Measuring concentration and participation in the South African economy: Levels and trends

The Preamble to the Competition Act No.89 of 1998 (“the Act”) begins by recognising that Apartheid had left the country with an economy characterised by excessive levels of concentration of ownership and control, as well as a lack of participation by all South Africans. Previous pioneering research by the Competition Commission (“Commission”) on concentration levels (Extent of Market Concentration in South Africa’s Product Markets, 2019), which was based on 2,150 merger filings, found that the economy remained highly concentrated fifteen years since the Act was promulgated. 2. Consequently, the Competition Amend-ment Bill (13 February 2019) was promulgated with the specific aim of adequately equipping the Commission to address “two persistent structural constraints on the South African economy, namely, the high levels of economic concentration in the economy and the skewed ownership profile of the economy”. Importantly, the Bill provided for a strengthening of abuse of dominance and market inquiries that may result in structural remedies as tools to reduce concentration in the economy. This is in the context where other tools such as merger control can only prevent concentration from getting worse and not reduce it. 3. This study seeks to deepen our understanding of the patterns of concentration and participation in the South African economy. It does so through a detailed assessment of both the levels and trends in concentration and participation over the past 5-10 years across 178 industries. Moreover, the methodology used in the study provides the basis for future updates using the same consistent measures, enabling the Commission to continue to track changes to concentration and participation going forward. This study should be considered as complementary to concentration studies based on merger filings, which usually have the added benefit of access to source data that is from the market participants themselves and also considers defined competition markets. 4. The study has achieved this through collating sectoral data that is consistently collected over time by an organisation, be it a government department, regulator, statistical agency or industry association. These data sources are supplemented by annual reports which are also consistently produced and merger investigations where gaps exist. The Commission has contacted more than 80 industry bodies, regulatory bodies, and government departments belonging to various sectors and subsectors.