Tim Cohen:
ARE we seeing something of a Prague Spring among the economic left-wingers in President Jacob Zuma’s Cabinet? And if so, why? One of the key characteristics of the Zuma government has been a very distinct division between the left and far left in the economic portfolios. Zuma tried to bridge the broader divisions in the African National Congress (ANC) by creating a new department, the Department of Economic Planning, and appointing perhaps the most dedicated leftwing minister, Ebrahim Patel.
Yet, to mollify fiscal centrists and perhaps also foreign investors, he convinced former finance minister Trevor Manuel to remain as minister in the Presidency. Both sides were strengthened by allies, with Trade and Industry Minister Rob Davies tending toward the Patel camp, and Finance Minister Pravin Gordhan the Manuel camp.
The idea, I suspect, was to institute the old ANC tactic of making sure all the key actors were inside the tent pissing out, rather than outside the tent pissing in. It worked in the early years of the transition, with the government of national unity.
The problem, however, has been the inevitable: with so many people inside the tent pissing out, it is getting pretty smelly here outside the tent. Although both sides are now inside the tent, their constant bickering effectively makes the implementation of any kind of coherent policy impossible. Hence, issues have been allowed to fester, and progress has been slow. To get anything done, something has to give.
I suspect the sluggish economic growth, the low level of direct investment, the booming trade deficit, and the current account deficit generally, are all concentrating minds a bit more.
One consequence has been the remarkable change of heart by Davies on Walmart’s acquisition of a majority stake in Massmart. Davies said last week that his department had recognised that the economy needed to be more open to foreign competition and, vis-a-vis, “Walmart’s takeover of SA’s Massmart deal has begun to create jobs”, he told reporters at the launch of the new Industrial Policy Action Plan.
What an extraordinary turnaround. Both Davies and Patel launched a very expensive legal battle against the merger, under the auspices of the competition law. They did so without any particular support from the authorities, who saw right from the start that it would fail since competition law is designed for another purpose.
There is more, too, and this gets pretty technical, but it is significant. The government has now promulgated a small part of the Competition Amendment Act. This act has been in limbo for five years after being passed by Parliament. That the legislation has vegetated for so long in itself demonstrates the stagnant consequences of a hopelessly conflicted decision-making apparatus.
In any event, section 6 of the Competition Amendment Act was promulgated last month, and came into effect on April 1. According to a comprehensive article in Engineering News, the section gives the Competition Commission the power to conduct market inquiries without a formal complaint against a specific company. No sooner had it done so, than the commission announced an inquiry into healthcare prices.
The significance is huge. Competition law normally requires some sort of active collusive action on the part of the accused. Hence, typically, a group of widget makers have a secret meeting in which they decide to increase prices by the same amount at the same time.
But in this case, the commission would be looking at the general outcome. For the left, which tends to believe that all businesses are essentially exploitative and probably evil by nature, it stands to reason that price increases are, by definition, part of some kind of broad conspiracy. It doesn’t help that so many industries in SA have given credence to this stereotype.
Hence, business has been worried about this legislation, which could easily slip into a kind of witchhunt mentality. It was particularly worried about the sections regarding the criminalisation of collusive conduct and something called the complex monopolies provision.
SA’s labour movement, never one to miss the opportunity to clamber onto a political bandwagon, strongly supported the criminalisation of offences against competition law. Some other countries have actually done so, including the US.
Both of SA’s competition authorities were originally supportive, but gradually revised their view as the legal consequences became clear.
The problem is that it would have affected the Competition Commission’s corporate leniency programme. The vast majority of successes by the competition authorities have come from this programme, which allows the commission to reduce fines for the first company to admit complicity.
But if there were criminal sanction involved too, then all kind of jurisdictional issues might come into play. Would, for example, the National Prosecuting Authority be bound to grant leniency in a criminal action if the notionally independent Competition Commission granted leniency in the corporate action? In the US, both civil and criminal activity fall under the jurisdiction of a single authority, so in some ways it’s easier. Locally, this is an issue that could easily end up in the Constitutional Court.
The complex monopolies provision is equally tendentious. The essence is that it would allow the authority to base a finding on a market outcome, where, say, prices are generally high, rather than positive collusive action by offenders. Hence, if there were, say, three cellphone companies which, in the words of the legislation, “conduct their business affairs in a co-operative manner”, the commission could impose conditions or prohibitions on the industry.
This section fits neatly into the left’s notion of a paradigm shift toward a “developmental state”, which was so heralded in the early days of the Zuma administration.
Yet now, those sections have been omitted. We are left to just imagine the backroom arguments that are associated with this decision, especially since the competition authorities now fall under the auspices of Patel’s department.
The big picture is that SA’s economy is dribbling along, but has failed to respond with any vigour to the hefty interventionist measures tried so far. The effect is to squeeze ANC policy back towards conventional economics, and for that we can all be truly grateful. I HAVE to say, I find City Press’s meat contamination story fascinating, perhaps for all the wrong reasons. It is amazing that so many supermarkets and butcheries mislabel meat — just under 60% of all samples tested in a recent study. But frankly, I think consumers are a bit naïve if they believed their beef patties contain 100% beef. Obviously, meat should be correctly labelled, but I don’t really have any aversion to eating buffalo. I think we should probably eat more venison, especially in SA, although I confess to being a bit dubious about donkey.
What is interesting, however, is how the supermarkets responded, and how the publication of the information became available. The University of Stellenbosch did the original study, but declined to name and shame the supermarkets. The Media24 investigations team then applied for Promotion of Access to Information Act (PAIA) disclosure of the full results of the study, which were published in City Press yesterday. It’s interesting that the university resisted publication of the data, but it is definitely worth noting that public institutions are especially vulnerable to PAIA applications, for the very simple reason that they are funded with public money.
You have to wonder how many other potentially embarrassing research projects there are out there and if universities will curb topical and potentially embarrassing research if they keep getting slapped with PAIA applications.
As for the results, because there was a delay between the time the general finding was made public and when the specific culprits were named and shamed, this was an opportunity for the supermarkets to line up their publicity teams and develop a strategy.
Shoprite decided to attack the results, and CEO Whitey Basson claimed there was no “intentional adulteration to mislead consumers”. Pick n Pay food director Peter Arnold argued along the same lines, saying the quantities of undeclared animal products found in the Stellenbosch study were “minute”. Basson said this was most likely to have resulted from meat saws and cleavers being used on different types of meat. Spar’s approach was to be relentlessly positive, and group merchandise executive Mike Prentice said labelling needed to be “tightened up” and the industry as a whole needed to “jack itself up”.
I have to say, I think Basson’s approach is risky. Blaming equipment sharing makes you wonder about hygiene — the fact is that 32 Shoprite and Checkers products were tested and 20 were wrongly labelled. Not intentional? Hmm.
The major weakness of the study, it turns out, is that the quantity of contamination has not been specified, at least not in the news stories so far. That works both ways too; it could be that the contamination was small, but since we don’t know, it might have been very big too.
Still, it’s an interesting exercise in public relations. Woolworths seems as if it was the biggest winner in the survey, which is its own publicity problem: do you crow about it or just stay silent and let others do the crowing for you? I can’t wait for the Nando’s advertising campaign.