Merger Control 2023 Comparisons

The relevant merger control legislation in Zimbabwe is as follows:

• the Competition Act (Chapter 14:28);
• the Companies & Other Business Entities Act (Chapter 14:23);
• the Competition (Notification of Mergers) (Amendment) Regulations, 2022 (No. 1), Statutory Instrument 55 of 2022;
• the Competition (Advisory Opinion) Regulations, Statutory Instrument 26 of 2011;
• the Competition (Notifiable Merger Thresholds) (Amendment) Regulations, Statutory Instrument 126 of 2020;
• the Competition (Advisory Opinion) Regulations, Statutory Instrument 125 of 2020;
• the Competition (Anti-Dumping and Countervailing Duty) (Investigation) Regulations, Statutory Instrument 266 of 2002;
• the Competition (Fees for Inspection and Copying of Documents) Regulations, Statutory Instrument 266 of 2001;
• the Exchange Control (Special Provisions for Securities Listed on Victoria Falls Stock Exchange) Regulations, Statutory Instrument 196 of 2020; and
• the Zimbabwe Stock Exchange Amendment Rules 2019.

The Indigenisation Act reserves up to a 49% shareholding for foreign investors in mining transactions relating to the mining of platinum and diamonds.

The Postal and Telecommunications Act requires persons licensed by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) to inform the authority of any transfer of more than 10% of the shares in the licensee.

The Zimbabwe Energy Regulatory Authority Act (Chapter 13:23) gives the energy regulator (Zimbabwe Energy Regulatory Authority) the power to regulate competition in the energy sector.

All other “general” foreign investments are regulated by the Zimbabwe Investment Development Agency Act.

The Competition and Tariff Commission (the Commission) regulates competition.

The following authorities regulate sector-specific competition:

• POTRAZ regulates sector-specific mergers involving telecommunications companies; and
• the Zimbabwe Energy Regulatory Authority regulates competition issues that are specific to the energy industry.

Notification is compulsory if a transaction reaches or exceeds the notification threshold.

The new threshold for a notifiable merger applies to merging parties whose combined annual turnover in Zimbabwe is USD1.2 million or whose combined assets in Zimbabwe are USD1.2 million.

There are no exceptions to notification.

Parties to a notifiable merger may not implement a transaction without having first notified and obtained approval from the Commission. Penalties for failure to notify are levied up to a maximum of 10% of either or both of the merging parties’ annual turnover or assets in Zimbabwe. The penalties are made public by the Commission.

Merger control legislation generally regulates vertical and horizontal mergers and conglomerations. The framework targets transactions involving direct or indirect acquisitions of a “controlling interest” only. Therefore, a transfer of shares that does not result in a “controlling interest” is not caught by the merger regulations.

The Competition Act qualifies “control” and defines a “controlling interest” as any interest in an asset that enables the holder to exercise control over the activities or an asset of another, through direct or indirect means.

The jurisdictional threshold is USD1.2 million of assets or annual turnover in Zimbabwe, applicable to all sectors. The threshold was previously set in Zimbabwe dollars, but this has been changed to US dollars by a recent statute. There are no sector-specific jurisdictional thresholds.

Annual turnover is calculated in accordance with the International Accounting Standards (standards set by the International Accounting Standards Association and adopted by the Zimbabwe Public Accountants and Auditors Board) and the statement of Comprehensive Income of the entity concerned for the immediate previous financial year.

The asset value of any of the merging parties is calculated using the International Accounting Standards and the International Financial Reporting Standards.

The asset value of the party at any time will be based on the gross value of its assets as recorded on the party’s Statement of Financial Position as at the end of the immediate previous financial year. Previously, any sales or assets booked in foreign currency were converted at the prevailing exchange rate. However, now that the threshold has been set in US dollars, there may not be any need for conversion, except in situations where sales are realised in Zimbabwe dollars, which may need to be converted to US dollars at the prevailing Dutch Auction rate for the purposes of determining turnover.

A seller's turnover is included with that of the target.

The threshold is calculated by combining all the merging parties’ annual turnover or assets in Zimbabwe; if such combined turnover or assets exceed the threshold, then the transaction becomes a notifiable merger.

For group companies, where one of the merging companies is a subsidiary company, the combined turnover of the group of companies in which the acquiring party is a subsidiary is also included.

