While Malawi may be celebrating a record 40 mergers since the inception of the Common Market for Eastern and Southern Africa (Comesa) Common Competition Commission (CCC) in January 2013, a renowned economist fears the mergers may create monopoly on the market.
Although mergers and acquisitions have become a major vehicle for attracting foreign and direct investments (FDIs) on the market, Chancellor College economist Professor Ben Kaluwa fears they may lead to market concentration.
In an interview on Wednesday, Kaluwa said while mergers and acquisitions attract FDI and help in coming up with stronger and better capitalised firms, he argued that they create monopolies as there may be few players on the market. This, he added, leads to abuse of customers’ rights.
“Since there are few players on the market, competition becomes weak,” he said.
He cited a healthy competition the country once enjoyed when it had 12 commercial banks. Currently, Malawi has 10 banks after National Bank of Malawi bought 97.05 percent stake in Indebank Limited while FDH Bank merged with Malawi Savings Banks (MSB).
In the Comesa bloc, Malawi had 11 mergers with notable ones involving My Bucks and Opportunity International; British American Tobacco Middle East and Blue Nile Cigarette Company Limited; Total Outre-Mer SA and Gulf Africa Petroleum Corporation; and China National Agrochemical Corporation merger with Syngenta AG.
CCC 2016 tabulations put Malawi on sixth position with 11 mergers whereas Zambia and Kenya are on the first position with 20 transactions seconded by Mauritius with 16 mergers. Zimbabwe and Uganda are on third with 15 assessments.
In response to a written questionnaire, CCC head of mergers and acquisitions Willard Mwemba said the commission has been remitting the share of the notification fees that are due to member States, including Malawi, since its inception in January 2013.
“Mergers that would affect Malawi would be those where the parties derived turnover,” said Mwemba.
He said since its inception, the turnover derived by the parties to mergers is estimated at $1.2 billion.
According to Mwemba, this figure, therefore, provides a hint on levels of investment taking place locally through mergers and their corresponding portion to Malawi’s gross domestic product (GDP).
He further said since the commission acts as a one-stop-shop for cross-border merger review, it shares a portion of the notification fees due to member States.
Mwemba said the share is calculated based on the turnover that the merging parties derive in the countries in question. n