Mwananchi Communication Limmited
Summary
· Deputy Minister in the Prime Minister’s Office responsible for Labour, Youth, and Employment, Mr Patrobas Katambi, said it’s not the first time the FCC has approved an application that had previously been rejected
Dar es Salaam. The government yesterday defended the disputed
acquisition of Tanga Cement Company Ltd by a foreign company that also controls
the majority shareholding in Twiga Cement.
In 2021, Scancem International DA
(Scancem), a subsidiary of Heidelberg Cement AG, which owns Tanzania Portland Cement
Plc (Twiga Cement), and AfriSam Mauritius Investment Holdings Limited, owner of
Tanga Cement, agreed for the former to acquire a 68.33 percent stake in Tanga
Cement.
The FCC approved the acquisition,
but the decision was quashed by the quasi-judicial Fair Competition Tribunal
(FCT).
In December 2022, Scancem International
applied again to the FCC in a bid to acquire Tanga Cement. This new application
was approved by the FCC in February 2023. However, the discussion has since
refused to end as different parties disagree on the legality of the latest
approval.
Some lawyers and Members of
Parliament (MPs) have been pushing for the government to respect and maintain
the ruling of the tribunal by disapproving the application.
On Thursday and Friday, almost half
of the lawmakers who contributed to the debate on the budget of the Ministry of
Industries, Trade, and Investment were divided over the matter.
Some MPs wanted an explanation of
why the FCC approved the application, which had previously been rejected by the
FCT.
Yesterday, the government defended
the merger, saying it was in line with all laws and regulations.
“The approved merger application was
a fresh one, different from what was rejected by the FCT,” said the Minister
for Industry and Trade, Ashatu Kijaji.
Dr Kijaji was responding to queries
by the MPs as she wound up her budget. “We respect the laws of the country, and
that is why we did not deal with the decision quashed by the FCT. We only
worked on the fresh application,” she said.
“The law allows a company to reapply
for merger or acquisition, regardless of the first decision around the first
application,” said Dr Kijaji.
According to the Fair Competition
Act, a merger is prohibited if it creates or strengthens a position of
dominance in a market.
The law considers a person to have a
dominant position in a market if two conditions apply. These conditions include
that if the person is (1) acting alone, the person can profitably and
materially restrain or reduce competition in that market for a significant period
of time, and (2) if the person’s share of the relevant market exceeds 35
percent. The application rejected by the FCT was assessed using the market
metrics for 2020, said Dr Kijaji.
According to her, the second
application was approved because market circumstances had changed, using the
market data for 2022. The FCC had initially approved the proposed Sh137.33
billion takeover, but with the caveat that the acquiring firm should not shut
down Tanga Cement; that it should continue to produce and promote the Simba
Cement (Tanga Cement) brand, and that it was barred from laying off existing
employees at Tanga Cement.
However, some players were opposed
to the decision on the grounds that allowing the acquisition to go ahead would
prevent, restrict, or distort competition in the market.
Chalinze Cement Company Limited and
the Tanzania Consumer Advocacy Society (TCAS) were the ones who lodged an
appeal with the FCT, which quashed the planned merger through its verdict
delivered on September 23, 2022.
Dr Kijaji cast doubt on the
credibility of Chalinze Cement, which was one of the applicants at FCT, saying
the company was only registered after the first application for the acquisition
of Tanga Cement had been filed at FCC and that it did not exist even during the
first stakeholder hearing session.
“I have written to the company
requesting to visit them, but no response has come up today. I made attempts to
meet the company officials in vain. Who is this person trying to disturb the
government’s resolve to attract investors?” she said. She said Chalinze Cement
was deregistered for providing the wrong information to the registrar. Such
information, she said, includes the “wrong address of the company and
shareholders.”
Efforts to get the comments from
Chalinze Cement were not successful, as calls went unanswered.
The Tanga Cement deal was also
defended by other government officials, who allayed fears over the possibility
of distortion of the Tanzanian cement market.
“I would like to assure the public
that the government has its hand in Twiga Cement, which is run by Heidelberg
Cement AG. Our pension funds invested in the firm, and therefore we are keen to
protect the national interest,” said the Minister for Finance and Planning, Dr
Mwigulu Nchemba.
Mkinga MP, Mr Dustan Kitandula, had
expressed scepticism over the future of the factories after acquisition. He
cited the example of his region, Tanga, which has seen many firms fail after
acquisitions.
Deputy Minister in the Prime
Minister’s Office responsible for Labour, Youth, and Employment, Mr Patrobas
Katambi, said it’s not the first time the FCC has approved an application that
had previously been rejected.
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