Consumer protection and quality of life in Africa through competition

Transcription

Consumer protection and quality of life in Africa through competition
Consumer Protection and
Quality of Life in Africa
Through Competition and Regulation
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2004 Annual Report
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AFRICA OFFICE
Annual Report 2004
Consumers International Africa office (CI-ROAF)
Consumers International is an independent, non profit and non political federation of consumer
organisations formed in 1960, and currently linking 238 organisations in 120 countries. The organisation
has an observer status with the United Nations Economic and Social Council and its specialised agencies
such as FAO, WHO, Codex Alimentarious etc, as well as with regional and sub-regional institutions such
as the Economic Community of West African States (ECOWAS). The Regional Office for Africa (ROAF)
co-ordinates and provides support through research, information networks, publications, regional and
international seminars, workshops, etc. to more than 120 organisations in 46 countries in Africa. The
main function of the ROAF is to build and develop the consumer movement in Africa and to represent
consumers at regional and international fora.
Published by:
Consumers International Africa Office (CI-ROAF)
No 2, La Tebu Close
East Cantonments Estates
PMB CT 386
Cantonments, Accra
Ghana
Tel: 233 21 911829 / 21 911878
Fax: 233 21 784370
www.consumersinternational.org/roaf
ISSN 1727-2157
Translation: Translingua
Editing: Lezak Shallat
Layout and design by: Sable Press, Harare, Zimbabwe
Printed by: Sable Press
© Consumers International Regional Office for Africa (CI-ROAF)
September 2005
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Preface
This second Report on Consumer Protection and
Quality of Life continues the series launched in
2003 by the Africa Office of Consumers
International. It analyses in a systematic,
objective manner the impact that effective
consumer policies have on the quality of life of
citizens in Africa.
An expert team of economists, lawyers,
sociologists and econometricians were
commissioned by the CI Africa Office for this
task. This interdisciplinary group devised a
scientific tool to document its research. This tool - the African Consumer Protection Index (ACPI)
provides a comparative measure of the
effectiveness of consumer protection across
different countries.
This Index surveys existing legal and legislative
frameworks for consumer policies in
participating countries and assesses perceptions
held by consumers, business sectors and
government agencies regarding their
effectiveness. The Index and Reports are
important components of a broader programme
entitled “Building African Consumers' Capacity
and Institutions for a Fair and Transparent
Marketplace” (the FTM programme) carried out
by the CI Africa Office.
This 2004 Report looks at the nexus between
competition, regulation of basic services and
consumer welfare.
Its findings are based on surveys conducted in 20
countries. These reveal that the general
perception of African consumers and other
stakeholders that competition at the national and
regional levels is widely regarded as ineffective.
Overall, respondents also hold a poor-to-fair
view of the quality of regulation of basic services
(water, electricity and telephone) in these
countries.
A more encouraging note emerging from the 2004
Report is that the participation of consumer
organisations in regulatory agencies -- especially
public utilities is increasing. Discussions and
meetings with CI member organisations and
other stakeholders confirm this finding.
These conclusions are a source of guidance for
Consumers International in its continuing
capacity-building efforts, which aim to:
foster a culture of competition at the grassroots,
national and regional levels
reverse the observed lack of effectiveness of
representation mechanisms and the limited space
for policy dialogue in the formulation and
enactment of competition policy
reinforce CI members' skills for sustained and
credible engagement with utility regulators.
I would like to thank all participating consumer
organisations and respondents who, along with
Aku Burawudi, Lezak Shallat and other CI staff,
were instrumental in bringing this effort to
fruition.
While the analysis and policy recommendations
expressed here do not necessarily reflect the
views of Consumers International, I would like to
express my appreciation to the team of experts,
under the coordination of Prof. Moustapha Kassé,
who produced this Report.
Finally, my special thanks to our partners, the
African Capacity Building Foundation (ACBF)
and the Norwegian Ministry for Co-operation
(NORAD), whose support has helped us turn into
reality the vision behind this Report on Consumer
Protection and Quality of Life.
Amadou Kanouté
Director, Africa Office
Consumers International
September 2005
Annual Report 2004
Acknowledgments
Consultants
Prof. Moustapha Kasse, co-ordinator Economist
Prof. Ake N'gboEconomist
Dr. Nouhoun Coulibaly Econometrician
Me. Landing BadjiLawyer
Participating Consumer Organisations
5 Benin
Ligue pour la Défense des Consommateurs au Benin (LDCB)
5 Burkina Faso
Ligue des consommateurs du Burkina (LCB)
5 Burundi
Association burundaise des consommateurs (ABUCO)
5 Cameroon
Mouvement national des Consommateurs (MNC)
5 Chad
Association de défense des consommateurs (ADC)
5 Ethiopia
AHa Ethiopian Consumer Protection Association
5 Kenya
Consumer Information Network (CIN)
5 Malawi
Consumer Association of Malawi (CAMA)
5 Mali
Association des Consommateurs du Mali (ASCOMA)
5 Morocco
Association Atlas Saïs
5 Mozambique
Proconsumers
5 Nigeria
All Nigerian Consumer Movement Union (ANCOMU)
5 Senegal
Association de Défense des usagers d'Eau, d'Electricité, des Télecoms et des Services (ADEETélS)
5 Seychelles
National Consumer Forum (NATCOF)
5 South Africa
Consumer Institute of South Africa (CISA)
5 Togo
Association togolaise des consommateurs (ATC)
5 Tunisia
Organisation tunisienne de défense des consommateurs (ODC)
5 Uganda
Uganda Consumer Protection Association (UCPA)
5 Zambia
Zambia Consumer Association (ZACA)
5 Zimbabwe
Consumer Council of Zimbabwe (CCZ)
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Executive
Summary
This Annual Report 2004 looks at the relationship
between competitive markets and consumer
protection in Africa and the potential of
competition policy to improve consumer welfare
and quality of life.
especially in public utilities. Case studies from
Zambia describe the benefits and obstacles to this
participation.
