Just a couple tidbits this week.
Supply side control as monopoly defense
By controlling supply, and therefore price, a company that dominates production of some good can hold onto its monopoly by bankrupting competitors who get too big.
This works especially when in a field where entry and operational costs are high.
The company with a monopoly can flood the market to drive down the price, which in turn drives down the competitions revenue. The monopoly company has cash reserves to weather the storm, but the newcomer has to shut down because they can’t cover operating expenses at the lower price point.
“The Chinese state-owned producers can do the Saudi [oil] trick,” he says, adding “They turn on the taps, flood the market, the price of dysprosium crashes, the new entrant is washed out, and then they’ve re established their monopoly.”
Competition for foreign investment
Countries compete with each other for foreign investment. This is obvious, but I hadn’t thought about it like that before. Companies from other countries, and even other countries themselves, want to send their money to countries where they will see the highest return.
Countries with better infrastructure, less corruption, and less violence are more attractive to foreign investors.
Even with the sharp drop in demand for power during the lockdown, this year has already had more outages than ever before.
Investors such as miners, which rely on steady power, will question whether South Africa is the right place for investment, said Ms Leoka.