There have been a number of important developments in competition law across Africa over the past few years. An increasing number of African countries have implemented merger notification regimes. Firms that wish to acquire businesses or expand their operations in Africa should be mindful that their transactions may require approval from regulator/s in the country/ies involved and non-compliance could attract a range of consequences including massive penalties. It is important that the costs and timing implications of these processes should also be factored in when transactions are planned.
1.Which African countries regulate mergers?
Many national competition authorities regulate mergers, including in Algeria, Angola, Botswana, Burkina Faso, Cameroon, Chad, Comoros, Ivory Coast, Democratic Republic of Congo, Egypt, Eswatini (Swaziland), Ethiopia, Gabon, Kenya, Liberia, Madagascar, Malawi, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Seychelles, Sierra Leone, South Africa, Tanzania, Tunisia, Zambia, Zanzibar and Zimbabwe. There are also multi-jurisdictional free trade areas, such as the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) which require notification of transaction having an effect in their markets.
2. What kinds of merger transactions are potentially notifiable as mergers?
The rules differ from jurisdiction to jurisdiction, but in general, any transaction in which a firm acquires or establishes control of another firm in any manner constitutes a merger ( for example by purchasing more than 50 per cent of its shares, acquiring the right to vote more than half of the votes at a shareholders or board meeting, or having a material influence over the strategic direction of the target business, will require a notification). This may include global acquisitions where the merging parties are based outside Africa but the transaction merely has an effect in one or more African countries.
3. When can a merger be implemented?
Some jurisdictions (including in key African jurisdictions such as South Africa, Namibia, Botswana, Zimbabwe, Zambia, Tanzania, and Kenya) require a merger to be filed and approved before the transaction can be implemented. Others, like COMESA, require that the merger filing be lodged within a specified period, but the parties are not prevented from implementing the transaction before clearance is granted. If clearance is not obtained, the parties have to unwind their transaction. Zimbabwe requires a merger to be filed within one month of the transaction agreement being signed by the merging parties and some countries, such as Egypt, require a notification post-closing of the transaction.
4. Are all mergers notifiable?
Some jurisdictions only require transactions which exceed certain prescribed monetary thresholds to be notified (for example, South Africa, Namibia, Botswana, Zimbabwe, Zambia). Other regulators such as Algeria and Eswatini, do not set monetary thresholds and accordingly all transactions which meet the merger definition have to be notified.
5. Which mergers do the COMESA Competition Regulations apply to?
Mergers are notifiable to COMESA where both the “Regional Dimension” and “Notification Thresholds” requirements are met. For the Regional Dimension test, the acquiring firm and target firm, or either the acquiring or the target firm, must operate in two or more COMESA member states. “Operate” includes having any turnover or assets in that member state.
For the Notification Thresholds test, both of the following must be met:
- the combined annual turnover or combined value of assets, whichever is higher in the COMESA Common Market of all parties to a merger equals to or exceeds USD50 million; and
- the annual turnover or value of assets, whichever is higher, in the Common Market of each of at least two of the parties to a merger equals or exceeds USD10 million.
However, if each of the parties to a merger achieves at least two-thirds of its aggregate turnover or assets in the Common Market within one and the same member state, the transaction will not be notifiable to COMESA, but may be notifiable to the relevant regional authority.
If there is doubt on whether a transaction is notifiable, a comfort letter can be sought from the Competition Commission of COMESA.
6. If a filing is made with COMESA, do I still need to file merger notifications in the individual COMESA member states?
The COMESA Regulations provide that CCC has “primary jurisdiction” to review COMESA mergers. However, there is provision for a member state to request the CCC to refer the merger for investigation and consideration under the member state’s national competition laws if it is likely to disproportionately reduce competition to a material extent.
Of course a merger requiring notification in COMESA could also trigger an obligation to notify in non-COMESA African states. For example, a merger which impacts on trade in South Africa, Namibia, Zambia and Kenya may be notifiable in South Africa and Namibia, as well as COMESA.
7. How much do merger filings cost?
Each jurisdiction has a different merger filing fee in terms of its own empowering legislation and regulations. For instance, the maximum filing fee for a COMESA filing is currently set at 0.1% of the merging parties’ combined annual turnover or combined value of assets in the common market, whichever is higher. The fee is capped at USD200 000. The merger filing fee for a large merger in South Africa is ZAR550 000 and ZAR165 000 for an intermediate merger. The notification fee in Zambia is 0.1% of the economic entity’s turnover or assets, whichever is higher, capped at ZMW5 million.
8. What if parties do not notify a merger?
Sanctions differ from jurisdiction to jurisdiction, but in general, parties may be at risk of financial penalties of up to 10 per cent of their turnover in some states and sometimes even imprisonment, if they fail to notify a transaction which is subject to compulsory notification. Where a transaction which is notifiable in multiple jurisdictions is implemented without approval, each jurisdiction can impose its sanctions on the parties. A fine, for example in one country, does not absolve the parties from one in another.
Due to the different timelines applicable it is important that mergers involving companies with operations in Africa be assessed at an early stage of planning in order to determine whether filings are required in one or more African jurisdictions.
The Kenyan and Zimbabwean competition authorities recently imposed their first fines gun-jumping.
9. Are all the African regulators fully operational?
The EAC’s Competition Authority became fully operational in 2018, although their Competition Amendment Act in not yet in force and the EAC is not accepting merger filings. The Competition Regulatory Authority in Mozambique became operational in January 2021 and mergers are now being accepted in this country. The Nigerian Federal Competition and Consumer Protection Commission finally adopted a formal competition law regime from February 2019.
10. Public Interest
Many African Regulators analyse the impact that a transaction may have on public interest as part of their analysis. For example, the South African Competition Act has recently been amended to expressly elevate public interest considerations to the same level as traditional competition assessments and for the first time, the South African Competition Commission prohibited a merger based solely on public interest considerations. The Competition Authority of Kenya has issued a number of merger decisions subject to both competition law and public interest related conditions. Other regulators in countries such as Algeria are taking public interest considerations into account. In Zimbabwe, a transaction was prohibited because it was going to result in serious competition concerns and was contrary to public interest in Zimbabwe.
Given the dynamic nature of merger regimes in Africa, which are evolving and can create challenges from a deal timing perspective, dealmakers should consider the potential risks of not notifying their acquisitions with the African competition regulators and timing and cost implications early on. Norton Rose Fulbright competition lawyers are able to assist with analysis of transactions as well as the preparation of merger applications to the relevant competition regulators and provide practical and commercial support and guidance throughout these proceedings.
Please consult the Norton Rose Fulbright African Competition Law Team at an early stage of planning your merger transaction.