South Africa: Block Exemption Exports Renewed for 5 Years

• The Block Exemption for the Promotion of Exports allows South African competitors to collaborate for international markets without violating competition law.
• Despite its potential, the exemption is currently underutilized by South African exporters, according to the DTIC.
• The exemption, provided under Section 10(3)(b)(iv) of the Competition Act, covers activities like joint marketing, selling, and production for export.
• It was gazetted in 2019, renewed in 2022 for three years, and a new Block Exemption has recently been promulgated, establishing a five-year regulatory framework.
• Businesses must ensure their collaboration strictly adheres to the exemption's scope to avoid penalties and maximize benefits for ZA export market cooperation.

However, despite its significant potential, the exemption is currently underutilized, meaning many exporters are not fully leveraging its benefits.

South African businesses looking to expand into international markets have a crucial tool at their disposal: the Block Exemption for the Promotion of Exports. This regulatory provision is specifically designed to enable local competitors to collaborate in their pursuit of global opportunities without falling afoul of domestic competition laws. However, despite its significant potential, the exemption is currently underutilized, meaning many exporters are not fully leveraging its benefits.

Mr. Kwanele Mkhwanazi, the Director of Export Development and Support at the Department of Trade, Industry and Competition (DTIC), recently highlighted this underuse, emphasizing that the exemption's intended advantages will only materialize if businesses actively engage with and implement its provisions. The DTIC views this Block Exemption as a critical mechanism for bolstering South Africa's export base and enhancing its participation in global value chains, underscoring its strategic importance for the national economy.

The legal foundation for this vital instrument is rooted in Section 10(3)(b)(iv) of the Competition Act. This specific clause grants a blanket exemption for certain collaborative activities among South African exporters, provided these activities are exclusively directed towards export markets. The Block Exemption for the Promotion of Exports was initially gazetted in 2019 and subsequently renewed in 2022, maintaining its validity for three-year periods. The Block Exemption for the Promotion of Exports has recently been promulgated, establishing a new regulatory framework for a period of five years.

Crucially, the exemption delineates precise areas where ZA export market cooperation is permitted. These include joint marketing, joint selling, joint distribution, and the joint purchasing of inputs. Furthermore, it extends to joint research and development, joint production specifically for export, joint logistics and transportation, joint after-sales service, and joint bidding for export contracts. The exchange of information necessary to facilitate these collaborations is also covered. However, it is imperative for businesses to understand that this Block Exemption strictly applies to international markets and does not permit any anti-competitive conduct, such as price fixing, market allocation, or bid rigging, that affects the domestic market.

For South African exporters, understanding and correctly implementing the Block Exemption is paramount. While it offers a pathway for competitors to pool resources and expertise to penetrate challenging international markets, any collaboration must strictly adhere to the exemption's defined scope. Failure to do so could expose businesses to significant penalties under the Competition Act, negating the very benefits the regulation aims to provide.

Mr. Kwanele Mkhwanazi, Director of Export Development and Support, has emphasized that the publication of the Block Exemption will not benefit businesses unless they make full use of the regulation. Such engagement is crucial to ensure that the Block Exemption for the Promotion of Exports remains a relevant and effective tool, fostering increased South African exporter competition law compliance while simultaneously driving growth in the global marketplace.

Lawyers and compliance officers advising South African exporters must ensure their clients fully understand and correctly implement the Block Exemption for the Promotion of Exports. Failure to properly utilise this regulation could mean missing out on its intended benefits for international market collaboration, while potentially exposing them to competition law risks if collaboration is not structured correctly under the exemption.

Source: Original reporting via {source}