RELEVANCE OF COMPETITION REFORMS
FOR DEVELOPMENT IN AFRICA
By
Peter Muchoki Njoroge
Chairperson
COMESA Competition Commission
1
CHARACTERISTICS WITH REGARD TO
COMPETITION IN THE AFRICAN REGION
■ Government involvement in many sectors.
■ Reliance on Governments to provide
essential services for the majority:
education, health, water etc.
■ Supremacy of the Executive vis a vis
other government arms.
■ Lack of Strong Competition Culture
2
CHARACTERISTICS OF AFRICAN STATES contd






Generally there is weak regulation. Probability of regulatory
capture is high[ both industrial and political].
High poverty levels.
Policy Makers are also by and large BO’s or are highly
intertwined with BO’s. Vested interests have high propensities
to converge.
High Concentration of economic power.
Lack of CPL in most countries eg in the COMESA region out
of 19 member states there are only 2, 3 or 4 fairly active CAs.
CL has been promulgated in about 7 States.
This scenario is replicated elsewhere
3
CHARACTERISTICS contd




Small sizes of markets not conducive to entry
competition
Little local capital enhances role of MNC’s
Foreign and domestic cartels may execute
restrictive distribution and market sharing
agreements
Lack of strong supportive institutions: Independent
judiciary; good governance; independent media;
professional well remunerated public service;
HENCE:
4
CHARACTERISTICS contd



Risk of law being misapplied
Possibility of unnecessary intervention in
markets, corruption and bribery
Possible affected government services:
Customs, tax collection, safety etc
5
EXAMPLES OF RTPs IN THE AFRICAN REGION
•
•
•
•
•
Trade agreements [ geographical market sharing, price
fixing, economies of scope provisions, production
quantities provisions etc].
Cartelization through trade associations.
Refusal or discrimination in supply.
Predatory practices to repress competition.
6
EXAMPLES OF RTPs contd
•Collusive tendering [BR].
• Collusive bidding at auctions [BR]
• Security related contracts
• Statute supported arrangements eg OTS in Kenya
• Outrightly dictated arrangements (generally a thing
of the past- hopefully?)
7
RELEVANCE OF COMPETITION REFORMS FOR
DEVELOPMENT IN AFRICA




The environment is conducive for proliferation of RTPs.
RTP will spawn transparency and accountability which will go
a long way towards controlling corruption.
Promotion of good governance by introduction of enforceable
rules. As already stated governments are involved in many
sectors of the economy.
As the majority of the people are poor, CPL will speak on their
behalf. Consumer Welfare will be enhanced.
8
RELEVANCE OF COMPETITION REFORMS contd.


Trade Associations are used to promote RTPs in key
sectors such as Insurance, Banking, Manufacturing,
Oil, Construction, Pharmacy, Medical etc. Some
claim to embrace safety and best standards. CPL is
needed to tame them.
As stated earlier vested interests control many sectors
of African States’ economies. CPL is needed to tame
these interests
9
RELEVANCE OF COMPETITION REFORMS contd.


There has been a proliferation of EPA
negotiations. Coupled with regional integration
initiatives plus WTO issues, reforms are needed to
conform with the new realities.
Competition Policy may be more important in
developing countries than in developed countries.
In many developing and least developed
countries, many people subsist on one or two
dollars per day.
10
RELEVANCE OF REFORMS, contd


That dollar when taken away, through
uncompetitive practices, from the poor person
disproportionately affects him more than it would
affect people from richer countries.
In situations where public funds are involved, for
example in bid-rigging, security, govt and statute
supported RTPS and collusive tendering, the dollar
which would go to assist the poor in state provision
of medicine or in providing universal primary
education ends up in private pockets. This is antidevelopment.
11
RELEVANCE OF REFORMS contd

Enterprises, especially Multinationals, abhor
adverse publicity. Any indication, therefore, that a
Governmental Agency is investigating them spawns
positive effects. The company being investigated,
and many other such companies, will desist from
conduct involving RTPs.
12
RELEVANCE OF REGIONAL COMPETITION
AUTHORITIES IN DESIRED REFORMS