Background
This Report aims to:
5 measure the perceptions of African consumers
regarding the effectiveness of national
competition policy
5 evaluate consumer perceptions of the quality
of regulation of household utilities (water,
electricity and telephone services)
The findings of the surveys indexed in this Report
reveal the general perception of African consumers
that national and regional policies enacted to
regulate competition are ineffective.
Consumer organisations in Benin, Burkina Faso,
Burundi, Cameroon, Chad, Ethiopia, Kenya,
Malawi, Mali, Morocco, Mozambique, Nigeria,
Senegal, Seychelles, South Africa, Togo, Tunisia,
Uganda, Zambia and Zimbabwe participated in
these surveys.
The respondents also hold a poor-to-fair view of
the quality of regulation of basic services (water,
electricity and telephone) in these countries.
Surveys found little evidence of participation by
consumer organisations in national competition
commissions. However, consumer organisations
participation in regulatory agencies is increasing,
As part of its “Building Consumer Capacity and
Institutions for a Fair and Transparent
Marketplace” programme, the Africa office of
Consumers International has conducted periodic
assessments of the level and effectiveness of
consumer protection and the impact on quality of
life.
To this end, it developed the African Consumer
Protection Index. The results of its first report were
presented in its “Consumer Protection and Quality
of Life: Report 2002.”
The aims and methodology for the current report
were developed in an Expert Planning Meeting
held in March 2004 in Senegal. This meeting
coincided with a capacity-building workshop on
competition policy and consumer protection in
which 24 African consumer groups participated,
along with facilitators from UNCTAD, COMESA
and UEMOA.
In February 2005, CI organised a Regional Dialogue
on Consumer Policies with representatives from 25
countries. Information on national competition
policies was updated and an Action Plan for
consumer protection adopted.
Annual Report 2004
Methodology
Findings
Questionnaires were sent to four stakeholder
groups: individual consumers, consumer
organisations, regulation agencies and
competition commissions.
The findings indicate that, overall, existing
regulation efforts are viewed by consumers as
inadequate to ensure consumer protection and
improve quality of life. Consumer appreciation of
the quality of water, electricity and telephone
service regulation was poor to fair. The survey also
revealed that consumer organisations are rarely
consulted by, and do not participate in, national
competition commissions.
Data collected from these questionnaires were
collated into three separate indexes
competition policy effectiveness
general perception of regulation
perception of the quality of basic service
regulation
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Consumer Protection and Quality of Life in Africa through Competition and Regulation
Contents
Introduction
1
Chapter 1: Competitive Markets and Consumer Protection
2
Neither pure nor perfect competition
Rational consumers
Corporate power
Competition theory
Contestable markets
Natural monopolies and utilities
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Chapter 2: Competition Policy, Law and Regulations
5
Case Study: National Competition Commission
Case study: Zambian Commission says 'know the rules'
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Chapter 3: The African Context
9
Chapter 4: The Role of Consumer Organisations
11
Case Study: Open markets in Senegal
Case Study: Consumer involvement in Zambia
11
13
Chapter 5: Indexes
14
Data collection
Findings
14
14
Chapter 6: Recommendations
16
Tables
17
Table 1: Characteristics of respondents by gender
Table 2: Distribution of respondents by residence
Table 3: Effectiveness of competition policy
Table 4: General perception of regulation agencies
Table 5: Perception of quality of basic services regulation by residence
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Appendices
21
1. Methodology
2. Related publications from Consumers International
3. Bibliography
21
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Annual Report 2004
Introduction
With the advent of globalisation, markets have
become a battlefield where companies jockey for
dominant position at any cost. Under these
conditions, any potential benefits from market
efficiency give way to unhealthy competition.
Markets are transformed into a race for survival,
where the stronger companies are able to
suffocate their weaker opponents.
Consumers are the victims of this positioning
battle because they are used to finance it. Located
on the “demand” side of this equation, consumers
are at a clear disadvantage in product safety,
quality and pricing.
Classical economic theory says that competition
works best when the market is relatively free of
distortions. But developing countries do not meet
the conditions for perfect competition.
Consumers do not always benefit from the
advantages of increased economic effectiveness.
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develop free and fair competition
guarantee the quality of products and
services
ensure consumer safety
protect the economic interests of
consumers.
Regulatory bodies in Africa have not been able to
fulfil these objectives. Reasons for this include:
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insufficient human, technical and
material resources
ineffective application
poor communication between regulatory
bodies and consumer organisations
lack of independence.
The correlation between greater competitiveness
and development is vague, and the experiences of
numerous developing countries raise concerns
about the impact on consumer welfare from the
increased competition resulting from trade
liberalisation, investment and privatisation
(UNCTAD, 2001).
Greater efficiency and effectiveness in regulatory
bodies will bring healthier competition to
markets. When competition works, it brings
lower priced, better-quality goods to the
marketplace. Regulation helps governments
and consumers to keep powerful business
interests in check.
In this scenario, consumer protection is
paramount, because a market left to its own
devices can collapse in a deregulation context. It is
consumers who pay the price for insufficient or
excessive regulation.
The overall objective of this Annual Report 2004
is to promote competition culture at the
grassroots level and encourage consumer
advocates to lobby national governments and
regional groupings for the competition laws and
policies needed to strengthen consumer
protection in Africa.
There is always a regulatory role to be played in
the markets. Regulation is the basis for
guaranteeing the security of the market, which is
the classical domain for formulating laws and
policies on consumer protection.
1
Competition commissions, regulatory agencies
and consumer organisations can protect the
interests of consumers. These are being created in
countries around the world in order to:
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Chapter 1:
Competitive markets,
consumer protection and
corporate power
A powerful synergy exists between competition
policy and consumer protection. As Blumenthal
states: “In its efforts to guarantee the honesty of
sellers, consumer protection policy goes beyond
the protection of individual consumer interests.
It serves the interests of all consumers and
encourages competition.”
The economic principle of maximising consumer
welfare means that consumers must be the main
focus of competition-based economic systems.
Adequate competition laws are an integral part
of effective consumer protection. By promoting
the competitive process rather than individual
firms, competition policies favour consumers
and serve to balance the dominance of
producers.