The current legislative framework has no extra-territorial application, except in respect of mergers with an “effect” in Zimbabwe – eg, change in control of an asset or entity in Zimbabwe. The competition legislation incorporates the “effects test”, which empowers the regulator to “regulate” any foreign transaction(s) that may have an economic “effect” in Zimbabwe regardless of a lack of presence. However, no guidelines have been issued on how the “effects test” will be applied to foreign mergers. In practice, such notifications result from co-operation between competition authorities, especially with those from the neighbouring countries.

There is no market share jurisdictional threshold.

Joint ventures are subject to merger control.

The competition framework requires parties to any agreement or arrangement – including a joint venture involving a transaction that is prohibited, restricted or affected by the Competition Act – to apply for authorisation from the Commission. There are no special rules for determining whether joint ventures and any similar arrangements meet the jurisdictional threshold.

The Commission is empowered to conduct any investigations it deems necessary into any merger or monopoly situations, to discourage and prevent restrictive practices.

There is no statute of limitations on the authorities’ ability to investigate a transaction.

Parties cannot implement a transaction unless the Commission has approved and cleared said transaction. The Commission can prohibit and penalise a party for implementing a transaction without its approval.

Parties may, however, seek dispensation to implement a transaction pending assessment by the Commission. Such matters are dealt with on a case-by-case basis.

The Commission may prohibit a transaction that is implemented before it has been cleared and/or may impose a penalty, which may not exceed 10% of the parties' combined annual turnover or assets in Zimbabwe.

The penalties are made public in the Commission's annual reports, which are published annually or quarterly after board resolutions.

There are no exceptions to suspensive effect. However, parties to a merger may seek a waiver to implement a transaction pending assessment by the authorities.

Closing prior to clearance is not permitted. The Competition Act empowers the Commission to impose a penalty on merging parties that proceed to implement a merger before it has been cleared.

Notification must be made within 30 days of concluding the merger agreement between the parties, or within 30 days of the conclusion of the acquisition of a controlling interest.

Failure to notify attracts a penalty, which may not exceed 10% of the merging parties' annual turnover in Zimbabwe.

The penalties are public and are published by the Commission on its public platforms, such as its website.

A formal and written agreement is required prior to notification.

Notably, the Companies and Other Business Entities Act requires the merging parties to provide notification of a provisional contract of merger to shareholders, accompanied by a copy of the contract of merger.

The contract of merger to be submitted to the shareholders on notification must include the following details:

• the name of the registered office and company secretary of each company that will merge;
• the terms and conditions of the proposed merger;
• the manner and basis of converting the shares of each merging company into cash or property;
• the full text of the surviving company's constitutive documents;
• the date upon which all transactions of the non-surviving company shall be treated as those of the surviving company; and
• the rights conferred by the surviving or new company on the holders of securities other than shares and any other provisions relating to the merger.

The Commission is expected to use this standard in cases where no formal agreement has been reached by the parties before notification.

The notification is accompanied by a notification fee, calculated at 0.5% of the combined annual turnover or assets in Zimbabwe of the merging parties.

The minimum and maximum fees payable are USD10,000 and USD40,000, respectively.

Either the acquiring party or the target party to a notifiable merger can make the transaction notification.

A standard notification form is provided by the Commission, setting out the information to be included in a filing.

The general information to be included is as follows:

• the names and official addresses of the merging parties;
• all undertakings directly or indirectly controlling the merging parties;
• the full name, address and contact details of the person authorised to make the notification;
• the address and designated office to which the Commission should send any correspondences;
• specific details on the nature or quantity of assets being acquired or transferred;
• purchase consideration;
• estimated timelines for concluding the transaction;
• the pre- and post-merger structure of ownership and control of the merging parties;
• the rationale and future plans of the proposed merger; and
• the anticipated benefits of the merger to consumers or any other third parties.

Documents from foreign countries must be notarised by a notary public, whilst those from Zimbabwe must be certified as true copies of the original. The filing must be in the English language; a document in any other language must be accompanied by a translation into English.

There are no penalties or consequences for incomplete notifications. In practice, the Commission may request further information upon realisation that the notification is incomplete.

The Commission is empowered to either amend or revoke any authorisation if it realises that said authorisation was granted based on erroneous or misleading information.

