HILARY JOFFE: On a slippery slope down the trendy block

Among trade, industry & competition minister Parks Tau’s collection of too-little-too-late Trump tariff response measures, one stood out. Tau will grant a block exemption to allow exporters to collude to diversify markets for their goods.

Of course, “collude” is not the word used in the announcement. “Collaborate and co-ordinate” is what the exporters will be able to do to develop joint infrastructure, share market information and co-ordinate their activities so they can be competitive.

This looks like the act of a government suddenly desperate to be seen doing something, anything, to mitigate the damage it has caused with its failure to do a deal with the US.

It doesn’t look like part of a well-designed strategy to diversify SA’s exports, in a tough world in which everyone is trying to find markets outside the US.

It’s unclear why an exemption from the Competition Act is needed to allow industry players to co-operate to develop new markets. Conversely, if an exemption is granted it’s unclear whether it would necessarily be used legitimately into the future, especially since this surely could not be a temporary exemption.

The 30% US import tariff is a shock. But it may well be permanent. And diversifying export markets is a long term game anyway. It is not like the Covid-19 emergency, when then trade, industry & competition minister Ebrahim Patel granted block exemptions to the healthcare, retail banking, hotel and property sectors to help SA manage the impact of the pandemic. Nor is it like the July 2021 riots, which prompted a block exemption to ensure the security of supply of essential goods.

Patel’s sweeping 2019 amendments to the Competition Act allowed the minister, in consultation with the Competition Commission, to grant block exemptions proactively and unilaterally, even if companies or sectors did not apply. It was initially used in crisis situations. But the block exemption has lately become a trend. And its use raises all sorts of questions.

Last year the minister granted a block exemption for small, micro & medium-sized businesses, to stimulate the growth and participation of small businesses in the economy.

The minister has wide discretion to pick and choose favoured sectors or industries, power that can easily be abused for patronage and political interference.

February this year saw a block exemption to set tariffs in the healthcare sector that was pitched as enabling the transition to National Health Insurance and was clearly a power grab by the health minister and his department, who will preside over the new collaborative tariff setting bodies.

In May, Tau gazetted a block exemption for ports, rail and key feeder road corridors, to enable collaboration on fixing operations and preventing bottlenecks. He also published a draft exemption for the sugar industry, to support the master plan in that industry. Exemptions for energy users and suppliers introduced during the 2023 load-shedding crisis are still going. And now the latest one for exporters, details of which are imminent.

Co-operation to sort out SA’s energy and logistics crises may well be a good thing; likewise working together to create an environment to compete in export markets or stimulate small business. But both of those aims are in the Competition Act preamble. So you have to wonder if there is something wrong with the act, or the agencies charged with implementing it, if exemptions need to be granted so often.

More problematic is that there is no policy framework or transparent set of criteria governing this. Why sugar but not other sectors? Why did the minister grant the latest healthcare exemption but reject applications from various other industry bodies? The minister has wide discretion to pick and choose favoured sectors or industries, power that can easily be abused for patronage and political interference.

That is especially so given that the commission now clearly sees its mandate as “collaborating across government to use all tools to unlock barriers to industrialisation”, as commissioner Doris Tshepe put it in a speech earlier this year. What happened to promoting competition in the interests of consumer welfare?

Meanwhile, Tau’s tariff response risks distracting from the need to fix the basics that constrain SA’s exports, and not only those to the US. Fixing the infrastructure, cutting the red tape and getting government to work with rather than against the private sector could more than offset the tariff hit.

• Joffe is editor-at-large.