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Lawmakers warn against Tanga Cement acquisition

Dodoma.  The Sh137 billion Tanga Cement acquisition saga emerged in Parliament yesterday, with legislators warning that allowing the deal to proceed would result in a monopoly that would have far-reaching consequences on cement prices across the country.

Debating the 2023/24 budget estimates of the Prime Minister’s Office, some MPs said the planned acquisition would lead to price spikes, especially when the manufacturer undertakes routine factory maintenance.

“I have read in the papers about the planned merger between Twiga Cement and Tanga Cement. If it (Twiga Cement) acquires a controlling stake in Tanga Cement, this problem (of price increases) is bound to be recurring in November because we will have a single manufacturer which will be capable of fixing prices,” said Mr Kenneth Nollo (Bahi-CCM).

He said Tanzanians would not be able to build decent houses if cement would be a luxury, and asked the government to provide a detailed explanation on the matter.

Mr Elibariki Kingu (Singida West-CCM) rose on a point of order, and said according to the Fair Competition Act, no company was allowed to control more than 36 percent of the market.

“The merger the honourable MP is talking about will create a market monopoly that surpasses the threshold in line with the law that was approved by this august House, and Tanzanians should thus brace for tough times insofar as cement prices are concerned,” he said.

The merger in question dates back to October 2021 when Scancem International DA (Scancem) – a subsidiary of Heidelberg Cement AG, which owns Twiga Cement – and AfriSam Mauritius Investment Holdings Limited, owner of Tanga Cement, issued a joint statement that they had finalised the terms upon which the former would acquire a 68.33 percent stake in Tanga Cement.

The Fair Competition Commission (FCC) had initially approved the proposed Sh137.33 billion takeover, but with the caveat that the acquiring firm should not shut down Tanga Cement; that it should continue to produce and promote the Simba Cement (Tanga Cement) brand, and that it was barred from laying off existing employees at Tanga Cement.

However, some players were opposed to the decision on the grounds that allowing the merger to go ahead would prevent, restrict, or distort competition in the market in violation of the Fair Competition Act, 2003.

It was on these grounds that Chalinze Cement Company Limited and the Tanzania Consumer Advocacy Society (TCAS) lodged an appeal with the Fair Competition Tribunal (FCT), which quashed the planned merger through its verdict delivered on September 23, 2022.

The judgment by the quasi-judicial FCT, delivered by Lady Justice Salma Maghimbi, Dr Godwill Wanga and Mr Boniface Nyamo-Hanga, said in part: “Pursuant to the provisions of Section 11 (1) of the FCA (Fair Competition Act), having quashed and set aside the decision of FCC, the Tribunal prohibits the merger between Scancem International DA and Tanga Cement.”

But in an interesting turn of events, the FCC placed an advertisement on February 11, 2023 in which it said it had begun reviewing and investigating afresh Scancem International DA’s intention to acquire control of Tanga Cement Plc.

The review and investigation, the FCC said, was meant to establish whether the acquisition was likely to harm competition or not.

In view of the development, an interested individual, Peter Hellar, lodged application No. 8 of 2023 with the FCT in which the respondents were the FCC, Scancem International DA, Fayaz Bhojani, William Erio and Hakan Gurdal.

The applicant asked the tribunal to grant an ex-parte temporary injunction against the intended merger as advertised by the FCC on February 11, 2023.

He also pleaded that in case the merger was granted or was about to be granted or would be granted in the course of hearing the application, then an ex-parte order be issued to restrain the Business Registration and Licensing Agency (Brela), the Capital Markets and Securities Authority (CMSA) and the Dar es Salaam Stock Exchange (DSE) from registering or otherwise executing any act or step that would follow the execution of the merger.

It was the applicant’s view that by beginning the review and investigation of the intended merger, the five respondents were acting in contempt of the orders FCT issued in its September 23, 2022 ruling on the matter.

And, in its judgement, which was delivered on March 24, 2023, the FCT panel, which was chaired by Judge Salma Maghimbi, with Dr Onesmo Kyauke and Dr Godwill Wanga as members, sided with the applicant.

“The intended merger between Scancem International DA and Tanga Cement Plc, as advertised by the 1st Respondent on the Daily News of 11th February 2023, is hereby retrained, pending hearing of the Application inter parties,” the panel ruled.

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