Company X sells a commodity below cost for a period of time, forcing its competitors to drop their prices as well. After some time, the competition collapses, at which point Company X increases its prices by extortionate margins.
“When that happens and an investigation by the Competition Commission finds the company’s conduct to be anti-competitive, it would impose a fine of up to 10 percent of the company’s gross income,” says Dr. Zein Kebonang, chairperson of Botswana’s new Competition Commission.
The story of Company X is only a hypothetical scenario but there are grim real-life examples of unethical anti-competitive conduct by some businesses that operate in Botswana.
In 2009, the South African Competition Commission had to deal with the case of a concrete pipes cartel whose tentacles reach across borders.
The cartel had reached various agreements to fix prices and trading conditions, to divide markets geographically and to allocate tenders, contracts and customers among themselves.
“The arrangements were applicable to the South African market and in certain instances even extended into neighbouring countries such as Mozambique, Namibia, Zambia, Tanzania, Swaziland and Botswana,” the South African Competition Commission says in its report.
When it starts its operations, Botswana’s own Competition Commission will police the market to ensure that anti-competitive practices such as those of the South African cartel are rooted out.
One other such practice that Kebonang says the Commission will deal with is exclusive franchise agreement. This is when a particular company has exclusive rights to distribute a particular product countrywide.
Kebonang says that while such exclusivity might make sense from a marketing perspective in that the preferred company might have expertise and be able to move products efficiently, from a competition perspective this is unhealthy as it creates unfair dominance of the market.
One of the things the Commission will do when its starts work is ask companies to submit their franchise agreements.
“If the agreement says that a particular company can be the only dealer of a product, that would be anti-competitive and the Commission would act accordingly,” Kebonang says.
He adds though that penalty would only be used as a ‘last resort’ because the idea is for businesses to comply with the law on their own.
The competition law is an improvement on the National Competition Policy for Botswana that went into operation in 2005.
Kebonang says that the policy-to-law transition was desirable because while the former only speaks to aspirations, the latter provides a set of legal instruments that can be applied to ensure that the playing field is level.
Levelling the playing also entails that the enhancement of consumer welfare. Kebonang says benefits that would accrue to consumers as a result of the Competition Commission coming about include reduced prices, improved quality of goods and services and wider choice.
However, at this point in time a majority of those consumers have not got the foggiest idea what a competition commission is. And so one of the first tasks that the commission will do is establish a public relations that will undertake a nationwide public education campaign.
“That will take a bulk of our time in the first year. If you are spending public funds you must justify why you exist,” Kebonang says.
Although Kebonang says that Commission is independent and will carry out its mandate ‘on the basis of its mandate and not political expediency’, some would look askance at the involvement of the minister of trade and industry who appoints the commission and the executive secretary.
To that he responds: “There are certain things where you cannot wish the government away. This was its initiative: it came up with the policy and the law and provided funds to run. The government cannot leave economic activity to the players and in this case is playing its role through the Competition Commission,” he argues.
Kebonang’s own association with the Commission goes back to 2005 when he was engaged as a citizen consultant by the Ministry of Trade (MTI) and Industry and the United Nations Development Programme to work alongside United Kingdom competition experts.
The latter needed someone familiar with local laws as well as with local knowledge of systems and processes. Kebonang, who holds a PhD in law from the Australian National University, an LLM from Harvard University and an MBA from the University of Botswana (UB) and has international work experience spanning two continents, fitted the bill and was brought on board,.
Between January and April 2006, the team put together a draft (“A Layman’s Draft of Competition Law in Botswana”) which was then sent to the ministry for buy-in, to the Attorney General Chambers for legislative drafting and to parliament for debate. In 2009, the competition law came into effect. When the position for chairperson of Commission was advertised, Kebonang applied and got the job.
Other commissioners are Gaylard Kombani, deputy chair and former deputy permanent secretary in MTI; Dr. Jay Salkin from Bank of Botswana; Tendani Malebeswa from Collins and Newman law firm; Tiny Kgatlwane, Botswana Insurance Fund Management chief executive officer; Oteng Batlhoki, deputy permanent secretary in MTI; and, Wankie Wankie, a UB lecturer who teaches consumer law and has headed a consumer protection agency. The commissioners will also constitute the tribunal that adjudicates on cases.
The chief executive officer, who is a Zambian national, has already been appointed and will assume duty in April this year. The Commission has asked him to come up with an organisational structure.
Kebonang says that some Batswana applied for the post but none among them had a competition background which was the reason they had to bring in an outsider. Generally, expertise in this area in Botswana is woefully lacking and competition as a discipline is not taught at any tertiary institution. Kebonang says that within the first year of setting up, the Commission will train staff to strengthen their technical competence and build local capacity.
The benchmarking was done in Zambia and South Africa because as Kebonang explains, those are the only countries in Africa that have competition commissions. Zambia’s particular allure was that the structure of its economy is a lot similar to Botswana’s.
If SADC countries do what they agreed to, each should have its own competition commission. Kebonang says that Lesotho has initiated a process to set up its own authority. Anti-competitive behaviour has been found to impede regional trade and it is hoped that properly constituted competition authorities working together would be able to right the situation. Inter-trade between SADC countries means that these authorities have to share information to ensure ethical conduct and compliance by companies.
Kebonang expresses satisfaction about the political support that the Botswana government has lent to the Commission project.
“The amount of commitment by the government has been remarkable. A law has been passed, budget allocated and the Commission set up,” he says.
Presently, the Commission has P4 million in its coffers and will get P19 million in the 2011/12 financial year.
