Market Power, Growth, and Inclusion: The South African Experience

Vimal Thakoor

No 2020/206, IMF Working Papers from International Monetary Fund

Abstract: Before the pandemic, the South African economy remained stuck in low gear, with anemic growth, stagnant private investment, and a shrinking tradable sector. Subdued growth has raised unemployment, poverty, and inequality, hindering inclusion efforts. The pandemic has worsened economic and social vulnerabilities. Economic recovery and social inclusion hinge critically on structural reforms to boost competiveness and growth. Product markets represent a cornerstone of the reform strategy. Firms have used their market power to drive up prices and limit competition. Important state-owned monopolies provide low-quality services, while representing a fiscal drag. Existing regulations inhibit the entry of both domestic and foreign firms. Addressing product markets constraints could boost per capita growth by 1 percentage point—adding about 2½ percentage points to headline growth—and foster greater inclusion.

Keywords: WP; market power; product market; firm; market concentration; mark-up; Competition; state owned enterprises; structural reforms; product markets; labor markets; South Africa; market structure; value chain; product market reform; growth performance; firm markup; market share; SMES space; market power abuse; uncompetitive firm; Commodity markets; Private investment; Job creation; Africa; Global; South Africa inflation differential (search for similar items in EconPapers)
Pages: 19
Date: 2020-09-25
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