With over 20 years in a democratic South Africa, the country still faces serious economic
challenges of poverty, inequality and unemployment. In response to these challenges, the
need for a higher level of economic growth, combined with a more inclusive approach to
sharing the benefits of such growth, are universally acknowledged. Recent literature
establishes an important link between growth and development and removing constraints to
accessing economic activity, and disciplining the market power of large firms. In this context,
inclusive economic growth is also about firms being able to overcome strategic barriers to
entry and expansion. The South African experience has been one of high levels of
concentration in several key sectors resulting in an economy which largely excludes the
majority of the population from ownership of important economic assets. This has deprived
the economy of the benefits from increased participation and access to markets, and dynamic
rivalry in the form of competition based on innovation, competitive pricing, investment in
improved production processes and capabilities, and learning-by-doing.
This paper highlights the factors which are critical to facilitating the entry of efficient rivals into
traditionally concentrated markets premised on the understanding that investment and
innovation emanates from and rests with firms. In this context, government’s role (including its
various agencies) should be to facilitate the process by lessening structural and strategic
barriers in the economy which restrict the dynamic rivalry introduced by firms that compete on
the basis of investments, innovation and developing new processes and capabilities. The
paper relates these issues back to the international growth and development literature in order
to provide a strong motivation for the relationship between barriers to entry, competition and
dynamic efficiency, increased participation in the economy and inclusive growth. This
assessment provides the theoretical context for understanding the sector-specific experiences
of firms in the sectors which the barriers to entry project will analyse. A second companion
review paper working paper no. 5/2015 discusses the literature on competition policy,
economic regulation and industrial policy.