Pieter Uys, head of strategic investments at investment holding company Remgro, says the Competition Tribunal’s rejection of a merger between its fibre business Maziv, which he chairs, and Vodacom, makes a mockery of government assurances to investors that South Africa is open for business.
“This is not the message we want to send out to the world. The president [Cyril Ramaphosa] stands up every year and says he’s calling industry to commit to infrastructure investment. This is a perfect example of infrastructure investment, and the public interest benefits we’ve committed to make it a no-brainer.”
Something else that won’t be lost on potential investors is the amount of time the competition authorities took before blocking the deal, which was submitted to the competition commission three years ago.
In August 2023 it finally made a decision, “after sending us at least 16 requests for information”, to recommend that the Competition Tribunal prohibit it — which the tribunal did at the end of last month after a six-month hearing.
“To leave companies that want to invest billions in the country in limbo for three years like the competition authorities did, is just too long, it’s unacceptable,” says Uys.
The proposed merger would have seen Vodacom take a 30% stake in Maziv worth an estimated R13bn, with the option of increasing it to 40%. The aim was to pool resources and democratise the internet by bringing fibre to townships and rural areas.
So it was a complete shocker, when everything felt so positive ... to receive notice from the tribunal a few days later that the prohibition recommendation of the competition commission was upheld
Maziv has committed R10bn over next five years to getting fibre to at least 1-million homes. The proposed tie-up with Vodacom would add R15bn to this and increase the number of homes tenfold.
“With the tie-up we’d be able to do in three-five years what would otherwise take 10-12 years.”
But Uys says the fibre project is unlikely to achieve that scale if the deal doesn’t happen and Vodafone, the owner of Vodacom, decides to put the R15bn in a country “which really is investor friendly”, such as Egypt or Ethiopia, where Vodacom also operates.
In addition to homes, Maziv committed to rolling out fibre to adjacent schools, police stations, health-care facilities and libraries, creating 10,000 new jobs and establishing a R300m enterprise and supplier development fund over three years for small businesses.
In spite of the obvious economic benefits, Uys never got a sense that the competition commission was seized with the need to move quickly.
“At this moment in time, right now, not in 10 years, right now, South Africa needs this,” he says. “We need to get this economy growing, and providing fibre is a massive lever. The tie-up would make a huge difference to millions of people, to schools, to education, to health services, to the economy.”
After engaging with the competition commission for 18 months Maziv “proactively” went to the department of trade, industry & competition (DTIC).
“We said surely this is now close to finality, let’s sit down before it goes to the tribunal for final approval and agree on the conditions so we don’t waste another year.”
So the company sat with the department, negotiated “in good faith” and agreed, in writing, to the public interest benefits that would arise from the transaction, knowing only too well “how many times in the past public interest considerations that are too difficult to achieve have killed the deal”.
In the three years it’s taken the competition authorities to rule on the merger Maziv has rolled out fibre to almost 30,000 homes in the Johannesburg township of Alexandra, among other low income areas, where residents can now buy uncapped, high-speed internet for less than R100 a month.
Uys was there recently to see the impact. In one home he found a woman on a Zoom call with her employers, who have allowed her and other staff to work from home a few days a week since Covid. The woman has never been able to join Zoom meetings before because she couldn’t afford the data. Fibre has made her feel fully part of the company for the first time, she told Uys.
In another home he found a young man who, thanks to fibre, is part of a development team for a company with a head office in India and members around the world. “Now he’s sitting in Alex helping to write pricing programs as part of a global company.”
In the three years it took the competition commission to consider its merger proposal Maziv also extended fibre to more than 750 schools, giving them 1Gbps (gigabit per second) internet as part of the public interest commitments it gave to the DTIC, says Uys.
And so he was “surprised” when the commission recommended that the tribunal prohibit the tie-up.
At the tribunal the DTIC cross-examined Uys and Vodacom CEO Shameel Joosub to make sure they put their public interest commitments on record.
“They said to the tribunal it should take serious consideration of the public good of this transaction, and even if there are small competition concerns they might have, they feel the public interest benefits outweighed them.”
During the tribunal hearings, which began in May, Maziv and Vodacom sat down with “interveners” including MTN and telecommunications company Rain, which initially told the hearing they were against the transaction.
On the last day of the hearing they stood up with the DTIC and told the tribunal they believed the conditions committed to made it a good transaction for the country, for the industry and for themselves, and they supported it, says Uys.
“So it was a complete shocker, when everything felt so positive, when all the interveners had turned so positive, when the DTIC stood up and said they wanted the transaction, it was good for the country, to receive notice from the tribunal a few days later that the prohibition recommendation of the competition commission was upheld.
“If I read what the president says it’s pro investment, pro-business. If I read the DTIC minister Parks Tau’s recent statement and what his department said at the tribunal hearings, that they ’re pro this transaction; it makes no sense.”
He says something must be done to improve the efficiency of the competition authorities. “You can’t take three years to consider a transaction and then just turn it down. It kills business.”
Without the merger Maziv will stick to its goal of bringing fibre to low-income parts of the country, but instead of five years it will take 10 or 12 years minimum.
“And South Africa doesn’t need it in 10 or 12 years, we need it right now.”
