Zimbabwe’s manufacturing sector dominates mergers, acquisitions in 2021

0

In 2021, the manufacturing industry Zimbabwe accounted for the bulk of mergers and acquisitions according to the Competition and Tariff Commission (CTC) report.

Cases examined in 2021 were in the mining, manufacturing, health services, hospitality, financial services, distribution of veterinary hygiene detergents and information and communication sectors.

In its 2021 annual report, CTC said 33 per cent of the mergers and acquisitions were in the manufacturing sector. The mining, quarrying, agriculture, forestry, fishing and financial and insurance service sectors were also among leading industries sought-after by investors.

  • Cases examined in 2021 were in the mining, manufacturing, health services, hospitality, financial services, distribution of veterinary hygiene detergents and information and communication sectors.
  • 22 mergers and acquisition transactions were approved without conditions in 2021, while two deals were approved with conditions.

Mining and quarrying, Agriculture, forestry and fisheries, Transport and storage, and Financial and insurance activities accounted for 11 per cent of the cases. This was followed by Wholesale and retail trade which had eight per cent. Few cases which were handled in 2021 according to the report came from Administration and support service activities, and Human health and social work activities all contributing 3 per cent each of the total cases.

The report said during 2021, the Commission carried over nineteen (19) cases from the year 2020 and received seventeen (17) cases in 2021. Twenty-two (22) transactions were approved without conditions, two (2) were approved with conditions, ten (10) were carried over to 2022 while one (1) transaction had the decision made by the Commission appealed in the court.

The chart above shows sectoral distribution of mergers and acquisitions in 2021. Cases examined in 2021 were in the mining, manufacturing, health services, hospitality, financial services, distribution of veterinary hygiene detergents and information and communication sectors. [Photo/ Competition and Tariff Commission 2021 report]
The COMESA Competition Commission, an institution formed by the COMESA Treaty, investigates mergers and acquisitions and restrictive practices with an effect in two or more member states. Accordingly, affected member states collect information on the cases which is then submitted to CCC for it to make the requisite determinations. According to CTC, Zimbabwe is a member of the COMESA Treaty and also has a functional competition authority. In this regard, in 2021, the Commission handled eighteen (18) CCC cases

Notable mergers and acquisitions

According to a related article by Newsday, in the period under review, notable approvals were Delta’s purchase of Mutare Bottling Company from telecoms giant Econet Wireless, and the big deal in which Sotic International Limited swooped into Bindura Nickel Corporation, taking over 74.73 per cent shareholding.

Also, the Zimbabwe Stock Exchange-listed leisure chain, African Sun Limited acquired Dawn Properties during the same period.

Mergers and acquisitions approved during the period also included the acquisition of up to 100 per cent of issued ordinary shares in Adapt IT Holdings Limited by Volaris Group Inc, as well as the acquisition of Ascendis Vet, Ascendis Animal Health, Kyron Laboratories and Kyron Prescriptions by Sun Valley Estates.

The commission also approved the Dairibord Zimbabwe/Tavistock Estates deal and the acquisition of 100 per cent shareholding in DSI Underground by Sandvik Holdings.

“The transaction was classified as a horizontal merger since the parties are competitors at the same level and in the same relevant market. Examination of the proposed acquisition by Sandvik of 100 per cent of the shares in DSI sought to establish whether the merger will be contrary to public interest through substantially lessening competition or creating a monopoly situation that will be contrary to public interest in the Zimbabwean market,” read the report on the acquisition.

According to CTC, Sandvik-the acquiring firm, is a public limited company incorporated in Sweden and is into high-tech and global engineering. In Zimbabwe, Sandvik operates through its subsidiary, Sandvik Mining and Construction Zimbabwe (Pty) Ltd (“Sandvik Zimbabwe”), and supplies drill rigs, underground trucks and loaders, aftermarket-parts, service and rock tools, crushers, consumables and surface drill rigs. Sandvik’s services and products relate to rock drilling, cutting, loading, hauling, tunnelling, quarrying, breaking and demolition.

DSI is a registered company in Luxembourg and mainly active in the ground support sector, where it supplies ground control systems, concrete accessories to mining and tunnelling customer. DSI does not operate in-country, but supplies the mining sector in Zimbabwe through Rocbolt Africa, located in South Africa, to Tutbury Trading, who in turn markets and sells the relevant products into Zimbabwe. DSI-U, through Rocbolt Africa/ Tutbury Trading, supplies hard rock bolts into Zimbabwe according to CTC.

“Analysis revealed that the transaction was unlikely going to substantially lessen competition in the supply of hard rock bolts market in Zimbabwe. It was also established that the merger was unlikely to result in unilateral and coordinated effects. The Commission noted that Sandvik was a small potential competitor in the relevant market hence the merger does not result in acquisition of market power.”

The report further stressed out that the transaction was approved without conditions.

CTC Director Ellen Ruparanganda said in 2021, the commission pursued its mandate of promoting and maintaining competition in all sectors of the economy and providing trade tariff assistance.

The Commission received a request from Ministry of Industry and Commerce (MoIC) to analyze an application from the Retail Pharmaceutical Association (RPA) for the removal of medicinal products from SI 122 of 2017 and duty reduction on certain medicines under tariff codes 3004.1000, 3004.2000 and 3004.9010. The application was declined.

According to the report, four restrictive practice cases were investigated in the school uniforms market, banking sector, central securities depository market and distribution of day-old chicks.

During the review period, four (4) restrictive practices cases were received which were at various stages of investigation and enforcement. [Photo/ Competition and Tariff Commission 2021 report]
The Restrictive Practices Division, established in 2020, is responsible for undertaking investigations into restrictive practices and monopoly situations that are contrary to public interest. These include any agreement, business practice, method of trading, or act which restricts competition directly or indirectly. Pursuant to section 28 of the Competition Act [Chapter 14:28], the Commission initiated investigations upon receipt of complaints of alleged violations and proactively from its own market intelligence.

Of the four cases, three were concluded and recommendations of the intended orders were communicated to alleged perpetrators before making final determinations.

Read: Noteworthy Tech acquisitions in South Africa in 2022

Albert is a Chemical Technologist and Author. He is passionate about mining, stock market investing, Fintech and Edutech.

Leave A Reply