BRICS, Extra-judicial Factors, mergers, personnel, politics, public-interest, South Africa

New Competition Commissioner not so new: Bonakele retains top job

south_africa

Interim South African Acting Competition Commissioner Tembinkosi Bonakele confirmed in permanent post by minister who unceremoniously fired predecessor Ramburuth

Plus ça change, plus c’est la même chose…

This morning, economic-development minister Ebrahim Patel announced the retention of the 38 year-old Mr. Bonakele as the top antitrust enforcer in the South African republic, making permanent for a five-year term the interim appointment of the man who said the following in an interview regarding the independence of the competition authorities in South Africa:

While competition authorities should not be beholden to the government neither can they be loose cannons who claim independence without accountability.”

In prolonging Mr. Bonakele’s interim appointment for another five years, Minister Patel thus assured that the important position of Competition Commissioner did not go to a “loose cannon”…

Legislative basis

The appointment is made pursuant to Part A, Art. 22 of the South African Competition Act of 1999, as amended, which also provides (in sub section 4) for the flexible salary and benefits determination to be made by the minister himself: “The Minister must, in consultation with the Minister of Finance, determine the Commissioner’s remuneration, allowances, benefits, and other terms and conditions of employment

Minister Patel

Commissioner Bonakele

Public announcement and emphasis on enforcement

In the duo’s official tweets announcing the decision (see graphic extract below), Patel congratulated Mr. Bonakele, reaffirming his and the SA cabinet’s support of the “eminently suitable” candidate, and emphasizing the importance of (1) the Competition Commission‘s ongoing and hotly debated private health-care inquiry as well as (2) the “social-justice” elements of merger conditions imposed by the SACC on mergers in the past 5 years, purportedly “protecting” 4,900 jobs.

The agency had come under considerable flak in the past year due to its high staff and executive-level turnover and a work environment that has been described as “toxic” by insiders.

The official release by the Ministry of Economic Development quotes Patel as follows:

“I am pleased to have someone of Bonakele’s calibre at the helm of the Competition Commission. He is taking leadership of the Commission at a time when the South African economy needs to become more competitive and create many more decent work opportunities by combatting market abuse such as cartels and pervasive monopolies and ensure competitive pricing of products. In particular, the key jobs drivers identified in our policy frameworks require coordinated and concerted efforts improve economic performance and development outcomes.
“The Competition Commission has been one of a number of successful economic agencies and regulators that are together beginning to transform the South African economy. Mr Bonakele possesses the skills and experience to build on the successes of the Competition Commission.”

The agency’s official “Structure” page had not yet been updated as of the day of the announcement, listing Mr. Bonakele as “Acting” head and still showing the long-departed Ms. Makhaya as a Commission official.

Official S.A. government tweets announcing SACC personnel decision of permanent Bonakele appointment

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COMESA, fees, legislation, merger documentation, mergers, new regime, notification

COMESA news of the day: web site down again; 5 “exemption” letters granted

COMESA Competition Commission logo

Site down – 5 “comfort letters in 5 months – Guidelines revision by June

In an almost farcical repetition of its information-technology woes, the COMESA Competition Commission’s web site (http://www.comesacompetition.org/) is off-line, yet again, after having been successfully hacked multiple times.  Whether the latest outage is due to a similar attack or simply (and hopefully) due to its webmaster’s shoring up the competition enforcer’s IT security measures remains to be seen.  (We have not yet heard back from the agency’s leadership on our request for information on the online data safety of parties’ submissions.)

In more substantive news, IFLR reports that the CCC has issued five so-called “Comfort Letters” since December 2013, exempting otherwise notifiable transactions from the duty to file (as well as the concomitant payment of the (high) filing fees), where the actual nexus to the COMESA region was negligible or non-existent.  This may help explain some of the lackluster filing statistics on which we reported previously.

The report also quotes the CCC’s head of mergers, Mr. Willard Mwemba, as saying that the revision of the Competition Guidelines should be finalised by the end of June 2014.

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COMESA, mergers, personnel

Malicious COMESA web site attack: Competition Commission hacked 3rd time

For the third time in a month, the fledgling pan-African antitrust enforcer’s web site has been disabled by hackers

As competition-law attorneys counseling clients on the necessity of notifying mergers in the COMESA jurisdiction, we view these developments with – put mildly – shock.  This is especially true as confidential party data and documents would appear to be at risk of involuntary and malicious disclosure to third, unauthorized parties.  As reported at AfricanAntitrust.com, the COMESA enforcement agency’s web site has previously been hacked and later simply disabled.

COMESA leadership non-responsive

On both prior occasions, AAT’s editors wrote to the COMESA Competition Commission‘s webmaster, as well as the agency’s leadership (Messrs. George Lipimile and Willard Mwemba), to seek an explanation of the attacks.  We also asked them about the safety of data and other confidential party information submitted to the CCC via its extranet & online document repository.

