Competition can still be effective in the midst of business closures
Onalenna Kelebeile | Monday March 26, 2018 12:45
Speaking during the just ended National Competition Conference hosted by Competition Authority Obuseng said competition is not conditioned by joblessness and business closures.
He said the closure of one firm may alter the market conditions but this only happens in exceptional circumstances. He further said that more often the firms that close shop operate in relatively competitive markets and their departure does not alter the market dynamics.
He said that though the closure of one bank may cause serious ripples in the economy it is unlikely to render the banking industry in Botswana less competitive. He said the remaining banks would continue competing for the benefit of the society.
He said Botswana currently endures double crisis of job losses and unusually high rates of business closures. He noted that last year unemployment was estimated at 17 percent on the narrow definition that excludes discouraged job seekers and nominal employment such as participation in Ipelegeng.
“Though not well documented the rate of business closures in the country is above normal. Nowhere in the country is the rise in the incidence of business closures more pronounced and intense in Selebi-Phikwe and the entire SPEDU region,” he added.
Obuseng further argued that competition is an essential component of the response to joblessness and sluggish growth. He noted that competition makes markets more efficient and fairer which is critical for private sector development, investment and growth. “Sometimes we look at major players in the industry such as Choppies and First National Bank and only see their dominant positions in their respective industries and forget that they competed their way to those positions. They got where they are by outperforming other established rivals and in the process they generated considerable value for the economy in terms of investment, innovation and economic growth,” he said.
He also maintained that effective competition is not about unfettered market but it is regulated because effective economies are rule-based. He also noted that effective competition is crucial in the development of efficient and fair markets and the development of a competitive private sector led economy. “The nations that are winning the development race today are aggressive market reformers,” he said.
He however, said that effective competition in markets is not automatic and argued that competition has two vulnerabilities that necessitate efficient and effective regulation and cited poor regulation such as bad policies, bad laws and weak institutions.
He said all failed states and failing economies found themselves in that predicament because regulation stops them from harnessing the power of fair markets. Obuseng noted that in developing countries markets are often dominated by large firms with close ties to government and this presents a serious corruption risk.
“The more effective competition is, the less the opportunity for corruption and the greater the space for entrepreneurs and SMMEs to grow. Effective competition in government procurement increases the effectiveness of expenditure and enhances value for money,” he said. He said it takes determined investment in sound policies, legislation and institutional capacity to competently enforce competition law to achieve effective competition.
“We must therefore look at Competition Authority as a strategic institution and worry about whether it has tools to execute its mandate because robust competition laws and policies with strong institutions to enforce them is vital to improving productivity and promoting innovation and better prices,” he said.
The workshop was held under the theme ‘Economic Stimulation: is competition the new hope?