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Zim records spike in company mergers

The Competition and Tariff Commission (CTC) has been handling numerous transactions involving mergers and acquisitions by companies in recent years.
Zimbabwe’s poor economic environment has meant that big companies with huge financial muscle tend to get involved in uncompetitive behaviour that disadvantages other players.

Our business reporter Fidelity Mhlanga (FM) spoke to CTC director Ellen Ruparanganda (ER) to get an insight into the commission’s activities and approved mergers. Ruparanganda revealed that there had been a spike in the number of mergers between 2017 and last year. Below are excerpts from the interview.

FM: How many transactions did you handle in 2019 and how many of those deals were mergers and acquisitions?

ER: The Competition and Tariff Commission decided on 14 mergers and acquisitions in 2019. Two mergers were approved with conditions, 10 mergers were approved without conditions, and two mergers were disapproved.

FM: In 2018, how many transactions did you consider?

ER: In 2018, a total of 12 mergers and acquisitions were decided on, two were approved with conditions and 10 were approved without conditions.

FM: How many have been submitted for this year so far?

ER: In 2020, the commission has so far received a total of two transactions to date.

FM: What has been the major challenge when dealing with mergers and acquisitions?

ER: The commission did not experience any major challenge when assessing mergers and acquisitions in 2019.

FM: In volatile situations like these, certain companies risk being taken over by big firms. What measures are you implementing to reduce anti-competitive take-overs?

ER: One of the main functions of the commission, according to the Competition Act 14:28 Section 5 (1) (a), is to encourage and promote competition in all sectors of the Zimbabwean economy.

Therefore, the Competition Act has provisions that empower the commission to either approve or prohibit mergers after assessing the possible effects of the proposed merger transaction on competition in the market.

In order to achieve this mandate, the commission undertakes an extensive assessment of the transaction through applying economic analysis and consulting other key stakeholders in the market that are likely to be affected by the merger.

It is only after such a rigorous analysis that the commission makes a decision either to approve or disapprove the transaction.

So as far as anti-competitive mergers are concerned, the commission has the internal capacity to restrict them before they are implemented.

Again applying the same principle as highlighted above, the commission is legally equipped to restrict a company or companies from taking over the economy, but only if it affects competition in the country.

This is so because companies merge for different reasons, for instance, a failing firm can decide to merge as a way to survive and in such situations, the commission considers mergers of this nature to be good for the economy as jobs are saved.

Further, it is important to highlight that the commission is not against the emergence of big business in the country, the commission only gets concerned and subsequently involved when big businesses start to engage in anti-competitive conduct.

When that happens, the commission can also institute an investigation into any company that abuses its dominant position using other provisions in the Competition Act.

FM: Which sectors of the economy have recorded the highest number of mergers?

ER: Mining, manufacturing and wholesale as well as the retail trade.

FM: And what has been the trend in the past five years?

ER: There has been an increasing trend in merger activity beginning from 2017-2019.

FM: I understand that Cassava and Emergency Medical Rescue Ambulance Service (EMRAS) are in talks for a possible merger or acquisition. Can you shed light on this transaction?

ER: No comment as the case is still being handled by the commission.

FM: When was the SSCG Africa Holding takeover of the Edcon stake in Edgars Zimbabwe completed? And what is the new shareholding structure?

FM: No comment as the case is still being handled by the commission.

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