November 14, 2018

Is one-time award-winning Competitions Commission starting to smell bad?

The State Security Agency is still investigating a spate of armed attacks on members of the Competition Commission which took place over a period of four months last year. Parliament was told that the release of the SSA investigation report was “imminent,” but that was some weeks ago and nothing has been heard since.

This comes at a time that the pending Competition Amendment Bill is making rapid progress through the legislature and is expected to be signed into law before the year-end, or at the latest before the election hands power over to a new legislature.

What is worrying the official opposition about this proposed law in particular is that it believes it will give the Commission considerable scope to reshape the economy by intervening in market structures.

Michael Cardo of the DA has said that if the Bill becomes law the Commission’s “empire” would expand considerably. It would be empowered to “reshape the economy” and its terrain to the extent that “the whole of economic policy would become the Commission’s fiefdom and protectorate”.

Making the economy more inclusive isn’t the role of the competition regulator.

This is strong talk from the official opposition who fears if the Competition Amendment Bill becomes law the Competitions Commission would gain considerable scope to intervene in market structures.

The ruling party, for its part, speaks of the need for a powerful Competition Commission to “deconcentrate” the economy and promote economic inclusion, while investigating restrictive business practices and abuse of dominant positions and mergers.

The DA’s Cardo, however, warns that making the economy more inclusive isn’t about breaking up large firms and provides no guarantee that smaller players will enter the market.

None of this, he believes, is the role of the competition regulator. “Economic inclusion is about radically transforming our labour laws to create jobs. It is about improving access to capital and credit for unbanked entrepreneurs, cutting red tape for small business people, and growing the economy.”

It’s to be expected that these two parties will have very different views of a Bill as contentious as this one, and concerned citizens are also likely to disagree on the objectives and outcome of the proposed legislation.

But what concerned citizens also need to know before this Bill becomes law is that for the last 18 months a shadow has fallen over the Competition Commission and the proposed legislation needs to be understood in that context.

The need for an SSA investigation itself rings alarm bells which should not be ignored, and while the SSA’s investigation slowly unfolds it is also worth bearing in mind that it appears that in addition a SAPS investigation into the Commission was conducted as well as another one by a private security firm.

It is seriously hoped that all this will be taken into account before the President’s signature turns this Bill into an Act.

Another matter worth taking into account is the R14,981,051 VIP security bill run up by the Commission between June 2017 until the time of reporting in August 2018, and which may still be in place. This involves an outsourced private security service to provide ongoing protection to the four leading Commission officials following a spate of robberies at the Commission over a period of four months in 2017.

The Competition Commission also terminated the usual security services at the Commission’s premises and called in a private service provider to conduct a security assessment. Its report, released some time ago, pointed to “some security gaps” in the security of the Commissioner, the Deputy Commissioner and the Divisional Manager for Cartels. It also upgraded the IT security systems and said more work needs to be done on that, if the budget permits.

So before considerable powers are handed over to those running the Competition Commission it is worth a moment’s pause. The Competition Commission falls under the purview of the impeccably reliable Minister of Economic Development, Ebrahim Patel, who has not a spot on his record.

All that there is to be asked about him is what happens when the President at last gets round to the urgent task of shrinking the bloated Cabinet back to a workable size. It is reasonable to expect that a Ministry of Economic Development may find itself redundant, especially given that government as a whole is ultimately devoted to economic development, and the economic cluster has spiralled somewhat out of control under previous regimes. What becomes then of a Department of Economic Development and its Minister?

There is no doubt that this is critical legislation which aims to unpack high levels of market concentration and racially skewed patterns of ownership. In brief the bill aims to promote the inclusion of black South Africans in the economy. It may be understandable under the circumstances that Patel is keen to get his legislation signed and sealed before it is too late to do so.

Why then has the squeaky clean Ebrahim Patel never responded to repeated requests by Michael Cardo of the DA for an investigation into the Competition Commission – also before it is too late for that as well.

The pesky Cardo has been regularly submitting written questions to the Minister about the Competition Commission for some time now, and some of the answers he has received from the characteristically thorough Minister may raise a few hairs at the back of your neck.

This all goes back to May 2017:

  • On 25 May 2017 the Deputy Commissioner was held at gunpoint after returning from a work assignment, and his work computer laptop, tablet and mobile phone, among other things, were taken.
  • For about three months after that laptops and mobile phones belonging to, amongst others, the Commissioner himself, Tembinkosi Bonakele, were stolen under what the Commissioner described as “mysterious circumstances”.
  • On 8 August 2017 two laptops containing sensitive evidence were stolen from the Cartels Division of the Competition Commission.
  • A month later, on 9 September 2017, the Chief Financial Officer (CFO) was robbed at gun-point.

Of course this kind of thing happens a lot in South Africa, and perhaps it could be shrugged off as an unfortunate run of bad luck. But it piqued Cardo’s curiousity and he has submitted persistent written questions to the Minister who conceded “The Competition Commission and senior staff have been subject to a spate of criminal acts, the source and purpose of which is not yet apparent.”

Patel confirmed that these had been reported to the law-enforcement agencies and that Commissioner Bonakele had indicated that there was a need to provide security to “a limited number of senior officials in order to ensure the safety of persons and sensitive information”.