Consumer activists believe that competition
policy and regulation can be used not only to
correct inefficiencies of the market but also to reBox 1
Neither pure nor perfect competition
The textbooks tell us that for markets to benefit
consumers, competition must be pure and
perfect, with numerous companies producing
the same product (or service), full information
available to consumers for informed
purchasing decisions and firms entering or
exiting the market without incurring
prohibitive costs.
distribute income and protect social welfare. Poor
and marginalised consumers have, potentially,
the most to gain from the opportunities to make
better use of their limited resources and from the
effects of general economic expansion.
As the foundation of the market economy,
competition brings together supply and demand.
In theory, effective allocation of goods between
producers and consumers can be achieved by
eliminating constraints and distortions and
allowing markets to operate competitively.
Competitive markets are, according to this
principle, a means of ensuring consumer
protection.
But markets are generally imperfect, leaving
consumers at a disadvantage in terms of
information and negotiating power.
Monopolistic power and opportunism produce
non-competitive markets.
The real picture shows that we are far from this
perfect world. Among the obstacles to perfect
markets are the following:
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economies of scale
capital requirements
switching costs
access to distribution channels
product differentiation
patents.
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Annual Report 2004
In economic theory, consumer behaviour is based
on the premise that consumers are rational beings
who seek to maximise their satisfaction and who
operate in a market that provides information and
transparency. But consumer decisions are also
influenced by a diverse range of socio-economic
factors, including cultural specifics, level of
economic development and access to information.
Box 2
Rational consumers?
Contemporary consumption is full of
advertising, brands, labels and marketing.
Firms compete to find ingenious ways of
marketing their products. Consumers may feel
lost in this world of imperfect and asymmetrical
information.
This is in stark contrast with classical analysis,
which postulates that consumers are perfectly
rational and informed about the products they
purchase.
Corporate power
In developed economies, abuse of corporate
power has set in motion a profound social
movement of rejection. The reputation of “big
companies” has never been more damaged and
the level of trust in them has never been weaker.
Companies impose upon others the burden of
market liberalisation while greedily helping
themselves to the spoils.
The privatisation of national water, electricity
and telecommunication services illustrates this
point. Privatisation replaced the public
monopolies with private monopolies. Expected
service improvements and rate decreases have
not always materialised. The new corporate
owners of these formerly public services are not
fulfilling the conditions of these transfers.
The corporate push to introduce genetically
modified foodstuffs is another case in point.
While the debate has often been wrongly framed
as the reaction of extremists hostile to science, it is
in fact a matter of corporate manipulation and
disinformation. Consumers are rightly
concerned over legitimate issues of public
interest such as environmental contamination,
patents on living organisms, biological diversity
and control of food stocks at a global level.
Companies tend to eschew the need for a
regulatory framework in favour of self3
Analysts are fond of citing the adage about
customers looking into their innermost beings
and becoming rational and independent. The
informed consumer relentlessly explores,
compares and seeks out the best value for
money. No longer will consumers be taken in
by devious traders and advertising campaigns.
The consumer has become a rational being!
Gilles Groleau
regulation. At the same time, it is now common to
hear company executives cite the public interest
as a business strategy.
Competition Theory
Competition can be viewed from two contrasting
economic theories. The classical approach
restricts state intervention in the belief that, left to
their own devices, firms will behave as
competitors rather than partners. However, this
principle ignores the power of oligopolies and
the massive mergers that have created the
multinational enterprises that dominate the
international economic panorama.
The structuralist approach, in contrast, requires
strong state intervention to correct market
shortcomings. Measures can take the form of
anti-trust laws, bans on mergers, controls over
concentration of ownership and others.
Neither approach draws a clear distinction
between rivalry and competition. Nonetheless, it
is important for consumers to understand the
difference between them, as consumers benefit
from competition, not rivalry.
In the view of some economists, rivalry is a
process where businesses form strategies to
better position themselves in relation to their
competitors. Where there is rivalry, there has to
be a winner.
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Competition is a process of rivalry among firms
and suppliers in a bid to make money and gain
customer loyalty. It allows firms to survive and
develop according to their own criteria and at
their own risk.
Competition leads to lower prices, a wider range
of choice and improved quality. It reduces
information asymmetry by encouraging sellers
to provide truthful and useful information about
their products.
Businesses prosper in competitive markets when
they are able to beat the competition at
identifying and serving the interests of
consumers.
In sectors open to competition, innovations
develop at an accelerated rate. Enhanced
efficiency and productivity as a result of
competition can lead to increased economic
revenues.
Box 3
Contestable Markets
Open competition among multiple service
providers is not a panacea. Competition must
take place in 'contestable' markets, where
competitive pressure is exerted by existing
producers and the arrival of new entrants to
the market.
Natural monopolies and utilities
Natural monopolies that provide a public service
(e.g. water, electricity and other utilities)
constitute an exception to the laws of competition
and must be regulated accordingly. In many
cases, liberalisation and privatisation have
transferred these services from the public to the
private sector, turning them from public
monopolies to private ones. Yet the nature of the
service they provide means that consumers
cannot opt for alternative service provision.
These require special regulatory mechanisms.
“Contestability” of markets and businesses can
also be understood from a consumer policy
standpoint. Consumers need ways of making
their voices heard and contesting the decisions
of companies.
The Declaration of the 17th CI World Congress
(Lisbon 2003) states that: "changes in the
management and regulation of public utilities (e.g.
water and sanitation, electricity, gas, public
transport, postal services, telecommunications)…
directly affect the price, quality and reliability of
these services and access to them, and thus the
most fundamental rights of consumers. The
consumer interest should be the overriding
concern in planning the future of these services. ...
There should be consumer participation and
representation in the regulatory process and the
monitoring of those industries."
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Annual Report 2004
Chapter 2:
Competition policy, laws and regulation
Competition policy emerged in the late 1800s,
first in the United States and subsequently in
Europe.
Competition policy is virtually non-existent in
emerging economies, where markets are
unfettered and self-regulation is the norm.
