Should the Competition Amendment Bill 2018 be passed, the South African economy would have to prepare for a new wave of black economic empowerment (BEE). This is the conclusion of business organisation Sakeliga (formerly known as AfriBusiness) after studying the Bill and submitting comments on it to Parliament’s Portfolio Committee on Economic Development.
“In particular the Bill mandates competition authorities to take BEE criteria into account when making decisions. This will mean that a competition authority will be able to penalise, permit, or forbid mergers, acquisitions or pricing behaviour depending on the race of company owners. Effectively, the Bill is adding a component for race to definitions in competition legislation,” says Piet le Roux, CEO of Sakeliga.
“Sakeliga’s overall concern is that the Bill subjects healthy and normal business conduct such as mergers, price setting and other market behaviour to further interference by bureaucrats. These interventions would mean increased compliance costs, which will further impede commerce. Should businesses find it even harder to ascertain their legal exposure to an expanded range of nebulous and racialized competition offences owing the new Bill, it would increase the risk profile of commerce in South Africa. The likely result is less investment and a weakened economy,” adds Le Roux.
Sakeliga had previously warned, in February 2018, about the risk that South Africa’s competition authorities would increasingly be employed toward promoting government’s counterproductive and economically harmful policy regarding BEE. In its comment to the portfolio committee, Sakeliga maintained that government has various other less harmful avenues at its disposal for the purposes of empowerment.
In Sakeliga’s submission, objection is also made to the introduction of national security as an ostensible concern in mergers with foreign firms seeking to acquire interests in South African businesses. Section 18A of the Bill seeks to establish a presidential commission to oversee mergers in cases where foreign firms’ interests in local assets are deemed to have national security implications.
“National security considerations are defined too broadly in the Bill and in reality, almost any foreign firm planning to merge operations with a South African business could potentially fall under the ambit of these considerations. It will become just another avenue by which to force foreign firms to agree to special empowerment deals, and greatly enhance the scope for corruption,” says Le Roux.
“Even a supposedly clinical application of competition policy is rife with potential pitfalls. The proposed law adds to these existing pitfalls by expanding the power of bureaucrats to selectively initiate expensive litigation against businesses for conveniently defined commercial crimes. The Bill will take South Africa further along the regrettable road of interventionism. It obstructs and villainises healthy and normal commercial conduct and will deter local and foreign investment alike,” concludes Le Roux.
Sakeliga will be presenting oral submissions in Parliament on the Bill to the Portfolio Committee on Economic Development on 28 August 2018 at 9:50.
Click here to read Sakeliga’s submission to the portfolio committee.