12 July 2016
New research from the University of Johannesburg’s Centre for Competition, Regulation and Economic Development (CCRED) shows how much money consumers have saved thanks to competition being introduced into South Africa’s biggest sectors.
In a series of studies funded by the National Treasury, CCRED identified substantial barriers to the entry and growth of new entrepreneurs and producers hoping to gain a foothold in the market.
The studies highlighted the importance of new entrants and effective rivalry for consumers and the economy, as well as what is at stake if they are blocked.
Among the group’s findings, researchers found that the entry and growth of Capitec has saved consumers close to R20 billion per annum since 2010.
Further, the reduction in mobile call termination rates, which enabled Cell C and Telkom (mobile) to be more effective competitors, has saved consumers R47 billion over 2010 to 2015.
In other examples, the group showed that low cost airlines reduced prices by as much as 38%, and Fruit & Veg City opened routes to market for suppliers and offered fresh produce at substantially lower prices.
“All entrants widened access and the extension of services to consumers,” the group said.
The Centre’s recommendations – with a number of practical ideas – include regulating for competition; providing funding for risk and rivalry; amending the Competition Act; and opening routes to market.
“Entry barriers are significant, but their magnitude and how they can be reduced is poorly understood,” said Professor Simon Roberts of CCRED.
“Our studies – into both individual firms and important economic sectors – underscore what South Africa needs to ensure a more inclusive economy, including greater performance-based competition, investment in capabilities and learning, and mechanisms for rewarding effort and creativity.”
While finance is often cited as the determining factor in new business success, Roberts said that without addressing the other barriers to entry, funding alone is likely to be a waste of money.
Similarly, implementing procurement measures without building capabilities and addressing the power of dominant firms is unlikely to ensure sustainable businesses.
This article was published on Business Tech.