File photo: Oupa Nkosi
The Competition Commission says it will investigate a complaint of legal non-compliance in a deal in which electrical infrastructure firm Actom acquired transformer producer SGB-Smit Power Matla (SSPM).
Competition Commission spokesperson Siyabulela Makunga confirmed to the Mail & Guardian that the fair trade watchdog was investigating a complaint from local company
Afro-Map — which failed in its own bid to buy SSPM. Its managing director Martin Ntuli alleged that provisions of the Competition Act were flouted.
Afro-Map has also filed papers at the South Gauteng High Court against the deal, claiming bias by SSPM’s business rescue practitioners (BRPs) and bad-faith conduct by the Industrial Development Corporation, which participated as a senior secured creditor.
In his submission to the Competition Commission, Ntuli said the deal contravened the Competition Act through the exchange of proprietary and manufacturing information with SSPM before the conclusion as well as the removal of machinery and equipment from SSPM premises.
“Doing this prior to obtaining the required notifications or approvals to implement the merger or transaction, is a practice prohibited in terms of the Competition Act,” said Ntuli.
“The prohibited conduct by the acquiring entity Actom and that of the BRPs on behalf of target SGB-Smit Power Matla (Pty) Ltd, exhibits a complete disregard and arrogant disrespect of the competition Act. This prohibited conduct further supports our submission to the commission as an interested and affected party opposing this merger.
“This is on the grounds of competition, public interest, flawed collusive, corrupt BRP process and conduct, which led to the lodging of this merger for approval by the commission.”
In the court case, papers seen by the M&G showed that Afro-Map accused Ian Fleming and Warren Castle, who were appointed business rescuers for SSPM in September 2023, of having applied “flawed reasoning” in recommending the acquisition and acted in a manner that was “irrational, unreasonable and procedurally unfair”.
An affidavit by Ntuli cited Fleming, Castle, Actom, SSPM, the IDC and state power utility Eskom as respondents.
“The conduct of the BRPs, IDC and Eskom, perpetuates the disadvantages experienced by the majority of black South Africans in participating meaningfully in the national economy,” Ntuli said in the affidavit.
“This undermines the constitution, achievement of equality and transformation of sectors dominated by a few players, who are largely white.”
Ntuli said his complaint to the Competition Commission arose after he received an inquiry from the National Union of Metalworkers of South Africa, which represents the majority of employees at SSPM.
“The inquiry sought to establish whether we were still pursuing the target because employees were witnessing frequent [visits by] Actom people at the factory – movement of machinery, equipment and the so-called inspection by the acquiring entity,” Ntuli said.
“This, despite there not having been any communication from authorities of the merger having been approved.”
He said Afro-Map had sought an interim relief order from the Competition Commission to prevent “serious damage to our interests and rights, as we are appealing the process, conduct and creditors’ meeting which approved the merger to be set aside”.
The conduct of the business rescue practitioners in the deal “constitutes a substantive gin-jumping practice, whereby merging parties are competitors, coordinating their competitive conduct prior to the actual closing of the transaction”, Ntuli added.
“This behaviour is an impermissible joint conduct of sharing competitive-sensitive information between the parties, to a merger transaction prior approvals. The competition law prohibits this conduct.”
Asked for comment, Actom spokesperson Mamiki Matlawa denied that the company had breached the law, saying the transaction was conducted “fully in compliance with all applicable legal and regulatory requirements”.
Matlawa said the matter had been taken to the Competition Tribunal where it was currently being adjudicated.
The Competition Commission investigates anti-competitive conduct and refers cases to the Competition Tribunal when it believes the law has been breached
“The tribunal’s role is confined to competition law issues and it does not have jurisdiction over the Companies Act,” said Matlawa, adding that Actom was “not aware of any separate probing processes conducted by the Competition Commission — either during its investigation of the transaction or after the matter was approved by both the Competition Commission and the Competition Tribunal”.
Earlier this month, the business rescue practitioners also defended themselves against Afro-Map’s accusations, telling the M&G that despite claiming to possess the potential and liquidity to drive the transformer industry through the acquisition of SSPM, the company could not provide sufficient proof of funds.
They said they had ensured “full transparency and context in terms of the legal process”, in line with the country’s business rescue regime, governed by the Companies Act.
The IDC has also denied any interference on its part. The state entity did not manage or interfere in the business rescue process, “which is the responsibility of the appointed BRPs”, head of corporate affairs Tshepo Ramodibe told the M&G earlier this month.
In recommending the acquisition in August, the Competition Commission had said it was of the view that the deal was unlikely to lessen or prevent competition in the sector.