Namibia: Ohorongo Sale to Chinese Buyer Blocked

The Namibian Competition Commission has blocked the N$1,5 billion sale of Ohorongo Cement to a Chinese company.

The commission is convinced that if allowed, this could lead to less competition in the cement industry and enable possible collusion and price fixing, which would be to the detriment of consumers.

The deal was that Chinese incorporated West China Cement Limited would buy 100% of Schwenk Namibia Pty Ltd's shares - the company which manages and owns 69,8% of Ohorongo Cement Pty Ltd - Namibia's biggest cement plant owner.

Other shareholders include Industrial Development Corporation of South Africa (14%), the Development Bank of Namibia (11%) and the Development Bank of Southern Africa (4%).

In an announcement made yesterday, the competition watchdog said after careful consideration it found that the proposed transaction would substantially prevent or lessen competition in the cement industry.

"The Namibian Competition Commission [has] made a decision to prohibit the acquisition of Schwenk Namibia (Pty) Ltd by West China Limited due to the fact that it would result in coordination between Ohorongo Cement (Pty) Ltd and Whale Rock Cement," read notes on the decision.

The deal, when announced, had left residents and the mayor of Otavi with a bitter taste as they felt sidelined when Schwenk Zement KG, Schwenk Namibia's parent company, offered the sale to the Chinese instead of to Namibians.

Ernst Gaoab, Otavi mayor, said he felt the deal was in bad faith because it directly contradicted Schwenk Zement's promise to sell Ohorongo's shares to Namibians.

The commission said due to the link between West China Limited and Whale Rock Cement (the owners of Cheetah Cement), the merger is likely to create or enhance conditions in the market conducive to collusion and the sharing of business information.

"Given the relationship between Whale Rock Pty Ltd and the acquiring group, the implementation of the proposed merger will increase and strengthen the dominant position of the merged undertaking," said the commission.

It added that allowing one investor to own competing firms is basically clearing the path to collusion through the sharing of sensitive business between the failed buyer of Ohorongo Cement and Whale Rock Cement.

Moreover, the commission weighed the benefit of allowing such an undertaking to the cost it poses to the market, and has established that "no concrete benefit would outweigh the detrimental effects that will result from the implementation of the proposed merger".

West China, during a public hearing early last month, denied any links between them and Whale Rock Cement - undertaking to comply with competition rules.

The competition watchdog said considering that entering the cement industry is already a challenge, if the merger is allowed it would be difficult for any Namibian-owned company to ever enter the sector.

Schwenk Zement last month said it was happy to break the promise of selling off the cement plant to an international investor, because no Namibian firm were interested in the plant - a statement some local investors refuted.

At the public hearing last month, concerned citizens called on Schwenk Zement to reconsider selling Schwenk Namibia in smaller portions and to allow it to be 'Namibianised'.

This is the second time Schwenk Zement failed to sell the company to a foreign investor.

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