Desired reforms must embrace regional CAs.
Will capture extra territorial violations on behalf of
regions in more effective and coordinated methods.
Treaties establishing regional economic cooperation
initiatives normally have competition adherance
provisions. Regional CAs are best placed to enforce
obligations arising out of such provisions especially with
regard to member states lacking CAs.
Regional CAs have competition advocacy provisions
within apposite regions e.g COMESA, EAC rules.
Regional CAs may be less amenable to Industrial and
Political capture.
13
PROPENSITY TO EMBRACE RTPS IN AFRICA
[EXAMPLE ONE] Quoted from a paper delivered
by Prof Jennings in South Africa
Houblon.net [Portrait of Pierre Castel, 2008]
Man to man. Over the years, his contacts increased. African
heads of state become his « friends ».
« If someone gives me a hard time, I get in touch with my
friends so they can solve the problem, he says. Like imports
by Lebanese merchants in the Central African Republic. « I
told the government: If you don’t stop them, I will freeze my
investments. » Same thing in the Ivory Coast, where he
controls one of the major sugar plants, Sucaf. This spring,
he asked to see Laurent Gbagbo so that over the border
smuggling would be stopped. A few weeks later, the Ivory
Coast government banned sugar exports for two years !

NB: The Castel Group is one of the two beverage companies in Africa. The group
has beer, carbonated soft drinks in fracophone Africa, including Angola, Benin.
Burkina Faso, Cameroon. Central Africa Republic, Ivory Coast, DRC, Gabon,
Mali,Tunisia, Morocco, niger, senegal and Togo. It is also in Ethiopia.
14
PROPENSITY contd EXAMPLE TWO- STATEMENT BY NAJIL
FAIRBASS, COMMUNICATIONS DIRECTOR SAB MILLER
[2001]

“ This agreement enabled us to develop opportunities…
There may be antitust laws at the national level, but
none covering the continent. I don’t see what the
problem is.”

-This statement was about a market sharing agreement,
contrived in 2001, which protected preferred zones for
the two groups without fierce competition.
15
PROPENSITY contd EXAMPLE THREE-THE
ANGLO LEASING SCANDAL [KENYA]- WIKIPEDIA
2009
 • In 2005 plans were hatched to buy a sophisticated passport
equipment system from France .
 •TheGovernment wanted to replace its passport printing system.
 •The transaction was originally quoted at 6 million euros from
François Charles Oberthur of Paris - the world's leading supplier
of Visa and MasterCards, but was awarded to a British firm, the
Anglo-Leasing and Finance Company Limited, at 30 million
euros, who would have sub-contracted the same French firm to
do the work.
 •Despite the lack of competitive tendering Anglo Leasing was
paid a "commitment fee" of more than £600,000.
 •Being a security related matter, the law removed this pernicious
arrangement from the ambit of CPL and competitiveness.
16
ANGLO LEASING contd
 •Anglo Leasing's agent was a Liverpool-based firm,
Saagar Associates, owned by a woman whose family
had enjoyed close links with senior officials in the
regime.
 • Company records show Saagar Associates was owned
by Mrs Sudha Ruparell, a 47-year-old Kenyan woman.
 •Mrs Ruparell was the daughter of Chamanlal Kamani,
the 72-year-old multimillionaire patriarch of a business
family which enjoyed close links with senior officials in a
past regime.
 •Anglo Leasing made a repayment (refund) of euro
956,700 through a telegraphic transfer from Schroeder &
Co Bank AG, Switzerland on May 17, 2004.
17
PROPENSITY contd EXAMPLE FOUR-THE
GOLDENBERG SCANDAL– KENYA-WIKIPEDIA







