THE MAN WHO LEADS THE FIGHT AGAINST COL­LU­SION

While the re­cent forex scan­dal in­volv­ing over a dozen banks is one of the most prom­i­nent cases the Com­pe­ti­tion Com­mis­sion has dealt with re­cently, the body’s top man, Tem­binkosi Bon­akele, also has his hands full with a va­ri­ety of other is­sues.

Finweek English Edition - - FRONT PAGE - By Lloyd Gedye

idon’t think any [other] de­vel­op­ing coun­try has been able to do this,” says Com­pe­ti­tion Com­mis­sioner Tem­binkosi Bon­akele proudly over the phone from the com­mis­sion’s Pre­to­ria of­fice. He is talk­ing to fin­week about the re­cently an­nounced pros­e­cu­tion of 18 lo­cal and in­ter­na­tional banks, ac­cused in the forex scan­dal.

“With this case, we have joined the elite com­pe­ti­tion en­forcers in the world,” he states. “It’s good for us as a com­pe­ti­tion author­ity, our team and the coun­try.”

Bon­akele says the com­mis­sion worked very hard on the case, adding: “It was not an easy in­ves­ti­ga­tion, it was painstak­ing.”

When fin­week asks him how he re­acted to pri­vate sec­tor play­ers and politi­cians ques­tion­ing the in­de­pen­dence of the com­mis­sion or the tim­ing of the an­nounce­ment of the pros­e­cu­tion, he says he just shrugged it off.

“Ul­ti­mately the truth will come out. You can’t play games with these kinds of cases. We treated it like any other pros­e­cu­tion,” he ex­plains. “No­body is treated spe­cial.”

Bon­akele ad­mits to be­ing sur­prised by the scale of the po­lit­i­cal and public re­ac­tion to the case and the media cov­er­age it gar­nered. “The com­mis­sion doesn’t re­fer cases with­out ev­i­dence,” he ex­plains. “We are quite keen for the case to be heard and be heard soon. That be­ing said, we are more than happy to en­gage with the banks, we want this case re­solved as soon as pos­si­ble.”

A dis­tin­guished ca­reer

A vet­eran of com­pe­ti­tion law, Bon­akele has been with the com­mis­sion for 10 years and was ap­pointed to head the com­mis­sion in 2014, af­ter serv­ing as deputy com­mis­sioner since 2008. He es­tab­lished the com­mis­sion’s car­tel di­vi­sion and was ac­tive in high­pro­file cases like those in­volv­ing the bread car­tel and the con­struc­tion car­tel.

These days the com­mis­sion’s high-pro­file cases crop up on a more reg­u­lar ba­sis. “Yeah, we are quite ac­tive in [cases in­volv­ing] car­tels,” he says in a mat­ter-of-fact tone. “It’s al­most ev­ery week.”

Bon­akele stud­ied law at Fort Hare Univer­sity and has an MBA from the Gor­don In­sti­tute of Busi­ness Sci­ence. He prac­tised with Chea­dle Thomp­son and Haysom in the ar­eas of labour law, reg­u­la­tion and health and safety. How­ever it was dur­ing a year spent work­ing in cor­po­rate fi­nance and an­titrust at Clif­ford Chance’s New York of­fice that the com­pe­ti­tion law bug bit.

He cur­rently serves as the chair­per­son of the African Com­pe­ti­tion Fo­rum and is a mem­ber of the In­ter­na­tional Com­pe­ti­tion Net­work Steer­ing Group.

Forex scan­dal

The com­mis­sion is in­volved in some very in­ter­est­ing in­ves­ti­ga­tions and mar­ket in­quiries at the mo­ment, but nat­u­rally the forex scan­dal is on the tip of ev­ery­one’s tongue. Ev­i­dence ap­pears to be stack­ing up against the 18 lo­cal and in­ter­na­tional banks that stand ac­cused in the mat­ter.

Citibank has agreed to pay a fine of R69.5m, as part of a set­tle­ment agree­ment for its part in the forex trad­ing scan­dal and has agreed to co­op­er­ate with the com­mis­sion, mak­ing avail­able wit­nesses to as­sist the pros­e­cu­tion of the other banks that col­luded in this mat­ter. Bon­akele says that the “full dis­clo­sure” that Citibank has agreed to, will “strengthen the ev­i­dence for pros­e­cu­tion of the other banks”.

That ev­i­dence is al­ready pred­i­cated on full dis­clo­sure from Absa and its par­ent com­pany Bar­clays, which is un­der­stood to have ap­proached the com­mis­sion with ev­i­dence of col­lu­sion in 2015. The com­mis­sion’s in­ves­ti­ga­tion fol­lowed hot on the heels of in­ves­ti­ga­tions and prose­cu­tions in Europe and the US in 2014/15.

