Competition in South African Banking: An assessment using the Boone Indicator and Panzar-Rosse approaches
Mpho Rapapali and Witness Simbanegavi
Last Modified Date:
2021-12-08, 10:20 AM
Publications > Working Papers
This paper uses the Boone indicator and the Panzar-Rosse H-statistic to assess competition in the South African banking sector. Results point to substantial exercise of market power by South African banks. More precisely, we ﬁnd evidence of ‘monopoly’ or ‘cartel’ tendency when using either the Boone indicator or the Panzar-Rosse approaches. The results are robust to different model speciﬁcations. We thus conclude that over the period 2008–2018, the nature of conduct by South African banks was ‘monopoly’ in the sense that banks’ market shares or revenues are little affected by the behaviour or actions of other banks. Given the role of banks in the transmission of monetary policy, and for economic growth more generally, the weak competition in the sector may have negatively affected the efﬁcacy of monetary policy during this period, and may partly explain South Africa’s weak economic growth performance post the GFC.