OECD Product Market Regulation (PMR) Indicators: How does South Africa compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
South Africa
2.53
OECD countries Average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
South Africa 5 Most competition-friendly countries
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Regulatory barriers are higher in South Africa than in most OECD countries. Public ownership of firms, in particular in network sectors, and the corporate governance of these enterprises could be improved to enhance their efficiency and to level the playing field between privately and publicly owned firms. There is scope for reducing the complexity of regulatory procedures, and there are no rules regulating the interactions between interest groups and policymakers. In addition, the rules governing public procurement fall short of OECD best practices, and there are high barriers to entry in both the services and the network sectors. By contrast, barriers to foreign direct investments are low, and the administrative requirements imposed on new firms are limited.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
South Africa
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
South Africa
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS Regulatory barriers to competition in service and network sectors are much higher in South Africa than in most OECD countries. There is scope to review the regulatory set-up in energy, e-communications and transport, with the exception of water and road transport, to foster competition. Professional services are hampered by strict entry requirements and distortive conduct regulations. Similarly, the regulatory framework for retail trade is not competitionfriendly.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation South Africa 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation South Africa 5 most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2
1 0 Lawyers
Accountants
Architects
Civil engineers
Professional services
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
Regulatory barriers to competition in South Africa are higher than in many OECD countries, hence there is scope for improving product market regulation in several areas.
Strengths
Challenges
The overall regulation of water transport is in line with the most competition-friendly regimes in the OECD. Only notifications are required to enter the sector and there is no price regulation. In addition, port authorities and operators of terminal facilities offering commercial services are separated.
Barriers to foreign direct investments are low.
The administrative requirements necessary to start a personally-owned enterprise or a limited liability firm are limited. In addition, there is an online one-stop shop where it is possible to obtain information on all the licences and permits required to start up a business and to issue them.
The regulatory framework for public procurement does not provide a level playing field for all potential bidders. For example, there is no obligation to ensure that the requirements imposed on bidders are proportionate to the size and complexity of the tender, and firms cannot always submit their bids online.
In the natural gas and electricity industries, as well as in most transport sectors, a number of unnecessary constraints to competition are still common and more prevalent than in many OECD countries. In addition, public ownership of the largest operators in network sectors is more widespread than in most OECD countries.
There is scope for paying greater attention to potential distortions to competition when designing and assessing new regulation. In particular, the obligation to perform a regulatory impact assessment, which includes an evaluation of the impact of new regulations on competition, only applies to some secondary legislation.
There is no regulation requiring transparency in the interactions between interest groups and policymakers, which may favour lobbying activities by incumbents.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org