Lipimile Advocates for Foreign Direct Investment, Encouraging Acquisition-Hungry Multi-Nationals in Recent COMESA Trade Remarks
In a comment on the COMESA Simplified Trade Regime (STR) regional programme, recently being implemented locally in the border region between Rwanda and the DRC, George Lipimilie, the Chief Executive Officer of the COMESA Competition Commission, stated that the regional body’s “focus on free movement of goods has generally paid dividends resulting in  a lot of cross-border mergers and acquisitions,” according to an article in the Rwanda New Times.
George Lipimile of the COMESA Competition Commission
It appears that the CCC chief is expressly favouring foreign direct investment into the region by way of mergers (or perhaps more accurately, acquisitions). “This is particularly so where the ‘foreign’ (presumably implying non-COMESA) multi-national entity brings with it novel technologies or R&D to improve the market position of the local competitor,” according to Andreas Stargard, a Pr1merio Ltd. competition-law practitioner.
Of interest to M&A practitioners, Mr. Lipimile is quoted as saying: “There are situations when foreign companies use acquisitions to enter the market where you find a multinational company buying a local company which is good because it comes with a lot of technology.” (Emphasis added).
Mr. Lipimile was also rather specific about encouraging FDI in the region’s raw-materials sector from nation states other than the PRC: said Lipimile, “[w]e have seen China taking advantage of our raw materials and we hope more countries can follow suit.”
We note that the domain of international trade — specifically tariffs as barriers to trade — has historically not been within the jurisdictional purview of the COMESA Competition Commission, which was designed to be a competition-law enforcement body. Technically, there exists the post of COMESA Director for Trade, Customs & Monetary Affairs, held by Dr. Francis Mang’eni and not by Mr. Lipimile. The CCC, however, “has recently emerged to take a more active role within the COMESA architecture of regional enforcement institutions,” Mr. Stargard says. He notes that Article 4 of the COMESA Treaty expressly provides that “[i]n the field of trade liberalisation and customs co-operation [the Member States shall] (a) establish a customs union, abolish all non-tariff barriers to trade among themselves”, and that the regional Competition Regulations expressly bestow the CCC with the authority to investigate and abolish all “anti-competitive practices affecting COMESA regional and international trade.”
South African Competition Commissioner quoted as preferring legislative action rather than Commission action
In a BD Live article from today (“Competition policy ‘not best way to plug industrial loopholes’”), Linda Ensor reports on a presentation Tembinkosi Bonakele made to Parliament’s trade and industry portfolio committee. In it, the head of the Competition Commission (“Commission”) remarked, according to the article, that “the application of competition law by the competition authorities was a slow process that should not be used to address loopholes in the implementation of industrial policy.” Mr. Bonakele is quoted as noting that the “litigious nature of using competition policy as a mechanism to reduce prices was a ‘delayed remedy to the market’.”
At issue, in part, are the price levels of South Africa’s natural-resource sector, including a reference by Mr. Bonakele to “a loophole” in industrial policy and regulation, i.e., the Commission’s long-running investigation of alleged excessive pricing by Sasol Chemical Industries, which lasted about seven years prior to a ruling by the Competition Tribunal, in which Sasol was found guilty of excessive pricing of propylene and polypropylene products, fining it R534m.
Mr. Bonakele’s key suggestion was that there are alternative means for the government to intervene, e.g., through regulation.
The Western Australian government has signed a Memorandum of Understanding with COMESA.
Colin Barnett signed the papers yesterday, January 31, 2014. COMESA dutifully posted a news release on its web site, albeit misspelling the W. Australian premier’s name (“Colin Barnnet“).
Setting aside the embarrassing PR SNAFU, we expect the MoU to have little to no effect on competition enforcement by the COMESA Competition Commission. The MoU appears to us to be primarily minerals-focussed (we note that this should come as no surprise, given the mineral-rich COMESA members and the fact that Western Australia is the world’s second-largest iron ore producer). The six so-called “thematic areas” of the MoU are: fiscal frameworks and mineral policy, strengthening human and institutional capacities, collection and management of geo-scientific information, research and development, environmental and social issues; and linkages, diversification and cluster development. Antitrust/competition is nowhere to be found.
That said, Western Australian companies may choose to invest more in the region and therefore somewhat increase the merger notification statistics, which have been lackluster to date.