Tanzania government defends Tanga Cement acquisition

The FCC approved the acquisition, but the decision was quashed by the quasi-judicial Fair Competition Tribunal (FCT).

In December 2022, Scancem International applied again to the FCC in a bid to acquire Tanga Cement. This new application was approved by the FCC in February 2023. However, the discussion has since refused to end as different parties disagree on the legality of the latest approval.

Some lawyers and Members of Parliament (MPs) have been pushing for the government to respect and maintain the ruling of the tribunal by disapproving the application.

On Thursday and Friday, almost half of the lawmakers who contributed to the debate on the budget of the Ministry of Industries, Trade, and Investment were divided over the matter.

Some MPs wanted an explanation of why the FCC approved the application, which had previously been rejected by the FCT.

Yesterday, the government defended the merger, saying it was in line with all laws and regulations.

“The approved merger application was a fresh one, different from what was rejected by the FCT,” said the Minister for Industry and Trade, Ashatu Kijaji.

Dr Kijaji was responding to queries by the MPs as she wound up her budget. “We respect the laws of the country, and that is why we did not deal with the decision quashed by the FCT. We only worked on the fresh application,” she said.

“The law allows a company to reapply for merger or acquisition, regardless of the first decision around the first application,” said Dr Kijaji.

According to the Fair Competition Act, a merger is prohibited if it creates or strengthens a position of dominance in a market.

The law considers a person to have a dominant position in a market if two conditions apply. These conditions include that if the person is (1) acting alone, the person can profitably and materially restrain or reduce competition in that market for a significant period of time, and (2) if the person’s share of the relevant market exceeds 35 percent. The application rejected by the FCT was assessed using the market metrics for 2020, said Dr Kijaji.

According to her, the second application was approved because market circumstances had changed, using the market data for 2022. The FCC had initially approved the proposed Sh137.33 billion takeover, but with the caveat that the acquiring firm should not shut down Tanga Cement; that it should continue to produce and promote the Simba Cement (Tanga Cement) brand, and that it was barred from laying off existing employees at Tanga Cement.

However, some players were opposed to the decision on the grounds that allowing the acquisition to go ahead would prevent, restrict, or distort competition in the market.

Chalinze Cement Company Limited and the Tanzania Consumer Advocacy Society (TCAS) were the ones who lodged an appeal with the FCT, which quashed the planned merger through its verdict delivered on September 23, 2022.

Dr Kijaji cast doubt on the credibility of Chalinze Cement, which was one of the applicants at FCT, saying the company was only registered after the first application for the acquisition of Tanga Cement had been filed at FCC and that it did not exist even during the first stakeholder hearing session.

“I have written to the company requesting to visit them, but no response has come up today. I made attempts to meet the company officials in vain. Who is this person trying to disturb the government’s resolve to attract investors?” she said. She said Chalinze Cement was deregistered for providing the wrong information to the registrar. Such information, she said, includes the “wrong address of the company and shareholders.”

Efforts to get the comments from Chalinze Cement were not successful, as calls went unanswered.

The Tanga Cement deal was also defended by other government officials, who allayed fears over the possibility of distortion of the Tanzanian cement market.

“I would like to assure the public that the government has its hand in Twiga Cement, which is run by Heidelberg Cement AG. Our pension funds invested in the firm, and therefore we are keen to protect the national interest,” said the Minister for Finance and Planning, Dr Mwigulu Nchemba.

Mkinga MP, Mr Dustan Kitandula, had expressed scepticism over the future of the factories after acquisition. He cited the example of his region, Tanga, which has seen many firms fail after acquisitions.

Deputy Minister in the Prime Minister’s Office responsible for Labour, Youth, and Employment, Mr Patrobas Katambi, said it’s not the first time the FCC has approved an application that had previously been rejected.