Navigating the negative corelation between the  growth of Monopolies and the increase in  consumer products

Background. 

The general consensus around monopolies is that they are organisations that thrive in  encouraging stagnation, inefficiency, and unethical conduct, as argued by Mwale (2000).  Consumer facing monopolies and conglomerates are just a big bowl of soaring prices and a  lack of innovation. Not only does it lead to an abuse of power, one can argue that an economy’s  reliance on monopolies can have harmful ramifications, Mwale (2000). The growth of the  South African economy is driven by various industries that fall within several commercial sectors Fedderke (2018). Snith and Grant (1992) argue that the more power the government  affords such organisations, the less investment opportunities the economy will see.

This paper will look into the behaviour of monopolies and conglomerates by examining the  buying power of consumers in the past 15 years, the perceived impact of The Competition of  Commission of South Africa as well as the perceived factors that have influenced a growth or  the need for monopolies and conglomerates.

Monopolistic practices and socio-economic outcomes.

Socio-economic structures are significantly impacted by the growth of monopolies and  conglomerates. These large corporate organisations have an impact on social and political areas  in addition to the economy. Examining different theories on market dynamics, institutional  influences, and economic development is necessary to fully understand their impact.

Mohr (2021) argues that reduced competition from monopolies and conglomerates can hinder  innovation and have a detrimental effect on consumers and small businesses. For instance,  monopolistic practices in digital markets may result in poor labour conditions, lowered service  quality, and the exploitation of customer data. These organisations have the ability to use their  market dominance to shape economic and regulatory frameworks, solidifying their position as  industry leaders, which can have adverse effects of society. (Christophers, 2016; Davies, 2010).

Monopolistic behaviour can have a detrimental effect on consumer welfare by driving up costs  and lowering the quality of products and services. Monopolies can also limit consumer access  and affordability in industries like healthcare, telecommunications, and retail. These actions  have a negative impact on consumer spending power and slower economic growth, which  affects overall economic stability and growth (McKinsey, 2021)

Introduction.

The economic landscape of South Africa has been significantly shaped by the presence of large  conglomerates and monopolies. This review of previous research aims to discuss scholarly  research on the socio-economic impacts of these entities on South African consumers over the  past 15 years, with a focus on the growth of large companies in south Africa, consumer and  market impact on monopolies, statutory frameworks, South Africa’s inequality, consumer  welfare as well as technical advancements.

The growth of monopolies and conglomerates.

The country’s economic and political history, which was marked by policies that favoured large  enterprises, can be linked to the rise of monopolies and conglomerates in South Africa, argued  by Fourie (2014). Economic reforms implemented after apartheid with the intention of  promoting growth frequently led to a rise in industry consolidation. Fourie (2014) claims that  in order to solidify their market positions, conglomerates like Naspers, Anglo American, and  Sasol took advantage of both economic liberalisation and governmental initiatives. The effects  of this consolidation on consumer choice and market competition have been extensive.

Consumer and market impact on Monopolies.

Research indicates that South Africa’s market power consolidation has resulted in less competition and more obstacles for smaller businesses. Chabane, Goldstein, and Roberts  (2006) claim that monopolistic practices in important industries like retail and  telecommunications have led to higher costs and fewer options for customers. Chabane,  Goldstein, and Roberts (2006) also emphasise how regulatory and policy frameworks can  mitigate these effects, arguing that intense competition laws are essential to safeguarding the  interests of consumers.

Statutory frameworks.

In order to combat anti-competitive practices, the Competition Commission of South Africa  has played a crucial role. According to Roberts (2012), enforcing competition laws effectively  is crucial to limiting the power of monopolies. Although there have been efforts to regulate,  the paper contends that obstacles like regulatory capture and inadequate enforcement still stand  in the way of advancement. Pistor (2020) argues that the influence of legal frameworks on  market competition, contending that monopolistic conduct can be both enabled and  restrained by several legal mechanisms.

South Africa and Inequality, a tale as old as time.

Growing socioeconomic inequality has been connected to the consolidation of economic power  within conglomerates. The impact of monopolistic practices on income disparities, is especially  worse on marginalised communities, argues Seekings and Nattrass (2015). Seekings and  Nattrass (2015) also explain that although these sizable organisations make a substantial  contribution to GDP and employment, the advantages are not shared equally. According to  McMillan, Rodrik, and Verduzco-Gallo (2014), conglomerate-driven economic growth  frequently ignores the less fortunate parts of society, widening the socioeconomic gaps already  present.

It would also be very negligent if race is not considered as a factor when discussing socio economic troubles in South Africa. The BBC (2013) have explained that in 2012 white  households in South Africa earn six times more that their black counterparts. Other statistics  also indicate that 73% of employees in south Africa are black Statistics South Africa (2023),  yet they are severely underpaid. This is very alarming because this means that businesses in  South Africa underpay the majority of their workers in south Africa, leading to a handful of  the population being able to fully participate in the economy.

Consumer welfare:

Given that monopolistic practices result in lower quality and higher prices for goods and  services, they can have a negative effect on consumer welfare. When analysing the welfare  effects of market power in the retail sector, Seekings, and Nattrass (2015) argue that consumers  are faced with more options and higher costs. Additionally, specific cases where monopolistic  behaviour resulted in negative outcomes for consumers, such as restricted access to necessary  goods and services, have been identified by the Competition Tribunal of South Africa (2020).

Employment ramifications.

Conglomerates and monopolies in South Africa have a mixed impact on employment. While  they create job opportunities, particularly in urban areas, the quality and stability of these jobs  are often a concern. According to Fatoki (2014), employment within monopolistic firms tends  to offer lower wages and less job security compared to competitive sectors.

Another thing to note is that social discontent and a decline in social cohesiveness may result  from the unequal distribution of the advantages of economic expansion. According to Seekings  and Nattrass (2015), monopolistic structures that restrict opportunities for widespread  economic participation are partially to blame for South Africa’s continued high rates of  unemployment and poverty.

Conclusion.

Conglomerates and monopolies have a complex socio-economic impact on South African  consumers, affecting consumer welfare, market dynamics, and socioeconomic inequality. A  combination of strong regulatory frameworks and focused policy interventions is needed to  address these problems. The long-term impacts of these organisations on social justice and  economic growth in South Africa should be the subject of more investigation. This review of  previous research has discussed, with reference to credible sources growth of large companies  in south Africa, consumer and market impact on monopolies, statutory frameworks, inequality  in South Africa, consumer welfare as well as technical advancements.

Key Terms.

Conglomerate:

• Cambridge (2024) defines Conglomerate as a company that owns several smaller companies, which operate in various markets.
• Indeed (2023) refers to Conglomerates as an organisation that owns smaller organisations known as subsidiaries.
• A Conglomerate, according to the researcher is a parent company that owns several other businesses.

Consumer:

• Mohr (2019) refers to Consumer as a person or household that purchase a good or service for their own use.

Economy:

• Cambridge (2024) use economy as a system of trade by which the wealth of a country is measured.

Market:

• Mohr (2019) defines a Market as the business or trade in a particular product.

Monopoly:

• Mohr (2019) defines Monopoly as a market structure in which there is only one seller of a good or service that has no close substitutes. The entry to the market for this good or service should be completely blocked.
• Cambridge (2024) defines Monopoly as an organisation or group that has complete control of something, especially an area of business so that no one else has no share. • Monopoly, according to the researcher, refers to an organisation that is the sole provider of a good or service that actively exploits its customers by driving up their prices.

Socio-Economic:

• Merriam Webster (2024) explains that Socio-Economic is the relations or the differences between groups of people caused by their financial situation.

Reference(S):

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