However, the ineffectiveness of self-regulation,
especially in the area of natural monopolies, has
become synonymous with non-regulation.
The 1990s saw a rush to enact legislation
governing competition and price liberalisation.
This type of legislation has as its primary aim the
regulation of the market and the efficiency of
economic agents, and not the protection of
consumer interests.
Box 4
Competition Policy
Competition policy seeks to create a situation
where no firm wields more power or
economic efficiency than any other and where
Regulation and regulatory agencies
Regulation is defined by some economists as the
ongoing monitoring by a public agency of
activities that affect the community. The
following elements must be monitored:
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breakdowns in competition
public property
external factors
incomplete markets.
Prerequisites for effective regulation
Independence: To be effective, the body that
determines regulatory policy must be
5
Common features of these laws are their bans on:
5 agreements aimed at directly or indirectly
setting the selling price and hindering
market-driven price setting by artificially
facilitating the increase or decrease of
prices; in particular, agreements between
companies at different levels of
production or distribution concerning resale prices
5 abuse of a dominant position associated
primarily with limiting production, outlets
or technical development to the detriment
of consumers. “Dominant position” is
defined by the Court of Justice of European
Communities as a company's “capacity of
behaving independently” in the face of
competition.
business concentration is permitted for cost
reductions purposes only.
Emmanuel Combes, Collection Repères
independent. Lack of independence can lead to
manipulation and corruption. Transparency
should be the foundation of procedures, codes of
conduct, decisions and any sanctions that have
been imposed.
Market discipline: Without discipline, markets
lose their points of reference. The resulting
inefficiencies can compromise consumer welfare.
Regulation of competition has two basic
components: regulations on market structure
and regulations on behaviour (anti-competitive
practices). Regulations may be set directly (by
controlling the cost of services) or indirectly
(with price ceilings), among other mechanisms.
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Regulatory agencies
Regulatory authorities are indispensable
institutions to modern states. Most are
jurisdictional bodies created by law. Regulatory
agencies may have the faculty of suspending
companies that breach anti-competitive rules.
When regulatory agencies act as a jurisdictional
authority by imposing sanctions, its decisions
can be submitted to the competent appeal courts.
When they are performing administrative tasks,
regulatory agencies may share certain
responsibilities with the executive branch of the
government.
Box 5
Regulatory agencies
Mission:
5 protect consumers from monopoly abuse
5 protect investors from arbitrary policies
5 encourage investment and effective
development
5 minimise intervention costs
Regulatory agencies enjoy varying degrees of
independence. In some countries, the President
has the authority to appoint and dismiss
members. Independence may be linked to receipt
of financial resources from the government.
Regulatory agencies have multiple objectives:
5 prevent and sanction anti-competitive
practices
5 create conditions for the financial
viability of companies in a sector
5 research applications for approvals,
authorisations or licences that enable
companies to invest in a sector
5 protect consumer rights in regard to
product price, quality and supply
Responsibilities:
5 regulate and adjust the price of services
and infrastructures
5 control the quality and standard of
services offered.
5 monitor competition among companies
5 arbitrate in disputes
Source: World Bank Institute
How Regulatory Agencies operate
Funding of Regulatory Agencies
As judicial bodies, regulatory agencies enact
rulings and hold hearings on cases presented to
them from consumers, their representatives or
other parties, including the government.
Regulatory agencies are generally State funded
but may also receive income from administrative
fees levied on companies for permits or licence
applications.
A simple letter may suffice to submit a case and
no fees are payable, making these jurisdictions
highly accessible to consumers.
Reliance on government funding may
compromise the independence of regulatory
bodies. The following market-based mechanisms
may provide alternative sources of funding:
Regulatory agencies have broad investigative
authority and can request and obtain technical,
economic, accounting, financial or commercial
information from firms and individuals. They
are also empowered to hold expert consultations.
Mandatory publication of rulings in the official
government bulletin and/or a national
newspaper constitutes an act of transparency
and good governance.
5 Funding by offenders:
Economic sanctions, which should be high
enough to be discourage infractions, can be
used to fund regulatory activities.
5 Funding by beneficiaries:
Regulatory bodies can be financed by
consumer activity through VAT taxes or
similar mechanisms.
Sanctions can include temporary or permanent
closure of the firm in question, or the levying of fines.
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Annual Report 2004
Box 6
Funding of Regulatory Bodies: Developed
Developed
Country Models
Country Models
As regulatory bodies develop, they are called
upon to demonstrate their independence from
day-to-day political interference while
exercising governmental functions. This is not
an easy balance and raises issues of funding of
the offices themselves.
An interesting development in recent years is
that, as regulators evolve, some of their
functions are “hived off'” and separately
funded from their core functions as economic
regulators. So while the main economic
regulation function remains directly State
funded, others (e.g. representation of
consumers and complaints handling) may be
funded differently.
For example, in the US and Canada, it is
common practice for price alterations to be
approved through a process of rate hearings.
Conducted by regulators on judicial lines, these
hearings allow providers and consumers to
present evidence, require disclosure of
documentary evidence and permit the cross
examination of fellow protagonists. As the costs
of the hearings are passed on to consumers by
the providers, consumer association costs may
be paid by the tribunal. Sometimes the cost of
consumer representation is funded by a small
levy on consumers' bills.
The UK has an elaborate structure of consumer
representation for water and energy. In the
past, complaints-handling was carried out by
regulators. But the position now is for
complaints-handling to be dealt with by
independent watchdogs financed by a levy
placed on the industry and calculated as a
percentage of revenue.
These developments raise the issue of
independence not only from the regulator but
also from industry and government. This
should be reinforced by rules on conflicts of
interest, research capacity and freedom of
information (both access and disclosure to
others) and the right of appeal.
This is difficult if the consumers are actual
members of the regulatory boards, and so the
arms-length relationship that comes from
industry levies may be a viable source of
funding. But consumer representation, once
established, is hard to suppress.
Robin Simpson, Consumers International
National Competition Commissions
National competition commissions are judicial
bodies established by competition and price
liberalisation laws. In countries where these
types of commissions are relatively new, they
may still lack necessary implementation
structures and resources.