Not only have we not received any response to date.  What’s more, in a – perhaps unsurprising, at this stage – turn of events, the Commission has now been subjected to its third hacking attack.

Hackers boast of achieving successful attack

This latest episode also embodies the most disconcerting hack, as it appears visually and substantively more malicious than the prior attacks (one of which featured an Indonesian love poem, whilst the second rendered the CCC’s page simply blank).  A visual example of the latest attack can be found below.  The hackers (identified as “Kinal Undetected” from SerdaduPerangCrew and SPCSO) [note: prior and subsequent links open hacker-related pages] acknowledge – for the first time – that it is an intentional event and not merely an accidental outage or otherwise unintended gaffe of the CCC’s webmaster.  Moreover, the perpetrators even submitted a screenshot of the intrusion to “Zone H“, a clearing-house of hackers, as evidence of the attack on Monday.  This means that the CCC’s site has been disabled for at least two full days (through 14 May — UPDATE: the regular COMESA site is back up and running at 16:00 CET, 14th May).  On the prior occasions, the site likewise remained compromised for several days in a row.

Logo of the successful COMESA hackers displayed on CCC’s web site (May 12-13, 2014)

High risk of data security breach & next steps

We are in the process of sending yet another follow-up e-mail to the CCC’s executives to obtain further information about this unsettling and embarrassing security breach/failure, including: (1) risks to confidential corporate information, (2) the impact on the private deliberative process of the Commission, as well as (3) steps the CCC intends to take to prevent future replication of these embarrassing and dangerous attacks, including (we propose) the retention of a professional data-security firm for advice and potentially management of the web interface.

COMESA hack no3

 

Call for parties to CCC proceedings to take action

Especially in light of COMESA staff’s unsettling silence in response to alerts to these attacks, and as we have done before, we are notifying our readership (and particularly current or potential future parties to CCC merger reviews) regarding the deficiencies in the competition enforcer’s electronic systems. These may impact the timetable and resulting deadlines of pending merger investigations, and it is advisable that all such interested parties enquire with the Competition Commission about the procedural effect of the outage.

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Ghana, mergers, no antitrust regime

Positive outlook for Ghana M&A activity

ghana
Future of Ghanaian M&A deals promising, according to bankers

The Benso Oil Palm Plantation and FanMilk International deals (both involving foreign investment in the country) over the past year are merely an indication of an upward mergers & acquisitions trend, according to a GhanaWeb report.

Usually, with increased merger activity comes heightened competition scrutiny, of course — not so in Ghana, however, as the West-African country still lacks an antitrust and merger-review law.  AAT noted in December:

[Ret. Ghanaian Supreme Court] Justice Date-Bah, who has held visiting academic positions at Oxford and Yale Law School, deplored the legislature’s previously failed attempts of enacting a comprehensive competition law, calling for the country to do so to ensure proper market dynamics.

The most recent economic report quotes Randolph Rodrigues, sr. investment banker at Stanbic Bank Ghana, as predicting “a rise in M&A activity in the country given the increasing emphasis on local content across sectors in the country.”

“The renewed quest for the institution of local content requirements across industries is expected to drive a wave of M&A activity, with larger foreign-owned enterprises seeking partnership opportunities with indigenous operations to continue to grow within the legal framework of their respective industries. Banks are well placed to lead the way in advisory services.”

In AAT’s view, four factors may contribute to the anticipated deal volume and influx of foreign investment, of which one is competition-law based: (1) the absence of antitrust hurdles, as noted above, (2) the relatively open Ghanaian economy, (3) stable political climate (unlike its distant neighbor at the moment, Nigeria), and (4) high intrinsic growth rate of Ghana’s GDP:

ghana gdp growth

Ghana’s GDP growth (blue line) compared to Kenya and Cameroon

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AAT, BRICS, collusion, COMESA, criminal AT, economics, fraud/corruption, full article, mergers, Nigeria, politics, South Africa

Investment in Africa: Changing landscape, new hurdles

Questioning African antitrust growth prospects: Slowdown in economic investment (both organic and outside investment) may affect functioning of competition law on the continent

Recent developments in Africa have many scratching their heads and wondering whether the formerly wondrous economic-growth engine of the vastly resource-rich and otherwise economically still undervalued continent will soon experience a slowdown, if not come to a halt altogether.

For one, in April 2014, Nigeria surpassed South Africa as the continent’s largest economy (see Economist Apr. 12, 2014: “Africa’s New Number One“).  This is a significant milestone for the former, and a setback for the latter — an economy that was 8 times the size of the Nigerian economy only 20 years ago, yet is now suffering from stagnating GDP, reeling from corruption allegations amongst its current leadership, undergoing a closely-watched presidential election process, and whose ruling ANC party is facing a heretofore unprecedented backlash and torrent of criticism.

