Most South Africans would agree with the proposition that they have been poorly served, if not abused, by our state-owned enterprises (SOEs), especially in the recent past. According to studies including the Edelman Trust Barometer, most South Africans trust the private sector and non-government organisations more than they trust their government.
In the past few months, as the state continued failing South Africans, the private sector has stepped in to fill the void left by the government. Commendably, the government has accepted business’s helping hand to deal with the energy, crime and corruption, and transport and freight logistics crises. Joint government-industry task teams are hard at work.
Grudgingly, even the most statist among the ruling elite now accept that competition has a role to play in the country’s economic future. A week ago, the presidency, the first adopters of this thinking, released a paper on the freight logistics system. In it, the private sector has an important role to play in the hitherto state monopoly.
As SA prepares for wider liberalisation of energy, freight logistics and other network industries, it is important to ask inconvenient questions. These include whether the country is headed for a future where the state’s monopoly is replaced by a private sector one or if South Africans can look genuinely forward to a future where the consumer has choice and the state — through effective regulation — is the enabler of fair pricing and contestability of markets.
SA has a mixed history of economic regulation. Before the end of apartheid, regulation was meant to prop up the laager economy. Using 1994, the dawn of democracy, as a baseline, SA has had mixed results with economic regulation. For example, our banking sector has been widely recognised as being among the best in the world. This is mainly due to effective economic regulation by the Reserve Bank and National Treasury.
Other economic sectors have not been that well regulated. For example, the National Energy Regulator of SA (Nersa), the economic regulator for the gas and electricity industries, has been a frequent guest of law courts where its decisions are successfully reviewed, especially in relation to the imploding Eskom. This augurs badly for the introduction of competition in the generation space of electricity. Worse, regulation has lagged behind technology advancement. Nersa, in its current iteration, was never meant to regulate wind, solar and other forms of clean energy.
Though the media and telecommunications sectors were among the first to be liberalised after 1994, economic regulation has been ineffectual. The Independent Communications Authority of SA is poorly resourced and is often bullied by the telecommunications minister. The well-resourced industry, which poaches its staff, regards it as toothless.
The other dismal failure has been the BEE Commission. After its many years of false starts, it has yet to jail a single fronting fraud. Its reports are not taken seriously despite its importance as a public policy agency.
By most accounts, the Competition Commission, the economywide watchdog, has had a good run since it replaced the apartheid-era Competition Board. Its successes have included the proactive sector inquiries, the settlement for 2010 price collusion by construction companies that built the stadiums for the Fifa World Cup, prizing open the auto body sector, clamping down on unscrupulous pricing by pharmaceuticals during the Covid-19 pandemic, and the block exemptions for small businesses to collaborate on research & development.
Its independence has been guaranteed by its self-funding model through the fines it levies on culprits. Still, it too hasn’t been insulated from the ideological whims of politicians. Ebrahim Patel, the minister for trade, industry & competition, has used it as a club against what he perceives to be unwarranted power of big business.
As parliamentarians rush through a plethora of bills to justify their return after the 2024 election, it is important that caution is exercised in assessing the bills and regulations they pass.
As a guiding principle, this newspaper believes that regulation must be for something, not against something. Also, it is important that the state or its agency becomes the regulator. Locating economic regulation within an entity like Transnet or Eskom would be self-defeating.
If consumers of public services are to be the ultimate beneficiaries it is important that economic regulators are financially and ideologically freed from the whims of political masters. Regulators must, like our judiciary, be the last line of defence.
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