? Coordinated action across competition authorities, regulators and government to underpin participation, more competitive outcomes Better use of existing levers Government as shareholder?