The competition authorities, at the best of times, can poke a spoke in a deal-making wheel. These interventions can be costly and frustratingly prolonged, even if genuine concerns around fair competition cannot ever be shrugged off.
With Parks Tau as minister of trade, industry & competition, maybe businesses can look forward to a more streamlined process in which competition affairs and broad public interest considerations are weighed up. As seen previously, certain large deals — PepsiCo/Pioneer Foods, Burger King, and Heineken’s takeover of Distell — take what seems like an eternity to be dragged over the finish line.
Some have argued that the perceived overreach by the department of trade, industry & competition (DTIC) and the complications around weighing up competition considerations might have dissuaded international investors, in particular, from chasing deals in South Africa — at a time when numerous assets might have represented incredibly attractive value.
Competition commissars are not likely to have eavesdropped on the Remgro investors’ call last week. If they had, they might have gained valuable insight into businesses’ frustrations when megadeals and megamergers are stalled by concerns that are not always competition related.
Remgro holds a 57% stake in Community Investment Ventures Holdings (CIVH), the owner of fibreoptic cabling businesses Dark Fibre Africa and Vumatel. CIVH’s noble (and profitable) goal is to “democratise the internet” in South Africa. It has seen Vumatel laying many kilometres of fibreoptic cabling in less affluent suburbs including Mitchells Plain, Alexandra, Khayelitsha and Kayamandi.
In November 2021 Vodacom proposed taking a strategic stake in CIVH, a transaction that would have brought heaps of fresh capital to an enlarged venture under the Maziv banner. The deal proposed Vodacom investing about R13bn through the transaction. The first time the competition authorities cast their eyes over the mooted deal was December 2021. Understandably there were objections from other large telecoms players including MTN and Rain, and in August last year the Competition Commission recommended the merger be prohibited. Remgro had indicated that, under a worst-case scenario, CIVH was ready for a future without Vodacom. But that would mean CIVH’s expansion goals would be achieved over five or even 10 years, instead of a much shorter period.
Nearly three years later, Remgro now seems “optimistic” the Maziv deal will finally get the nod, with the group indicating that MTN, Rain and the DTIC have all confirmed to the Competition Tribunal that they support the transaction.
But it has been a costly impasse for Remgro and CIVH. CIVH remains cash-flow generative — but its considerable debt has put a brake on expansion. Vumatel, which is focused mainly on households, passed (in other words, connected) 138,000 houses in the year to end-March 2024 — far fewer than the 403,000 households passed in the previous financial year. Higher interest rates were also a killer, with CIVH having to fork out R800m more on interest payments on its R20bn debt.
Interestingly, some of the DTIC’s requests for public interest submissions to be met feed nicely into Maziv’s growth ambitions. These include passing fibreoptic cabling through 1-million households in lower-income areas within five years and investing R10bn over a similar period. A win-win arrangement such as this surely did not need the best part of three years to hammer out?
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