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- Journal of Economic and Financial Sciences
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- Volume 7, Issue si-1, 2014
Journal of Economic and Financial Sciences - Special issue 1, October 2014
Special issue 1, October 2014
Understanding economic regulation and competition in a developing economy : introduction to special issue : guest editorialSource: Journal of Economic and Financial Sciences 7, pp 501 –505 (2014)More Less
The most widely regulated markets are natural monopoly markets, where regulators impose limitations on monopoly behaviour regarding price, quantity or entry and exit into the market (Viscusi et al., 2000). A critical element of regulation is identifying the essential facilities or infrastructure where competition is not possible and enforcing measures to make sure access is provided on fair terms to different participants, along with ensuring appropriate incentives for investment. The articles in this special issue analyse how these challenges have been addressed by different regulators. There is also a strong link here with competition law provisions prohibiting abuse of a dominant position. Economic regulation and competition law enforcement is particularly important where there are entrenched dominant firms, which are also often vertically integrated into a range of related activities and may have incentives to exclude rival actual and potential participants. However, the case for economic regulation is much wider than simply constraining market power; it can also rest on information imperfections, the existence of incomplete markets and externalities, and the resulting income and wealth distribution effects (Jalilian et al., 2006).
Source: Journal of Economic and Financial Sciences 7, pp 507 –526 (2014)More Less
South Africa's Renewable Energy Independent Power Producer (REIPP) procurement programme is hailed worldwide as a model for renewable energy procurement. Its success is far from experimental and haphazard and points directly to lessons acquired prior to, and during, the launch and running of the programme. This article explores the journey to the REIPP procurement programme and draws critical lessons from the process. It discusses the success of the REIPP procurement programme in developing the renewable energy sector in South Africa, drawing seven key lessons explain this success and exploring the remaining challenges. The article shows that, despite the need for further improvements and continual optimisation, the development of the REIPP procurement programme has been a positive illustration of successful policy and regulatory learning processes.
Is vertical separation a prerequisite to enhancing competition in the South African energy industry?Source: Journal of Economic and Financial Sciences 7, pp 527 –546 (2014)More Less
Vertical separation is believed to have positive effects in energy sectors where certain phases of the value chain operate under a natural monopoly. This paper discusses whether unbundling is necessary in the South African electricity and piped gas sectors to encourage entry and increase competition based on the experiences of other nations. Despite positive results in some instances, unbundling does not always result in higher levels of competition and benefits for consumers. In fact, in some cases, vertical separation has resulted in energy sectors that are worse off.
Source: Journal of Economic and Financial Sciences 7, pp 547 –568 (2014)More Less
This article reviews the regulation of liquid fuels in South Africa over the past decade. We first briefly assess the regulatory regime and how the regulatory functions have been carried out. We then consider the influence of security of supply concerns on regulation and highlight that it has favoured local refining interests rather simply ensuring supply to local fuel customers. The record of price regulation at different levels from refinery to retail is assessed, revealing the margins which had been allowed through the way in which the import parity price calculation had been done, which set prices that were higher than actual import prices would have been. The article further highlights how regulation has failed to take into account the special position of Sasol, notwithstanding the recommendations of the Windfall Tax Task Team and the reasons why the recommendations were not adopted by National Treasury based on expectations of investment. The case of natural gas provides a contrast, being subject to a recent regulatory framework, and we consider whether learnings from regulation in other parts of the value chain have been used in setting out new regulations.
Source: Journal of Economic and Financial Sciences 7, pp 569 –586 (2014)More Less
Poor delivery of infrastructure leads to inefficient pricing of these assets, which is passed through to consumers. Inefficient pricing is caused by a poor selection of a funding and financing method as well as project overruns. This article used a case-study approach to investigate if South African (SA) infrastructure projects were executed efficiently. It was found that the procurement method was not a reason for inefficient infrastructure delivery. Further, SA projects overran significantly by between 5 and 58%. The case of Transnet's pipeline project was highlighted. Two case studies (Gautrain and e-tolls) are presented to highlight issues around funding. It was found that the user-pays mechanism of funding is efficient only if there is complete transparency and communication between the user of the infrastructure and other stakeholders. Given the findings, this paper ends with policy recommendations for regulators of utilities that will ensure that consumers are protected.