This is the longest-running scandal in Kenya.
The Goldenberg scandal occurred in early nineties when the
government had fallen foul of the Bretton Woods institutions and
badly needed foreign currency.
The Kenyan government (through parliament) subsidized exports
of gold, paying exporters in Kenyan Shillings (Sh) 35% over their
foreign currency earnings.
In this case, the gold was smuggled from Congo.
Most of the gold was non existent but the customs and geology
and mines depts certified the gold as real.
The Goldenberg scandal cost Kenya the equivalent of more than
10% of the country's annual GDP.
Again, there was no competitive bidding before Goldenberg was
picked as the sole handler of this scheme.
18
PROPENSITY contd EXAMPLE FIVE-THE TRITON
OIL SCANDAL-KENYA-WIKIPEDIA




In Kenya, regulation of the oil industry is in the
hands of the Ministry of Energy and one of its arms.
Around 2003, the Ministry and the marketer adopted
a so called ‘Open Tendering System’.
The system only allowed one marketer to import oil
products on behalf of all players in the industry.
The 2009 Triton Oil scandal involved the
unauthorized releasing of oil by Kenya Pipeline
Company (KPC) without informing financiers.
19
THE TRITON SCANDAL contd


The scandal became public in January, 2009.
The release of the oil occurred in 2008 when
Triton Oil Company was allowed by KPC to
withdraw oil amounting to Kshs 7.6 billion or
(US$98.7 million). The company collapsed
shortly afterward, withdrawing the oil and
selling it to the market.
The government may have to reimburse the
financiers as KPC is a public entity.
20
PROPENSITY contd EXAMPLE SIX-THE FAMINE
MAIZE SCANDAL-KENYA-WIKIPEDIA



This scandal in Kenya became public in
January 2009
It concerned the sale of imported maize.
In late 2008, the ban on importation of maize
was lifted by the government to allow capable
businessmen to import maize to supplement
the local produce that was short of the
minimum required to satisfy the local market.
21
THE FAMINE MAIZE SCANDAL contd



The scandal alleges that the following events might
have taken place:
A.- Briefcase millers, existing only on paper, some of
whom were defunct at the time when the scandal
unfolded, were awarded large quantities of maize by
the Strategic Grain Reserve management entity.
B.-They accomplished this by inflating their milling perhour capacity and having public officials vouch for their
authenticity.

22
THE FAMINE MAIZE SCANDAL-KENYA- contd



C. - The briefcase millers and local businesses that were either
awarded quotas by the SGR or awarded import permits by the
NCPBK (National Cereals Produce Board of Kenya respectively
might have also re-directed the bags of maize outside the
country in order to avoid price controls stated by the government
to help the poor and thus make bigger profits.
D.- Some of the maize imported in 2009 by local businesses was
certified unfit for human consumption and might have been
released into the market after directions of senior government
officials.
Again this was a scheme protected from application of
competition law.
23
PROPENSITY- EXAMPLE SEVEN-USAID PROJECTS IN
EGYPT-BID RIGGING [US District Court, Birmingham
(Alabama) v. AICI and others (2000)




USAID financed waste water treatment works in Egypt
between 1989 and 1995.
Concerned firms gave astronomically high bids to favour
winning company.
The winning company compensated the co-conspirators.
The public and USAID, as a result, did not get the best
value for money
24
USAID PROJECTS IN EGYPT contd


The money lost could have financed other
projects.
Egypt at that time did not have competition
law. There was no CA.
25
CONCLUSION



CPL promotes development whether at
regional or national levels.
The characteristics (broached in Slide 2 etc)
require taming by effective enforcement of
CPL.
There may be inordinate propensity to
embrace RTPs in Africa if the examples given
are replicated in other states.
26
CONCLUSION contd





CPL may be required more urgently in the African region ( and in
other comparable regions) than perhaps would be required in more
developed regions. Money saved through enforcement of CPL will
go into important services such as water, health and education.
African countries have progressively adopted political democracy.
CPL will spawn economic democracy.
Political democracy combined with economic democracy will bring
about comprehensive democracy.
Competition and attendant reforms may be the prodigal son that will
help tame corruption and economic dictatorship in Africa.
27
CONCLUSION contd


Thank you for your attention.
Good-bye. Au revoir
28