It’s time the DA touched gloves and got into the fight. In the shadow of Pretoria’s Union Buildings, far from the bogeymen of “white genocide” and land grabs without compensation that preoccupy the tinfoil-hat corners of Washington, a more insidious and institutionalised form of expropriation is quietly strangling investment and punishing precisely the kind of enterprise SA so desperately needs.
No, it’s not the land, it’s capital. And it’s being expropriated by bureaucrats with public interest guidelines. As I’ve written time and again, the Competition Commission, that sacred cow of technocratic righteousness, has turned merger control into a form of state-sanctioned shakedown. Every time two businesses try to consummate a transaction, large or small, local or foreign, the commission saunters into the room like a crooked priest, demanding a tithe. Not for its own coffers, of course. That would be crude. No, it’s a holy tax for workers’ trusts, for empowerment schemes, for enterprise development funds, for bursaries, for local procurement. In short: pay up or your deal dies.
And like the worst kind of dogma, this isn’t about evidence. It’s about belief. According to the commission’s public interest guidelines (a phrase that now belongs in the SA bureaucratic newspeak hall of fame), it is not enough for a merger to do no harm. It must do good. It must be redemptive. You, capitalist sinner, must show that your transaction will not only avoid retrenching workers and harming suppliers, you must also prove it will spread the gospel of historically disadvantaged person ownership, sanctify a new worker trust and tithe no less than 5% of your purchase consideration towards the commission’s vision of economic virtue.
It does not matter if the business in question is profitable, nor if it’s a single car dealership or a mom-and-pop bakery. It does not matter if the parties to the deal are black, white, green or blue. The bureaucratic logic remains: if you want to buy a business, you must pay for your sins. Sins often imagined and prescribed by the commission itself. Worse, it’s deeply cynical policy masquerading as transformation. It takes the real and urgent need for economic growth and economic redress, and weaponises it into a transaction tax that is arbitrarily applied, unevenly enforced and suspiciously convenient for a rent-seeking elite.
As former Competition Tribunal deputy chair Liberty Mncube warned recently: “Flawed and erroneous economic and legal reasoning in decisions creates a daunting hurdle to effective merger control. The resulting harm goes beyond the effects in individual cases to chilling competition and investment.”
The new DA deputy trade, industry & competition minister need not look far to determine how we arrived here. Partly, it’s because the commission has wilfully misread the law. The Competition Act requires that mergers be assessed not only for their effect on competition but for their effect on the public interest, a nuanced and contextual test that, as former Competition Appeal Court president judge Dennis Davis pointed out recently, demands balance, not ideology. It asks us to weigh the evidence. To understand whether a deal, taken on the whole, advances or undermines employment, local procurement, ownership and industrial capacity.
But the commission has no time for nuance. It has decided, unilaterally, that a 5% ownership stake is the price of moral cleanliness, regardless of context. Even where no harm is proven. Even when the buyer is an existing black-owned business, or where the target is failing, or where the funds would be better spent modernising the operation.
Like a fundamentalist preacher handing out indulgences, the commission tells merging parties if they can’t meet the standard they can buy their way out with “equally weighted countervailing public interest remedies”. A bursary here. A training programme there. A few million in a supplier development fund. What does it add up to? A quiet, creeping tax on doing business in SA.
A tax that disproportionately punishes the very investors President Cyril Ramaphosa courts with saccharine charm at Davos and investment summits. A tax that introduces uncertainty, delays and suspicion into every transaction. A tax that makes it harder, not easier, to create the competitive, efficient and job-creating businesses this economy so desperately needs.
One would think this extractive approach might have softened in the face of criticism from inside the institutions tasked with safeguarding our competition regime. But no. Judge Davis’s commentary, and the more recent critique by Mncube, have been dismissed like letters to the editor. The Vodacom/Maziv merger ruling, which clearly instructed a contextual, fact-driven application of the law, has been ignored if not outright defied.
Instead, the commission has doubled down. A wandering albatross tells me that between January and June nearly a third of all intermediate mergers were burdened with public interest conditions, most of them vague, some arguably illegal, all of them costly. In effect, it has become an ideological battering ram for industrial policy, pushing localisation, racial ownership targets and spending commitments with neither parliamentary mandate nor economic justification.
As Davis has put it with characteristic precision: “The commission thus no longer seeks to engage with a holistic approach to assessing the effect of a merger on the public interest. All too often rent-seeking, rather than the promotion of an inclusive economy, has been the consequence of the application of this approach.”
In other words, what began as an effort to tackle historic injustice has metastasised into a bureaucratic tollbooth, one where rent-seekers wave through deals going by the size of the cheque handed over to satisfy arbitrary “commitments”. And yet we tolerate it because the victims are dispersed — a fund here, a foreign acquirer there, a frustrated entrepreneur further on whose deal quietly dies in the corridors of the department’s campus in Sunnyside.
If the commission’s overreach continues, if Pretoria insists on wielding competition law as a backdoor to transformation-by-extortion, the backlash will come. Not from Business Day columnists or legal scholars, but from Washington. From regulators who may rightly ask whether this approach to foreign acquirers, particularly American ones, passes the smell test.
Of course, what Donald Trump has yet to appreciate is that this is a tax that is only levied on investors who are not South African “historically disadvantaged persons”. From Walmart onwards, American companies have been forced by the SA competition authorities to subsidise all sorts of affirmative action projects, based on race. One can’t imagine our authority’s officials will be too welcome in US federal buildings, or at events hosted by the US department of justice antitrust division, when the penny eventually drops in the Oval Office.
But we don’t need to wait for a White House tantrum. The new DA deputy minister of trade, industry & competition needs to make it their mission to rein in the Competition Commission — its guidelines rewritten, its officials reminded that their job is to protect competition, not moonlight as BEE priests or industrial policy wonks.
• Avery, a financial journalist and broadcaster, produces BDTV's ‘Business Watch’. Contact him at michael@fmr.co.za.
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