Competition policy and economic recovery

The Malawi economy is still recovering from the effects of Covid-19, climate-related shocks and economic effects of the Russian-Ukraine War.

The shocks have not spared industries and the market at large. Amid the shocks, such as the 44 percent kwacha devaluation and the war in Ukraine, the cost of living has been risisng. This has, however, rendered many consumers vulnerable amid declining purchasing power.

Resultantly, consumers and businesses have been lodging complaints to the Competition and Fair Trading Commission (CFTC), mostly on matters of excessing pricing and price instability.

CFTC was established under the Competition and Fair Trading Act of 1998 with a mandate to regulate, monitor, control and prevent acts or behaviours which would adversely affect competition and fair trading in Malawi.

The commission conducts regular monitoring of prices to ascertain the level of prices and check where interventions are needed, investigates all enterprises that are suspected of anticompetitive and unfair trading conduct and conducts sensitisation workshops to empower consumers to be vigilant about their rights during economic shocks, teach the business community on the benefits of competition and to empower businesses to safeguard themselves against exploitative and exclusionary conduct.

On December 5, Malawi joined the global community in commemorating the World Competition Day. In Malawi, the day was commemorated under the theme ‘Role of competition policy in enhancing economic recovery.

The role of CFTC

Lately, consumer complaints have been on the rise with CFTC data showing that in the 2021/22 financial year, the commission received 347 cases, a rise from the 231 registered in the 2017/18 financial year.

Of these, 263 cases were resolved, representing 75 percent of the cases.

During the review year, the commission conducted investigations on 157 cases which were resolved either through mediation or orders.

Through its interventions, the commission helped recover K14.6 billion which consumers could have otherwise lost.

In the year  under review, common consumer violations was that of unconscionableconduct accounting for 42 percent, 18 percent were on misleading and deceptive conduct, 16 percent were on excluding liability for defective goods while 13 percent were on supply of harmful products.

CFTC executive director Lloyds Nkhoma concedes that there has been an influx of concerns which pertain to various forms of anti-competitive conduct and unfair trading practices.

These, he says, affect competition and innovation in various sectors.

Says Nkhoma: “Competition is a fundamental staple of economic recovery. Competition policy enforcement can support the economic recovery by redirecting enforcement resources towards strategic markets and industries considered important for the recovery process.”

He says that for competition enforcement to foster economic recovery, there is need to  create an enabling and competitive environment for the growth of the private sector and micro, small and medium enterprises (MSMEs).

Says Nkhoma: “The MSMEs are one of the most affected sectors during the economic shocks usually due to among others, increased prices of inputs, reductions in demand and low economic scales which lead to losses in revenue.

“As such, the ministry is interested in protecting MSMEs from any negative outcomes that may arise out of conducts such as abuse of market power by large enterprises and this can be done through competition enforcement.

“Additionally, competition advocacy can help raise awareness among MSMEs on how they may safeguard themselves against anticompetitive conduct by among others, lodging complaints with the CFTC.”

Consumers take

Consumers Association of Malawi executive director John Kapito observes that the laws on competition and consumer protection are facing challenges with the current economic order, where liberalisation of markets has not offered gains to consumers.

He says: “The Malawi market is not so competitive to allow market forces to determine prices and supply. It’s a market that requires continuous monitoring.

“The biggest challenge of our State market enforcement agencies is the lack of independence and resources and that has made price monitoring and inspection to be a challenge by the such authorities.”

Traders take

On his part, National Working Group on Trade and Policy chairperson Frederick Changaya says the primary aim of fair trading and completion is to enhance efficiency which should benefit the consumer through competitive prices; hence benefit the economy through natural price stabilisation without involving monetary policy.

He says: “Enacting fair trading and competitions Act in 1998 was a welcome development. In a way the existence of the competitions commission helps moderate the problem of monopolies and or quasi monopolies that either introduce inefficiencies; hence unjustified price increases for abnormal profit margins.

“That in turn accelerates inflation which the central bank has to mop up. Such scares aware investors.”

How economists perceive the competition policy

Economics Association of Malawi (Ecama) despite having the competition policy, enforcement has challenging.

Says Ecama president Betchani Tchereni: “In the main, the mechanics of determining unfair trade practices and anticompetitive behaviours need data which in many cases is not really availed. This causes the role of the CFTC to be hampered.

“ However, one hopes that the competition commission will be beefed up with proper industrial economists to provide expert and timely analysis to determine the many cases reported there.”

Forward looking

Besides the Competition and Fair Trading Act and Consumer Protections Acts being outdated, the CFTC has limited powers in the current legal framework and these include powers to make certain orders that would bring immediate solutions and stop anticompetitive and unfair trading conduct.

“This is why work to review the Competition and Fair Trading Act is currently at an advanced stage and only awaits parliamentary review and approval.

“Further, the commission will soon have a Consumer Protection Bill ready for consultations with stakeholders,” says Nkhoma.