Bon­akele says that the col­lu­sion in­ves­ti­gated by the com­mis­sion would have had the ef­fect of dis­tort­ing the prices of for­eign ex­change trades and in­flat­ing the costs of trad­ing. This would have par­tic­u­larly hurt im­porters and ex­porters in the coun­try. If the cur­rency was ar­ti­fi­cially weaker it would neg­a­tively im­pact im­porters into South Africa, while if it were ar­ti­fi­cially stronger it would neg­a­tively im­pact ex­porters from the coun­try.

Schools uni­form sec­tor

On other fronts the com­mis­sion is tak­ing on the school uni­form sec­tor, the food re­tail sec­tor, the liq­uid petroleum gas sec­tor and the au­to­mo­tive ser­vice and panel beat­ing sec­tors. These cases speak to the ev­ery day plight of con­sumers and were fu­elled by nu­mer­ous com­plaints to the com­mis­sion. Bon­akele ex­plains the R10bn school uni­form sec­tor is a key fo­cus area for the com­mis­sion. It first an­nounced its in­ter­est in this sec­tor in late 2015 af­ter nu­mer­ous com­plaints from par­ents. “It was only af­ter we started in­ves­ti­gat­ing that we re­alised how wide­spread it is,” he says. At first the com­mis­sion de­cided to work through the min­is­ter of ba­sic ed­u­ca­tion, send­ing a guide to schools on how to pre­scribe uni­forms. But Bon­akele adds that the up­take to the guide­lines was very dis­ap­point­ing and so the com­mis­sion has de­cided to step in and reg­u­late. “We wanted the min­is­ter to di­rect the schools, it didn’t work well, the schools didn’t com­ply,” he ex­plains. “So we have be­gun in­ves­ti­gat­ing some schools and sup­pli­ers.” Bon­akele says the com­mis­sion is par­tic­u­larly in­ter­ested in cases where schools pre­scribe items as part of the uni­form that are only avail­able from one or two sup­pli­ers. The com­mis­sion is also in­ter­ested in exclusive re­la­tion­ships be­tween sup­pli­ers and schools. “Schools must be as generic as pos­si­ble when pre­scrib­ing uni­forms,” Bon­akele main­tains, adding that schools can still dis­tin­guish them­selves, through cheaper op­tions, like badges, which can be eas­ily at­tached. “You can dis­tin­guish your school,” says Bon­akele. “But you need to bear in mind that it can’t cost par­ents an arm and a leg.” He adds that if schools in­sist on ex­clu­siv­ity for an item, then it has to be sub­ject to a com­pet­i­tive bid­ding for the con­tract.

Au­to­mo­tive sec­tor

The com­mis­sion also re­cently made public the fact that it is busy with a scop­ing study of the au­to­mo­tive sec­tor as well as re­lated in­surance and ser­vice sec­tors. Bon­akele de­scribes it as ad­vo­cacy work, say­ing that the com­mis­sion has con­cerns

He es­tab­lished the com­mis­sion’s car­tel di­vi­sion and was ac­tive in high-pro­file cases like those in­volv­ing the bread car­tel and the con­struc­tion car­tel.

about ex­ces­sive con­cen­tra­tion of own­er­ship and con­trol and ex­clu­sion­ary prac­tices. The body is also con­cerned with “po­ten­tially ex­or­bi­tant prices” be­ing charged be­cause of a lack of com­pe­ti­tion.

The scop­ing study was launched af­ter an ex­ces­sive num­ber of com­plaints from con­sumers. “There were a lot of com­plaints,” says Bon­akele. “There is a lot of un­hap­pi­ness.”

He adds that that EU, China, Rus­sia and the USA all had to step in to deal with this sec­tor, ei­ther through codes of con­duct or reg­u­la­tions: “This is a big area of con­cern for us.”

Bon­akele ex­plains that the study has found many exclusive anti-com­pet­i­tive agree­ments in the sec­tor cut­ting right across the value chain, which in­cludes panel beat­ers, ser­vice cen­tres, parts man­u­fac­tur­ers, car man­u­fac­tur­ers and in­surance com­pa­nies. Of­ten these agree­ments re­quire the con­sumer to deal with one spec­i­fied com­pany.

Bon­akele says the com­mis­sion is con­cerned with what this means for com­pe­ti­tion and how in­de­pen­dent ser­vice providers are be­ing fore­closed from these mar­kets through the exclusive agree­ments. The com­mis­sion is still en­gag­ing with stake­hold­ers in these sec­tors. It is hop­ing to come to an agree­ment on how to make sure that con­sumers are al­lowed max­i­mum choice and the sec­tor is opened up for in­de­pen­dent ser­vice providers.

