In recent weeks, the South African Post Office (SAPO) has been in the news after it instituted legal proceedings against courier companies like PostNet and the South African Express Parcel Association, trying to bar them from delivering packages that are less than 1kg. The South African Post Office argues it has exclusive rights over the delivery of packages less than 1kg. The technicalities of the matter are neither here nor there. It is the substance of it, that is of utmost importance. A state-owned entity, which already enjoys unfair competitive advantages over private couriers given its taxpayer-funded nature, is trying to monopolise the market.
The substance of this issue reveals the absurdity of the state and the ideal of legislating competition for all to see. This is most interesting particularly for Competition Law or its philosophy at least, in that, we have, in real-time, an illustration of how past and future monopolies can be created. Namely, through using the power of law to inhibit new entrants, be it through onerous legislative provisions for compliance or just clear exclusivity provisions which implicitly criminalises competition in whatever area is said to be exclusively the domain of the state. In this instance, ICASA, as a regulator, is of the stance that SAPO ought to have a monopoly on the delivery of these packages, hence the matter being taken to court after an interdict was obtained to stay the implementation of ICASA’s ruling until the matter was heard in court.
The public goods school in economics is getting disproved as we speak about natural monopolies. There are no such. Only monopolies created by state force, protecting one business (SAPO) from the competition and thus from the efficient deployment of society’s resources in that area of people activity exist.
In South Africa, we ought to understand the effects of a monopoly on the broader economy. The monopoly Eskom has is costing the country billions with every load shedding cycle. SAPO is doing what is not unique to state businesses only but most businesses that exist in a highly legislated environment like say the financial sector or the telecommunications sector. That is, it is seeking to use force (regulation and legislation) to improve its financial position which has been quite porous for the past years, instead of innovating and improving on their model so that me as a consumer, choose them as my courier option instead of always opting for a private courier.
There is legislation that says I should use SAPO and should I dare do not, should another company seek to satisfy my preferences, then that activity is criminal.
We have a situation wherein market forces seek to be manipulated, not through more efficient use of resources which would be easily seen in SAPO attracting more consumers and creating an actual profit but rather through legislation. Through state power. Their existence is already due to state power, so they seek to leverage it even more by deeming themselves the anointed 1kg couriers. Anointed not by me the consumer buying the product but rather anointed by a bureaucrat somewhere in the past, who, as per the Rule of Law, has no business interfering in my commercial transactions since I would be violating no one’s rights.
The current case with SAPO and the courier companies ought to be instructive. It comes in an absurdly hostile business environment in South Africa, by our state companies like SAPO and even by regulators like ICASA or the Competition Commission which is currently conducting a market inquiry into online retailers. This hostility to sectors of the economy that are still productive, creating revenue for the state and wealth for citizens is unfathomable, totally divorced from broader economic reality that saw the highest recession by percentage this past year. In our economy, SAPO is seeking to use legislation to essentially ringfence a market for themselves instead of improving their model and attracting customers willingly like their competitors.
For those of us with a basic understanding of economics, we aren’t surprised by this clearly monopolistic behaviour from SAPO. The only true monopoly that could ever exist in a market is state-enforced, and the SAPO case is a perfect example of that. It is the perfect case study for mainstream economists who would have us believe that monopolies are possible without state legislation and that they are curtailed by them! In actuality, the best way to prevent competition, and prevention is used deliberately, is to use the power of the state to make it either illegal or incredibly onerous for the average citizen to leap through legislative hoops that cost an established business and limit startup capital for a new entrant.
As the consumer, my choice is demonstrated in my choosing every other courier but SAPO for my 1kg parcels, is inconsequential. It matters not what I, the person whose money is being used to purchase and whose parcel is being transported, wants, and how I demonstrate that, by not using SAPO. There is legislation that says I should use SAPO and should I dare do not, should another company seek to satisfy my preferences, then that activity is criminal. Without violating any rights outside the arbitrary edict of a legislator defining ends, like which courier to use, as if we are not fully functional human beings capable of making those decisions on our own.
Will sanity prevail and the freedom to trade, to choose, as part of human dignity, be respected as it ought to be? Or will the status quo of a strong hostility to the private sector by the state continue? We can only wait and see. One thing we do know is that monopolies are statist creations. The solution is freedom to trade and enterprise uninhibited by ends defining legislation. The solution is the philosophical basis of a just and true Rule of Law. The solution is Liberty.
Zakhele Mthembu is a law student at the University of the Witwatersrand. The views expressed in the article are the author’s and not necessarily shared by the members of the Free Market Foundation.