Partnership for Regulation Economic Policy and Strategy - PREPS

On 15 January 1950, John Nash’s paper 'Equilibrium Points in n-Person Games' was published by National Academy of Sciences. You can read the paper here: http://www.jstor.org/stable/88031

Nash (1928-2015) shared the 1994 prize in economic sciences "for their pioneering analysis of equilibria in the theory of non-cooperative games."

The African Continental Free Trade Area – The Advantages

The African Continental Free Trade Area (AfCFTA) is one of the flagship projects of Agenda 2063: The Africa We Want’’. It is a high ambition trade agreement, with a comprehensive scope that includes critical areas of Africa’s economy, such as digital trade and investment protection, amongst other areas. By eliminating barriers to trade in Africa, the objective of the AfCFTA is to significantly boost intra-Africa trade, particularly trade in value-added production and trade across all sectors of Africa’s economy.

The deal creates a continent-wide market embracing 55 countries with 1.3 billion people and a combined GDP of US$3.4 trillion. Its first phase, which took effect in January 2021, would gradually eliminate tariffs on 90 percent of goods and reduce barriers to trade in services. That could raise income by 7 percent, or $450 billion, by 2035, reducing the number of people living in extreme poverty by 40 million, to 277 million, according to a World Bank report published in 2020.

A new World Bank study, released in collaboration with the AfCFTA Secretariat, accounts for the additional benefits that would accrue from an increase in foreign direct investment (FDI) – both from within and outside of Africa – that the deal is expected to generate. FDI is important because it brings the fresh capital, technology, and skills so badly needed to raise living standards and reduce Africa’s dependence on volatile commodity exports. In this scenario, real income would rise further, to about 8 percent in 2035, and the number of people living in extreme poverty would fall by 45 million.
The new report also models what would happen if the agreement is expanded, as planned, to harmonize policies on investment, competition, e-commerce, and intellectual property rights. Deeper integration in these areas would help build fair and efficient markets, improve competitiveness, and attract even more FDI by reducing the risks of shifting regulations and policies. This scenario would bring income gains of 9 percent by 2035 and reduce extreme poverty by 50 million.

The report, Making the Most of the African Continental Free Trade Area: Leveraging Trade and Foreign Direct Investment to Boost Growth and Poverty Reduction, is intended to be a guide for policy makers charged with carrying out the agreement. To maximize its benefits, the first step will be to conclude planned negotiations on investment, e-commerce, and intellectual property. The report also recommends building grass-roots support for and understanding of the agreement, simplifying red tape to encourage investment, and pairing the deal with a “complementary agenda” that includes training and advice for national trade ministries charged with supervising compliance and administration.

Key Findings

The AfCFTA promises broader and deeper economic integration and would attract investment, boost trade, provide better jobs, reduce poverty, and increase shared prosperity in Africa.

Africa could see FDI increase by between 111 percent and 159 percent under the AfCFTA.

Inflows of FDI attracted by the AfCFTA would bring jobs and expertise, build local capacity, and forge connections that can help African companies join regional and global value chains.

The AfCFTA can bring higher-paid, better-quality jobs, with women seeing the biggest wage gains.

Wages would rise by 11.2 percent for women and 9.8 percent for men by 2035, albeit with regional variations depending on the industries that expand the most in specific countries.

To make the most of the AfCFTA, African governments should conclude talks as planned and ensure the agreement covers investment and competition policy, intellectual property rights, and e-commerce.

African governments should seek to build broad public support for AfCFTA and help businesses benefit from its provisions.

Distributional impacts should be carefully monitored, and policies designed to provide social safety nets and programs for worker-retraining and job-switching.

If AfCFTA’s goals are fully realized, 50 million people could escape extreme poverty by 2035, and real income could rise by 9 percent.

Under deep integration, Africa’s exports to the rest of the world would go up by 32 percent by 2035, and intra-African exports would grow by 109 percent, led by manufactured goods.