Commissions are generally composed of
magistrates and experts in competition or
consumer issues. The State is generally
represented by a Ministry of Trade official.
Competition commissions have the right to take
up cases and to rule on any practice deemed
7
contrary to competition. Consumer
organisations may refer cases to them, as can
governments and businesses. Firms and
individuals under investigation are given the
opportunity to legal representation and defence.
Competition commissions may order the
cessation of anti-competitive practices within a
specific period of time. Fines may be imposed.
Decisions are generally subject to appeal.
Competition commissions are meant to be
independent. However, commission members
are often appointed by Presidential decree and
budget resources come from the national
treasury. Many lack the resources necessary to
carry out monitoring and assessment activities.
Consumer Protection and Quality of Life in Africa through Competition and Regulation
In some countries, commissions are
distinguishing themselves by their boldness,
particularly in tackling price fixing in
telecommunications, pharmaceutical and
petroleum sectors.
Unfortunately, their decisions are not always
implemented. Suspension of anti-competitive
practice and the imposition of fines are
temporary measures that may not prevent the
sanctioned company from future abuses.
Box 7
Case study:
Zambian Commission asks
consumers to know the rules
The Zambia Competition Commission (ZCC) is
a statutory body established under the
Competition and Fair Trading Act. The
Commission is charged with preventing anticompetitive conduct and encouraging
efficiency in business as a means of fostering
greater choice for consumers in price, quality
and service, and ensuring that consumer
welfare is protected in dealings with producers
and sellers.
The Commission has among its attributes the
resolution of consumer complaints. Over the
past five years, the Commission has seen a
considerable increase in the number of
complaints received. In 2004, it received a
fourfold increase in the number of complaints
presented over the previous year. But its efforts
could be more successful if consumers would
follow the stipulated procedures.
The Commission is concerned that “consumer
rights illiteracy” is keeping consumers from
filing, and winning, complaints about abusive
business practices.
The Commission conducts awareness
programmes and has drawn up guidelines to
assist consumers in their dealings with
producers and sellers.
The Commission calls upon consumers to know
their rights and obligation, and to familiarise
themselves with complaint procedures so that
their testimony and documentation is
irrefutable and in court.
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obtain the information necessary to
evaluate and choose between products
inspect goods before purchase.
inform themselves of product guarantees
and warranties, and their expiration dates.
demand a receipt or other proof of
purchase.
return defective goods as soon as possible
do not tamper with goods covered by
product warranty.
Consumers are asked to undertake all the above
steps before filing a complaint with the
Commission. Only if the consumer is not
satisfied with the response from the seller
should a complaint to the Commission be
presented.
In cases of adulterated food, consumers are
asked to take a sample to the Lusaka City
Council Department of Public Health for
analysis.
Should a defective product cause personal
injury, the consumer should seek medical
attention from a recognised medical doctor and
obtain a medical report.
Consumers may have the right to seek damages
in a civil suit. The Commission has the power to
launch criminal proceedings on behalf of the
public interest against manufacturers of unsafe
products.
--- from Consumer Watch, ZACA/CUTS-ARC
(Zambia) Vol. 1., Issue No. 3, July 2005.
8
Annual Report 2004
Chapter 3:
The African context
In Africa, competition policy and consumer
protection must be viewed from the context in
which market mechanisms have failed.
markets hindered access by African consumers
to reliable information.
Increased economic and financial imbalances,
growing indebtedness and stagnation of
production forced African states to abandon
development policies centred on a vast public
and parastatal sector.
At the same time, African companies have not
been competitive, due to constraints on lowering
production, the costs associated with importing
capital equipment and semi-processed goods,
and a limited capacity to innovate and
incorporate foreign technology.
In the 1980s, most African countries shifted from
interventionist and trade protectionist policies to
liberalisation and gradual deregulation, with the
aim of building a competition-based,
competitive and market-driven economy. The
public and parastatal sector established at
independence was dismantled and subsidies
lifted.
Under the structural adjustment programmes
promoted by the International Monetary Fund
and World Bank in the 1990s, African countries
began the dual process of economic liberalisation
and state withdrawal from productive sectors.
But this shift has not brought the desired results.
Prices of consumer goods weigh heavily on
consumer expenditure and undermine
purchasing power. Expected improvements in
quality from deregulation have not occurred.
Consumers did not benefit from wider choice, as
was anticipated.
Several factors have contributed to these poor
results. Imported consumer goods consisted
mainly of manufactured products from
monopolistic markets or oligopolies.
Consequently, prices did not decrease. The
information asymmetry characterising these
9
The legal panorama
The establishment of competition and consumer
protection policies in Africa is in its infancy,
although it is growing steadily. In the last two
decades, an increasing number of African
countries have adopted economic reform
policies that place greater reliance on market
forces and less emphasis on government
intervention and control. These policies include
liberalisation of trade through the removal of
trade barriers, liberalisation of financial markets,
privatisation of state-owned assets, removal of
price controls, reduction of subsidies and
liberalisation of exchange controls to encourage
investments.
National legislation
At least 12 African governments have enacted
national competition laws. The accompanying
chart on page 11 shows the state of competition
legislation in the region.
In the South African Development Community
(SADC), Namibia, South Africa, Zambia and
Zimbabwe have practical experience in applying
competition laws.
Consumer Protection and Quality of Life in Africa through Competition and Regulation
In the Common Market for Eastern and Southern
African States (COMESA) region, Kenya and
Angola have enacted national competition laws
and have operational competition commissions.
In the Economic Community of West African
States (ECOWAS), Burkina Faso, Côte d'Ivoire,
Mali, Niger, Senegal, Togo and Guinea have
competition policies in place.
Regional integration
The other route for the implementation of
competition laws in Africa goes through regional
integration. Integration is aimed at developing and
strengthening the capacities of national
competition authorities to deal with transnational
corporations. Integrated competition policies are
likely to promote competition and consumer
welfare in the region.
