Tanga Cement tussle: Act in line with the law, says lawyer

The Tanga cement factory - one of the few surviving vibrant plants in the Indian Ocean coastal city which in the distant past was one of the country’s top industrial hubs.PHOTO | FILE

What you need to know:

  • Dar advocate says the merger cannot go ahead because FCT's ruling still stands

Dar es Salaam. The Tanga Cement takeover row raged on at the weekend when a lawyer privy to the case urged the involved parties to respect the law.

Mr Melchisedeck Lutema, who represented the appellants in their petition lodged with the Fair Competition Tribunal (FCT) against the decision by the Fair Competition Decision (FCC) to approve the merger, said in a country that respects the rule of the law, there was no way the acquisition could proceed without the ruling being first challenged in accordance with the law.

In October 2021, 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 that the former acquire a 68.33 percent stake in Tanga Cement.

Initially, the FCC had approved the acquisition, but the decision was quashed by the quasi-judicial FCT in its September 23, 2022 ruling after Chalinze Cement Company Limited and the Tanzania Consumer Advocacy Society (TCAS) lodged an appeal against the approval.

However the takeover bid was initiated afresh in December 2022 and on February 11, 2023, the FCC announced that it was seeking public views on whether the acquisition should be approved or not.

According to Mr Lutema, restarting the process did not invalidate the September 23, 2022 FCT ruling that was delivered by Lady Justice Salma Maghimbi, Dr Godwill Wanga and Mr Boniface Nyamo-Hanga

“As far as the rule of law is concerned, that ruling remains valid and any process that does not respect that decision is in contempt of the FCT,” said Mr Lugema.

He said if Scancem and FCC were dissatisfied with the ruling, they should have applied for a review, a revision or appealed against it.

His remarks were in apparent reaction to what FCC chairman Aggrey Mulimuka and FCC director general William Erio told journalists in Dar es Salaam recently.

Dr Mlimuka said 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 that things have changed and the common standard is that a rejected merger application can be filed again under different circumstances,” Dr Mlimuka said.

But Mr Lugema said those opposed to the merger had requested to be furnished with concrete evidence showing that there had been a change in market dynamics and statistics between September 2022 when the FCT ruling was delivered and December 2022 when a new application was lodged. He, however, noted that no concrete evidence was provided. “What followed was that the appellants were told to submit their arguments for objecting to the merger in writing by 10am on February 28, 2023 in Dodoma. They did just that, but on the same day, an approval was granted and the submissions were rejected. You can ask yourself how long it took them to go through all the arguments – which totalled tens of pages – and still be able to arrive at a decision and prepare a Merger Certification Certificate on that same day,” Mr Lugema wondered.

He said the appellants feared that they could be used as a rubber stamp for an approval process that had already been predetermined.

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

However, Dr Mlimuka said recently that there were instances where mergers were approved which led to entities holding a 40 percent market share, but with conditions.

In another new twist in the saga, in March 2023, the Business Registration and Licensing Authority (Brela) moved to deregister Chalinze Cement for what was said to be failure to submit its annual tax returns, but Mr Lugema said that did not change anything before the law.

“The law does operate retrospectively and therefore whether Chalinze is deregistered or not, that doesn’t change the September 2022 ruling, which has not been objected to or overruled by any legal body in Tanzania,” he said.

On the assertion that the country was discouraging investors, Mr Lugema said it was “another flimsy argument” because even Tanzanian investors could easily get the money to buy Tanga Cement.

“Who said that the buyer of Tanga Cement can only be the one involved in this saga?” he queried, adding that it would amount to condoning illegality on the excuse of discouraging investors.

Mr Lugema said it was only sensible that for a decision that affects consumers, a consumer group should be involved so that any decision made should be one that puts their interests first.

The saga since spawned several cases, with some individuals filing applications both in court and with the FCT, claiming that the regulator ignored had the FCT ruling.

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.