HomeNewsLiquidity crunch, indigenisation lead to mergers

Liquidity crunch, indigenisation lead to mergers

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The Competition and Tariff Commission (CTC) approved five mergers and acquisitions in the first seven months of the year as companies sought to recapitalise and meet the indigenisation and empowerment regulations.

Under the country’s indigenisation rules companies are expected to cede 51% of their shareholding to indigenous locals.

Mergers and acquisitions approved include FMI and BP Shell, Pioneer and Unifreight involving Swift, FBC Holdings acquisition of 49,2% in Eagle Insurance.

Also approved was the acquisition of 100% stake in Engen Zimbabwe by Chevron Zimbabwe and the takeover of Makro by OK Zimbabwe.

CTC assistant director Benjamin Chinhengo said the commission had additional applications that it was still considering that have shown intentions of merging or acquisition.

“Most of the cases were due to liquidity challenges. Companies are merging and are forced to come together through vertical mergers so that they will be able to compete.

“The other reason is the desire to meet the indigenisation plan requirements and recapitalisation requirements,” said Chinhengo.

He said some companies had adopted the measures as part of their survival strategies.

During the period under review, the commission handled two cases of alleged imposition of restrictive measures involving two beverage wholesalers in Chitungwiza that were however dismissed after investigations found no unfair practices in place.

Since its inception in 1998 to September 2010 the commission handled over 1 000 competition cases with 53% involving restrictive and unfair business practices and 47% being mergers and acquisitions.

Common restrictive and unfair business practices investigated have included anti-competitive agreements of both horizontal and vertical nature such as price fixing and market-sharing arrangements, bid-rigging, exclusive dealing, and resale price maintenance.

Other issue included abuse of dominant or monopoly positions through excessive pricing, discriminatory distribution, tied and conditional trading.

The Competition and Tariff Commission is a statutory body established under the Competition Act (Chapter 14:28) to regulate competition and to give advisory opinions on trade tariffs matters.

It is a product of the merger in 2001 of the former Industry and Trade Competition Commission, which had come into operation in 1998 under the Competition Act, 1996 (No 7 of 1996), and the Tariff Commission, which also came into operation in 1998 under the Tariff Commission Act (Chapter 14:29).

The Commission is a non-commercial statutory body that gives regulatory and advisory services on government policies. The government is the main source of funding for the Commission.

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