Economic integration is considered as a process by
which inter-dependence is established between
national economies through increases in the
exchange of goods, services, capital and labour.
Inter-dependence is also established in the form of
harmonised economic policies, joint projects and
standardised laws. This implies the intensification
of competition among economic operators.
To achieve sustainable economic growth in Africa,
national competition laws and policies must be
harmonised through regional frameworks. The
most advanced regional groupings in terms of
formulating; adopting and harmonising
competition laws and consumer protection policies
are the COMESA and the West African Economic
and Monetary Union (UEMOA).
COMESA's December 2004 Regional
Competition Law includes a provision on
consumer protection. UEMOA has adopted a
Regional Competition and Anti-Dumping Law
that sets up a redress mechanism for anticompetitive practices. Its Common Industrial
Policy framework also has a regional mechanism
for accreditation, standardisation and product
quality. UEMOA recently formulated a regional
consumer protection bill.
In the SADC bloc, Article 25 of the SADC Protocol
on Trade obligates its members to implement
measures to prohibit unfair business practices
and promote competition.
Regional integration has contributed to the
concentration of economic power. Liberalisation
has ushered in the creation of producer, sectoral
and professional organisations. Businesses have
formed chambers of commerce to promote their
common interests.
Collusion through agreements on pricing,
market segmentation, production limits or
quotas is found in many sectors. Examples of this
abound in Africa, where commercial banks
generally charge the same interest rates, oil
companies sell petrol for the same price and
transport operators charge identical rates,
despite differences in costs, scale and operational
efficiency.
Regional economic liberalisation has also
opened the door to a flood of substandard and
dumped products that weak national
regulations and monitoring of quality
standards has been unable to control.
10
Status report
Enactment of competition legislations in Africa
Countries with existing competition laws
Countries with an existing draft on competition laws
Countries with in the process of drafting a bill or other instrument on competition
COMESA countries
Countries
& membership type
Existing law on
competition
Existing draft on In the processof
Sub-regional
competition
drafting bill /
& Regional levels
other instrument
In the process
Angola / C
Benin / A, A, A
Burkina Faso/ F
Burundi / C
Comoros / Nm
Côte d’Ivoire / A
Dem.c Rep. of Congo / C, C
Djibouti / Nm
Egypt / A
Eritrea/ Nm
Ethiopia / C
Guinea Conackry / C
Ile Maurice / F
Kenya/ F
Madagascar / C
Malawi / A
Mali / F
Mauritius / F
Morocco / A
Namibia / G
Niger / C, C
Rwanda / A
Senegal
Seychelles / F
Sudan / C
Togo / C, C
Uganda / A
Zambia / F
Zimbabwe / F
CI membership status
A = Affiliate members
G = Government affiliates
11
C = Contact members
Nm = Non-members
F = Full members
Annual Report 2004
Chapter 4:
The role of consumer organisations
Consumer organisations have a clear
philosophy: the aim of economic activity is to
satisfy consumers. The consumer movement is
not opposed to market liberalisation per se, but it
advocates the enactment of the regulations
necessary to control abuses that occur as a result
of liberalisation.
competitive practices, consumer organisations
are ideally placed to:
Great progress has been made in consumer
protection over the last 40 years. In 1985, the
international community accorded consumer
rights their full importance with the adoption of
the UN Guidelines on Consumer Protection.
There are now comprehensive laws in the OECD
countries and in many Latin American countries.
Even China, in its transition to a market
economy, has a vast network of consumer
information centres.
5
To date, only a few African countries have
enacted consumer protection legislation. Four
countries Botswana, Malawi, Seychelles and
Tunisia have functioning consumer protection
laws. Legislation has been drafted in Benin,
Burkina Faso, Burundi, Chad, Ghana,
Mozambique, Namibia, Niger, Rwanda, South
Africa and Uganda. Legislation is in the process
of being drafted in Ethiopia, Kenya, Nigeria,
Zambia and Zimbabwe.
5
5
5
5
5
monitor the market
refer anti-competitive activities to regulatory
authorities for appropriate sanctions.
conduct advocacy based on evidence of
restrictive business practices
lobby for the adoption of appropriate
corrective measures
conduct consumer awareness and education
campaigns
orient consumers about the possibilities and
procedures for redress.
Training and consumer rights awareness allow
consumers to play their role in regulating the
market. Consumers need to know both their
rights and the obligations of manufacturers and
distributors. Consumers can use a combination
of legal measures and market-based activities to
see that these are enforced.
The spread of consumer defence NGOs around
the world and the proliferation of electronic
networks and digital technology means that
information to combat fraud, price-fixing and
other anti-competitive practices can be easily
shared among activists in many countries.
Consumer groups play an important role in
consumer protection. In terms of combating antiBox8
Case Study:
Open markets in Senegal
Should a shopping basket containing only
Senegalese products be imposed on consumers?
The Senegalese Consumer Organisation
(ASCOSEN) says "No".
ASCOSEN rejects the “hostile” position
toward Chinese imports held by the National
Union of Traders and Industry of Senegal
(UNACOIS).
12
Consumer Protection and Quality of Life in Africa through Competition and Regulation
ASCOSEN views the UNACOIS position as an
"attack" on the rights of Senegalese consumers.
ASCOSEN believes that obstacles to goods
from China breach the principles of
international law and free trade subscribed to
by Senegal, and could infringe upon the
fundamental consumer right to satisfaction of
basic needs.
ASCOSEN defends the consumer right to free
choice based on purchasing power and
sovereign decisions.
Representation
Consumers are increasing their representation
and participation on regulatory boards,
especially in the utility sector.
Forms of consumer representation and/or
participation in the region include:
ASCOSEN calls upon authorities to investigate
the practices of UNACOIS traders, including
sale of expired goods. ASCOSEN is working in
alliance with Rencontre africaine des droits de
l'homme (RADDHO), the National Union of
Senegalese Consumers (UNCS), the
Confederation of Independent Trade Unions
(CSA) and the National Council for Protection
of Citizens' Purchasing Power (CNDPA).
contract conditions for concessions and leases)
are absolutely necessary for consumer
organisations to exercise real representation.
