How Continental Competition Policy Strengthens the African Marketplace
- By Chilufya Sampa: Regional price distortions hurt small traders the most; as more states adopt competition rules, it's the traders and consumers who will win big.
- National economies may reign supreme, but cross-border trade remains vibrant across Africa. Markets are interconnected. A drought in one country will impact the price of maize in a neighbouring country. Businesses understand this dynamic and often operate on a regional basis. Take an example: traders buy soybeans in Malawi and Zambia to then sell them in Kenya.
- When markets work well, everyone benefits. Barriers to entry are lowered, benefiting micro and small business, while consumers can access a variety of goods at lower prices. But when large, and vertically integrated suppliers operate across borders and abuse their dominant market position, they earn excessive margins. Looking at soybeans again, the African Market Observatory showed that traders earned a mark-up of up to 91% by suppressing farmer prices in Malawi and Zambia and increasing prices to buyers in Kenya.
- This is where competition authorities would ordinarily step in to enforce market rules. Yet, a recent report by the Shamba Centre for Food & Climate reveals that nearly half the countries in sub-Saharan Africa lack competition laws and institutions. This has dire consequences. Markets become pawns in the hands of a few businesses, which dictate how those markets operate, thus defeating the principles of open markets and competition. In many instances, such businesses determine prices - whether buying or selling - to their benefit.
- In the agriculture sector, it leads to poverty and food insecurity. Small food producers are squeezed; they face higher prices for their supplies and lower prices for their goods and often exit these markets. Data confirms this sad reality. In African cities, food prices are on average more than 30% higher compared with low- and middle-income countries in other parts of the world.
- But it is not all bad news.
- In sub-Saharan Africa, a vibrant competition landscape is emerging. Nine countries have strong competition regimes in place with a history of enforcing case law while a further 17 countries have nascent competition authorities in place. Increasingly, these national authorities are turning towards regional competition organisations to strengthen their capabilities. Improved cooperation among competition organisations on advocacy and investigations is leading to better enforcement.
- Leveraging regional African institutions and enforcement is a first step towards building a strong, continent-wide, competitive market. Better coordination and cooperation between regional competition authorities and national authorities is needed to help regulate cross-border anti-competitive behaviour and reinforce the capabilities of national authorities. This is of particular importance for countries that currently do not have competition laws or institutions in place.
- A win-win situation
- Regional economic communities, such as the Common Market for Eastern and Southern Africa (COMESA) and the West African Economic and Monetary Union (WAEMU), have an essential role in tackling regional anti-competitive conduct.
- For example, the COMESA Competition Commission has demonstrated how it can regulate cross-border competition as well as support national authorities in their work. It recognizes that competition enforcement at the regional level cannot be effective if national authorities are weak. As such, it helps to develop national competition laws, strategic plans and internal capacity. It sponsors training and can, upon request, review competition conduct and mergers.
- Yet, COMESA relies on national competition authorities to provide data and the knowledge to help other national regulators. Through COMESA, for example, the Zambian regulator provided support to national authorities in Ethiopia, Malawi, Seychelles and Eswatini. National authorities are the building blocks for regional competition enforcement.
- Reviewing cross border mergers
- COMESA has been active in regulating cross-border competition through the review of mergers with regional implications. In the past 10 years, 369 mergers and acquisitions have been assessed. It is notable that in the food and agriculture sector, these reviews have not blocked any mergers. Significant mergers, such as those between Bayer/Monsanto and ETG/SABIC Agri-Nutrient, have been allowed to proceed.
- Is this a failure of COMESA to regulate the market? Most likely not. Rather, these mergers exemplify how regional authorities depend on national regulators for data. In these cases, the information received may not have been sufficient, leading to erroneous analysis. The strength of COMESA is reflected in the capabilities of national authorities.
- Competition regulators at the national, regional and continental levels provide the building blocks for a thriving and competitive African economy. Effective competition policy and enforcement are prerequisites for open economies, fair trading conditions and a level playing field. In the agrifood sector, competition is essential. Our livelihoods, well-being and food security depend on it.
- Mr. Sampa is the former head of the Competition and Consumer Protection Commission in Zambia from 2011 to 2022. He is an active member of the International Competition Network (ICN), the African Competition Forum (ACF) and the International Consumer Protection Enforcement Network (ICPEN) which he presided in 2018-19.
- Read the original of this report, including embedded links and illustrations, on the African Arguments site.How Continental Competition Policy Strengthens the African Marketplace