The party that submitted the erroneous or misleading information may be called to correct, justify or explain the information thought to be erroneous or misleading.

The party responsible for the submission of misleading information may be fined or imprisoned for a period not exceeding one year. There have been no reports of any instances where the authority has had to utilise this power.

The review phases are as follows:

• filing a notification accompanied by the notification fee;
• scrutiny of the submitted forms by the Commission;
• initial screening committee;
• stakeholder consultation;
• case analysis and report drafting;
• consideration of the report by the draft committee;
• consideration of the report by the Commission board's sub-committee;
• consideration of the report by the Commission's main board; and
• notification of the board's decision to the merging parties.

There is no set timeline within which this process must be completed. However, in practice, the Commission takes up to 120 days to review complex transactions, while less complex transactions take about 60 days.

Parties can engage in pre-notification discussions with the Commission, which is empowered by the Competition Act to enter into such negotiations with parties at “any time”. Pre-notification discussions are encouraged by the authorities but are not mandatory.

Any discussions with the Commission will be deemed to be confidential, and such confidentiality is binding on all members of the Commission.

The Commission may request any information it deems necessary; since there is no timeline within which a review must be completed, the request for information has no effect on the time for completion of review. Parties are encouraged to submit comprehensive documents to avoid requests for documents, which may delay the review process. Where a party submits erroneous or misleading information, it may be called to correct, justify or explain the information thought to be erroneous or misleading.

All merger review procedures follow the channels set by the Commission. As such, there is no method through which to accelerate any of the review procedures.

The Competition Act does not specifically define the substantive test used in reviewing a merger. A reading of the different sections in the statute gives the impression that “public interest” is the substantive test applied by the authorities, which is defined to cover any transaction that is likely to lessen the degree of competition or create a monopoly in all or part of the country.

The Commission largely considers the geographical/location points for the distribution of the product/service sold by the merging parties.

Authorities frequently rely on case law, although case law from other jurisdictions is persuasive rather than binding. Case law from South Africa is heavily relied on because of the common Roman Dutch law heritage.

The Commission is mostly concerned with investigating effects which in their nature are restrictive practices. Such restrictive practices include anything that has or is likely to have the following effects:

• restricting, preventing or limiting the production or distribution of any commodity or service;
• enhancing the price of any commodity or service;
• preventing or retarding the development of any technical improvements in regard to a commodity or service;
• preventing or retarding the expansion of the existing market; and
• limiting the availability of the commodity or service.

Economic efficiencies are regularly considered. The Commission largely considers economic efficiencies for mergers having a higher risk of stifling competition. It requires the merging parties filing the notification to justify the merger transaction and suggest how they intend to mitigate the anti-competitive effects of the merger concerned.

A consideration of the economic efficiencies of the merger may result in the merger being approved with conditions.

The Commission is allowed to take non-competition issues such as public interest into consideration. The Competition Act specifically makes reference to the Commission's power to restrict any practice that is against public interest. The test for whether an act is contrary to public interest is open to contextual/circumstantial definition. However, non-competition issues may include:

• the creation of employment;
• consumer protection;
• the promotion of indigenisation;
• the dismantling of market entry barriers;
• brand development; and
• the promotion of foreign investment.

Foreign direct investment is regulated by the Zimbabwe Investments Authority. Rules for foreign direct investment are separate from merger control rules. Foreign direct investment does not require filings, but rather compliance with the Zimbabwe Investment Authority's framework, such as obtaining an Investment Licence and complying with exchange control rules.

The Commission makes special considerations for joint ventures that are long term in nature. No competition issues may arise for short-term joint ventures.

The Commission can:

• conditionally approve a merger;
• approve the merger without conditions; and/or
• prohibit the merger in its entirety if it is likely to lessen or remove competition, or result in unfair business practices.

In making the above orders, the Commission considers the following factors:

• maintaining and promoting effective competition;
• promoting the interests of consumers, purchasers and other users; and
• promoting, through competition, the reduction of costs and the development of new techniques and commodities.

The Commission may enter into negotiations with the parties concerned with the intention of making an arrangement that will ensure the discontinuance of any restrictive practice and terminate, prevent or alter any merger or monopoly situation.

All enforcement orders and remedies must be reasonable and justifiable.

