Blow to President Cyril Ramaphosa

The Competition Commission and Competition Tribunal’s decision to block the Vodacom-Maziv deal dampens President Cyril Ramaphosa’s call for more investment in South Africa.

On Tuesday, the Competition Tribunal issued an order prohibiting the proposed transaction involving Vodacom and Maziv.

“The proposed transaction would have combined the country’s largest mobile operator, Vodacom, with one of South Africa’s largest fibre infrastructure players, Maziv,” it said.

The ruling came fourteen months after the Competition Commission recommended to the Competition Tribunal to prohibit the transaction.

The Competition Commission welcomed the decision by the Tribunal to prohibit the proposed merger between Vodacom and Maziv.

The Competition Commission was clearly dead set against the transaction, despite the numerous positives it offered the country.

However, it was not the only problem. In addition to the adverse ruling, the time it took to reach this conclusion raised concerns among the investment community.

The process started in November 2021 after Vodacom signed a deal to buy a stake in Maziv, which owns Vumatel and DFA.

In October 2022, the Independent Communications Authority in South Africa (ICASA) approved the transaction.

However, the Competition Tribunal took another two years to stop the deal. This means that Vodacom and Maziv had to wait three years for a decision.

Uncertainty is a business’s worst enemy, and the Competition Commission created tremendous uncertainty with its prolonged process.

Uncertainty chases investors away and creates a business-unfriendly environment. This, in turn, damages the economy.

Maziv and Vodacom were disappointed at the decision, considering the positive effects it would have had on South Africa.

Vodacom said the transaction was designed to assist Maziv in growing its fibre footprint into lower-income areas and would have been highly beneficial for South Africa.

Even the Department of Trade, Industry and Competition described the transaction as having “substantial positive public interest effects”.

Vodacom committed to invest at least R10 billion in fibre infrastructure over 5 years, predominantly in low-income areas.

This investment would enable it to pass at least one million new homes with fibre in lower-income areas over the 5 years.

It would create 10,000 new jobs and establish a R300 million enterprise and supplier development fund to prioritise SMME development.

Vodacom also committed to providing high speed internet to over 600 adjacent schools and police stations at no cost.

It would have seen Vodacom invest up to R14 billion into South Africa through the transaction.

“Our investment of up to R14 billion would have changed millions of lives and created thousands of jobs,” Vodacom CEO Shameel Joosub said.

Some consolation is that all is not yet lost. Vodacom and Maziv said they await the Tribunal’s detailed reasons for prohibiting the transaction.

After the reasons are released, they may appeal the Tribunal’s reasons in the Competition Appeal Court.

Competition Commission and Competition Tribunal’s decision slated

Renowned investment specialist and analyst David Shapiro also said he was disappointed in the Competition Tribunal’s decision.

He explained that Vodacom and Vumatel wanted to roll out fibre in underprivileged areas to ensure everyone has access to fast and affordable broadband.

“The Competition Commission can sometimes be so preoccupied with money and balance sheets that they miss what companies want to achieve,” he said.

He added that it is essential that everyone in South Africa has access to fast Internet to promote small businesses and enhance education.

“I hope the deal goes through. Vodacom and Maziv’s intentions were not all about money,” Shapiro said.

Mergence head of equities, Peter Takaendesa, told Business Report the decision will have implications for other market consolidation transactions.

“Vodacom will likely deploy more of its capital outside South Africa or prioritise repaying debt should its bid ultimately fail,” he said.

Simply put, Vodacom has many options for allocating its money. This transaction would have seen it investing billions in South Africa to roll out fibre.

However, it may now look at options abroad where there are more favourable business conditions for investment.

This means the Competition Commission and Competition Tribunal’s decisions harm President Cyril Ramaphosa’s call for more investment in South Africa.

Ramaphosa and his government have repeatedly called on local and international businesses to invest in the country.

Yesterday, he told delegates at the SA Tomorrow and SA Macro Investment Conference that “South Africa is open for investment”.

“South Africa is firmly on the road to recovery. Investments in South Africa are secure. Our business environment is stable,” he said.

While Ramaphosa tells businesses that “South Africa is open for business,” the Competition Commission’s message is “not so fast”.

The Commission welcomed blocking a deal which would have pumped billions into South Africa, created thousands of jobs, and bolstered the economy.

It sends a clear message that big deals, which the South African economy desperately needs, are at significant risk of being blocked.

The Commission may drag the process out for years, causing additional damage to those who want to invest.