pretoria, February 2, 2016 – Enhancing domestic competition among South African businesses could help foster faster growth and poverty alleviation in an environment of low growth and limited fiscal space, according to a new World Bank report. There is.
South Africa Economic Update: Competition Drives Faster Growth and Poverty Alleviation reviews recent economic developments and assesses South Africa's near-term economic outlook. Like other emerging markets, South Africa faces challenges from falling commodity prices, declining demand from China and rising US interest rates, the report said. The report says these already difficult headwinds are exacerbated by domestic factors such as policy uncertainty, infrastructure gaps and drought. Additionally, the report notes that fiscal and monetary policies are being tightened due to rising public debt and future inflationary pressures.
Real gross domestic product (GDP) growth is projected to be 0.8% in 2016, down from 1.3% in 2015 and the lowest growth rate since 2009. Growth rate in 2017 is expected to be 1.1%. Overall, South Africa is expected to maintain its growth rate. This is lower than the average growth rate for sub-Saharan Africa of 4.5% from 2016 to 2017. Against this background, poverty is expected to increase in South Africa as incomes decline, and the National Development Plan (NDP) goals of eradicating extreme poverty, reducing unemployment, and doubling incomes by 2030 will be further missed. It disappears.
Guan Tse Cheng, Country Director for South Africa at the World Bank, said: “In this depressed economic climate, it is important that South Africa looks to other non-fiscal levers to stimulate faster growth. There is,” he said. “With this study, we provide evidence of one such route, competition policy, and how this can foster debate and revitalize the country's economy towards faster growth, increased employment and eradication of poverty. We hope that this will strengthen the basis for the bold policy decisions needed.”
South Africa's slow economic and productivity growth and export performance are associated with a lack of competitive pressure in domestic input and downstream production markets. Research shows that when companies compete, they offer high quality products at low prices to gain market share. This reduces input costs and increases competitiveness for other industries that use these products. The report examines the case of cement and shows how the dismantling of regional cartels reduced the price of cement to users by 7.9 to 9.7 percent. The report estimates that if South Africa were to ease regulations on professional services, value-added growth in industries that use intensive professional services could increase by $1.4 billion to $1.6 billion. This corresponds to an increase in GDP growth of 0.4 to 0.5 percentage points.
“This report shows that if South Africa is to succeed in promoting global competitiveness, it needs to lower the input costs of key services used by businesses. For example, evidence from other countries shows that broadband penetration rates This suggests that improvements could boost growth by 1.4 percentage points,” said Tania Vegazo, World Bank Senior Competition Economist.
The report also shows how competition can work to foster faster poverty alleviation. Sanctions on wheat, corn, poultry, and pharmaceutical cartels contributed to lower retail prices for these goods, which account for 15.6% of the consumption basket of the bottom 10% of the poor. This increased the purchasing power of the poor by 1.6%, moved approximately 202,000 people above the poverty line, and reduced the national poverty rate by 0.4 percentage points.
“The dismantling of the basic food cartels that conspired to artificially inflate the retail prices of these essentials will demonstrate how competition policy will alleviate poverty and further expand the cash subsidies provided to the poor by the budget. “This is a powerful example of what can be done and results can be achieved,” said Catriona Purfield, World Bank Program Leader.
The report recommends that South Africa's competition authorities extend their investigations beyond traditional sectors such as food, intermediate inputs and construction to new industries and markets. Protecting the effectiveness of corporate leniency policies that provide incentives for cartel members to disclose information will be key to ensuring the continued success of competition authorities in busting cartels. Future spectrum allocation for broadband services offers the potential for a favorable regulatory environment, fostering competition among providers, and achieving 100% access to broadband by 2020 at an affordable price for consumers It will allow us to move more quickly toward the NDP's goal of