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Investors warned over agreements that divide markets in East and Southern Africa

1 May 2018
– 4 Minute Read


Any commercial agreement that blocks the free flow of goods and services in the Common Market of East and Southern Africa (COMESA) will receive short thrift from competition authorities. This was the clear message conveyed during the Africa Competition Law Conference 2018, hosted by pan-African law firm Bowmans in Johannesburg earlier this year.

“Our aim is to integrate all the markets in COMESA, so agreements that divide the market will be closely scrutinised. Any agreement that stops goods moving from A to B will attract my attention,” said Dr George Lipimile, director and CEO of the COMESA Competition Commission.

He was part of a panel discussing prohibited practices and investigations that African competition regulators, regional and national, are prioritising. Other panellists taking part in the discussion were from the national competition authorities of Kenya, South Africa, Zambia and Zimbabwe.

Restrictive agreements frowned upon
Achieving single market integration among the 19 countries in the Common Market was the main objective of the COMESA Competition Commission, which was well aware that certain existing commercial agreements and practices were in conflict with this, Dr Lipimile said. “Goods should be able to circulate freely, but there are a lot of goods now that you cannot buy in some countries because of agreements that were put in place before our countries had competition regulations.”

A survey among COMESA’s member states had indicated that “most countries had not heard of competition” five years ago, he said, adding that many agreements restricting the flow of goods between countries had been signed before competition laws and regulations were in place.

Such agreements were now coming under scrutiny, and companies that were party to them should voluntarily notify the COMESA Competition Commission about them, Dr Lipimile said, failing which the Commission would take action.

Competition law developments in individual countries were also highlighted during the conference at Bowmans. Zambia and Zimbabwe are currently amending their competition laws, the aim being to broaden, strengthen and clarify them.

Zambian authority puts its foot down
“There is an unfortunate tendency for companies to consummate mergers without notification or approval,” said Parret Muteto, chief analyst of Zambia’s Competition and Consumer Protection Commission. He said these companies knew very well that they may not undertake mergers without approval and that the Commission needed to “put our foot down”. In all cases where mergers had gone ahead without notification or approval, it had imposed sanctions on the offending companies.

In Zimbabwe, there were “quite a number of gaps” in the current Competition Act, and these were being addressed through legislative amendments, said Loveness Jayaguru, legal counsel at the Zimbabwean Competition Tariff Commission. “The amendments are aimed at providing clear deterrents,” she said, pointing out that the existing sanctions for abuse of dominance or cartel conduct were ineffectual, being limited to criminal sanctions in the form of negligible penalties or very short periods of imprisonment.

“It is important to note that even though the law is not that clear, we have had success in investigating restrictive practices,” she said, describing the Zimbabwean business community as “quite” compliant when it came to actions such as cease-and-desist orders. “The business community is not that litigious and we have not been challenged.”

Public interest an emerging concern
The conference – the seventh since Bowmans began hosting it in 2012 – also highlighted the growing emphasis on public interest aspects of competition law in East and Southern Africa, especially the protection of employment in mergers and acquisitions.

“Public interest is a key issue in all jurisdictions covered today,” said Maryanne Angumuthoo, partner at Bowmans, noting that Kenya and Zambia have a specific focus on protecting employment. “We have also heard the COMESA Competition Commission say that it is simply not a sin to try and preserve jobs, and that the guidelines it will be publishing will also consider public interest issues.”

Angumuthoo said a key message to emerge from the Africa Competition Law Conference was that investors and their advisors should guard against treating other African jurisdictions like a European Union or South African “colony” when it came to competition law. “While there are similarities in the competition regimes, the context is different and it is important to be aware of that,” she said.

Just as investors and their advisors should ensure they understand the nuances of competition law in different nations or regions in Africa, so should regulators ensure they explain the rationale behind their decisions. It is important for national and regional competition authorities to publish the reasons for their decisions so that investors and their advisors can follow these and not, in the absence of reasons, try to ‘transplant’ South African or European Union laws to other jurisdictions.