South Africa: Drought Highlights the Importance of the Basic Foods Sector to the Competition Commission

 

By Michael-James Currie

South Africa is in the midst of one of the worst droughts in decades.  The droughts impact stretches far broader than simply grass roots levels. Maize prices have recently reached a record high due to shortage of supply over the past 12 months, which, being a staple food source for the majority of the population..

It comes as no surprise that the drought has sparked interest of  the competition authorities or those wanting to use competition law as a means to promote and protect socio-economic goals.south_africa

The recent matter involving alleged price-fixing and collusion between a number of fertiliser companies (including the H Pistorius and Co. company which has strong family ties to convicted former Para-Olympian champion, Oscar Pistorius – previously reported by AAT) will be heard before the Tribunal in a month’s time.  Despite the matter laying dormant for some time, the Commission appears intent on prosecuting the respondents.  The Commission’s spokesperson stated that the fertiliser sector is viewed as a priority sector, due to the its importance as an input in the agricultural sector.  The case will undoubtedly receive additional media attention due to the heightened focus on the agricultural industry brought about by the drought, as well of course from an atmospheric perspective given the Oscar Pistorius link.

Unrelated to the fertiliser case, the Congress of South African Trade Unions (COSATU) has recently called on the Commission to investigate the maize sector for collusion. This call follows an investigation which was already carried out during 2006-2007 which saw a number of maize milling companies referred to the Tribunal for adjudication. A date for these complaint hearings has not yet been set.  The complaint brought by COSATU, which must be investigated by the Commission, relates to traders who are allegedly “buying and selling maize unlawfully and manipulating the price of maize taking advantage of the shortage of supply of maize as a result of the drought”.  The allegations have, however, been denied by AgriSA who insists that the price of maize has consistently being increasing from 2015 to over 50%.

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Pioneer Hi-Bred completes acquisition of South African seed company

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South African seed business Pannar and DuPont seed unit Pioneer Hi-Bred finally overcame regulatory roadblocks to Pioneer’s majority stake acquisition in the pan-African seed business of Pannar.  They have completed the acquisition.

The world’s #2 seed producer, Pioneer, now owns 80% of Pannar after closing of the transaction.  The deal had been long in the making, as it was announced almost three years ago, in September 2010.  Yet, the parties failed to convince the South African Competition Commission of the neutrality of its competitive effects on the South African seed market, which is estimated at $450 million.  The Commission rejected the deal, sending the parties back to the drawing board (and to several rounds of appeals before the South African appellate courts and tribunals).

The business rationale for Pioneer is a three-way race with competitors: according to Pioneer’s deal statement, there are approximately 75 million acres (or 30 million hectares) available for corn / maize production on the African continent.  And with a rapidly growing population and economies, African nations, their cattle, and their consumers will constitute ready buyers for maize and corn-derivative products.