Another important feature of the South African market is the concentration of income in the hands of a few, and the implications this has had on barriers to entry in key markets, products and service lines, as well as the development of small business. The South African economy is characterised by the dominance of a few organisations in key market and product value chains. In 2017 the Competition Commission found that even ‘unilateral dominance’ (where a single firm has market share in excess of 45%) existed in a large number of markets. There are other forms of dominance which are also harmful to the functioning of the South African economy.
In their review of merger reports between 2009 and 2016, Bosiu, Goga and Rogers found that dominant firms existed in 294 distinct product markets, including communication technologies, energy, financial services, food and agro-processing, infrastructure and construction, intermediate industrial products, mining, pharmaceuticals and transport.12 Furthermore, if we look at the concentration of income in manufacturing, the subsectors in which five firms held 70% or more of market share had increased from 16 in 2008, to 22 in 2014, indicating that concentration is getting worse.13 The influence of dominant firms on key markets serves to weaken the prospects of entry for newer and smaller (or even medium-sized) firms, which has macro-wide implications for investment, employment creation and the reduction of poverty (we discuss the challenges that small businesses face in a later chapter in this publication).
We now turn our attention to the spatial structure of South African society.
Spatial structure of South African society
If apartheid was a systematic attempt to prevent black encroachments on white privilege in South Africa’s urban core, the spatial planning model had two important dimensions. Firstly, it consisted of a rural area and urban core. The urban core was serviced by labour from the rural areas, with apartheid labour-sending areas in the then homelands. Secondly, this model was reinforced by racial segregation and influx control, restricting the movement of black people in the urban nodes. Every major city or second-tier city that one visits in South Africa is characterised by this spatial design: townships serve low-income black households and in most cases are far away from the urban, more prosperous and well-serviced suburbs.
In the post-apartheid period, a redistributive social housing programme, the Reconstruction and Development Programme (RDP), has had unintended consequences on social mobility and the well-being of the poorest citizens. These have included entrenching urban sprawl and a rise in the ‘daily reproductive costs of the poor, instead of providing them with an appreciating asset’.14 This is because many of the newly built houses were located far from economic activity without public transport infrastructure connecting these areas to the urban core. Such a ‘disconnect’ presents a cruel irony: the poorest working people often face the longest and costliest commutes between their homes and places of work. In last year’s Benefits Barometer we explored the challenge of transport costs and the role that employers can play in addressing these challenges. This year, we discuss in greater detail the role that transportation solutions can play in well-being.