Rus­sia, he says, fol­lowed this vol­un­tary self-reg­u­la­tion model, while the EU opted for leg­is­lated reg­u­la­tions. “We will try the sel­f­reg­u­la­tion model, fail­ing which we would se­ri­ously con­sider ask­ing gov­ern­ment to reg­u­late this sec­tor.”

En­ergy sec­tor

Mean­while the com­mis­sion’s reg­u­la­tory in­ter­ven­tion in the liq­uid petroleum gas (LPG) sec­tor is reach­ing a con­clu­sion, with “fi­nal touch ups” be­ing done to the re­port. The body is propos­ing changes to the LPG sec­tor in a bid to stim­u­late com­pe­ti­tion and achieve lower prices for con­sumers.

In 2016 the com­mis­sion put out draft pro­pos­als for com­ment. These draft pro­pos­als were a di­rect re­sult of a mar­ket in­quiry launched by the Com­mis­sion in 2014.

South Africa pro­duces about 300 000 tons of LPG an­nu­ally, with a turnover of about R1.5bn. Do­mes­tic users use only 3% of this, and the com­mis­sion be­lieves this is due to high prices and limited sup­ply.

The com­mis­sion is rec­om­mend­ing changes to the prac­tice of long-term sup­ply agree­ments be­tween ma­jor whole­salers and re­finer­ies. Some of these agree­ments al­low dis­counts on the reg­u­lated re­fin­ery gate price of up to 10%, terms not of­fered to smaller whole­salers.

The com­mis­sion has also pro­posed a new al­lo­ca­tion mech­a­nism where whole­salers bid for their LPG re­quire­ments. Al­ter­na­tively, re­finer­ies could set aside a min­i­mum al­lo­ca­tion for them. The com­mis­sion be­lieves that con­sumers are likely to ben­e­fit if smaller whole­salers are able to ac­cess LPG di­rectly from re­finer­ies with the same dis­counts.

Su­per­mar­kets

Bon­akele says the com­mis­sion’s in­ves­ti­ga­tion of the gro­cery re­tail sec­tor is sched­uled for com­ple­tion in a year’s time and is “go­ing well”. SA’s for­mal su­per­mar­ket in­dus­try is very con­cen­trated, with a few large chains mak­ing up more than 90% of the mar­ket. This mar­ket share hands the chains sig­nif­i­cant mar­ket power. The com­mis­sion is con­cerned with how this power is used, par­tic­u­larly in the form of ex­clu­siv­ity clauses in long-term lease agree­ments be­tween an­chor su­per­mar­kets and prop­erty de­vel­op­ers in shop­ping malls. It is the an­chor su­per­mar­ket that of­ten calls for these ex­clu­siv­ity clauses and it means that com­peti­tors like butch­ers and bak­ers, as well as fruit and veg­etable re­tail­ers are barred from space in the mall. Some­times these ex­clu­siv­ity pe­ri­ods can be as long as twenty years. Ob­vi­ously this has im­pli­ca­tions for com­pe­ti­tion and con­sumer choice, and has been the sub­ject of nu­mer­ous com­plaints to the com­mis­sion. In 2016 the com­mis­sion said it was ini­ti­at­ing the gro­cery re­tail sec­tor in­quiry be­cause it has rea­son to be­lieve there are fea­tures in the sec­tor that may “pre­vent, dis­tort and re­strict com­pe­ti­tion”. But the body’s in­ves­ti­ga­tion is also fo­cused on the in­for­mal re­tail sec­tor and this has seen the in­sti­tu­tion’s work dove­tail with a reg­u­lar and per­sis­tent com­plaint against in­ter­na­tional mi­grants made by South Africans. “We are look­ing at spaza shops,” says Bon­akele. “We are try­ing to un­der­stand why South Africans can’t com­pete in town­ship busi­nesses. Given the im­por­tance of the in­for­mal sec­tor, it is im­por­tant to make a de­lib­er­ate ef­fort to ex­am­ine com­pe­ti­tion be­tween lo­cal and for­eign-owned small and in­de­pen­dent re­tail­ers.” Upon com­ple­tion of the in­quiry, the reg­u­la­tor could rec­om­mend pol­icy changes to pro­mote com­pe­ti­tion. It’s clear that Bon­akele has a lot on his plate. Con­sumers should be grate­ful – if he gets his way, they should feel their fi­nan­cial bur­dens lessen in years to come.

We are try­ing to un­der­stand why South Africans can’t com­pete in town­ship busi­nesses like spaza shops.

Tem­binkosi Bon­akele Head of the Com­pe­ti­tion Com­mis­sion

Citibank’s of­fices in Sand­ton, Jo­han­nes­burg

A spaza shop in Alexandra, Jo­han­nes­burg

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