Mergers Situation and Notification Procedures in Namibia ...eight mergers await approval

By Vitalis Mwashimika Ndalikokule
August 2011
Just a Call
SECTION 42 of the Competition Act, 2003 defines a merger as something that occurs through a stock or asset purchase of one firm by another. Section 43 of the Act empowers the Minister of Trade and Industry, with the concurrence of the Competition Commission to determine the merger thresholds.

To do this, it requires a study to determine jurisdictional thresholds for the merger review. As the thresholds are not yet determined, all mergers taking place in Namibia or having effect in Namibia are notifiable to the Namibian Competition Commission (NaCC) in terms of section 44 of the Act.

Firms often seek to merger with or acquire other firms in order to expand business, reduce costs or to increase market power. Mergers may present threats to competition, depending on type of merger and the size and strength of the parties involved. The entire structure of an industry can be altered by a merger.

The Competition Act, 2003 and Rules made under the Act provides a basis for merger evaluation procedures and determination. The Commission has the authority in terms of section 47 of the Act to give approval for the implementation of the merger; or decline to give approval for the implementation of the merger; or alternatively give approval for the implementation of the proposed merger on such conditions as the Commission may consider appropriate.

GDP growth since 2006

Figure 1 shows the five-year moving average of the real growth in GDP (that is, real gross value added at constant 2004 prices as a measure of the output) as reported in the Bank of Namibia Annual Report 2010.





In 2010, the year on year growth in real GDP was recorded at 4.6% from a contraction of 0.7% in 2009. Real GDP growth averaged 4.1% annually for the whole economy over the five-year period. The growth of economy attracts an increasing number of mergers being notified to the Commission. This is also confirmed by the number notifications received in the different sectors of the economy.

Procedures for merger notifications

Merger activity has increased in Namibia since 2009, a sign of business confidence in the economy. The procedures for merger notifications are provided for in section 44 of the Competition Act, 2003 and Rule 28 of the Rules made under the Competition Act. In terms of these procedures, each firm involved in a proposed merger as contemplated in Section 44(1) of the Act must notify the Commission of the proposal in the form of Form 38, and must attach to it a completed statement of merger information in the form of Form 39. Forms 38 and 39 are part of the Rules and are available at the Commission offices in Windhoek, in both hard and soft copies. Figure 2 shows increases in the number of merger cases notified to the Commission.

Figure 2: Increases in merger cases notified, 2009 to 2011



Source: Competition Commission reports

As shown in figure 2, the number of mergers notified to the Commission increased from a total of 12 in 2009 to a total of 26 in 2010. In first half of 2011 the number of mergers notified stood at 20. Commission expects by the end of the year the total number mergers notified in 2011 to exceed that of 2010 by a big margin. This expectation is based on the number of mergers already notified during the first half of 2011.The sectors that contributed to the increase in the merger notifications are shown in Table 1.



In 2010, the mining sector and the financial sector can be singled out as two leading sectors that contributed to the increase in mergers notifications, both having recorded a total number of 6 mergers, followed by the retail sector with 4 mergers notified. In the first half of 2011, the mining sector maintained its lead with 6 mergers notified, with the retail sector also recording a total number of 6 mergers notified.

Approval of mergers

All merger cases (100%) notified in 2009 were either approved or conditionally approved. The majority (99%) of all the cases notified in 2010 were either approved or approved with conditions. The first half of 2011 shows the same tendency. This has been the trend since 2009 as evident see Table 2.



The majority of the mergers approved by the Commission were non-problematic. However, there were few merger cases that were problematic among those that were approved with conditions. As shown in Table 2, there was only one merger that was prohibited in 2010. The merger prohibited involved Ohorongo Cement (Pty) Ltd and AfriSam Namibia Cement Ltd. The merger was prohibited on grounds that it was anti-competitive and was likely to lessen competition in the cement market in Namibia.

Problematic mergers

Mergers that were approved with conditions and those that were prohibited made up a minority of the total number of merger cases approved by the Commission since 2009. Among the mergers that were approved with conditions or prohibited, the mergers that were analysed to be of a competition concern in their relevant markets were the following:

(i) Builders Trade Depot (Pty) Ltd // Pupkewitz & Sons (Pty) Ltd notified on 28 May 2010 and approved on 9 July 2010 with conditions.;
(ii) Wal-Mart Stores Incorporated // Massmart Holdings Ltd notified on 26 November 2010 and approved on 8 February 2011 with conditions.;

(iii) Uramin Namibia (Pty) Ltd t/a Areva Resources Namibia // Erongo Desalination Company (Pty) Ltd; notified on 12 November 2010 and approved on 8 February 2011 with conditions.
(iv) Ohorongo Cement (Pty) Ltd // AfriSam Namibia Cement Ltd notified on 7 September 2010 and prohibited on 23 November 2010.

These mergers cases were showing strong competition concerns in their relevant markets in accordance to Section 47 of the Competition Act.

The Commission approved these mergers except one with conditions. The merging parties challenged the approval of conditions of some of these mergers, either as a recourse to the High Court or as a Merger Review in terms

As such, it resulted in protracted negotiations post merger in the case of Pupkewitz, a High Court challenge in terms of section 52 of the Competition Act in the case of Wal-Mart, and an application to the Minister of Trade and Industry for review in terms of section 49 of the Competition Act. In terms of the review the parties are requesting the Minister to review the decision of the Commission. PF

Vitalis Mwashimika Ndalikokule Assistant Secretary for Mergers and Acquisitions at the Namibian Competition Commission; holds a LLM degree in Economics, a Certificate in Management Development and has experience in trade, industry and economic policy

(Footnotes)
1 The figures represent the first half of 2011.