Tanga Cement saga: FCC speaks out after uproar in Parliament

Dar es Salaam. The controversy surrounding the acquisition of Tanga Cement by a German company took a new twist yesterday when the Fair Competition Commission (FCC) commented on the matter after it caused an uproar in Parliament.

The issue dates back to October 2021 when Scancem International DA (Scancem) – a subsidiary of Heidelberg Cement AG, which owns Tanzania Portland Cement Limited 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.

FCC’s comments came after several MPs and some respected legal experts opposed the envisaged merger on the grounds that it would create market dominance by one manufacturer thus resulting in unfair competition.

FCC had approved the acquisition, but the decision was quashed by the quasi-judicial Fair Competition Tribunal (FCT).

“I cannot discuss details of this issue because it is in court,” said FCC director general William Erio yesterday.

FCC board chairperson Aggrey Mlimuka said when opening a seminar with editors in Dar es Salaam yesterday that the tribunal rejected the first merger application, but a second application was submitted.

“If a merger was rejected last year, it does not mean that the rejection is indefinite. If metrics change then the decision might be different. We can’t rely on what happened last year.

“We will explain to the FCT that we believe things have changed and the common standard is that a rejected merger application can be filed again under different circumstances,” Dr Mlimuka said.

Analysts would probably be interested in understanding the specific circumstances that might have changed within a span of two months between September 2022 when the verdict was delivered and December 2022 when a new application was filed.

Commenting on the FCT ruling, Dr Mlimuka said, “The decision by the tribunal was made after hearing one side. We were not heard at all.”

Scancem International also joined the fray, stressing that the ongoing debate now stems from its new application, which was lodged in December 2022 in the firm’s renewed bid to acquire Tanga Cement.

“This new application was submitted based on prevailing market conditions in 2022 and was approved without conditions by the FCC in February 2023, as the combined market share is below the legal threshold (35 percent) and affirms no dominant position,” Scancem International said in a statement.

Some individuals have already filed applications both in court and with the FCT, claiming that the regulator ignored the FCT ruling.

Apparently, one of the applications in question was that by an interested individual, Mr Peter Hellar, who lodged an application No. 8 of 2023 at the FCT in which the respondents were the FCC, Scancem International DA, Fayaz Bhojani, William Erio and Hakan Gurdal.

In the application, the applicant asked the tribunal to grant an ex-parte temporary injunction against the intended merger as advertised by the FCC on February 11, 2023.

He also pleaded with the tribunal that in case the merger is granted or is about to be granted or will be granted in the course of hearing the application, then an ex-parte order be issued to restrain the Business Registration and Licensing Agency (Brela), Capital Markets and Securities Authority (CMSA) and Dar es Salaam Stock Exchange (DSE) from registering or otherwise executing any act or step that would follow the execution of the merger.

It was the applicant’s view that by beginning the review and investigation of the intended merger, the five respondents were acting in contempt of the orders of the FCT in its September 23, 2022 ruling on the matter.

And in its judgment delivered on March 24, 2023, the FCT panel, which was chaired by Judge Salma Maghimbi and with Dr Onesmo Kyauke and Dr Godwill Wanga as members, sided with the applicant.

“The intended merger between Scancem International DA and Tanga Cement Plc, as advertised by the 1stRespondent on the Daily News of 11th February 2023, is hereby retrained, pending hearing of the Application inter parties,” the panel ruled.

The FCC law requires acquisition not to exceed the threshold of 35 percent market share so as to promote fair competition.

“We have previously approved a merger which enabled a company to hold a 40 percent market share but with conditions,” said Dr Mlimuka.

He also suspected that there could be “invisible powers” behind those who are challenging the process.

“If you carefully investigate, some of these people who complain that they will be affected by the planned merger do not have a cement factory. I’m wondering what kind of message we are sending to investors about our country.”

Scancem International stated yesterday that the cement sector in Tanzania is characterised by production overcapacities since the arrival of Dangote and Huaxin.

According to the company statement, at least three other cement producers are adding around 15 percent of additional cement capacity this year.

“The combined market position of the two Scancem controlled entities, after the transaction, will thus continue to further erode. After this transaction, there will be more than 12 players in the cement industry which ensures a healthy competitive landscape, far above that in neighbouring countries. For example, the cement industry in Kenya has 7 cement competitors,” the firm said

“The recent interferences by unknown actors are merely trying to frustrate this transaction process. The blocking can lead to loss of investment,” the statement added.