Competition policy will protect industry

GOVERNMENT is almost ready to implement a new National Competition Policy, one that will speed up the bureaucratic process of considering whether to allow a merger as well as making the rules to block cartels tighter and more transparent.

Slashing the bureaucratic process from a maximum of 90 days to a maximum of 60 days will be simple to implement. This is part of the general process of making it a lot easier and simpler to do business in Zimbabwe so making the country more attractive to both foreign and local investors. No one should have to wait longer to find out if they are allowed to open a business in Zimbabwe or to join an existing business through a merger.

It is the rest of the package that could ignite a bit of debate, although the Government has consulted widely and we hope the final result is a set of rules that are widely accepted, allow businesses to grow without sucking the blood of consumers, and are easy to implement and highly transparent.

This last condition is absolutely necessary so everyone doing business knows where they stand and that as far as possible objective criteria rather than subjective criteria are used.

It is also important that it is easy to change the rules. Where they are found obscure, or are found to hamper business without any compensating benefit, or are found to contain loopholes that allow a group of suppliers to “fix” a market, then obviously we need to change them.

Competition rules are needed in Zimbabwe, especially in light of the Government’s set policy, one that has widespread public acceptance, to boost local industry and business rather than be totally reliant on imports.

But there is a potential problem. In many sectors there is just one or two or three businesses. Competition can be relatively ineffective in such circumstances to ensure maximum efficiency by producers and a fair deal for consumers.

The obvious breaches of trust, say a couple of CEOs fixing prices over a golf game, are fairly easy to detect and control. Where the serious problem arises is in cartels that are not formally discussed and set in stone, or are not even discussed at all. A general understanding to follow each other can be just as damaging to a sector.

In the past in Zimbabwe we have those, who are not really thinking things through properly, accusing retailers of forming such cartels. Considering the level of competition and the lack of serious consumer loyalty in Zimbabwe this is quite unlikely, and probably impossible.

But where there are only two manufacturers, or where one has near dominance of the market, problems can arise on the supply side. It is here that we need rules that make it easy for a new business to enter the market and where the authorities can warn and even sanction suspicious behaviour which could overlie an informal “understanding” not to rock the boat.

They might be able to prove that there is an underhand deal, but they could by comparing Zimbabwean costs and prices to those of similar businesses in the region and globally obtain enough data that puts a spotlight on the problem and makes all start seeking solutions.

All this is why the new policy needs to be clear, transparent and effective, allowing businesses to grow, but barring illegitimate methods.