Tackling agrifood monopolies in African countries

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Chilufya Sampa, the head of Zambia's Competition and Consumer Protection Commission from 2011 to 2022, talks to Critical Takes about:

• Why agrifood monopolies are a problem for African countries (to 04:40)
• Some regulation success stories (to 08:40)
• Obstacles to regulating monopolies (to 12:28)
• When the monopolist is a foreign multinational (to 17:08)
• Civil society: a bridge between the poorest and the powerful.

 

Here is an edited transcript.

 

Diarmid O’Sullivan:

Hello, this is Critical Takes on Corporate Power and I’m Diarmid O’Sullivan. When giant corporations control entire markets and supply chains, they can also control prices for basic necessities like food. And that's a serious problem for entire populations, particularly poorer people.

So I'm delighted to be talking to Chilufya Sampa, who was the head of the Competition and Consumer Protection Commission in Zambia from 2011 to 2022, and now works with the Shamba Centre for Food and Climate Change.

Chilufya, thank you very much for making time to talk.

 

Chilufya Sampa:

Thank you for inviting me on your programme.

 

Diarmid:

So if I can start by asking, why is corporate concentration and monopoly power in the agrifood sector a problem for African countries and people?

 

Chilufya Sampa:

Well, basically there are two major reasons. The first, of course, is to do with the high cost of food because of the potential abuse that monopolies tend to have once they are operating in a monopolistic situation because there is no competitive restraint from any other company that is in that space.

It becomes very easy for them to manipulate or to abuse their market power, the power that they have as a monopolist to increase prices, and that becomes a problem, especially for the poorest of the poor.

The second reason is that a monopolistic market tends to not allow small and medium enterprises … they would put in policies that become very unfavorable for small scale industries to be able to participate in the mainstream market ... The small scale are not involved in the mainstream market and they also cannot employ people. And that means you have unemployment that goes up. At the same time, because people are not employed, then they're not earning a living, and then that makes the cycle go round in that they do not have money to purchase the essential goods that they need.

So those are basically the two reasons, because high cost of products that they would produce onto the market, and also the tendency to exclude other market players.

 

Diarmid:

If we talk about food prices, how common is it for monopolists to jack up prices beyond what they should be in an open market?

 

Chilufya Sampa:

You see it’s not just food, but it's the whole value chain. So you start from the inputs and then of course it goes on into the production, and then eventually the food product that is presented onto the table.

So if you have monopolistic markets, which is usually what is the case in Africa, you know, we are coming from market economies that were command [economies]. So most of them were highly, highly concentrated. And when privatization did come where they're basically selling what used to belong to the government and they're selling it now to the private sector, in most of the cases it was sold to one company.

So that gives you a very highly concentrated market and throughout the value chain. It's safe to say that it's very, very prevalent in African markets and once you have these monopolistic tendencies or monopolistic markets, it is very easy [to put up prices].

We have noticed it. We have seen that any global effect will result in unproportionate increase in the prices of food. So when you had the Ukraine War, you could see that yes, food prices all over the world went up. However in Africa it went more than proportionate to the other countries. And [with] the COVID as well. When prices started coming down, in Africa the prices remained still high.

That is what we are trying to warn people about having these highly concentrated markets. So it's quite prevalent.

 

Diarmid:

It's absolutely outrageous when you think about what these companies are doing. I mean, they're exploiting a global price shock to profiteer off people who then struggle to pay for basic needs. It’s a horrendous way to behave actually. It's very exploitative.

What has been the track record of regulators in different African countries of tackling this monopoly power? Are there success stories in any countries?

 

Chilufya Sampa:

There are quite a few success stories. You have to bear in mind that in 2023, Shamba [Centre] did do a study on competition and also the competition policy, the laws in each and every country in Africa, just to see what type of legal framework and also the capacity of the competition authorities that are in Africa to see whether they were able to deal with such issues.

Of the 54 countries, you can safely say that only about 20 to 25 countries have a competition law and a competition institution that is meant to enforce that law. And of the 25, only 10 competition authorities are over five years [old].

The other 15 are less than 10 years, some are even less than five years. Some are very, very, very new. However, there are standout competition authorities that have been there for 20 to 25 years. One of them is the Zambian Competition Authority. Another is the South African Competition Authority. You also have the Zimbabwean, the Malawian, and Kenya, and these competition authorities.