Limiting collusion in the construction industry : a review of the bid-rigging settlement in South AfricaAuthor Hardin RatshisusuSource: Journal of Economic and Financial Sciences 7, pp 587 –606 (2014)More Less
This paper undertakes a critical case analysis of the process and outcomes of the Competition Commission (CCSA) Fast Track Construction Settlement Project relative to the mandates of the CCSA and the Construction Industry Development Board (CIDB). The study reviews the information from the CCSA's settlements, analysing the breakdown by private and public projects, type of project and the nature of bid-rigging. It provides an assessment of the practices involved and considers the co-operation that is required for the successful implementation of large infrastructure projects and how these can be organized in a way that ensures rivalry while enabling co-operation. The paper further reviews the barriers to entry, and the complementary measures that can be taken to ensure greater effective rivalry and participation. Interventions that could be necessary at the regulatory, procurement and firm level to ensure that the construction sector charts a new sustainable competitive path are highlighted.
Author Andrew SylvesterSource: Journal of Economic and Financial Sciences 7, pp 607 –618 (2014)More Less
Firms have a special cost advantage when they receive a discount or subsidy without assuming any risk or without being innovative. It is thus a received benefit, rather than an earned benefit, which results in a cost below the normal competitive level. The treatment of these special cost advantages has been a complicating factor when the firm in question is a dominant firm accused of charging an excessive price. The relevant benchmark against which to assess the price charged by the firm is the notional competitive market price, which in turn is linked to the cost of production under competitive conditions. This led to the Competition Appeal Court recommending that special cost advantages should be excluded from the cost build-up of the dominant firm when assessing excessive prices allegations. This would artificially inflate the dominant firm's costs and reduce the likelihood of a finding against the firm. This recommendation by the CAC has a number of theoretical and practical problems, and it remains unclear how special cost advantages should be treated in South African competition law cases.
International trade administration commission tariff investigations : an analysis of the poultry and paper casesSource: Journal of Economic and Financial Sciences 7, pp 619 –640 (2014)More Less
This paper critically evaluates the role and performance of the International Trade Administration Commission of South Africa (ITAC) with a focus on tariff investigations. The paper analyses ITAC's poultry and paper tariff investigations. For both of these cases, we analyse the economic context, assess parties' submissions and perceptions of the tariff investigation processes and outcomes, evaluate the duration of the investigation, consider the balancing of the various interests involved, and analyse ITAC's recommendations. From these two important cases it appears that ITAC has changed its approach to tariffs in line with developments in South Africa's trade policy. The findings also indicate that ITAC is not yet consistently meeting the stipulated tariff investigation timeframes. Possible policy implications arising from the analysis are discussed.
Source: Journal of Economic and Financial Sciences 7, pp 641 –660 (2014)More Less
This article analyses the role and capacity of the International Trade Administration Commission of South Africa (ITAC), focusing on ITAC's tariff investigation function. ITAC's institutional setting is compared to that in other developing countries. An assessment of legal challenges to ITAC decisions shows that the proportion of ITAC's decisions overturned by the courts has declined over time, suggesting increased robustness of these decisions. ITAC's current human resources and capacity-building are reviewed. Key institutional issues are discussed and policy recommendations put forward concerning: the appropriate institutional location for tariff-investigations; the current positioning of ITAC under two departments; co-operation between ITAC and other institutions; the strengthening of reciprocity commitments; the role and capacity of part-time Commissioners; the duration of tariff investigations; joint capacity-building among the economic regulators; the extent to which research at ITAC should be undertaken in-house; economics and inspections capacity at ITAC; and the grading of positions at ITAC.