Business

South African SMEs set to benefit from new competition regulations

The minister of Trade, Industry and Competition (DTIC), Ebrahim Patel, published the draft Block Exemption Regulations for small and medium-sized businesses (SMEs) on 31 August 2022 after consultation with the Competition Commission.

The draft regulations aim to promote the growth and participation of SMEs in the South African economy, making it easier for them to compete against larger businesses in the local market.

The exempt regulations contained in the draft include:

  • Research and development agreements
  • Production agreements for goods or the provision of services
  • Joint purchasing agreements
  • Joint selling prices to business customers
  • Commercialisation agreements
  • Standardisation agreements on technical or quality issues
  • Collective negotiations with large buyers and suppliers; and
  • Other specified types of conduct.

The regulations do not apply to fixing the selling prices of goods or services to end consumers, which the Competition Act prohibits.

The Commission’s study on Measuring Concentration and Participation in the South African Economy: Levels and Trends found that the share of SMEs of the country’s aggregate income is comparatively low and declining.

The newly published regulations will exempt categories of agreements or practices relating to SMEs from the application of sections 4(1) and 5(1) of the Competition Act 89 of 1998.

Why SMEs will benefit from these regulation changes

According to ENSafrica, the proposal is welcomed for SMEs, who historically have had to apply for an exemption to engage in these types of conduct.

Such exemption applications are generally burdensome on applicants and often take considerable time to finalise.

The new draft regulations effectively remove the time-consuming obligations on SMEs. Those wishing to implement the Regulations must now simply notify the Commission and the DTIC of the agreement or practice within 30 business days of its implementation.

These SMEs are then obliged to keep a record of meetings concerning any agreements or practices that fall within the ambit of the exemptions.

The public now has 30 days from the Regulations’ publication date to submit comments on the draft Regulations by sending them to the acting director-general of the DTIC.

Once finalised, the Regulations will be published in the Government Gazette, after which they will be in effect for a period of five years.

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