Minister Parks Tau addressing officials at the handover of the second Concentration Report of the Competition Commission hosted at the headquarters of the Department of Trade, Industry and Competition in Pretoria.
Image: Supplied
South Africa’s economy remains heavily shaped by patterns of concentration created during apartheid, with dominant firms continuing to control large portions of key industries.
This is despite South Africa being decades into democracy, according to the Competition Commission’s latest Concentration Tracker Report.
The report says the structure of the economy was “largely the result of a market structure inherited from the apartheid period which supported national champions to develop self-reliance and restricted outward investment but also excluded the majority of citizens from participation in the economy”.
Trade, Industry and Competition Minister Parks Tau said the findings showed that concentration in South Africa “is an inheritance”.
“The apartheid economy was engineered, deliberately and systematically, to concentrate ownership, to exclude the majority, and to entrench the dominance of a small elite,” Tau said at the report’s launch.
Tau added that “that architecture did not dissolve with democracy. It persists — in who controls markets, in who can access finance, in who is permitted to grow, and in who is locked out.”
The report analysed 228 sub-sectors across the economy using tax data from more than 450,000 firms between 2017 and 2021.
While the commission said there were signs of improvement, concentration levels remain high across major parts of the economy. According to the report, 21.5% of sub-sectors analysed in 2017 were classified as highly concentrated. By 2021, that had declined to 17%.
However, the report also found that in 46% of sub-sectors, the top three firms still controlled at least 40% of turnover by 2021. Highly concentrated industries remained most prevalent in manufacturing, mining, electricity, gas and water, and transport and storage.
The commission warned that high concentration suppresses competition, limits participation by smaller firms and undermines job creation. South Africa's unemployment rate has just increased by 0.2 percentage points to 32.7%.
“High levels of concentration undermine growth and job creation through imposing high prices on intermediate products or services used by downstream industries and by imposing market access barriers that exclude entrepreneurs and rival firms from expanding in those markets,” commissioner Doris Tshepe states.
The commission also found that micro, small and medium enterprises accounted for 97% of firms in the economy by number, but only 22% of turnover in 2021. Large firms, meanwhile, represented just 3% of firms but controlled 78% of turnover.
The report notes that South Africa’s small business participation levels remain well below Organisation for Economic Co-operation and Development averages, where smaller firms contribute roughly 50% to 60% of value added.
Tau said concentration “suppresses growth”, “stifles competition” and “kills jobs”. The commission also warned that dominant firms may make deconcentration harder to achieve over time.
It found highly concentrated sectors with “presumptively dominant” firms were more likely to remain concentrated than sectors where several large firms competed against one another.
The report said the findings supported the need for broader reforms beyond competition enforcement alone, including removing regulatory barriers that prevent smaller firms from expanding.
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