These must be backed by the force of law.
Principles of consumer
representation
5
5
5
5
membership on the administrative board of
the water holding company (Senegal)
membership on regulatory boards (Burundi,
Zambia, Chad, Cameroon)
participation in public hearings (Ghana)
5
5
5
Membership on regulatory boards is not
inconsistent with independence if there is full
access to information and no duty of
confidentiality about the matters discussed.
Guarantees of full disclosure of key matters (e.g.
5
5
5
terms of reference: domestic consumers,
price, quality, and complaints
geographical structure should reflect the
structure of the industry
independence from industry, regulators and
government
research capacity in-house or budget for
commissioned work.
freedom of information (e.g. transparency of
contracts)
right of appeal against regulatory decisions
resources
Box 9
Consumer participation on utility regulatory boards
In Africa, consumer involvement in utility
regulation is spreading. In Burundi, a
representative of the Association Burundaise
des Consommateurs has been appointed to the
National Commission on Water and Energy, an
oversight body. The Consumers Association of
Ghana represents consumers on Ghana's
public utility regulatory board. The Zambian
Consumer Association is working with the
National Water Supply and Sanitation Council
to establish consumer watch groups nationwide
to deal with complaints about water services. In
Kenya, the Consumer Information Network
seeks a seat on the Water Services Regulatory
Board. In Senegal, the Association de Defense
des Usagers de l'Eau (and other utilities) sits on
the water regulatory council and on the board of
the national water holding company.
Robin Simpson, Consumers International
13
Annual Report 2004
Box 10
Case Study:
Consumer involvement in Zambia
The Zambia Consumer Association (ZACA), a
CI member, works on competition issues on
several fronts.
5
5
in its duty to control price hikes and extend
service to the unserved.
ZACA director Muyunda Ililonga has found
that participation on regulatory bodies is
fraught with challenges. “Consumer groups are
viewed as an interest group lacking in
objectivity. Other stakeholders tend to mistrust
them, particularly with critical information.
Consumer groups are viewed as lonely voices
on behalf of an undefined and unorganised
constituency.”
Monitoring: Its Consumer Watch project
monitors the activities of the national
regulatory agencies and national
enterprises. Its Consumer Watch
Newsletter (produced with the Consumer
Unity and Trust Society Africa Resource
Centre), “strives to support” the work of
the Zambia Competition Commission in
preventing anti-competitive practices. A
recent issue of the newsletter gives a
glimpse of the range of its concerns: alleged
collusion among mobile phone providers in
Zambia, fuel price increases and diesel
shortages, consumer perspectives on the
liberalisation of the transportation sector,
and analysis of proposed electricity price
hikes.
Nonetheless, consumer representation on
regulatory bodies is “beneficial,” he believes.
“Consumer groups bring to the table critical
consumer-related issues that no other
stakeholder government, private sector or
academic can elaborate. Consumer groups
receive complaints from consumers, therefore
they speak from experience.”
Participation in regulatory council: ZACA is
working with the National Water Supply
and Sanitation Council to establish a
nationwide network of consumer watch
groups to deal with complaints about water
services. ZACA's goal in working with
NWSSC is to support this regulatory agency
Ililonga believes that, in addition to complaintshandling and policy work, consumer
organisations should focus their energies on
mobilising consumers. “It is the number of
people behind them that will give consumer
groups the negotiating power and political
clout they currently lack to achieve their goals.”
14
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Chapter 5:
The indexes
The 2002 Report reviewed the effectiveness and
extent of protection of consumer rights in Africa
using a consumer rights protection index
developed for that purpose.
This 2004 Report uses a similar index to evaluate
efforts to promote the quality of life of consumers
through competition and regulation policy.
Three indexes were employed:
5 competition policy effectiveness index
5 index on the general perception of regulation
5 index on the perception of the quality of
regulation of basic services (water, electricity
and telephone)
Data Collection
Data was collected from consumers, competition
commissions and regulation agencies.
Questionnaires were developed for four groups:
individual consumers, consumer organisations,
regulation agencies and competition
commissions.
All questionnaires had four sections. Section 1
collected data on the gender and place of
residence of respondents. Section 2 looked at the
effectiveness of competition policies. Section 3
looked at regulation. Section 4 looked at
consumer perception of the quality of basic
utilities.
Questionnaires for competition commissions
and regulation agencies asked respondents to
identify a) structure (name, date of creation,
missions and method of designating members);
b) operating resources (material and human) and
15
effectiveness; and c) relations with consumer
organisations.
Respondents came from 16 countries: Benin,
Burundi, Cameroon, Côte d'Ivoire, Ethiopia,
Malawi, Mali, Morocco, Mozambique, Nigeria,
Seychelles, South Africa, Togo, Uganda, Zambia
and Zimbabwe.
In the consumer category, 50 people respondents
were selected to collect balanced data from
urban, rural and peri-urban areas.
A full description of the methodology used to
calculate the indexes is contained in the
Appendix.
Findings
1. Distribution of respondents by gender
Table 1 shows that about 59% of male consumers
and 40% of female consumers responded to the
questionnaire. South Africa is the only country in
the sample where the female response rate is
higher than the male response rate.
2. Distribution of respondents by place of
residence
Table 2 shows that most respondents (54.6%)
reside in urban areas, followed by the peri-urban
areas (24.5%) and rural areas (20.2%). The
exceptions were Seychelles, Zimbabwe and
Uganda, with greater response from peri-urban
areas
3. Competition policy effectiveness index
Table 3 shows the general competition policy
effectiveness for each country. Indexes for all
Annual Report 2004
countries ran between 0.34 and 0.93, which
indicates that, overall, competition policy is
viewed as being a weak means of improving the
quality of life of consumers in countries
surveyed.
The findings indicate that consumers in Malawi
have a better understanding of the competition
policy than consumers elsewhere, followed by
consumers in Benin and Zimbabwe.
The survey revealed that consumer organisations
do not belong to and are rarely consulted by
national competition commissions. Neither are
consumers regularly informed of commission
decisions.
