Barriers to entry and the link between
competition, regulation and inclusive growth for SMEs
The structure of SA’s economy welcomes few entrants. It is highly concentrated with insiders firmly entrenched. Widening access to the economy requires a concerted and collaborative effort by the government to alter the economic landscape, remove barriers to entry, enhance competition and foster inclusive growth.
The Centre for Competition, Regulation and Economic Development (CCRED) at the University of Johannesburg, through research undertaken in several sectors of the economy, uncovered a range of often mutually reinforcing factors that stack up to block greater participation in the economy by entrepreneurs and SMEs.
These barriers include the difficulties of accessing routes to market to reach consumers; overcoming consumer inertia and switching costs; achieving sufficient scale to enjoy efficiencies and lower costs; having patient capital to ride out the time it takes entrepreneurs to learn and build a business; and the reliance on vertically integrated rivals for key inputs and/or markets. This includes incumbent firms, or ‘insiders’, with market power acting strategically to exclude new entrants through anti-competitive conduct.
Evidence shows that with no threat of competition, incumbent market players are less likely to invest, innovate or increase productivity. Instead, insiders tend to abuse market power to marginalise rivals and maximise profits. SA has an extensive history of cartel behaviour that means entrants can be locked out of markets.
Access to finance is often cited as the determining factor in new business success, but the research suggests providing development finance without tackling other barriers to entry is likely to be a waste of money.
This session explores different barriers to entry faced by SMEs and the measures that can be taken to overcome them. Several of these are recognised by the National Treasury as hindrances to economic growth in its recently released strategy document – ‘Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa’.
- Date: 18 October 2019
- Time: 09:30 for 10:00 – 13:00
- Venue: Johannesburg Business School (Cnr Barry Hertzog and Empire Road, Milpark)
- Facilitators: Dr Thando Vilakazi & Dr Reena das Nair (Centre for Competition, Regulation and Economic Development, UJ)
- Fee: R750, including a light lunch
- +27 11 559 1783