The South African Electricity Supply Industry (ESI) is dominated by a state-owned and vertically integrated utility, Eskom, which ranks seventh in the world in terms of size and electricity sales. It supplies about 96% of South Africa's electricity requirements which equals more than half of the electricity generated on the African continent. Eskom owns and controls the high voltage transmission grid1 and it supplies about 60% of electricity directly to customers. The remainder of electricity distribution is undertaken by about 240, recently amalgamated, local authorities. The municipal distributors buy bulk electricity from Eskom, with some also generating small amounts for sale in their areas of jurisdiction. A few industries have private generation facilities for their own use, accounting for 2.8% of total electricity produced.
Since the early 1980s South Africa's trade policy regime has shifted from one of import substitution towards one of export orientation. This shift has been encouraged by trade liberalisation which accelerated in 1994 with tariff liberalisation, export orientation policies that ranged from direct support (GEIS) to marketing related support, and the GEAR macroeconomic strategy that was explicitly expected to transform South Africa into a 'competitive, outward orientated economy' (GEAR, 1996). Accompanying each of these policies is some instrument that is used to gauge the effectiveness of the policy in raising the competitiveness of South African exports. For example, the trade liberalisation and export promotion policies aim to reduce the anti-export bias associated with South Africa's history of protection (Holden, 1992, Bell et al., 1993, IDC,1997). The GEAR strategy aims to enhance the competitiveness of South African production by stabilising the real effective exchange rate at a competitive level over time.
The success of these policies has been mixed. Manufacturing exports have grown rapidly since the mid 1980s and now account for 43.8 % of total exports. Export orientation has also risen with the share of production rising from 6.6 % in 1984 to 22 % in 1998. While some of this growth was driven by surplus domestic production capacity in the 1980s and early 1990s, the continued rise in exports since 1993 as domestic demand recovered suggests that shift towards export markets has become permanent. Yet the structure of trade is still very capital and skill intensive (Bell and Cattaneo, 1997, Edwards, 2001b) and appears out of norm with other middle income countries (Tsikata, 1999). Some of this is due to number of capital biased domestic supply side policies, but the inability of labour intensive sectors to compete has also played a role (Edwards, 2001b). Employment in manufacturing has also continued to fall since many of these policies were implemented. Finally, while exports have grown, this growth is not significantly greater than other dynamic emerging countries (Golub, 2000).
This paper evaluates the competitiveness of South African production during the 1990s. Through this some insights into the mixed performance of South African exports can be achieved. The paper is structured in three parts. The first part provides a detailed review of measurements used to analyse the changing competitiveness of South African exports. The second part utilises a variety of classifications to present an overview of the changing commodity and regional structure of South African manufacturing trade. The third part utilises a 'Âdynamic' Revealed Comparative Advantage measure to analyse the changing competitiveness of South African exports at a sectoral level.
Significant changes have taken place in the distribution stage of the pharmaceutical supply chain in the South Africa during the past decade. These have led to a series of complaints and applications for interim relief to the competition authorities. The Competition Tribunal has delivered some judgements that have been in favour of the pharmaceutical manufacturers and others, in favour of the wholesalers.
The purpose of the paper is to reflect on the changes that have taken place in the distribution stage of the pharmaceutical supply chain, and to flag a selection of issues that arise in an assessment of the competition impact of these changes. As a case is currently in process at the Tribunal, it is important to skirt sub judice territory, and therefore this paper does not present a complete review of Tribunal decisions.
This paper starts with a brief review of recent developments in the pharmaceutical industry in South Africa. The changes within the distribution stage of the supply chain are particularly pertinent in the context of the series of competition cases that have been decided upon by the Competition Tribunal since 1993. We then flag select issues that are relevant to a consideration of the competition impact of the joint exclusive distribution ventures that have been established by groups of pharmaceutical manufacturers or the exclusive dealing arrangements that manufacturers have entered into with distribution enterprises. This exercise emphasises the complexity of such assessments, to which the ongoing rounds of cases before the Tribunal, are also testimony.
South African export and investment performance improved markedly during the 1990s, particularly the post-1994 period, coinciding with the demise of Apartheid, the ending of sanctions, and the adoption of more liberal economic policies. However, some questions remain. Although much improved, South African overall export growth still lags behind that of the most dynamic emerging economies. Moreover, the improved performance could be due to a one-time postsanctions boom rather than a manifestation of sustained long-term competitiveness.
