Opinion / 25 July 2019, 11:50am / Sello Mashao Rasethaba
On Friday, the Competition Commission issued a statement that it had recommended to the Competition Tribunal that the proposed acquisition of Murray & Robert (M&R) by German firm Aton be prohibited.
It is reported that there are more than 300 German companies operating in South Africa, which employ more than 60 000 people.
In his budget vote speech, Minister of Trade and Industry and Economic Development Ebrahim Patel stated that one of the issues he was focusing on this year and beyond was to improve the levels of investment in the economy, and help achieve the target set by President Cyril Ramaphosa in his State of the Nation address last year.
Patel said that his department would use its budget and resources to support the Investment Conference scheduled for November 5 to 7.
Patel must use these resources to ensure that South Africa does not lose the Aton investment.
The commission said it had “found that the merging parties are close competitors and that this transaction would, for both parties, result in the removal of their closest and strongest competition”.
But what about the interests of shareholders of JSE-listed construction group M&R, who stand not to realise value which could be used for new ventures that could create new jobs?
Just last week, the African News Agency (ANA) reported that Patel welcomed a R50million investment by BFG Africa Rail in a manufacturing facility in Germiston, Ekurhuleni.
Patel reportedly said the launch would create new jobs, resulting in a full staff complement of 120 employees by the end of December. He also affirmed the improving investment climate in South Africa which would contribute towards President Cyril Ramaphosa’s investment mobilisation drive.
While we welcome transactions such as the BFG one, South Africa needs to create an equally conducive climate for big and large-scale business activities.
Aton has made an offer consideration of R17 a share, representing a significant premium of 77.3percent over the closing price of the M&R share price as at March 22, 2018.
This offer values M&R at R7.6billion, and represents significant value to M&R shareholders.
It provides them with an opportunity to realise value in cash, and divest them of their M&R shares at a premium. This is attractive considering the low trading volumes in M&R shares.
Aton emphasised that implementation of the offer would be beneficial to M&R and its stakeholders, including broad-based black economic empowerment (B-BBEE) shareholders who are locked in a share that is going nowhere.
Aton stated that it intended to support M&R in its continued efforts to foster B-BBEE initiatives and transformation as a commercial imperative.
It is an open secret that companies such as Aton are responding to the call by Ramaphosa for domestic and international companies to invest in South Africa.
The Aton offer represents a vote of confidence in the “New Dawn” and the economy by a German-owned firm with a global presence.
In this regard, the foreign-direct investment that would result from the proposed transaction would contribute towards the recovery of the economy, while our own Naspers is planning to spin off assets including a $134billion (R1.8bn) stake in Chinese games-maker Tencent Holdings to list on the Euronext Exchange.
I agree with Aton that “the investment by an experienced multinational corporation into South Africa” is likely to result in enhanced growth and opportunities for South Africa, as well as the transfer of skills and knowledge to local employees.
This investment should not only be beneficial to M&R, but also domestic suppliers and the South African society in general.
The South African economy is in crisis, companies are shedding jobs, and we can’t afford this decision by the commission.
In his budget vote speech, Patel said: “Larger businesses will have a more flexible exemptions’ regime in place to enable them to collaborate with each other to help expand South African production, grow our export markets, develop new technologies or expand jobs.”
These words ring hollow and are meaningless if we continue to make it difficult for the likes of Aton to invest in our economy. Let’s hope that the decision by the commission to recommend a prohibition will not discourage other German companies from responding to Ramaphosa’s call for foreign-direct investments.
The government and its regulatory agencies must change the way they consider transactions such as that of Aton in this gloomy economic environment. The message I hear from the likes of Aton is unequivocal: they want certainty and stability from the government.
The time to act is now, before we go into a deeper economic crisis.
Sello Mashao Rasethaba is chairperson of the African Entrepreneurs Council (AEC). AEC focuses on effectively supporting businesses, as well as entrepreneurs. This is achieved by forging partnerships with local and international companies.