South Africa: Webber Wentzel Competition Practice - Africa Quarterly - 26 July 2012

Introduction

Welcome to the first edition of our quarterly newsletter focusing on African competition matters.

Our focus will initially be on providing useful insights and general information on competition law in specific African jurisdictions. Later editions will focus on competition law developments, cases and events throughout the continent.

In this edition we conclude that the Common Market for Eastern and Southern Africa (COMESA) is, for now, the only relevant regional trade arrangement that governs competition in southern Africa. (This is in addition to the steadily increasing number of jurisdictions with national competition legislation.) It does appear, however, that the SADC is poised to create its own regional competition authority in the near future.

Southern African Development Community (SADC)

According to the UN Conference on Trade and Development (UNCTAD), over the past five years the region has been the recipient of most of the foreign direct investment (FDI) into Africa. The flow of FDI into Africa is furthermore increasing rapidly - USD 415 million over the last ten years, which is more than five times the amount in the previous decade¹.

Regulatory reforms are required to facilitate investment and improve the business environment in the region. These include, amongst other things, the enforcement of competition laws.

All southern African countries besides Kenya are members of the Southern African Development Community (SADC). The SADC is an inter-governmental organisation headquartered in Gaborone, Botswana, that represents 15 member states in southern Africa. The organisation's purpose is the promotion of sustainable and equitable economic growth and socio-economic development. This is so that the region emerges as a competitive and effective player in the world arena².

As a result of the increased investment over the last decade, most SADC members have adopted national competition laws; the most recent of which was Botswana in 2011. However, SADC members with no national competition legislation include Angola, Lesotho, Mozambique and the Democratic Republic of Congo.

Members of SADC adopted the SADC Declaration (Declaration) on regional co-operation in competition and consumer protocols in 2009.

The Declaration deals with, amongst other things:

• co-operation in relation to cross-border anti-competitive practices;
• safeguards to protect confidential information; and
• the harmonisation of national competition laws.

The SADC facilitates and encourages competition laws to be adopted in member states, but does not have competition legislation itself. However, it now appears that the organisation is working towards the adoption of a regional competition framework.

The Common Market For Eastern And Southern Africa (COMESA)

A number of SADC member states are also members of the Common Market for Eastern and Southern Africa (COMESA).

COMESA is a regional co-operation organisation that, like the SADC, has the goal⁴ of ensuring fair competition and transparency among 19 member states⁵ in the south and east of Africa. In order to achieve this objective, COMESA has adopted a regional policy on competition law, namely the COMESA Competition Regulations and Rules⁶ that came into effect in 2004 (the COMESA Competition Rules).

Although COMESA adopted its competition policy in 2004, it was not implemented due to the lack of the institutional framework necessary for its enforcement. It did however appoint its first Board of Commissioners in 2008.

At the beginning of 2011, the COMESA Competition Commission (Commission) appointed its first director and CEO who have been working towards making the organisation fully operational. It also appointed its second board in the course of 2011.

The Commission, based in Lilongwe, Malawi, is responsible for the enforcement of the COMESA Competition Rules. As it is a new institution, enforcement is most likely to be initially felt in the area of merger notifications as transactions in the COMESA region with a regional dimension are notifiable to the Commission.

Certain SADC countries are also members of the Southern African Customs Union (SACU), which is comprised of five member states - Botswana, Lesotho, Namibia, South Africa and Swaziland. Established in 1910, the SACU Secretariat is located in Windhoek, Namibia, and is the world's oldest customs union.

Besides being a customs union, SACU's main purpose has been to promote economic development through the regional coordination of trade. The SACU Trade Agreement (Agreement) stipulates that one of its key objectives is to promote conditions of fair competition in the common customs area.

The Agreement provides for the enactment of national competition legislation by each member state and cooperation on the enforcement of competition law in the region. Thus far, cooperation between SACU members has been informal (as between agencies), technical in nature and capacity-orientated. No regional competition legislation has, however, been enacted to influence transactions and the conduct of firms in these member states.

Note: transactions falling within the jurisdiction of countries in the shaded area are therefore subject to competition legislation.

Conclusion

As investment opportunities in southern Africa continue to steadily grow and the number of national competition authorities increases, firms doing business in the region will need to carefully consider the implications of their investments from a competition law perspective at both a national and regional level.

Questions will need to be raised as to whether a proposed transaction triggers merger notifications requirements in different jurisdictions (particularly when the merging parties have activities in a number of jurisdictions). As the substantive and procedural aspects of merger regulation in these jurisdictions may vary considerably, merging parties would be wise to take account of these differences in analysing risk.

Although there is some commitment to increased co-ordination and co-operation among authorities in the region, there appears to be doubt over to the efficacy of this co-operation. This is because COMESA and SADC both appear to be intent on operating regional competition bodies. Without any formal mechanisms for reviewing mergers of companies operating in various countries in the region, parties may furthermore face the onerous task of notifying transactions in many different jurisdictions at both a regional and national level.

Footnotes

1. UNCTAD World Investment Report 2012

2. As one of its key objectives, SADC is intending to establish a free trade area.

3. Madagascar is currently suspended from SADC as a result of political turmoil in that country.

4. COMESA, like the SADC, intends to establish a free trade area and to become a customs union.

5. COMESA's 19 member states include Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe and the Republics of Egypt and Malawi.

6. The policy is based on the United Nations Set of Principles and Rules on Competition and the development of policy is in line with the provisions of Article 55 of the Treaty Establishing the Common Market for Eastern and Southern Africa.

7. The Economic and Monetary Community of Central Africa (or CEMAC) is an organisation of states of Central Africa established by Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea and Gabon CEMAC will be considered in more detail in a forthcoming newsletter.

8. The East African Community (EAC) is the regional intergovernmental organisation of the United Republic of Tanzania and the Republics of Kenya, Uganda, Rwanda and Burundi; with its headquarters in Arusha, Tanzania.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.