They have had success stories, not as much as we would like. I think being on the other side, I can actually see that we could have done a bit more. But I see also that they did carry out some success stories for South Africa. For example, one of the leading competition authorities, uh, not just in Africa, but I think even in the world, they have managed to deal with concentrations quite comfortably using what they call public interest concerns.

So when a merger or a particular case tends to to form a monopolistic market or a high market concentration, they have this option of putting policies or conditions on that merger to ensure that they can bring in small scale industries and not just discard them. So that has been very successful.

I think there is a particular case where Walmart was taking over an enterprise from South Africa called Game Enterprises.

In Kenya, they also did something very similar. This is where monopolistic companies were failing to pay the small scale, uh, industries that would supply them the goods. They managed to come up with a new law, which they call the buyer power law. With those provisions, they were able to force these big companies to pay the small and medium scale enterprises in a reasonable time because sometimes they would take six months. So you can imagine if you are a small scale and you have very little resource and you supply your goods to a company and it takes six months for them to pay you, you are most likely to go under.

They've been able to resolve that issue in Zambia also, they've been using the public interest provisions to help the small scale and also just to ensure that the pricing of the foods are not too high.

 

Diarmid:

Can you talk a bit about your experience in Zambia? What were the obstacles that you had to overcome at the Competition Commission of Zambia?

 

Chilufya Sampa:

Well, in terms of obstacles, I think the biggest one really is data. A lot of mergers that tend to create monopolistic markets in already highly concentrated markets tend to be allowed to go through because of lack of data. There isn't sufficient data that is on the African market that will tell you what the conditions of the market are and what is going to happen once that particular merger has gone through.

The second obstacle is of course, the skills levels. As you may know, America has been doing competition law for over a hundred years. Europe, almost the same, but with Africa, these are very new agencies. These are very new concepts. Not many people know about this, and that becomes a problem because now you need to come up with some skillset. That is able to look at what is going on and be able to discern that a transaction would lead to a high concentration of the market. But you need to be careful at the same time because you also don't want to unnecessarily stop progressive mergers that would bring benefit to the economy. So that is the skill that needs to be harnessed within the competition authorities.

Then there's also the lack of competition culture. A lot of politicians, a lot of stakeholders, and even to some extent even civil society organizations don't really understand what competition authorities do, basically, and they don't see what their role is, and so that becomes problematic as well.

And lastly, I would say quite a big obstacle is the lack of coordination among competition authorities. You would have a situation where a company is operating in two or three countries, but that company has been maybe found wanting in one country, but the competition authorities are not at liberty to inform the other authorities about what they have found in their economy, which is most likely to be happening in the other economies as well.

These are legal issues, but because of that lack of coordination you find yourself in a very, very difficult position. Because you don't know that this particular company was breaching the law in Country X, and most likely is breaching the law in Country Z. But because there's no coordination among the authorities, that becomes a problem.

The other one that I would speak about is we now have a regional competition authority called COMESA Competition Authority under the COMESA region [Common Market for Eastern and Southern Africa]. That has been doing quite well. But then the problem has been lack of data because it depends on the data that is coming from the national authorities.

And so if the national authorities are not strong enough, it means the data that they're giving to all the regional body is not as robust as it should be, and so that becomes problematic as well. So yes. You may have a regional body there, but if the data is not robust, then it is most likely that they will not end up giving a decision that is a robust.

So those could be some of the things that I would pick up as saying the major obstacles.

 

Diarmid:

That's very interesting. What happens in the situation that you described earlier where the monopolist is perhaps a former state-owned company which has been privatized, or perhaps it's an entity that dates back to the colonial era as some of them do, where, as you say, back to the era when everything was commanded and everything was monopolist.

And then, I'm not going to name it for legal reasons, but I have an actual case of a company in mind in several African countries where it's pretty clear that they are overcharging. But they are the subsidiary of a foreign multinational so the ownership ultimately is somewhere else and perhaps they're so dominant in the market that there’s a question of if you do use competition law against them, who's going to come in and take up that market share? So what do you do in that circumstance when it's a subsidiary of foreign multinational?

 

Chilufya Sampa:

That's a very good question, and it's something that I think a lot of competition authorities grapple with. The difficulty has always been the fact that for a subsidiary company, it has a lot of information or even decision making that is made outside the country.

So they would come and say, this is a price, but it was determined in, for argument's sake, London. And so because that decision has been made in London, without necessarily looking at what the economic issues or what the economic environment is in the local country, it becomes problematic for the authority to be able to say, okay, can we get this information from London?

