Dar es Salaam. Players in the cement manufacturing industry are up in arms following the decision by Twiga Cement’s parent firm to acquire Tanga Cement.
The uproar stems from the October 2021 joint announcement by Scancem International DA (Scancem), a subsidiary of Heidelberg Cement AG, which owns Twiga Cement, and AfriSam Mauritius Investment Holdings Limited, owner of Tanga Cement, that they had finalised the terms upon which the former would acquire 68.33 percent of shareholding in Tanga Cement.
The Sh137.33 billion takeover, which had been under the scrutiny of the Fair Competition Commission (FCC) and the Tanzania Mining Commission (TMC), has, however, not gone down well with some players in the industry, who argue that the merger will be contrary to Tanzania’s competition laws.
They have since written to the relevant authorities, explaining why the takeover was in violation of the law.
“If the two cement producers are permitted to merge as requested by Heidelberg Cement AG, they will have a total Tanzanian market shareholding of 47 percent. This is in excess of the maximum permitted shareholding set out in the Tanzanian law and administered by the Ministry of Investment Industry and Trade under the Fair Competition Commission,” the players argue in their submission to the authorities according to documents obtained by The Citizen.
The law, they say, was enacted to protect Tanzanian industry and consumers from the negative impact that a dominant producer could have in the market.
Section 8 (3) (a) (b) of the Fair Competition Act, 2003 says, “Unless proved otherwise, it shall be presumed that an agreement does not have the object, effect or likely effect of appreciably preventing, restricting or distorting competition if none of the parties to the agreement has a dominant position in a market affected by the agreement and either (a) or (b) applies: the combined shares of the parties to the agreement of each market affected by the agreement is 35 per cent or less; or none of the parties to the agreement are competitors.”
They argue that although there are divergent views on whether the merger should be approved or not, the fact remains that doing so would be illegal.
The players are threatening to take legal action should the plan to merge the two firms proceed as proposed, insisting that in a market where a single player boasts much more than the 35 percent limit of the market share at 47 percent, it will be easy for the market leader to dictate terms, including prices, in the market.
“These legal challenges against the merger being will be heard by the FCC tribunal over the next few months and may well result in them having to reconsider the strategic reasons for the acquisition , which clearly may be beneficial to their own viability and long-term profitability but will be at the great expense of the viability and profitability the Tanzanian cement industry, positive economic growth and wealth of its citizens,” the players argue.
“For national security, this is bad because such a producer can decide to cease production as long as he sees that their interests have been tampered with, thereby affecting the national economy.”
They have appealed to the authorities to swiftly intervene, and ensure that the deal does not go ahead in a manner that is contrary to Tanzania’s laws.
The earlier merger plan was that if all conditions were to be fulfilled, the acquisition would become unconditional, and be implemented in the second quarter of 2022.
It was expected that Scancem would, after the final acquisition price had been determined, make a general offer to acquire the remaining shares in Tanga Cement (general offer), subject to the approval of the Capital Markets and Securities Authority (CMSA).
In order to ensure that all shareholders of Tanga Cement receive an amount equal to the price per share paid by Scancem to AfriSam, pursuant to the acquisition as required by the regulations, the general offer was to be made after the final price payable by Scancem to AfriSam had been determined.
The Citizen has been reliably informed that the proposed merger is currently being debated at high government levels, including within the Ministry of Investment, Industry and Trade and the Attorney General’s Chambers.