Interventionist deal maker Patel would do well at the head of a merged ministry
The JSE can look forward to a big new primary listing some time after March 2018 when Old Mutual Ltd, the Johannesburgbased emerging markets business that will come out of the break-up of London-based Old Mutual, comes to market.
But first SA’s competition authorities have to give their approval to the creation of Old Mutual Ltd, which is why it came before the Competition Tribunal on Wednesday.
It’s one of the quirks of SA’s competition regime that even a corporate restructuring such as Old Mutual’s needs approval in terms of the merger control provisions of the Competition Act. But what helped to make the process even more interesting was another quirk of SA’s competition regime — the increasing focus on public interest issues, with Economic Development Minister Ebrahim Patel intervening actively to extract public interest undertakings from the companies involved.
These days, doing a large deal in SA generally requires going to Pretoria to negotiate terms with Patel, who is entitled to intervene in mergers on public interest grounds and who will gain even more of a say in merger control if his new proposed amendments to the Competition Act are enacted.
But he has also intervened to broker deals in collusion cases, such as those in the construction industry, and there, too, he is using the leverage provided by competition regulation to effect transformation and achieve economic policy goals such as investment in job creation, small business development and local supply chains.
Bright and early on January 3, the Competition Commission announced it had given the goahead for as many as 25 deals and Patel’s hand was evident in at least five of these. One was the Old Mutual transaction, which the Competition Commission recommended subject to the conditions agreed between the minister and Old Mutual.
Another was China Petroleum and Chemical Corporation’s (Sinopec’s) acquisition of 75% of Chevron SA. Sinopec has agreed to a series of public interest undertakings.
A further three deals, involving alliances between construction companies Raubex, Stefanutti Stocks and WBHO and smaller, black-owned contractors, relate to the October 2016 settlement agreement which the government reached with seven companies following the construction industry cartel case.
Talks on some of these deals had been going on for months, if not years, and the sudden rush of approvals certainly looked like someone had put a rocket under the minister and/or the merging parties. It’s surely possible that going into the ANC’s elective conference, Patel and the parties had a big incentive to make sure they reached closure — just in case the minister, who had made known his support for Cyril Ramaphosa, was booted out of his post or promoted to higher things after December.
Either way, he will be able to claim new victories in getting big corporates to invest in transformation, localisation and job creation, to add to the ones he had already clocked up when he leveraged SA’s merger regulation to get Massmart/Walmart, AB InBev and Coca Cola to do the same.
Some competition lawyers see the minister’s meddling as a problem for competition law as it overlays the predictable and transparent processes of the competition authorities with a separate, backroom process at the economic development ministry, which can pick and choose the deals in which it takes an interest.
However, says one political analyst who notes Patel’s evolution from Trotskyite to technocrat: “It makes sense for a leftish government to make friends with big business but in exchange to extract advantages from it in the form of public interest commitments.” And, says the analyst, big businesses may well be keen on practical measures that can address political concerns about “white monopoly capital”.
Patel has welcomed Old Mutual’s move “back home” and hailed the commitments it has made to retain jobs, achieve “best of class” empowerment status and establish a R500m fund to drive growth of small business and employment.
There’s a nice irony to the fact that he was originally very much a Jacob Zuma appointment, aimed at placating the trade unions that supported Zuma against Thabo Mbeki at the ANC’s Polokwane conference. Patel’s department was created by Zuma as a kind of sop to the unions and it never really made sense as a department separate from the Department of Trade and Industry. Patel has done much to leverage the entities in his portfolio, such as the competition authorities, the Infrastructure Commission and the Industrial Development Corporation, to pursue what are in effect industrial and broader economic policy objectives. It could well make sense to consolidate the departments of economic development and trade and industry back into one super economic policy and trade department, led by Patel, and bring some coherence and business-friendliness to the pursuit of SA’s transformation and job creation imperatives.