Being monopolised

2008-03-07 00:00

Currently, we are experiencing the restrictive and negative influences of monopolism. Our telecommunication charges are higher than many other countries because we have had a single provider for so long. The electricity crisis has been brought about by Eskom’s favourable position as the sole provider of electricity and as far as fuel is concerned, we are the victims of the international hegemony of the Organisation of the Petroleum Exporting Countries (Opec). If Opec were a South African cartel its price-fixing would attract the attention of our Competitions Commission which would impose severe sanctions.

In a recent radio debate, Raymond Ackerman was arguing for the deregulation of the petrol price. He pleads for a free market environment in which, he maintains, prices would come down to the benefit of the consumer. Notwithstanding the overwhelming evidence that competition does result in lower prices, it was surprising to hear the number of callers who defend the current controls. There is an inherent distrust of the private sector, it seems, which is perceived by some to use free market as a licence to exploit consumers unfairly. It would be silly to deny that this does happen, especially in the case of a company which, by virtue of its market dominance, as opposed to a legislated right, assumes the mantle of a monopoly and suffers consequent criticism. Microsoft is an example. It has become, by far, the pre-eminent supplier in its sphere. It has placed itself in a position where it is able to control the market. At the same time, however, it appears to many to have taken on the character of a monopoly by charging high prices and, above all, perfecting interdependence which inhibits a consumer from buying elsewhere in the market. It may also be accused of a kind of planned obsolescence, a practice which is the norm in the world of such rapidly advancing technology. The cellphone industry has got this down to a fine art, for it has managed to convince consumers that the “free” upgrades offered so regularly are reflective of the industry’s benevolence. The line between fair competition and market dominance is no more easily defined than that dividing ethical product development or sales practice from the unethical.

It is interesting that there are several instances of double standards. The government has preached free market for a long time, but persists with state-controlled monopolies, disguising them in a corporate image. This is the worst of both worlds. The perpetuation of the corporate image is costly and the lines of accountability appear to be very thin. It is a moot point whether they would have fared better or worse had they been established as straightforward government departments accountable to a minister and Parliament. The reality is that they have never had to face the real test of business which is to deal successfully with competition.

Regrettably, there is little prospect of change. Despite having been on the verge of privatisation on more than one occasion, it has not been accomplished. Cosatu, among others, is set against the private sector’s involvement in the delivery of services which it identifies as state responsibilities. There are three main reasons. One is that jobs will be lost as workers are laid off. This seems to be a tacit admission of over-employment and poor productivity on the part of state enterprises. The second is that prices will escalate. I’m not sure if there are many examples of private provision costing more than public provision, but the perception exists in the context of the mistrust I referred to earlier. I suggest that acceptable profit represents a total amount of money that is less than that associated with wastefulness and inefficiency. In any event, as long as there is competition, the consumer may choose the least expensive option and there is no better incentive for cutting-edge business practice. The third reason is that the socio-political objectives of the liberation of our country are not shared by private sector profiteers. I think this is true, but only up to a point. While some companies have a poor record of social responsibility, many business people know that transformation is essential to our economic welfare and implement projects that support this wider view.

Since it is also true that historical trends have a way of persisting into the future, we are accustomed to monopolies. We would find it difficult, perhaps, to choose from among an array of telecom or electricity providers. Our political landscape is also one in which there is little challenge to the dominance of the market leader.

• Andrew Layman is a former headmaster and now the CEO of the Pietermaritzburg Chamber of Business.

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