Namibia: Chinese Purchase of Ohorongo Blocked By Nacc

5 August 2020

The Namibia Competition Commission (NaCC) has blocked the acquisition of Schwenk Namibia (Pty) Ltd, which owns and operates the Ohorongo Cement factory, by West China Cement Limited for N$1.5 billion since it would result in coordination between Ohorongo Cement and Whale Rock Cement, which trades as Cheetah Cement.

The proposed acquisition was deemed uncompetitive by the NaCC since West China Cement Limited also has a majority stake in Cheetah Cement, the sole competitor to Ohorongo Cement.

"The Commission had found that the proposed transaction was likely to substantially prevent or lessen competition in the cement market due to coordination. This coordination is likely to lead to a strengthening of dominance and the exercise of market power to the detriment of consumers," read the NaCC's decision.

The NaCC secretariat's investigations revealed that a link exists between the acquiring group and Whale Rock Cement that will increase the likelihood of coordination post-merger, between the two players in the local cement market. "The merger is also likely to create or enhance conditions in the market which are conducive to collusion, specifically the sharing of sensitive business information between the primary acquirer and Whale Rock Cement."

"The target undertaking has a dominant position and post-merger, the Commission is of the considered view that given the relationships that exist 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," read a statement by the NaCC. The Commission added that barriers to entry in the cement market are high and it is not likely that a small undertaking, particularly small undertakings owned or controlled by historically disadvantaged persons, will be able to gain access to or be competitive in the relevant market.

"Worth noting is that collusive conduct is of greater concern to competition authorities than single firm dominance. This is not only because such conduct often results in the most egregious form of anti-competitive outcomes such as price-fixing or market allocation, but also because of the inherent difficulty in detecting and policing conduct between competitors that are practised subtly, if not entirely tacitly," the Commission stated.

The proposed acquisition followed a failed bid last year by another Chinese company, which was blocked by the Singaporean Stock Exchange out of concern about weak profitability prospects at Ohorongo.

Ohorongo Cement plant outside Otavi has an annual production capacity of one million metric tonnes. The total subscribed, issued and fully paid-up share capital of Ohorongo Cement is around N$2 billion.

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