Testing for Competition in the South African Banking Sector

We employ both the Panzar and Rosse (1987) and the Bresnahan (1982) models to test for competition in the South African banking sector. We find evidence consistent with monopolistic competition in the South African banking sector. While this may be considered relatively good news for consumers that South African banks are not acting as a cartel, there is need for policies and other interventions to enhance contestability in the banking sector and thus improve efficiency.