We understand that. The Competition Commission is not popular in certain circles –for example, we get that it was necessary to call in the South African Police Services (SAPS) to provide protection for former Chief Justice Sandile Ngcobo while he headed up a panel appointed by the Commission to conduct a Market Inquiry into private healthcare.

The work of the Competition Commission is risky business that may not be very popular with the cartels out there that would probably prefer to be left alone to get on with whatever it is they are getting on with.

The Minister’s impeccable explanation to one of Cardo’s questions explains all that clearly: “The Competition Commission undertakes investigations into collusion and cartel activities in the economy and in the course of carrying out its responsibilities, it is privy to commercially sensitive information which may result in significant competition penalties being imposed on affected parties and the possibility of criminal charges being brought against individuals.”

And in case there still remains any doubt, he added, “in addition, significant vested interests in the economy may be affected by the work of the Commission”.

But in these days of citizens still reeling from the Gupta leaks and whose confidence in leaving financial matters to government has been finally swept away by the mounting exposures of the Nomdo Commission of Inquiry into State Capture now need to know more.

Patel has confirmed that the total cost for the various Protection Services for the Commission has amounted to R14,9 million to date. He said the findings of the SSA investigation will determine whether or not to continue with security measures, and if so, at what level of security.

It may all sound like it’s in the capable hands of the good Minister but more recently Cardo changed tack and started asking Minister Patel about one of the legal firms used by the Commission, Ndzabandzaba Attorneys.

Of particular interest to Cardo was Antony Ndzabandzaba, the principal partner at Ndzabandzaba Attorneys, who was previously head of training and development in the Commission’s Cartels Division.

Cardo is curious about the high-drama dawn raids carried out on the instruction of Ndzabandzaba Attorneys by a contingent of armed police kitted out as if for a military-style operation.

But mostly he wants to know why, between 1 January 2015 and 1 January 2017, seven law firms were briefed by the Commission to deal with a total of 44 cases, and 31 of these, all cartel cases, were handed to Ndzabandzaba Attorneys, which is 70% of all the Commission’s cases. This has earned this firm an impressive R10,519,266 (64% of all such expenditure).

Patel, whose replies to Cardo’s question are normally prefaced with a subtle qualification confirming that the information he is about to supply was received from the Commissioner of the Competition Commission, Bonakele, had this to say in reply:

“The nature and the scope of work rendered by the law firm include assisting the Commission with prosecution of cartel cases, negotiating and concluding settlement agreements on behalf of the Commission, giving legal advice on cartel cases and briefing legal counsel to appear at the Tribunal and higher courts on behalf of the Commission. Ndzabandzaba Attorneys has also assisted the Commission with High Court applications for search warrants.” This is another direct quote that the Minister atrributes directly to the Commissioner.

It would appear there is a lot of lucrative work to be found in the business of investigating cartels. Patel cites some of the cases on which Ndzabandzaba Attorneys was briefed by the Commission. There was, for example, a Furniture Removal case, which involved 46 respondents engaged in over 7,000 separate instances of collusion, an Automotive Components case which involved 61 respondents engaged in 310 separate instances of collusion, and the Foreign Exchange (Forex) case with its 23 respondents.

It may be that the Minister is happy enough with Ndzabandzaba Attorneys’ work, but in reality he is quoring the Commissioner again in an another reply to Cardo when he states, “the law firm successfully negotiated settlements to the amount [of] R594 million and has a 100% success rate on prosecutions at the Competition Tribunal thus far”.

But the high-publicity dawn raids are becoming contentious, and there was shock among the legal fraternity when it emerged in the KwaZulu-Natal High Court that the Commission lied to gain search warrants on two edible-oil companies which it suspected of collusive behaviour.

The high-stakes foreign-exchange case against 23 banks charged with manipulating the rand/dollar exchange rate resulted in 22 of the 23 petitioning the Competition Tribunal to order the Commission to clarify its charges. As is well known, Standard Band challenged, and won on appeal, its demand to see the record of its investigation.

There is a growing concern that the Commission is getting ahead of itself and is increasingly not acting within the prescripts of the law. Even Former commission staff query why so much work, which used to be done in-house, is now being outsourced and why the cartel division now has its own building and legal team, allowing it to bypass the Commission’s highly regarded legal services unit, which previously served all divisions.

One final matter requiring consideration before the Commission is authorised to take on its expanded authority is the Auditor-General’s finding on the Competition Commission’s Annual Report for the financial year 2017/18. The A-G found total irregular expenditure of R128,590,000, most of it ,to do with contravention of the regulations for supply chain management and for costs incurred on forensic, economic and legal experts used on cases.

Moira Levy

Last modified on Monday, 22 October 2018 22:33

About Us

Notes from the House is an independent weekly email newsletter that tracks and monitors Parliament in its role of holding government to account and passing legislation to improve people’s lives. It aims to bring you the news from Parliament that you don’t get elsewhere. Published by Moira Levy with the support of the Claude Leon Foundation.

Latest Tweets

#parliamentodrsa in crisis. There is a committee to oversee its financial management but who oversees the political… https://t.co/1FDYQkbrCz
What's happened to the party funding bill. It was raced through parliament last year, in record time, ostensibly fo… https://t.co/s9fiWgGj9D
Follow Notes from the House on Twitter