Botswana: Competition Authority
The Competition Authority in Botswana (the Authority) has been in existence since April 2011 and has continued to execute its mandate as per its values of transparency, professionalism, integrity and teamwork. The Authority’s Strategic Plan has been under implementation through annual performance plans at both corporate and departmental levels, which inevitably lead to knock-on effects for the individual performance contracts for staff. While this process has been perfected, realising the tangible benefits of our performance for business and consumers must be our ultimate goal. Therefore, measuring the benefits of competition law and policy to society is a task we must undertake. In this brief, we share the strategic direction and focus for the Authority beyond our five years of establishment.
The Authority is at the tail-end of the implementation of its five-year Strategic Plan, which has primarily focused on enforcement and advocacy, particularly concerning bid rigging and mergers. For a small, developing country with a high government procurement budget for goods and services, this has been a natural priority for the Competition Authority. For its size and resources, the Authority has managed to establish itself as a reputable institution, more so in terms of sound corporate governance, transparency, accountability, integrity and professionalism. We have completed our first shareholder compact with the government, which sets out our mutual obligations and expectations.
While the Strategic Plan sets performance targets for the Authority, the shareholder compact sets out the parameters of the relationship between the shareholder (ie, the government of Botswana) and the Authority, articulating the shareholder’s expectations, setting performance targets, monitoring and evaluation of performance and confirming the performance targets, as indicated in the Strategic Plan and Business Plan. It is also recognised that in order for the shareholder compact to be an effective performance agreement, it is imperative that it represents what the government, as the shareholder, requires from the Authority and, in turn, sets out what support would be needed by the Authority from the shareholder to enable it to achieve its targets.1
Key stakeholder expectations
With each passing year, the government, consumer and business expectations on deliverables for the Authority have continued to grow. The government focuses particularly on job creation, economic diversification and competitiveness. These are matters that the Authority can achieve through both smart enforcement and smart advocacy. The Authority’s operations are expected to create a business environment that is unfettered by any conduct, arrangement or understanding that prevents, restricts or distorts competition (ie, anticompetitive practices). Some expectations are obvious, while others are beyond our capacity or may be only be realised in the long term.
As expected from any government within a developing country context, the government in Botswana set up the Competition Authority to deal with anticompetitive practices in the economy and help the country to have more competitive and dynamic industry structures. The National Competition Policy of 2005 is clear on this. As the primary funder of its operations, the government has many expectations of the Competition Authority. Such expectations are generally contained in the National Development Plan, Vision 2016, the National Competition Policy, the Industrial Development Policy and the Procurement Policy. Specifically, there are particular priorities each year, contained in the president’s state of the nation address and the Minister of Finance’s budget speech.
The government has identified four key thematic areas: the growth of the economy; promotion of inclusive growth; enhancement of the business environment to promote investment and foster diversification; and the strengthening of the judicial system, and combating of crime and corruption. These thematic areas are critical to promoting growth and ensuring economic diversification, and therefore assisting in efforts to create employment and improve on the general infrastructure, health and social development, and the fight against corruption and crime.2
Botswana’s economic fortunes have been on a downward trend since the 2008 global financial crisis, which affected revenue from its key export earner, diamonds. However, despite continued uncertainty over the global economic recovery, the outlook for the domestic economy has remained positive. Real GDP was estimated to have grown by 5.2 per cent in 2014, and forecast to grow at a slower rate of 4.9 per cent in 2015. Such positive growth for Botswana has mainly been driven by the non-mining sectors, including trade, hotels and restaurants, finance and banking, and social and personal services.3
Government expectations are particularly important, as they affect the budget of the Authority. While the Authority has operational autonomy, it needs to ensure that its focus and impact are reasonably in accordance with the overall national developmental paradigm and government priorities for industrial growth and development. In the absence of this, the Authority risks being another bottleneck for the government.
The aggregate economic, social and political intervention in an economy should enhance the welfare of the citizens. Citizens’ welfare is evident in their consumption of goods and services available within or imported into the economy. The consumer concern for lower prices, choice, availability and quality of goods and services is something that the Authority has to bear in mind. The Authority’s intervention in areas such as monopolisation and abuse of dominance (exploitative conduct), and cartels and anticompetitive mergers have an impact on the welfare of consumers. Unfortunately, there is no strong organised consumer voice in Botswana, although the Botswana Consumer Centre for Advocacy, Research and Orientation (BCCARO) has been in existence for a while. Lack of membership commitment, as well as funding, has affected their visibility.
The Authority has engaged in business at various levels. Generally, big business has been the target audience for the merger notification process and cartel leniency policy. Botswana’s ranking in the Global Competitiveness Report, in terms of dominant market structures, has not gone down. The Authority’s work on abuse of dominance has not been effective because there are no penalties for abuse of dominance in the Act. Despite this, notable interventions have been made. Following the Authority’s removal of barriers to entry, the country witnessed four new market participants in the physiotherapy equipment, sugar supply, cash-in-transit and alarm and response, and electrical supply markets. Further, two bid-rigging cases were successfully investigated and referred to the Commission by the end of the financial year 2014–2015. Both cases affect government procurement and involved tenders worth US$11.7 million, for sugar beans, and another worth €1.8 million, for infant formula milk. At the time of writing this report, the Authority had lost both cases at the adjudication level due to perceived procedural errors in the investigation process that were raised as preliminary issues before the actual hearing of the merits of the case. The Authority appealed to the High Court of Botswana.
