In all economies competition is a key driver of economic growth. In Africa there’s another dimension. A recent African Competition Forum and World Bank report Breaking Down Barriers states that reducing anticompetitive practices in the food industry in just three African countries (Kenya, South Africa and Zambia) could lift 490,000 people out of poverty and save consumers more than $700 million a year. Tembinkosi Bonakele, Chair of the African Competition Forum, offers his advice to (new) investors in Africa on how to deal with fair and unfair competition.
Anticompetitive practices are a common concern for investors on the continent. In over 40% of African countries a single operator holds over half the market share in the telecommunications and transport sectors. Agreements among competitors to fix prices limit production or rig tender bids affect sectors from fertilizers and food to pharmaceuticals and construction materials.
Open for business
Tembinkosi Bonakele is Chair of the African Competition Forum, set up five years ago by competition authorities to promote competition in Africa. Competition authorities deploy a number of instruments to combat anticompetitive practices, from administrative penalties and fines through to dawn raids on companies under investigation. Since May 2016 company directors in South Africa may even face a jail sentence for being part of a cartel. “Africa must be seen to be open for business if we are to grow our economies and reduce poverty.”
Bonakele has three main tips for investors to check out the competition:
1- Find out which countries have a competition authority
Each of Africa’s 54 countries has its own laws and practices. Investors should understand which countries have a competition authority and engage with them from the outset. The World Economic Forum’s Global Competitiveness Report for 2016 - 17 is a good starting place.
2- Navigate entry with local experts
In South Africa the Industrial Development Corporation and the Department of Trade and Industry advise investors on specific questions. Each country has its own versions of these bodies.
3- Focus on specific sectors
One way the competition authorities promote competition is to focus on key sectors for the growth of African economies. The Breaking Down Barriers report highlights three sectors – cement, fertilizer, and telecommunications – that directly affect the competitiveness of African producers but lack a level playing field.
The level of market regulation can be decisive in investment decisions. For instance the food and agri-processing sector is ‘screaming for entry’ from foreign investors says Bonakele: “Processing in most of South Africa’s agricultural sectors is still dominated by one or two players. This is a sector with high margin opportunities for basic processing of agricultural products. And not just in South Africa. Mozambique, for instance, has very fertile land, lots of fruit, but very little processing.”
Collaboration in competition
South Africa’s competition authority was set up 17 years ago. It enjoys a solid reputation for enforcement and is ranked number 7 in the world by the World Economic Forum.
African Competition Forum members support one another to build capacity on competition issues. In the last year, South Africa has hosted study tours from the Namibian and Botswana competition agencies, for example. French-speaking agencies in West Africa are benefiting from training from Canadian and US counterparts. Zambia and Kenya both have a long tradition of competition enforcement and regularly hold training for other authorities.
Ethiopia, one of Africa’s fastest growing economies, recently established a competition authority and Nigeria, Angola and Mozambique are taking their first steps along this road. Here too the African Competition Forum is sharing knowledge and best practices.
Images by Africa Competition Forum