The Competition Commission’s decision to investigate the Vodacom deal is most welcome if we must win the struggle against poverty, unemployment and inequality.
It made this announcement two weeks ago and one hopes that such investigations must be extended to other areas of concern. The high levels of concentration in our economy militate against entrepreneurship and enterprise creation.
They also undermine Black Economic Empowerment as it must not only be distributional and transformative, but also generate new wealth.
One of the manifestations of new wealth is the emergence of thousands of new black-owned small businesses. Thus, an enabling environment is required which, among other things, dilutes the dominance of the incumbents as they will do all to protect their market.
The statutory obligation of the commission is to facilitate competition, thus make entry and survival easier for new players, more so black ones. Obviously, such an investigation is not welcome by many in the private sector for three reasons: firstly, it focuses attention on the structure of an unfair economy in which they benefit; secondly, and as stated, it creates new competition and, thirdly, who is next after Vodacom?
We have had arguments that the tender process was open and fair and, it was said, the government would reduce costs by 30percent to 40percent. There was also talk of political pressure exerted on the commission.
I personally welcome political pressure as it is in the interests of the country and is done through the law and the appropriate institution.
Millions participated in various aspects of the struggle. Many went to jail, others paid the ultimate price, many more lost their livelihoods in various phases of the struggle, tens of thousands of others were in exile, and all these sacrifices were to create this new democracy.
That 23 years into democracy it serves only a few as the majority of South Africans wallow in poverty, unemployment and inequality, is an unforgivable injustice. Thus, and stressing the point, the issue is not the process, but the impact. Giving one major player such a massive contract results in a lot of small players, many of them black, directly or indirectly losing business.
In addition, this one big player gets massive clout to influence activity and prices, and dictate issues in the sector. All in all, and because of the above, this translates into more job losses, with the majority unemployed being black.
To look at issues globally, the World Bank, IMF and OECD have warned that as South Africa’s economy is still highly concentrated, creating jobs is not going to happen that easily. Sectors are dominated by two or three big players. Vertical and horizontal linkages have become the order of the day and enable these major players to dominate.
Collusion in the market comes in many ways. As argued earlier, smaller players are the casualties and in South African language, black small players. The scenario, even in 2017, is that formal black businesses, are a mere 10 to 15percent of the formal sector as the past perpetuates itself. Most blacks are primarily in the informal sector as reports by StatsSA and the Department of Trade and Industry review of small business released in 2015 reflect.
The argument on 30percent to 40percent savings by the government misses the point. The government has a responsibility to keep people in jobs, and that is its primary mandate. Hence when elections come political parties promise jobs as they ask for votes. If a policy will result in job losses, the government must think twice.
That the Treasury itself is the initiator of such a policy simply blows the mind in an environment in which the government claims it is fighting unemployment. Giving Vodacom such a fat contract worsens unemployment.
Regretfully, Treasury has in the past been responsible for policies that simply militate against empowerment and the Black Business Council can attest to this. Obviously, while this is not necessarily a deliberate or improper act by the Treasury; it does suggest officials did not investigate the impact on entrepreneurship and small business development.
Lastly, according to national data 10percent of the population owns at least 90percent to 95percent of all assets, although they earn about 55percent to 60percent of income.
On the other hand, the poorest 50percent of the population, who share about 10percent of income, own no measurable wealth. This is the reality of South Africa. No police or military prowess stands a chance against empty stomachs and people who brought apartheid to its knees can bring down our democracy if their stomachs stay empty. We ignore the hungry and angry masses at our peril; they have nothing to lose except empty stomachs.
Dr Thami Mazwai is special adviser to the Minister of Small Business Development but writes in his personal capacity.
- BUSINESS REPORT