South Africa

Notes from the House: Is the award-winning Competition Commission starting to smell bad?

Democratic Alliance fears that if the Competition Amendment Bill becomes law the Competitions Commission would gain considerable scope to intervene in market structures.

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 in 2017. 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 when 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 2019 election puts a new legislature in place.

What is worrying the official opposition about this proposed law 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” to the extent that “the whole of economic policy would become the commission’s fiefdom and protectorate”.

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

The ruling party, for its part, sees this Bill quite differently. The ANC says the the Competition Amendment Bill recognises 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.

It’s to be expected that two such different parties would approach this matter from different ends of the political spectrum, as will their supporters and most concerned citizens.

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 seen in that light – or absence of light.

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, an SAPS investigation into the Commission was conducted as well as another 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 since June 2017, which may still be in place, to provide outsourced private security to the leading commission officials following a spate of robberies at the Commission.

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.

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. Given all this 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 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.

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, among 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 gunpoint.

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 curiosity and in one of his persistent written questions to the minister the reply he received was: “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”.

The work of the Competition Commission is risky business that may not be very popular with 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 agrees. In a reply to one of Cardo’s questions he 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 #GuptaLeaks gloom and ongoing exposures from the Zondo Commission of Inquiry into State Capture, that kind of answer may not suffice. It fact, it may have citizens wanting to know more when it hears of government structures that are to be entrusted with a lot more power.

Patel has confirmed that the total cost for the various Protection Services for the commission has amounted to R14.9-million to date and 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 minier’s capable hands but more recently Cardo changed tack acommission, Ndzabandzaba Attorneys.

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.

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

Cardo asks 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, of which 31, all cartel cases, were handed to Ndzabandzaba Attorneys, which amounts to 70% of all the commission’s cases. This has earned this firm an impressive R10,519,266 (64% of all such expenditure). Patel gave this 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.”

In other words, the minister appears to be satisfied with Ndzabandzaba Attorneys’ work so far. In another of his replies to Cardo he states that “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 not all share the minister’s confidence. 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 known, Standard Band challenged, and won on appeal, its demand to see the record of the commission’s investigation.

There is growing concern that the commission is getting ahead of itself and may be stepping outside the prescripts of the law. 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 that may require consideration before the commission is authorised to take on its expanded authority under the pending legislation 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. DM