Look out for the discourse on disadvantages and anticipated bottlenecks.

Statistics tell a story. Policy should be based on well researched data!

Predatory Pricing

Predatory pricing is a method of pricing in which a seller sets a price so low that other suppliers cannot compete and are forced to exit the market. A predatory pricing strategy, a term commonly used in marketing, refers to a pricing strategy in which goods or services are offered at a very low price point, with the intention of driving out competition and creating barriers to entry. In contrast to loss leader pricing, predatory pricing is aimed toward setting prices low for an extended period of time, long enough to, hopefully, drive the competition out of the market.

Predatory pricing, not only causes others to leave the market, but it also restricts entry for others. Since this is the purpose of predatory pricing, it is banned in many places because it is considered a violation of competition laws. However, in many cases it is difficult to prove a business is actively trying to implement predatory pricing rather than just partaking in normal competition.

If you had a competitor that was selling a TV at $100, and you sold the same TV at $80 (while taking a loss) because you knew they couldn't beat your price, you're practicing in predatory pricing. This is illegal in many countries and is treated very harshly by many justice systems.

Access to clean, reliable and affordable energy for all is key to the development of the energy sector and will ensure sustainability.

Zambia Has a Mandatory Merger Notification Regime

When companies decide to merge, they are in fact altering the market structure of the sector (s) in which they operate. The merger may enhance or reduce competition. It is also possible that a merger may not change the levels of competition in the sector. As a Competition Authority, the Competition and Consumer Protection Commission (CCPC) is more concerned with mergers that would significantly reduce competition in the relevant market as opposed to those mergers that enhance competition or maintain the levels of competition.

It can be challenging for any authority to predict the effects of a merger without analyzing the proposed merger and the market (s) in which it will occur. Therefore, the Competition and Consumer Protection Act number 24 of 2010 under sections 25, 26, 27 and 28 clearly stipulates the types of mergers that are reviewable by the Commission and the necessary threshold for a merger to warrant notification. This allows the Commission to undertake a review of the merger and analyze the possible market effects it will have after the merger has been consummated or effected.

The Law principally requires that before any merger/takeovers can take legal effect, authorisation must be sought from the Commission. The Act, and in particular Section 26, requires notification of all mergers/takeovers, that meet the prescribed threshold under section (5) of K9 billion, shall apply to the Commission for authorization of the proposed merger in the prescribed manner or form.

On a lighter note🤣 We need policy and regulations that make it easy to do business.

Am I lying ... 🧐

Chilufya Sampa, emphasised the importance of effective cartel enforcement to decrease the negative effects cartel conduct has on economies. He further emphasised the need for stakeholders such as politcians and the legal fraternity to be encouraged to play an active role in cartel enforcement.

African journalists as key stakeholders in the AfCFTA
"Africa will succeed in record time if journalists understand and are enthusiastic enough to report about the AfCFTA"
https://www.justori.com/justori/stories/user_story/TWprM05RPT0=

The DSTV Saga – Abuse of Dominance

In the last article time, we said Abuse of Dominance could be categorized as either Exclusionary or Exploitative. In this brief article before we move on to the role of the regulator, I explain what the two terms mean. I request that we don’t get too caught up in the intricacies of the definition of these terms but get the overall picture of what is trying to be communicated. Further, any examples cited are hypothetical and don’t point to any entity. Furthermore, any reference to DSTV is merely for illustration purposes and is not in any way trying to put them on trial and convict them in the court of public opinion. It is merely to give a balanced opinion on the public debate that has been raging.

So, Exclusionary conduct in layman’s terms means behaviour by a Dominant firm that leads to the barring of another player from participating fairly in a market. This for instance could manifest itself in what is known as Price Discrimination. Hypothetically speaking, say we have two competitors in the Non Alcoholic Beverages Market (Company A and Company B) which depend on a Dominant firm to supply them sugar for the drinks that they manufacture. If the firm supplying is charging company A much higher for the same quantities of Sugar with the same payment conditions, than company B, this could disadvantage company A as their cost of production would be high and they could have challenges effectively competing with company B.

