Lend Naspers an ear on global giants taking a lot more

EUROPE HAS BEEN A DIGITAL DESERT FOR THE PAST 15 YEARS. IT WAS COLONISED BY THE GLOBAL, MAINLY US-BASED TECH FIRMS

NASPERS AND OTHERS ARE WORRIED ABOUT COMPETITION THAT MAY NOT BE SUBJECT TO THE SAME RULES AND COMMITMENTS

When Naspers tried to buy WeBuyCars four years ago, it was blocked by the competition authorities on the unusual grounds that it had uncovered evidence that the deal could prevent competition from a rival car platform that Naspers had yet to create.

Transaction Capital bought WeBuyCars instead. This week, it reported explosive earnings growth from the used-car trading platform, which is now the market leader and is benefiting big time from a jump in first-time buyers and a shift from new to used cars.

One could hardly blame Naspers/Prosus CEO Bob van Dijk for saying, as he did at the release of his own group’s results this week, that he was “deeply frustrated about WeBuyCars”. It was not the loss of a killer acquisition he was bemoaning, but rather the regulatory environment in SA. There was no abuse of dominance, he argues. As he sees it, the group just looks big — and the competition authorities didn’t like it.

Van Dijk and Naspers/ Prosus chair Koos Bekker took aim at them at the time, charging that the SA regulators’ old-fashioned approach was driving merger & acquisition (M&A) activity away from our shores. This time, however, he and his team have a bigger message: SA needs to nurture home-grown online platforms and the digital ecosystems that go with these if it is to avoid being entirely colonised by the global giants.

“It’s important for SA now to build a local industry to stand up to the international players [that] are entering,” says finance director Basil Sgourdos. Van Dijk says Europe has been a “digital desert” for the past 15 years. It was colonised by the global, mainly US-based tech giants, which kept the intellectual capital and engineering in the US.

SA risks going the same way if it lets itself be owned by the foreign platforms.

Of course, he is talking to his book, in Europe and in SA. But Van Dijk emphasises that the platform or online economy needs to be regulated. He welcomes the fact that the regulators are getting their heads around a previously underregulated industry.

But he urges a level playing field where everyone has a fair chance to build a business, as he puts it.

His comments highlight some of the policy complexities that surround the digital economy in SA, as they do everywhere, as well as some of the inconsistencies in SA policy more broadly.

Van Dijk didn’t mention subsidiary Takealot in this context. But while it is small in the context of a group that operates in 60 countries, it is large in the context of SA online retail. In fact, Takealot has almost half of this market — even though the entirety of online retail is still just 4% of total retail trade in SA, up from about 2% before the Covid-19 pandemic.

That’s way below global norms, even way below many other emerging markets, where online retail’s share is well into the double digits. But Takealot and other local online marketplaces face a potential global competitor in the form of Amazon, which is reported to be about to set up its own marketplace here, though the US giant has not confirmed this. And Takealot’s lead in the domestic market has put it up there in the sights of the Competition Commission, which over the past couple of years has been looking closely at the digital economy and how it should be regulated.

In the latest iteration of its report on digital intermediation, the e-commerce platforms section is all about Takealot, whose conduct the commission says distorts competition in the marketplace through practices such as “product gating” and “self-preferencing”. Local regulators are not alone in this; European regulators have been particularly focused on developing new forms of regulation for the new economy, with its powerful players and powerful ability to collect and deploy data.

The competition issues and objectives are often different from what they used to be. So, for example, when it comes to online marketplaces the concern may not be so much that they lock out rivals, but rather that they are “gatekeepers” with power over the sellers that rely on their platforms to sell to buyers, including the ability to prefer their own products over those of third parties on the platform. European lawmakers have put legislation in place that will impose tighter upfront regulation on players identified as digital gatekeepers, even where there’s no evidence they have (yet) abused their position.

SA’s regulators seem keen to do the same. They are also keeping a beady eye on socalled creeping mergers, where even a small acquisition in tech might prove in future to have neutralised competition that might otherwise have happened. Antitrust regulators in advanced economies are still smarting from Facebook’s “killer acquisitions” of WhatsApp and Instagram years ago, for example. That has put the fear into regulators everywhere, and our own are understandably cautious.

However, a big question is how far European models of competition regulation can or should be imported into a small, open economy such as SA’s, where the digital economy is still so immature — yet has such rich potential to democratise markets and enable even small start-ups to sell to larger companies or directly to consumers.

No wonder Takealot has been making much lately, including on Business Day’s oped pages, of the fact that the number of small and medium enterprises selling on its platform has grown from 120 in 2014 to more than 8,000, and that its fashion platform, Superbalist, hosts more than 100 local brands (“E-commerce is opening the door for SMEs”, November 17).

No wonder too that Naspers and others are worried about competition from global giants that may not be subject to the same rules and commitments — and will simply leverage off their US platforms and technology to keep costs low.

That touches on another big question, which Van Dijk’s comments indirectly allude to. The government claims to have localisation at the centre of its economic policy. But it’s not always clear what that means to our policy-makers.

It’s not just that state-owned entities give contracts to Chinese suppliers when there are perfectly good local ones, but also that some dominant local companies — chicken or steel producers for example — are seen to be in need of protection where others are deemed too dominant.

It’s not that these are easy issues. We can but wish for policies that focus on making SA a more competitive and dynamic economy, not decisions driven by vested interests or politics.