Moves are afoot to enhance the transformation role of the Competition Commission in approving medium and large M&As.
Of particular concern to members of parliament’s trade, industry and competition committee is the recycling of a limited number of historically disadvantaged persons (HDPs) in transactions required by the commission for an M&A to comply with its public interest conditions.
The commission can order the purchase of shares by HDPs or employee share ownership schemes (Esops) as conditions of an acquisition or merger and can also require the divestiture of a subsidiary or asset.
Commissioner Doris Tshepe informed MPs during an engagement on Thursday that seven divestitures had been imposed between 2020/21 and the first quarter of 2025/26 and during this period 64 M&As were approved by the commission subject to the implementation of an HDP transaction. In a further 11 cases the merger parties could choose to adopt either an HDP transaction or an ESOP.
MPs expressed concern about the recycling of HDPs in these transactions, which they said did little to address the heavy concentration in white hands of the economy and merely enriched a small, politically connected black elite.
Trade, industry and competition deputy minister Zuko Godlimpi agreed legislative amendments were required to prevent this type of revolving door, which was unacceptable. However, it would be more problematic, he said, for the commission to dictate who the HDP of a transaction should be as this might encourage rent-seeking.
“I think we broadly agree on the problems,” the deputy minister said.
Tshepe stressed in both the case of HDP transactions and divestiture, the selection of the buyers was left to discretion of the merger parties, subject to certain principles. Deal making was not the role of the commission, she said. The commission did however verify that the person be historically disadvantaged.
In a bid to counteract the revolving door trend, the committee called for more transparency about the beneficiaries of transactions to encourage new market entrants as well as about the deals themselves and how they were financed after they had been made public.
It also proposed the creation of a central data base from which potential business partners could be drawn. The National Empowerment Fund has also proposed a directory of possible historically disadvantaged firms which could be involved in transactions.
The use of the proposed R100bn Transformation Fund or the Industrial Development Corporation to finance this participation was proposed.
Committee chair Mzwandile Masina said secrecy with regard to BBBEE partners in Competition Commission approved transactions was not acceptable.
Other concerns raised were the need for a lock in period to be stipulated in transactions with HDPs to prevent fronting and the buy out of the beneficiaries after commission approval of the transaction. Godlimpi agreed with this proposal.
The committee agreed there should be post transaction monitoring to ensure compliance with the commission’s conditions though Godlimpi suggested this might be the role of the BBBEE Commission.
The committee resolved that trade, industry and competition minister Parks Tau should publish regulations to enhance the transformation provisions in the Competition Act.
Godlimpi also suggested black businesses should be exempted from certain provisions of the Competition Act to enable them to grow.
Tshepe insisted the commission was active both in fostering competition in the economy by reducing barriers to entry through its market inquiries, which also promoted inclusivity and transformation.
DA spokesperson on trade, industry and competition Toby Chance questioned the equation of black with disadvantage and the need to redefine what was disadvantaged to prevent the recycling of the same black elite.
MK party MP Siyabonga Gama urged the commission to become an activist commission to change ownership patterns in the economy and reduce its concentration in white hands. There was a need for transparency, he said, in the way sellers identified buyers.
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