State aid to state owned enterprises in South Africa : the need for a comprehensive State aid policy : a competition law inquiry

Journal Title
Journal ISSN
Volume Title
Stellenbosch : Stellenbosch University
ENGLISH ABSTRACT: The Competition Act 89 of 1998 applies equally to all firms with regard to anti-competitive behaviour regardless whether it is privately or publicly owned. Therefore it applies to stateowned enterprises (SOEs) if their actions fall short of the Act. There is however one aspect relating to SOEs which is not covered by the application of the Competition Act but may have a significant impact on free and fair competition and can be of big concern for private competitors of SOEs. Since discriminatory policies during Apartheid have created a huge inequality gap in post-Apartheid South Africa, the government has to be actively involved in the economy to address the inequality. Therefore the government uses SOEs as vehicles to achieve its developmental goals. As a result SOEs in South Africa which are active market participants may always rely on the financial support of the state. They may do so purely because of their crucial governmental mandates regardless of financial mismanagement, poor corporate governance and deep seated corruption in almost every SOE. Even though the fundamental need for the existence of SOEs in South Africa is acknowledge, it is argued that state financial aid could qualify as a state-initiated constraint on competition in South Africa as it creates an uneven playing field between SOEs and their private competitors, which is always skewed in favour of the SOEs. It may create warped incentives and SOEs may not compete efficiently if they know that they are protected by a state sponsored safety net. This dissertation asks the question whether the time has not arrived in South Africa for state aid to SOEs to be subjected to a certain degree of scrutiny in order to bring about a level playing field between SOEs and their private competitors. It is recognised that privatisation of SOEs is not always the better option as it could threaten the delivery of basic services and goods to poorer South Africans. Hence, the dissertation investigates whether a state aid control model, based on the European Union state aid rules, is not perhaps a solution to address the potential distortion of free and fair competition by state financial aid. It proposes a customised state aid control regime for South Africa which provides for an active role by the competition authorities in state aid decisions and it presents draft legislation which could be used as a basis for the implementation in South Africa of a regulated system of state financial aid to SOEs (and even private enterprises where applicable).
AFRIKAANSE OPSOMMING: Die Wet op Mededinging 89 van 1998 is gelykerwys op alle ondernemings van toepassing, ongeag of die onderneming in privaat- of staatsbesit is. Gevolglik is dit ook van toepassing of ondernemings wat in staatsbesit is wanneer hulle nie-mededingend optree. Daar is egter een aspek wat verband hou met staatsondernemings wat nie deur die Wet op Mededinging gedek word nie maar wat ‘n groot impak op vrye en regverdige mededinging kan he en wat kan kommer wek by mededingers van staatsondernemings. Aangesien die beleid van Apartheid tot erge ongelykheid, ook in post-Apartheid Suid-Afrika gelei het, is die regering tans aktief betrokke om die ongelykheid reg te stel deur onder andere van ekonomiese maatreёls gebruik te maak. Gevolglik gebruik die regering ondernemings wat in sy besit is om sosioekonomiese doelwitte te bereik. As gevolg hiervan kan hierdie ondernemings, selfs al is hulle deelnemers in die markte, altyd staat maak op die finansiёle ondersteuning van die staat. Hulle kan dit doen bloot op grond van hulle mandate, selfs al word hulle gekenmerk deur finansiёle wanbestuur, swak korporatiewe beheer en erge korrupsie. Hierdie proefskrif gee erkenning aan die bydrae wat ondernemings in staatsbesit maak tot die staat se ontwikkelingsplan. Daar word egter geargumenteer dat die staat se finansiёle ondersteuning van hierdie ondernemings kan kwalifiseer as beheer oor mededinging wat deur die staat geїnisieer is, aangesien dit lei tot ’n ongelyke speelveld tussen ondernemings in staatsbesit en private mededingers, wat altyd in die guns van die staatsondersteunde ondernemings is. Dit kan verder lei tot die afwesigheid van motivering in staatsondernemings om effektief met privaat ondernemings mee te ding. Hierdie proefskrif bevraagteken of dit nie nou die tyd in Suid Afrika is om staatsbefondsing van staatsondernemings aan ‘n mate van evaluering onderworpe te stel nie en sodoende ’n gelyke speelveld tussen staats- en private ondernemings mee te bring. Dit erken dat privatisering nie altyd die beter opsie is om die kwessies met staatsbefondsing van staatsondernemings op te los nie, aangesien privatisering die lewering van goedere en dienste aan finansieel kwesbare persone in Suid-Afrika kan affekteer. Gevolglik ondersoek die proefskrif of ’n stelsel vir die beheer van staatsbefondsing van ondernemings wat aan die staat behoort, gebaseer op die Europese Unie se model vir die beheer van staatsbefondsing, moontlik die oplossing vir die kwessies onderliggend aan sodanige befondsing kan wees. Die vraag wat beantwoord moet word is spesifiek of sodanige beheer die bedreiging van vrye en regverdige mededinging deur staatsbefondsing sal verwyder of beperk. Die proefskrif stel ’n stelsel vir die beheer van befondsing aan staatsbeheerde ondernemings voor in terme waarvan Suid Afrika se mededinginsgesag ‘n aktiewe rol speel. Dit stel verder ’n konsepwet voor wat kan dien as die basis vir die implementering van ’n stelsel vir die beheer van staatsbefondsing vir staatsbeheerde ondernemings (en ook vir privaat ondernemings indien toepaslik).
Thesis (LLD)--Stellenbosch University, 2020.
State-owned enterprises -- South Africa, Government business enterprises -- South Africa, State aid -- South Africa, Competition, Unfair -- South Africa, UCTD