Dealing with the nuts and bolts of the investigation
Retraining of investigators and prosecutors
The rule of law does not just apply to business, but also to enforcement agencies such as the Authority. The four years of enforcement of the Competition Act have shown that we cannot underestimate the capacity of businesses to defend their actions to the letter of the law. Withdrawal of cases due to procedural errors has been a very discomforting blip on our radar, but also indicative, on the whole, of our passion and ability to smoke anticompetitive practices out of the market. This passion and ability will now have to be channelled into paying attention to the details of the investigation process – the nuts and bolts. The Authority has prioritised and intensified training of its investigators, as well as prosecutors, to ensure that we focus on not just the spirit of the law, but the letter too. Arising from this is a more determined and refined team that has already taken steps to show that past errors will not be repeated. The Authority also engaged KPMG as internal auditors to, inter alia, review the investigation process, and its recommendations have been under implementation. The ongoing review of the Competition Act has also been an opportunity to strengthen the investigation process by making it clearer, closing existing loopholes that impede the proper enforcement of the Act, as well as removing the one-year time limit within which to carry out an investigation and refer to the adjudicating body.
Leadership development programme
The focus has not just been on nuts and bolts of the investigation and prosecution of cases, but also of the leadership of the Authority as a whole. Good leadership and management of the human and operational resources are key success factors for a competition authority. Internal staff harmony and teamwork were identified as being pivotal to ensuring that the Authority achieves greater success in its undertakings. To assist in better team cohesion, during the financial year 2015–2016 the Authority engaged a consultant to assist with team dynamics, as well as a focused leadership development programme that includes one-on-one coaching and mentoring, and 360-degree feedback processes.
The objective of the leadership programme is to help leaders and their teams acquire the necessary management and leadership skills that will help them to respond effectively to current and future business challenges. The employees would also develop a broad and deep understanding of organisational issues such as leading change, increasing accountability and creating a service-driven organisation. The aim was to enable the leaders to boost performance, improve outcomes and craft effective solutions to complex problems. The other stage of the programme was the Investment in Excellence training, the objective of which was to get employees to fully embrace their drive for excellence, with a view to seeking further enhancement. The goal was mainly to enable them to constantly invent ways of improving performance and production levels in the short, medium and long term.
The programme assisted the Authority to review and reform organisational and leadership discrepancies that have affected performance, and chart the way forward through personal coaching and mentoring sessions facilitated by experts.
In addition to the four new entrants indicated earlier, the Authority intervened in a number of mergers. It is estimated that the Authority facilitated the recapitalisation of over 145 million pula into existing businesses in the country (ie, expansion of existing businesses), in addition to technological and skills transfer, the creation and retention of 740 jobs, and citizen empowerment.
We have made inroads into the policy sphere and successfully influenced a number of laws and policies, including those pertaining to public procurement, whistle-blowing, anti-corruption, trade and consumer protection. This arises from a realisation that competition can be distorted not just by business conduct, but also by inadvertent government or business-sponsored laws and policies that are in place. Such laws and policies may be discriminatory in application or create entry conditions that frustrate competition. Additionally, such laws and policies may facilitate anticompetitive behaviour among competitors or within particular markets.
The Authority has continued to work closely with counterpart agencies such as the Directorate on Corruption and Economic Crime, and the Public Procurement and Asset Disposal Board in its enforcement and advocacy activities. Joint audits of mega infrastructure projects were under way in 2015–2016, which will culminate in recommendations on how to improve the government procurement system by identifying anticompetitive and corruption acts that taint the system, resulting in losses to the government.
Moving on beyond 2016
The ‘Big Bang’ impact
The ‘Big Bang’ impact has hitherto been elusive for the Authority. As the Authority turns five in 2016, it is safe to say that we will have moved out of the initial learning curve, and should have perfected our act, beginning to see fines roll into the treasury. With the intensive training of the leadership, investigators and prosecutors, our focus should be on significant impact at national level. We should begin to see positive strides made in global indices such as those on intensity of local competition, extent of market dominance and effectiveness of antimonopoly policy under the Global Competitiveness Report. The Authority has set up a ‘Business Impact Analysis Forum’ aimed at ensuring that time is devoted to reporting, analysing and discussing our core mandate of preventing, redressing and removing anticompetitive practices in the economy.
The Authority will have to achieve a strategic resource fit, and further evolve its impact evaluation mechanisms, to allow for clearly demonstrable outcomes on the economy and public front. This strategic initiative will also pay dividends in terms of discouraging potential perpetrators, and notably in accounting for the Authority’s outcomes and influencing other key competitiveness fundamentals.
The Authority’s key focus areas include:
- competitive local industries;
- employment creation;
- enhanced sound procurement systems at central and local government;
- export promotion; and
- industrial growth.
The review and streamlining of the Project Selection and Prioritisation Framework during 2015–2016 will ensure that the Authority focuses its limited financial and human resources and capacities on the identified key focus areas. This will help lead to the desired impact on the economy generally, and consumer welfare in particular, in the years to come.
As of 2016, the Authority deems a high performance culture as the centrifugal part of its intended strategic success. As such, the Authority will streamline its policies and implementation structures to allow for continued processes and systems reviews. Furthermore, given the significance of the workforce in the success alluded to here, the Authority will thrive on its effort of continued and sustained staff involvement, capacity building and well-aligned performance rewards and incentives.
The transfer of the Consumer Protection Act to the Competition Authority, beyond 2016, is expected to create more publicity for the Authority as well as pressure that comes with being at the centre stage of consumer demands. The Authority will have to be appropriately restructured and resourced to deal with this important mandate. Consumer protection and competition are two sides of the same coin and we look forward to dealing with both of these issues at the Authority.
- Shareholder Compact between the government of Botswana and the Competition Authority, paragraphs 1.6 -1.7.
- Hon Kenneth Matambo, Minister of Finance and Development Planning, Budget Address to Parliament, para.37, 2 February 2015.
- Ibid, para 33.