Exploitative Conduct on the other hand is where consumer welfare is diminished because the trading conditions set out by the dominant firm are not favorable to the consumer. So this could be through excessively pricing their goods or services. This has been the major complaint of the consumers, who feel the company in question is pricing their bouquets excessively.

Now I must mention here that these cases of Abuse of Dominance are quite complex and highly technical to investigate and so before any authority can intelligently direct a firm to change or desist from a particular conduct, a lot of investigations would have had to be done and it could take many years to complete investigations. In fact, some developed countries do not even investigate Excessive Pricing. But that’s not to say it cannot or should not be investigated, our context could significantly be different from others.

Lookout for the next article on the role of the regulator. Keep Reading!

DSTV, THE REGULATOR AND THE CONSUMER

Over the next few days, we will try to chime in on the raging debate about DSTV. The topic is much broader and deeper than what meets the eye. However, the general consensus is that consumers are unhappy and feel exploited. This multi-faceted topic has the business side, regulatory side, technical side and of course the consumer side. We will try to offer our opinion in piece meal fashion so that the readers do not get bored while reading, as this could be a long discourse.

First and foremost, what we need to appreciate is that Zambia is a liberalized economy. This means that there are no pricing controls. We do know that in certain markets such as the Energy sector, tariffs are approved by the regulator but this is not the case in all markets. However, in spite of the fact that there are no pricing controls in the country, the Competition and Consumer Protection Act No. 24 of 2010 (CCPA) empowers the Competition and Consumer Protection Commission to investigate instances of consumer exploitation. This could be though Unfair Trade Practices or Abuse of Dominance.

So the question that begs answer is; is Multichoice abusing its Dominance? For a firm to be in a position to Abuse its Dominance, it must be in a Dominant Position of Market Power. According to Section 15 of the CCPA: A dominant position exists in relation to the supply of goods or services in Zambia, if (a) thirty percent or more of those goods or services are supplied or acquired by one enterprise; or (b) sixty percent or more of those goods or services are supplied or acquired by not more than three enterprises.
As we conclude on today’s submission, lets establish if DSTV is in a dominant position. DSTV operates in what is known as the Pay Television Market. The Pay TV Market has about three aspects to it, even though the third one is still in developmental stage. The first one is the Digital Terrestrial Transmission (DTT) this has players such as GOTV and Top Star (this is the one where antennas are inside the house), Direct to Home (DTH) this is the one that uses the Satellite Dish like DSTV, if you remember GTV had a similar arrangement and Kwese TV attempted a similar arrangement. The third is Over the Top Transmission (OTT) which is streaming platforms now such as Netflix and Zizwa plus which is new entrant on the Zambian Market.

Past research has shown that DSTV has held more than 60 percent market share in the DTH pay TV market (disclaimer, the actual figures could be higher). It is safe to then say that DSTV is the foremost player in the DTH market and is dominant. Now, what is important to note is that, the CCPA does not prohibit firms from being dominant, what is wrong is the abuse of a dominant position. So the question is; are they abusing their dominance? At least in the eyes of the law. Also Abuse of Dominance manifests itself in Exploitative or Exclusionary conduct. Don’t worry, we will unpack this technical jargon as we proceed.

Keep reading.

Partnership for Regulation, Economic Policy and Strategy - PREPS

An Enabling Business Environment

It is the combination of conditions that affect an enterprise's capacity to start up, grow, and create decent jobs, and are of political, economic, social, and environmental nature. Small and medium enterprises (SMEs) are often hit harder by an unconducive enabling environment.

Improving it helps them to access new services to: perform better, reduce their cost of doing business, unlock investment opportunities, and create more decent and productive employment.