Cartels as private corruption in Malawi, Tanzania and Zambia: the steel sector and enforcement of competition law

Research partners:

Principal Investigator: Simon Roberts, University of Johannesburg, CCRED

Summary

This research project, focused on the steel industry in Malawi, Tanzania and Zambia, will analyse arrangements within regional and national industry which appear collusive. It will seek to understand how these arrangements work, their relationship with industrial development in these countries, and how the current political settlement is sustaining them. It will explore how new coalitions can emerge to disrupt existing arrangements, and create the conditions for development, including for new market entrants and effective cross-border competition.

Why steel?

Steel plays a central role in manufacturing, construction and government infrastructure projects. Artificially high steel prices caused by cartel arrangements raises costs for these buyers and has a knock-on impact on down-stream competitiveness and industrialisation, inhibiting development. There are now many signals of extensive collusion in southern and East Africa operating through industry associations exchanging information, secret agreements and lobbying government to distort notionally developmental policies for private benefit.

The research project

The research will assess the roles of different participants in the value chain. The steel producers and traders are typically part of industrial groups, with local, regional and international footprints. In order to enable institutions such as competition authorities to address uncompetitive arrangements research is needed to demonstrate the negative impact and mobilise support to address it, often to be found among those affected. Developing an understanding of affected groups will help build support for competition authorities to investigate concerns, and to bring on board ministries of industry and other policy-makers to which authorities report. This is expected to lead to feasible anti-corruption initiatives including developing the capacity of the competition authorities in the use of cartel screening tools, and industrial policies to support local competitive rivalry. CCRED will draw on the research to further collaborate with competition authorities to strengthen their tracking of market data, economic analysis and enforcement activities targeting cartels.

Ultimately, interventions in the steel value chain will likely reduce the domestic prices of steel thus supporting industrial development and the competitiveness of downstream industries. It will contribute to disrupting existing political settlements and creating the space and conditions for the emergence of new ones that privilege broader development outcomes. The research findings will provide policy recommendations including appropriate policy support for new industry entrants and guidelines linking domestic competition policy objectives and tools with national and regional industrial policy goals, with a focus on requirements for facilitating investment, entry and cross-border rivalry in the steel industry.

This research grant project is one of four funded by SOAS-ACE. Read about the others here.