Hidden in plain sight – private cartels in Africa

by THANDO VILAKAZI

Across the world the extent of corporate collusion raises a range of fundamental questions relating to the manipulation of markets and capture of the policy agenda by private companies. Little is known about the extent of such collusion in so-called developing countries, in Africa in particular. Based on recent research for ROAPE, Thando Vilakazi argues that the form and extent of collusion across much of the continent points to limitations of conventional ‘governance fixes’, namely competition law, to address private cartels in Africa.

There is a growing body of evidence that collusion between competitors in the global economy has led to significant economic harm to consumers, with prices typically between 15% and 25% higher than would pertain under competition. A lot less is known about the extent of and harm arising from collusion in so-called developing countries, in Africa in particular. There are indications that there is widespread domestic and cross-border collusion in, for example, southern and East Africa. The related social harm is likely to be very significant given high barriers to entry and concentration in key industries, meaning that competitive constraints are lower and the likelihood of collusion is higher. Our own research points to high mark-ups from cartels in the cement and fertilizer industries in southern and East Africa, involving arrangements that have extended beyond national borders.

The extent of corporate collusion raises a range of fundamental questions relating to the manipulation of markets and capture of the policy agenda by private companies. In the transition from generally state-led economies to liberalisation our case studies point to deeper concerns about widespread cartel conduct. This has to do with the fact that private companies, including large transnational corporations in these industries, have deliberately misrepresented their conduct, manipulated markets, and influenced the policy agenda to reinforce their market power. This includes lobbying for regulatory barriers which limit entry as part of industrial policies which favour established businesses.

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