4. Indexes on regulation
The indexes on the general perception of
regulation agencies showed that all consumers
have a poor to fair understanding of the
importance of these agencies. Table 4 shows
indexes between 0.45 and 1.17 for all of utility
regulation agencies.
Classifying the countries according to this
general index puts Côte d'Ivoire in first position,
with a general index of 0.94, followed by
Seychelles (0.88) and Mozambique (0.80).
5. Perception of quality of basic services
regulation
Consumer appreciation of the quality of water,
electricity and telephone services in the countries
surveyed was poor to fair. For the three services
analysed, the general perception index ran
between 0.27 and 1.2.
Although the perception of water quality was
poor (with indexes between 0.3 and 1.47), urban
consumers in all 16 countries had a better
perception of its quality than peri-urban and
rural consumers. The exception to this is Malawi,
where the perception among peri-urban and
rural consumers was better.
Table 5 indicates that urban consumers had the
highest perception of the quality of electricity
services, except in Benin, Zimbabwe and
Mozambique, where rural consumers who had
higher perception.
Perceptions of telephone services followed the
same pattern, with urban consumers holding a
better view of the quality of this service. The
exception comes from Zimbabwe, where rural
consumers had a better appreciation of the
quality of telephone services (1.08).
In summary, the analysis indicates that existing
regulation efforts are inadequate for bringing
about improvements in the consumer quality of
life.
16
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Chapter 6:
Recommendations
Survey findings and analysis of the current
state of competition policy suggest the
following steps should be taken to improve
consumer protection:
5 Create fairer competition
Regulatory agencies and consumer
organisations need to increase the extent to
which they monitor markets.
5 Safety standards
Quality control must be conducted
through an autonomous standards-setting
and product testing public body.
5 Monitor advertising claims
Strict legislation on misleading advertising
should be enacted and infringements
subject to fines.
5 Set sanctions
Regulations should stipulate sanctions for
fraud, falsification and other illegal
conduct.
5 Legal representation
Injured parties should have access to legal
representation.
17
5
5 International agreements
National governments must respect the
international consumer protection
standards they have adhered to.
5 Consultation with consumers
Regulatory bodies and consumer
organisations must consult with one
another. It is imperative to take consumers
into account because nobody is in a better
position to define consumer expectations.
5 Information
It is necessary to have an effective
information dissemination policy.
5 Independence
Regulatory bodies must be independent
from government and from business.
5 Regional co-ordination
Co-ordinated regulatory initiatives can help
to counteract pressure from multinational
enterprises.
* : NS means 'not specified'
Table 2 : Distribution of respondents by place of residence
* : NS means 'not specified'
Table 1 : Characteristics of Respondents by Gender
Annual Report 2004
18
19
Table 4. General Perception of Regulation (agencies)
Table 3. Effectiveness of Competition Policy
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Table 5. Perception of Quality of Basic Services Regulation by place of residence
Consumer Protection and Quality of Life in Africa through Competition and Regulation
20
Annual Report 2004
Appendix I:
Methodology
Data collected calculated using the following generic formula.
Index = [(N + n2)/(N + n1)] [n0 / N]
(1)
where:
- N : the total number of respondents per country;
- n0 : the number of respondents who gave a negative response;
- n1: the number of respondents who did not answer the question;
- n2: the number of respondents who gave a positive response.
The following method was used to calculate the competition policy effectiveness index: a basic index is
calculated for each of the nine questions concerning competition effectiveness as follows:
1ek=[(N + n2)/(N + n1)]- [n0 / N]
(2)
where:
- 1ek : basic index relating to question k;
- N, n0, n1 and n2 as above
Questions providing numerical values as responses (ratings, for example) use a standard to convert
quantitative variables into qualitative variables. These qualitative values take on the value of 1, when the
standard is reached or surpassed (in the case of positive responses) and if not, the value 0 (in the case of
negative responses). When this is changed, n0, n1, and n2 are easily calculated.
Once basic indexes have been calculated, the general competition policy effectiveness index is calculated:
9
åI
Ig =
ek
k =1
(3)
9
Where
- Ig: general index;
- k=1,2 ...,or 9.
Ig is equal to 0 when competition policy is not at all effective in the opinion of consumers.
Ig is equal to 2 when the competition policy is very effective for all the respondents.
21
Consumer Protection and Quality of Life in Africa through Competition and Regulation
Appendix II:
Related publications from Consumers
International
See the CI website section on Competition and Consumers for additional information:
www.consumersinternational.org/shared_asp_files/uploadedfiles/B0FD3D89-4A89-4927-9DEB1B2CC269DCAF_Doc319.pdf
Trade and economics
Multilateral framework for competition policy: Where do African consumers stand?
Explores the link between competition policy and consumer welfare at national, regional and multilateral
levels.
Regional overview on the impact of Multilateral Trade Agreements on African consumer
Overview of selected Multilateral Trade Agreements and their effects on African consumers.
Impact assessment of the Agreement on Agriculture (AoA) and the General Agreement on Trade in
Services (GATS) on consumers in Africa
Assesses the impact of free trade on consumers, focusing on how WTO trade liberalisation regimes in
agriculture have affected consumers.
Proposed US-SACU Free Trade Agreement: Analysis and potential impacts
These briefing papers conclude that bilateral trade agreements may bring onerous trade regulations
which could negatively impact on consumers.
Public utilities
Liberalisation of the water sector in Africa: Trends and impacts
Evaluates trends in water management in the context of the liberalisation and its impact on consumers in
Africa.
Building the capacity of consumer organisations to engage in urban water supply and sanitation sector
reform in Africa
Presents the experiences of African consumer organisations.
Consumer protection legislation
Model Law for Africa: Protecting African consumers
Provide a set of legal principles to help guide consumer legislation, intervention and activism on the
African continent.
Consumer protection and quality of life in Africa: Report 2002
Highlights the links between consumption, development and quality of life, and introduces the Africa
Consumer Protection Index ranking countries according to the effectiveness of the various institutions
and legislations in place and as perceived by consumers themselves.
22
Annual Report 2004
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