This emerged at a Competition Tribunal hearing last week about the proposed merger between WBHO Construction and Faku Family Enterprises (FFE) with Grindrod Rail Construction South Africa (GRC SA) and Grindrod Rail Construction Company (GRCC), which are part of the listed integrated logistics service supplier Grindrod.
The tribunal approved the merger without conditions.
Lindiwe Khumalo, appearing for the Competition Commission, said there was a three-year restraint of trade between the parties and the geographic scope of the restraint was the continent of Africa, including Mauritius and Madagascar. Khumalo said the commission had assessed the restraint and found it was reasonable.
However, Medi Mokeuna, a tribunal panel member, questioned if it was reasonable for the restraint to apply to the whole of Africa.
David Colman, the divisional financial director at WBHO Construction, highlighted that they were currently working in 12 or 13 African countries but had more than 50 to 60 rail opportunities throughout Africa that they were tracking.
Colman said these opportunities could lead to WBHO Construction expanding into 20 to 30 other countries in Africa. However, he said only one or two rail opportunities were closed each year.
"They are extremely rare to get awarded and we track them for over two or three years. That is why it’s very important to not only look at the countries that GRCC is working in, but all the opportunities we have been tracking and spending money on for the last two years.”
Andrei Wessels, the chairperson of the tribunal panel, said the acquiring and target firms appeared to have different views on the potential growth in this market.
Colman said a lot of infrastructure had to be built in South Africa and there was a complementary relationship between the civil and railways side of these opportunities.
He said WBHO Construction’s new relationship with FFE established GRC SA as a 51percent black-owned company, which would allow them to capitalise on tender opportunities in South Africa issued by Transnet, the Passenger Rail Agency of South Africa, Sasol and Eskom.
Colman added that WBHO had been actively looking deeply into Africa, such as Ethiopia, Ivory Coast, Zambia and Uganda, and had assembled consortiums that included the Development Bank of Southern Africa “as Africa Incorporated”.
Kenn Verster, the head of capital projects at Grindrod, said Grindrod was primarily a freight logistics business and its original strategy for buying into GRCC was to use the internal construction capability for an opportunity they saw both in South Africa but more around the African continent to develop logistics infrastructure.
In terms of the transaction, WBHO Construction will acquire 87.5 percent of GRCC from Grindrod Holdings and FFE the balance and acquiring a 51 percent stake in GRC SA on completion of the acquisition.
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