That would require coming up with some cooperation with the Competition and Markets Authority [a UK regulator], which is very unlikely to happen because we are breaching British laws in terms of confidentiality and we'll probably be breaching Zambian laws in terms of confidentiality. So that becomes a very big problem dealing with a subsidiary company.

There's a lot of decision making that would be happening outside the country. We have had several even catalystic cases, which cannot be resolved because the decision to enter into a cartel, even in the food market, has occurred somewhere else. It has occurred in South Africa, it has occurred in Mauritius, and all you are seeing are the effects of that.

So that becomes a very big problem. The only way to resolve that would be to enter into cooporation agreements with the authority where that subsidiary's parent company is registered. So it's a very difficult situation.

 

Diarmid:

Is that something that's been attempted? Say for instance, has Zambia attempted to enter into those agreements with competition authorities?

I mean, you mentioned in the case of the the UK regulator that would be difficult because of confidentiality concerns that would make it hard to share information. But has there been an attempt to enter into those kinds of relationships so that you can get the data that you need?

 

Chilufya Sampa:

Yes, there has been attempts, but usually because of the legal situations, most of the countries will end up being unable to actually enter that agreement. I know for example the US and the EU have that arrangement where they can share even confidential information, but that is not so, especially with developing countries. We have not seen a very positive response from the developed countries to actually engage in these corporation agreements that would share confidential information.

However, they can share non-confidential information, which to some extent does help a lot, but it doesn't give you the same amount of information that you require. It can be a pointer to say that there could be a problem here, but that does also not necessarily give you the smoking gun, so to speak.

 

Diarmid:

In the UK,  as you may be aware, for domestic political reasons there’s been a lot of pressure on the competition regulator to be less strict, even within the UK. So that's a problem that really, there are things that our competition regulator could do to work with competition authorities in Africa, but the political wind is blowing in the other direction to towards favoring the interest of large companies. So that's a difficult one politically at the moment.

What is the role of civil society in this area? What role do civil society organizations play in the political economy of competition regulation? And I ask this because I know that as you said, that many are not familiar with the concept of competition, but obviously high prices for consumers are a major concern, and there are consumer campaigns.

So what role do you think civil society can play in this?

 

Chilufya Sampa:

Civil society is a major stakeholder, I think in all this. And I think earlier on I had mentioned about developing a competition culture. Sometimes what tends to happen is that where you have a competition concern in a particular region, the authority may not be aware that that is occurring in that region, and civil society tends to be the player that would be able to reach the poorest of the poor, and at the same time be able to reach the most powerful people.

And so they act as a bridge, and they also act as a force that bring out or teach or advocate for what is happening. And the resources of civil society tend to be outside, not just the country that they're operating in, but they can also benefit from resources from other countries.

And because of that, civil society has a very, very critical role to play. It can bring to the fore, to government, to the other stakeholders, the behaviour of a monopolistic company. They can also ensure that they train or teach people what is happening. The people then are able to identify an anti-competitive conduct early on and report that conduct to the competition authority.

So I cannot overemphasize the need for civil society as this bridge that can 1) reach the poorest of the poor, 2) to reach the most powerful in the nation; 3) to advocate for competition or whatever it may be that they're doing and ensure that the conduct that has been identified is brought to book. In fact, to some extent, they actually would even hold the competition authority accountable, ensuring that they are able to carry out their mandate.

The role of civil society is to ensure that the institutions are held accountable and the politicians, once they see civil society society involved in that, tend to back away.

 

Diarmid:

That's really interesting because I think that would be true for other issues as well, not just for competition. So to conclude then, do you feel optimistic about the outlook for competition regulation? Do you see governments gradually getting more confident in taking on these big commercial interests?

 

Chilufya Sampa:

That's a very good question, and I say this because we are seeing a lot more political influence, monopolists having more political influence on African governments, but I think what needs to be done is to improve the capacities of the competition authorities. That's where my optimism is. What Samba is doing now is trying to strengthen the capacities, allow for data to be collected and use that data to come up with reasoned decisions, and it's with that reasoned decision that will be able to change the minds of the politicians to see the harm that some of these people who are the influence on them are doing to their people.

So it's one of those things that you see that once you develop that capacity, not just in data but in skills, and also changing the competition culture, having a competition culture in a country, that is where my optimism lies.

 

Diarmid:

Well, thank you very much for a very in-depth and informative interview.

 

Chilufya Sampa:

Thank you for having me.