CTC receives five mergers in Q2

The Competition and Tariff Commission (CTC) received five propositions by companies for merger approval in the second quarter to June 30, 2023 as firms seek to consolidate their balance sheets.

In the first quarter, the commission also received five requests for merger approval.

A merger is a direct or indirect acquisition or establishment of a controlling interest in the whole or part of another business.

The commission said during the period under review, 80 percent of the merger cases were in the manufacturing sector while the rest were in the wholesale of solid, liquid and gaseous fuels and related products sector.

In its newsletter for the second quarter to June 2023, the commission indicated that the merger cases it received involved K2023647843 (South Africa) Proprietary Ltd that sought to merge with Danny’s Auto Body Parts Proprietary Ltd and Danny’s Auto Property Holdings Proprietary Ltd.

Other transactions also involved Shepco Industrial Supplies (Pvt) Ltd which targeted Haggie Rand Zimbabwe (Pvt) and Matumi Energy sought to merge with Redan Kerosine while Takura Capital targeted SSIP’s shareholding in Almin Metal Industries.

The other merger that CTC received in the second quarter to June 2023 involved Centre Grow Farm that was targeting Twine & Cordage.

Economist, Professor Gift Mugano, told Business Weekly that while the positive side of businesses merging enables companies to build critical mass to achieve their primary goals of making profit, build efficiency and enhance their economies of scale, the shortcoming of continued approval of mergers is the risk associated with monopolies.

“The downside of it is you are creating monopolies and the challenge for Zimbabwe is that we now have in each sector oligopolies.

“Oligopolies are few companies while monopoly is just one, so we, therefore, lack competition and when there is no competition the market suffers, people suffer and it becomes an issue.

“But if you have more economic players, the more the better in as far as improving efficiency is concerned,” said Prof Mugano.

During the period under review, CTC said it provided information on four regional transactions with a cross border effect to the Comesa Competition Commission.

These transactions involved acquisition of sole control by Total Energies SE over Total Eren Holdings S.A, the acquisition of control by Vitol Emerald Bidco Pty Ltd over Engen (Pvt) Ltd, the merger involving CA Cornerstone Limited, Capital Alliance Private Equity IV and C-RE.

Another merger also involved EMIF II Holding I B.V., and Hassan Allam Utilities B.V. and Cairo.

“I really don’t know why CTC always endorse mergers because there is not even any space in Zimbabwe to accept any merger as this creates monopoly. The commission’s mandate is to manage anti-monopolies — they (CTC) are actually behaving on the contrary of what they are supposed to be doing, they are creating monopoly.

“To say that is it because of political pressure, it’s only God who knows,” Prof Mugano said.

In a separate interview, economist Wendy Mpofu, said the appetite for getting into mergers and acquisitions particularly by foreign companies demonstrates the level of confidence the investors have in Zimbabwe’s economy.

“This may point out to the fact that foreign investors have confidence in Zimbabwe’s
economy due to the policies by the Government.

“However, on the other side mergers and acquisitions are associated with the risk of fostering monopolies in the economy, something not good as it kills competition in the market,” she said.

Businesses intending to merge have to do a merger notification, to alert CTC of the intention by the companies to merge or generally combine into one entity.

CTC director Ellen Ruparanganda is on record saying the reason for such notification is to enable the commission to review the merger within its jurisdiction with a view to prevent anti-competitive implications that may arise on account of the merger.

The commission is a statutory body established in terms of the Competition Act (Chapter 14:28) to implement and enforce Zimbabwe’s Competition Policy and Law.

The Act provides for, as one of the commission’s functions, the investigation, prevention and discouraging of restrictive practices which are contrary to public interest.-ebusinessweekly