Source: The Economist

Not only South Africa has weakened, politically and economically, however.  Events such as the Northern Nigerian wave of violence – with sectarian Boko Haram forcefully displaying the impotence of the central Nigerian government of a weakened president Goodluck Jonathan – fuel the fire of outside investors’ mistrust of African stability and their concomitant reluctance to make good on prior investment promises.  As The Economist notes in the article quoted above: “it is not a place for the faint-hearted” to invest, even though it highlights the successful Nigerian business ventures of outsiders such as Shoprite, SABMiller, and Nestlé.  Bloomberg BusinessWeek quotes Thabo Dloti, chief executive officer of South Africa’s fourth-largest insurer Liberty Holdings Ltd. (LBH), as saying: “It does slow down the plans that we have, it does put out the projections that we have by a year or two.”

http://www.stanlib.com/EconomicFocus/Pages/InterestingChart112SouthAfricaneconomyvsNigerianeconomy.aspx

Nigerian vs. RSA GDP
Source: http://www.stanlib.com

Likewise, multi-national organisations such as COMESA and its competition enforcement body, are undergoing significant changes (such as, currently, an opaque process of raising the heretofore insufficient merger-filing thresholds), shockingly successful web attacks on their data, and a resulting dearth of transactions being notified.  Elsewhere in developing economies, recent political turmoil has likewise led observes to comment on the negative spillover effect from political & social spheres into the economy (e.g., Financial Times, May 8, 2014: “Political crisis further dents prospects for Thai economy“).

Impact on antitrust practice

The upshot for competition-law practitioners and enforcers alike is rather straightforward, AAT predicts: more hesitation around African deals being done means fewer notifications, less enforcement, and overall lower billings for firms.

The flip side of the coin – as is usually the case in the economic sine curve of growth and slowdowns – is the commonly-observed inverse relationship of M&A and criminal antitrust: while we may see fewer transactions in the short term, the incidence of cartel behaviour and commercial bribery & government-contract fraud cases will likely increase.

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agriculture, BRICS, mergers, South Africa

Commission’s fisheries merger conditions upheld on review by Tribunal

south_africa

Competition Tribunal confirms Commission’s ruling on Oceana and Foodcorp merger

Johannesburg-listed Ocean Group Limited is the largest fishing company in South Africa, whose fishing activities include inter alia the catching, processing, marketing and distribution of canned fish, fishmeal and fish oil and mid-water and deep-sea fishing.

Foodcorp Limited is a food producer and manufacturer with eight production divisions, one of which is a fishing division. Foodcorp’s fishing business comprises a pelagic division, a hake division and a lobster division.

The Competition Commission said its investigation into the proposed transaction showed that the proposed transaction would substantially affect competition in the market for canned pilchards to the detriment of competition and customers. Following implementation of the transaction, Oceana will hold 80% of the market, while its closest competitor would hold less than 10%. Furthermore, the Commission was concerned that the transaction, without the conditions, would remove an efficient competitor to Oceana’s Lucky Star brand from the market, as Glenryck would not be able to provide competition to Lucky Star without its own fishing quota.

Both Oceana and Foodcorp contended that the Department of Agriculture, Forestry and Fisheries had approved the transfer of Foodcorp’s small pelagic fishing rights to Oceana, which includes the consideration of public interest issues regarding black economic empowerment.

The merging parties had taken the conditional approval of the intermediate merger on review before the Competition Tribunal. The conditions which the Competition Commission had imposed entailed that the merging parties are to sell the Glenryck canned-pilchards brand to an independent third party, as well as the small pelagic fish quota allocated to it by the Department of Agriculture, Forestry and Fisheries. The condition was imposed as a means that would deprive Oceana of Foodcorp’s fishing quota, thereby preventing market dominance.

The Competition Tribunal approved the transaction on the same conditions initially imposed by the Competition Commission. The Tribunal will issue its reasons for the decision in due course.

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BRICS, mergers, South Africa

Tsogo Merger Unconditionally Approved

south_africa

Unconditional approval of SA hotel deal

The Competition Tribunal of South Africa (“Tribunal”) has unconditionally approved the merger of Southern Sun Hotel Interests (Pty) Ltd (“Southern Sun Hotel Interests”), which is a subsidiary of Tsogo Sun Holdings Limited, and The Cullinan Hotel (Pty) Ltd (“The Cullinan Hotel”).

The merger related to the provision of short-term hotel accommodation. Pre-merger, Southern Sun Hotel Interests held a 50% shareholding in The Cullinan Hotel and exercised joint control with Liberty Holdings Limited (“Liberty”) over The Cullinan Hotel. Southern Sun Hotel Interests acquired an additional 10% shareholding in the Cullinan Hotel from Liberty, thus increasing its shareholding in the joint venture to a majority interest of 60% and thereby acquiring sole control of The Cullinan Hotel.

The Tribunal approved the merger without any conditions.  Nortons Inc. represented Southern Sun Hotel Interests in this transaction.

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