The cement industry in Africa is one of the sectors that would benefit from stronger competition policies, which can help strengthen the economy by preventing anti-competitive behavior and collusive price-fixing.
Photo by Simon Davis / DFID — U.K. Department of International Development
What determines whether a country is able to reap the benefits of deepening regional integration and the related increases in trade, cross-border investment and economic opportunities from participating in global value chains? One of the key points in this timely discussion is ensuring that the gains from integration are not nullified by anticompetitive business practices or distortive government interventions. As economies become more interconnected, it will become ever more important to allow all businesses to compete on a level playing field. Some African economies, for example, have not benefited as expected, in part because of the continued existence of barriers to competition in domestic markets.
These concerns lie at the heart of a new publication developed by the World Bank Group in partnership with the African Competition Forum (ACF). The report explores competition issues that affect the performance of key markets in Africa, and it reviews the status of competition policy and its implementation across the continent. It is the first report to take a broad regional perspective on competition issues – and the first to be built on a partnership between the World Bank Group and a regional network of government agencies and ministries responsible for competition.
Among its findings, the report shows that reforms in input sectors, such as professional services, can boost the export competitiveness of downstream firms that use those inputs intensively. However, in many cases, trade is restricted when governments impose non-tariff barriers, including product standards or testing regimes that are more restrictive than necessary, which prevent the entry of new, lower-cost products. This is the case with fertilizer markets in both East and West Africa. Even when such non-tariff barriers are removed, it is important to prevent anti-competitive behavior, such as collusive price-fixing and market-allocation agreements among competitors – as was seen in the case of cement in South Africa, Namibia and Botswana.
The report also highlights that, in some sectors in Africa, the same firms operate in many countries and some firms may locate themselves in areas that allow them to supply markets across borders. These factors hold potential efficiencies – for example, where it leads to economies of scale – but it also makes it vital to view competition dynamics through a regional lens as well as a national one.
Understanding regional dynamics can help strengthen the enforcement capacity of competition authorities and can provides synergies in their work. Monitoring regional market structures and sharing information on patterns of collusive behavior between and among firms can help authorities screen for sectors that have a greater risk of being cartelized. This can help authorities better prioritize their resources. Indeed, developing new tools to help detect cartels is something on which the Bank Group is actively involved in supporting our clients.
Regional initiatives, such as this one, can also help advocate for reforms to sectoral policies and regulations that unnecessarily limit competition in member economies. This could be achieved by creating subgroups of competition authorities for countries with economic linkages that can jointly study competition issues in a sub-region, benefit from peer-to-peer learning and design implementable strategies to address competition problems, thus unlocking economic benefits.
Networks like the ACF – in partnership with development partners like the WBG – can be valuable actors in building a common understanding of how to embed principles for competition in sectoral and economic policies. Moreover, they provide a useful forum for exchanging valuable enforcement and advocacy experiences as well as studies that quantify the benefits of competition. Countries with an incipient competition culture can especially benefit from the experiences of other countries in the region to show that competition matters for the effectiveness of government policies in tangible ways.
The number of jurisdictions with competition laws in Africa has almost tripled in the past three years, and this report shows there is still work to be done in effectively implementing those laws in practice. As more countries and regional bodies develop their competition frameworks, both in Africa and beyond, regional networks and development partners can help foster platforms for cooperation and knowledge creation that allow for real market changes on the ground. The World Bank Group looks forward to supporting the ACF and its members in their efforts to harness competitive markets to achieve their goals of sustainable economic growth and poverty alleviation.
A new report by the World Bank Group and the African Competitiveness Forum outlines how vigorous competition policies can help unlock the potential of many sectors of the African economy.
Photo by Nicolas Yip / MultiImage Singapore