Pieter Steyn: Werksmans and LEX Africa
Pieter Steyn is a Director of South African law firm Werksmans and Chairperson of the LEX Africa Alliance of African law firms. He has been practising South African competition law since 1999 and has also advised and assisted clients regarding competition matters in other African countries, as well as with regard to the COMESA Competition Commission. Alongside other major achievements in his career, Pieter and his team advised Funai Electric in obtaining the first ever merger approval from the COMESA Competition Commission in 2013. He speaks with Lawyer Monthly about Africa’s competition law and common misconceptions on Africa’s economy and legislation.
How has the M&A sphere changed in Africa over the years? What are your hopes for the sector in the near future?
In 2000, the cover page of the Economist called Africa the Hopeless Continent. In 2010, the cover page referred to Africa Rising and M&A activity has become increasingly important. One must however remember that Africa comprises 54 countries and a huge diversity of cultures, languages, religions, ethnic groups and political, economic, business and investment environments. Such diversity inevitably affects M&A activity. Since 2014, the decrease in commodity and oil prices has affected several countries including Nigeria, Angola and Ghana and the South African growth rate in 2016 was about 0.3%. These recent developments have affected M&A activity in those countries although in some regions like East Africa, M&A remains active. Private equity investments also remain important.
What are the main challenges behind maintaining merger control in South Africa and how do you overcome said challenge?
One of the main challenges for merger control in South Africa relates to the public interest test in our Act, whereby a merger is not only assessed with regard to its effect on competition, but also with regard to its effect on certain public interest issues, including employment and the ability of small businesses or firms controlled by non‑white South Africans to become competitive. Although the Commission is an independent body, the Minister of Economic Development may participate in merger proceedings with regard to public interest issues. A non‑confidential copy of the merger filing must be served on local trade unions and trade unions may also participate in the merger proceedings. In practice no merger has ever been prohibited purely on the basis that it had a negative effect on public interest, but in certain recent high profile cases (like the recent SABMiller/AB Inbev and Massmart/Walmart mergers), the public interest issue caused significant delays in obtaining merger approval and led to the imposition of quite complex conditions to the approvals. Such cases are, however, more the exception than the rule and in practice job loss concerns are resolved by a condition relating to a moratorium on job losses for a certain period after closing. The Commission has issued guidelines on its approach to public interest as well as service standards for the time to decide mergers. This is very helpful for advisers. The key issue is to identify and deal with these issues upfront and openly with the Commission to facilitate an early resolution. The Commission is also currently working on guidelines for penalties for “gun jumping” or implementing a merger before approval.
How have cartel investigations changed over the years as competition grew in Africa?
An important recent development is a shift of focus by African competition authorities from merger control to cartel enforcement. An increase in dawn raids (for example in Kenya, Botswana, South Africa, Zambia and Malawi) indicates increasing confidence and experience of African competition authorities. In South Africa cartels have been criminalised since 1 May 2016 and this is likely to occur in other African countries. There is also an increased focus on regional cooperation (10 Southern African countries signed a cooperation agreement in 2016 and the South African Commission has signed bilateral cooperation agreements with the Kenyan, Russian, Mauritian and European authorities) and regional authorities (for example COMESA and in East Africa).
What is the first course of action in South Africa after proceedings have shown anti-competitive behaviour? Could this be improved in any way?
One must immediately assess the evidence and risk of a penalty and third party damages claims. The Commission has recently issued penalty guidelines which assist in assessing possible penalties. One must check if the conduct is ongoing as a complaint may not be initiated if the conduct ceased more than three years previously. For cartel conduct, immunity from penalties is available for the firm which is “first to the door”. For other firms, the Commission considers penalty discounts of 10% to 50% if a settlement is reached. The criminalisation of cartel conduct is another complicating factor. Prevention is however better than cure and in house compliance programmes and clear guidelines for staff are important.
What are common misconceptions that (international) clients have in regards to complying with the local competition laws?
Although there are some basic principles which are common to most competition laws worldwide, one must always check local law and practices and policies of the authorities. South Africa’s public interest test for mergers is a good example of a peculiarly South African approach to merger control. Another is that in South Africa dominance is defined by reference to market share with a rule of thumb 35% market share being presumed to be dominant.