AFRICA: NAMIBIA: Ohorongo-Afrisam Merger Crumbles

The Namibia Competition Commission (NCC) has shot down a proposed merger between cement giant AfriSam and local producer Ohorongo, saying it is potentially anti-competitive and could distort the market at the expense of the consumer.

AfriSam Namibia and Ohorongo Cement in September filed an application that would have allowed AfriSam to sell and distribute cement produced by Ohorongo locally and in neighbouring countries.

Ohorongo plans to produce 700 000 tonnes of cement this year, of which the Namibian market only needs 320 000 tonnes. AfriSam, as the biggest cement company in Africa, has an extensive distribution network and would have been crucial in Ohorongo's export plans.

Announcing its ruling yesterday, the NCC said the proposed merger would have "a significant snowball effect of preventing or lessening competition or restrict trade or the provision of any service or endanger the continuity or supplies or services".

AfriSam and Ohorongo could lodge an appeal against the decision with Trade and Industry Minister Hage Geingob. However, NCC Chairman Lucius Murorua said that the ruling was a good decision.

"It will stand the test of time," Murorua said.

He added that the NCC doesn't take decisions "on the spur of the moment" and that plenty of expertise went into its investigations.

Neither party was available for comment yesterday. Ohorongo's board of directors were meeting on site near Otavi, while Johan Burger, AfriSam's country manager in Namibia, was at his head office in South Africa.

The local cement market currently is monopolistic with only a few suppliers, the NCC said. The market share of AfriSam Namibia is "disproportionately larger" than the other players, it continued.

"Given the larger market share of AfriSam Namibia Cement, the investigation concluded that the firm is currently a significant competitor in the market and exercise considerable dominance. The proposed merger will give rise to an increased market power which will put the merger parties in a strong market position to an extent that it would be able to determine inventory supply and pricing of cement independently from its competitors and potentially distort the monopolistic competitive situation evolving in the cement market."

With the NCC's ruling AfriSam Namibia effectively becomes Ohorongo's competitor. Any unfair pricing practices will be deal with in terms of the law, the NCC warned yesterday.

AfriSam waged a price war with Cheetah Cement in 2007, forcing the smaller local company to eventually sell below its cost price.

The NCC said it was aware of Ohorongo's "enormous potential" in terms of economic growth, job creation and foreign investment.

"Commission encourages that Ohorongo Cement continues its planned production capacity independently for Namibia to have local capacity production of its own cement," it said.