Blue Robbon complies with CTC guidelines

The Commission and Tariff Commission (CTC) has said Blue Ribbon is operating within the commission’s guidelines set when the company was acquired by Bakhresa Zimbabwe.

In 2016, the commission conditionally approved the transaction involving acquisition by Bakhresa Zimbabwe in Blue Ribbon Industries and during assessment of the transaction, competition concerns were raised which resulted in the merger being approved subject to certain trade conditions.

Approving the acquisition CTC said; “At least 80 percent of the wheat and maize products to be sold and utilised by the merged entity (Bakhresa Zimbabwe), all its subsidiaries and its successors in title, shall be produced in Zimbabwe.

“Bakhresa Zimbabwe should utilise at least 50 percent of locally produced raw materials, that is wheat, maize and packaging, subject to availability of such raw materials locally and Bakhresa Zimbabwe all its subsidiaries and successors in title, shall supply its products to all its customers on non-discriminatory terms and conditions.”

According to the law, CTC is required in terms of Compliance Monitoring Guidelines and section 33(5) of the Competition Act to periodically undertake compliance monitoring investigations to ascertain the merging parties’ compliance with imposed conditions.

The conditions came after stakeholders had competition concerns in respect of the possibility of the merged entity engaging in discriminatory conduct as far as procurement of packaging material and supply of flour is concerned. It was further established that there was a possibility of the merged entity refusing to deal with local suppliers of wheat and maize.

Bakhresa Group is a Tanzanian family-owned multinational company which formed Bakhresa Zimbabwe, which then acquired Blue Ribbon and all its subsidiaries.

The group is a diversified food manufacturing company, involved in maize and wheat milling, bread making, confectionery, beverages, logistics and freight, marine transport and real estate. It has operations in nine African countries.

Blue Ribbon and its subsidiaries were placed under judicial management in 2012 and the merger was the judicial manager’s strategy to save the ailing business.

The CTC said, “Products of the merging parties overlapped in the baking of bread and maize and wheat milling. Furthermore, the Bakhresa Group has a packaging unit, Omar Packaging Industries Limited in Tanzania, which has the likelihood of supplying Blue Ribbon with packaging materials.

“There thus existed a vertical relationship between the merging parties in that respect. Noting the overlaps and vertical linkages, the relevant market was defined as the production and distribution of mealie-meal, flour, flexible packaging material, bread, and biscuits.”

In its periodic assessment the CTC found out that none of these products are produced by any of the Bakhresa Zimbabwe’s sister companies and supplied to Zimbabwe.

The commission also noted that to guarantee continued production of flour in Zimbabwe, a new flour milling plant was installed at Blue Ribbon’s Msasa plant and the company’s maize milling plants in Harare and Bulawayo are also operational.

Bakhresa Zimbabwe is using locally produced maize, wheat, and packaging in its operations to the satisfaction of the commission.

According to the Grain Marketing Board (GMB), Bakhresa Zimbabwe has been consistent in procuring both maize and wheat from the local market.

“From GMB’s statistics, Bakhresa Zimbabwe procures an average of 50 percent of its total production requirements of both maize and wheat from GMB. However, the balance is supplied by other local farmers,” the commission noted.

From the top five customers of Blue Ribbon that were consulted they all stated that they have never had challenges in their trading with Bakhresa Zimbabwe, to the extent that some of them have arrangements with the entity that are negotiated and agreed upon with individual customers.

Conclusively the CTC said, “Based on information gathered during investigations, it can be concluded that Bakhresa Zimbabwe is complying with the conditions of approval. Regarding relevance of the conditions, the commission concluded that the conditions are still relevant and should be maintained as long as Bakhresa Zimbabwe remains a subsidiary of the Bakhresa Group.”

-ebusinessweekly