The South African Competition Act of 1998, implemented on 1 September 1999, establishes a range of criteria for evaluating mergers and company practices that are deemed to harm economic efficiency, among other objectives. In particular, the Act prohibits a range of practices if the firm is ‘dominant’, including charging an ‘excessive price’, engaging in an ‘exclusionary act’, or price discrimination (Sections 8 and 9). ‘Dominance’ is defined as having at least a 45 percent market share, or less than 45 percent if the firm has market power (Section 7). A range of horizontal and vertical restrictive practices are also prohibited (Sections 4 and 5). For the implementation of the Act the links between structure and behaviour are therefore extremely important. This paper seeks to explore these relationships in a particular industrial sector, that of plastics, and in so doing to highlight issues in the implementation of competition policy.
construction and furniture. This implies that plastic products are more important in the development of manufacturing than their share of manufacturing production of 2.8 percent would suggest.
The levels in the supply chain differ greatly in their production characteristics. Polymer manufacture is relatively capital intensive and is broadly characterised by economies of scale, significant transport costs and a corresponding concentration of production. Downstream plastics manufacture, by contrast, is characterised by low or negligible scale economies. While many firms in some of the industries use plastic products, there is a very small number of plastics firms. An overview of the sector is necessary to understand the linkages between different levels, and the study then analyses polymer production in more detail. Assessment of corporate structure and performance, market structure, vertical relationships and barriers to entry provide the foundation for an analysis of market power and some tentative conclusions for the implementation of the new competition legislation.
The aim of this paper is to consider the relationship between competitiveness, international trade and financial factors in the South African economy.
The term ‘competitiveness’ is used here in two closely related, but distinctly different, senses. One of these refers to a country’s ability ‘to realise central economic policy goals, especially growth in income and employment, without running into balance of payments difficulties’ (Fagerberg, 1988:355). This may be thought of as competitiveness in the macroeconomic sense, or what we shall refer to as macro-competitiveness. Competitiveness, however, may also be defined as the ability of an economy, or sectors of it, to compete in world markets. Conventionally emphasised sources and indicators of competitiveness in this sense are movements in real exchange rates, productivity and unit labour costs, which are reflections of price-competitiveness. As distinct from these, there are various sources of the ability to compete in world markets, such as product differentiation and innovation, and (of particular interest in the context of the present study) access to finance, which may be regarded as aspects of non-price competitiveness.
Section 2 considers the competitiveness of the South African economy in the macroeconomic sense, by examining the historical relationship between GDP growth and the ratio of the current account deficit to GDP. On this basis, it finds that there has apparently been a significant deterioration in the competitiveness of the South African economy.
The rest of the paper is in effect an attempt to shed light on this problem. The rate of growth of exports is clearly one factor pertinent to South Africa’s macro-competitiveness. One concern of the paper, thus, is with explaining trade performance in recent years. However, a long historical view is seen as indispensable for this purpose. The evolution of the growth and sectoral pattern of South Africa’s exports in the period 1911-72 is therefore described briefly in Section 3.
Section 4, the longest in the paper, discusses variations in the growth and sectoral pattern of South Africa’s trade in 1972-97, divided into two sub-periods: 1972-83, which includes the great gold-led, commodity price boom of that decade; and the period of adjustment from the onset of economic crisis in the mid-1980s, through to 1997, which is the main focus of attention. The emphasis is on changes in relative prices, in particular on real exchange rates, as the determinant of variations in the growth rate and composition of South Africa’s exports, though some consideration is also given to productivity and unit labour costs. The problem of sustaining rapid growth of exports, and hence of increasing macro-competitiveness, is seen as lying in the sectoral pattern of South Africa’s exports.
The effect of financial factors based on trade and competitiveness, one of the particular concerns of the studies in this volume, is the subject of Section 5. Matters considered there, in varying degrees of detail and in different sub-sections, are the effects of South Africa’s relatively advanced stage of financial development; the availability of credit and economic instability as factors relevant to the level of investment; differences in the severity of financial constraints between groups of firms categorised according to trade orientation and trade performance, and hence relevant to competitiveness (in both senses stated above); and the question whether the ownership of banks by South Africa’s conglomerates has skewed the allocation of credit in sub-optimal directions. Section 6 consists of concluding remarks.