Mark-ups and competition: a comparison of the profitability of listed South African industrial companies
Stellenbosch Working Paper Series No. WP02/2015Publication date: 2015
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
This paper tests the well-established finding in the literature that SA firms are significantly more profitable and operate in a highly concentrated market, relative to that of their foreign counterparts. In particular we question the conclusions drawn by Aghion, Braun, and Fedderke (2008) who find that South African firms enjoy profitability margins more than double that in other countries for a sample from 1980 to 2004. We test this claim empirically by using survivorship bias corrected datasets of the top 25 South African industrial firms listed on the JSE (by market capitalisation) and those in the Dow Jones Industrial Average index. We compare (for this period) the mark-ups (as measured by Aghion et al. (2008)) as proxied for by the relative profitability (as measured by Return on Equity (ROE) and Return on Invested Capital (ROIC)). We also compare a set of commonly used ratios for SA firms relative to their US, UK and Brazilian counterparts for the period 1994{2013. Our results for both data sets do not confirm the claim that South African industrial companies have enjoyed sharply higher mark-ups as approximated by the relevant rates of profitability when compared with their international counterparts.
JEL Classification:L250,L100
Keywords:competitiveness, profitability margin, return on equity, return on assets, return on invested capital, mark-ups, profit margins, gross margins
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Upcoming Seminars
Monday 21 July 202512:00-13:00
Izak Odendaal: Old Mutual Wealth Chief Investment Strategist
Topic: "Diverging fiscal policies and what it means for markets"
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Prof Willem Boshoff: Stellenbosch University
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
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27 Jun 2025 Another setback for the GNU, but oil markets breathe a little easierThis week was marked by heightened tensions both domestically and internationally. At home, friction intensified between the two largest parties in the Government of National Unity (GNU), the ANC and the DA, following the firing of one of the DA's deputy ministers. Internationally, the US conducted airstrikes on three Iranian nuclear facilities using...
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