World Bank report urges South Africa to boost competition, improve regulation

The bank’s South Africa Economic Update report said “competitive bidding and efficient spectrum assignment policies could expand spectrum availability and help small network providers” enter the domestic telecoms market.

In addition, the report said cutting regulatory red tape in relation to professional services would mean “other sectors using them would see their value added grow by $1.4 billion to $1.6bn”.

The report said South Africa needs to take action in the face of “challenges from weaker commodity prices, lower Chinese demand and rising US interest rates”.

The bank’s country director for South Africa Guang Zhe Chen said: “In this prevailing weak economic climate, it is important for South Africa to look to other avenues outside the fiscal space to stimulate faster growth. With this study, we offer evidence for one such route, competition policy, and hope this will enhance debate and reinforce the case for the bold policy decisions needed to revive the country’s economy for faster growth, more jobs, and poverty eradication.”

World Bank senior competition economist Tania Begazo said “if South Africa is to succeed in promoting its competiveness internationally, it needs to lower input costs for key services that firms use”.

Begazo said: “For example, evidence from other countries shows that improving broadband penetration has the potential to boost growth by 1.4%.”

The report recommended that South Africa’s competition authorities “expand their investigations beyond the traditional areas of food, intermediate inputs and construction to new industries and markets”.

“Safeguarding the efficacy of the Corporate Leniency Policy (15-page / 180 KB PDF), which provides incentives for cartel members to disclose information, will be key to ensuring the continued success of the competition authorities in cartel detection,” the report said.

The report said: “The upcoming assignment of spectrum for broadband services offers the possibility to get the regulatory environment right so to encourage greater competition between providers, allowing for more rapid progress towards the National Development Plan (NDP) target of achieving 100% access to broadband by 2020 at an affordable cost to consumers.”

In the NDP, South Africa’s government has pledged to establish “a more efficient and competitive infrastructure... to facilitate economic activity that is conducive to growth and job creation”. The NDP also sets out plans to “strengthen key services such as commercial transport, energy, telecommunications and water, while ensuring their long-term affordability and sustainability”.

South Africa was the top market for private participation in infrastructure (PPI) investment in the first half (H1) of 2015, according to data released by the World Bank last December. Total PPI investment in South Africa of $4 billion during H1 was “boosted” by the country’s renewable energy programme, according to the bank’s updated PPI database (12-page / 800 KB PDF).

Analysis published last month by the International Data Corporation said spending on information and communications technology in South Africa is projected to exceed $26bn in 2016 as organisations “increasingly embrace digital transformation initiatives in a bid to streamline their costs and bolster their flexibility”.