Typical remedies include “conditional approval” of a merger, divesting or dissolution in cases of a monopoly or prohibiting the acquisition, in whole or in part, of an undertaking or assets that raises competition issues.

The remedies imposed on the merging parties cannot be varied or negotiated by the parties once they have been imposed by the Commission. In practice, an affected party is given an opportunity to make representations before a remedy is issued by the Commission.

The conditions and timings for divestitures or other remedies are determined on a case-by-case basis. Parties cannot implement a transaction where the remedies have not been complied with.

All decisions are issued to the parties, explaining, if necessary, the reasons for the decision if the merger is prohibited. The Commission makes all decisions public in its annual reports.

The information provided for in the public reports includes:

• the names of merging parties;
• the date of notification;
• the merger details (specifics of transaction);
• the relevant market;
• the type of merger (conglomerate/vertical/horizontal); and
• the decision of the Commission (approval or disapproval).

Where foreign-to-foreign parties have a local asset or branch, remedies are imposed on the local entity. There is no recent record of any remedies being enforced in a foreign-to-foreign transaction.

Clearance decisions cover related arrangements. Separate notifications are not required for ancillary transactions, since all related transactions are treated as one.

Third parties are notified of a proposed merger through a publication in the government gazette.

The Commission gives third parties the right to submit written representations regarding mergers.

Communications to third parties or the general public are usually made by way of publication in the government gazette.

However, where authorisation is sought, the Commission may not publish the notice if it considers that such publication may prejudice the parties to the merger and if the notification will not materially assist the Commission in gathering the information it seeks to gather from the public.

A notification is not confidential: after notification is made, a notice of the proposed merger is published in the government gazette, calling on third parties to make any submissions regarding the merger.

The description of the transaction itself is confidential unless it is disclosed by members of the Commission in their official capacity, and only when they are required by law to do so. Failure to maintain the confidentiality of information bears penalties against members of the Commission.

The Commission co-operates with competition authorities from other jurisdictions for transactions involving foreign entities. It shares information relating to specific transactions without authorisation from the parties involved. The co-operation extends to the development of policy, practice and regulation.

Any person who is aggrieved by a decision of the Commission may appeal against it to the Administrative Court.

An appeal is supposed to be lodged within 30 days of the original decision being made by the Commission.

The framework does not provide for the right of appeal by third parties against clearance decisions.

However, third parties have the right to recover damages for any loss, suffering, injury or harm resulting from any arrangement, undertaking or conduct that constitutes unfair business practise or any conduct in contravention of the Competition Act.

There is no foreign direct investment or foreign subsidy merger control legislation in Zimbabwe, nor is there any requirement for a separate filing other than that provided under the merger control law.

The most recent change is Competition (Notification of Mergers) (Amendment) Regulations, 2022 (No.1), Statutory Instrument 55 of 2022, which provides for new monetary thresholds for notification.

The Statute pegs the monetary threshold in US dollars, which is a material change as the previous instrument pegged the monetary threshold in local currency (the Zimbabwe dollar).

Furthermore, principles for a new, modernised Competition Act are being discussed. The new Act is expected to address some of the short-comings of the current Act and bring it into line with developments in the regulation of competition.

The authorities are also in the process of drafting merger guidelines to simplify the law and practice of merger regulation in Zimbabwe.

There have been two cases involving enforcement, both relating to late notification:

• in the merger of Sub-Sahara Tourism Investment & Shearwater Legends of Africa with Zambezi Tourism Investment, the merging parties were penalised 1.27% of their revenue; and
• in the merger of Takura Ventures P/L and New Health 263 P/L, the merging parties were penalised 2.8% of their turnover.

In another case, the Commission ordered Innscor Africa to sell its shares in Probrands, one of the country’s biggest producers of groceries, and pay a fine of the equivalent of USD9 million for not notifying it of that acquisition. The Commission said that the deal substantially lessened competition by according Probrands/National Foods the ability to exercise market power as a result of the lower competitive constraints between the merging parties. The merger created a single firm with anti-competitive effects as well as substantial market power, with long-lasting consequences for consumers.

Generally, a trend has emerged in which the authorities will approve conglomerate mergers without conditions and vertical mergers with conditions, to avoid concentrations and competition being harmed.