Document Type

Article

Disciplines

International Law

Abstract

After contentious bids to acquire one another in mid 2009, BHP Biliton and Rio Tinto, both Australia based mining giants, settled for a joint venture arrangement.2 This came about after an initial effort by Chinese state-owned, Chinalco, to partner, Rio Tinto failed. 3 In June 2009, Xstrata, a Swiss mining company, made an estimated E41 billion merger overture to its rival, London and South Africa - based, Anglo American.4 This was the second major merger effort from Xstrata in as many months after its bid to acquire rival, Lonmin, failed because it could not raise the necessary finance in the middle of the global financial downturn. 5 The South African government is reluctant to endorse the merger of Xstrata and Anglo American. The reasons cited by the Mining Minister include the impact of the merger on jobs, competition and on the larger South African economy. Anglo American itself has rebuffed the offer but Xstrata insists that a merger of the two will make more than £l billion in efficiency savings. The underlying philosophies of South African competition law and policy are efficiency and equity. Whereas the latter is more peculiar to South Africa, given the history of apartheid, efficiency seems to be the cornerstone of almost all competition regimes.

The question that this article confronts is: in what ways do the waves of mergers and acquisitions affect the goals of competition law in the African context? Specifically, how do the mergers of transnational natural resource businesses with significant presence in Africa affect the African countries in which they operate? This question cannot be answered in isolation of the theory and practice of mergers and acquisitions and the major legal regimes that regulate or are implicated in the merger process. It is for this reason that the article discusses, in brief, the cycles and types of mer ers in the last century and challenges the view that mergers peak in bull markets. Mergers in general may move in tandem with the stock market, but mergers of businesses in natural resources do not reflect that. In fact, there were instances where resource mergers were inversely related to stock market direction.11 The work also evaluates the theories underlying mergers and shares the conclusion that efficiency gains in mergers are inconclusive or exaggerated.12 If, as various laws on competition and parties involved in mergers suggest, mergers must make businesses more efficient, indicated by cost reduction, reduced price of the product, fair competition and welfare benefits to the consumer,13 then mergers in resource businesses can hardly be said to be efficient. Cost reduction, this work would show, is mainly attained at the expense of the income realised by governments in countries where the companies operate;' 4 and hardly any natural resource company advertises its effort to reduce the price of platinum, diamond, gold or oil. Efficiency, as envisaged by the laws on competition and implied in merger language, is not necessarily practical in natural resource mergers.

As mergers in natural resources in Africa are driven by companies in the developed world, especially North America and Europe, the second part of the work examines the competition laws of the US, EU and South Africa.15 The conclusion here is that the doctrines of "substantial lessening of competition" and "abuse of dominant position" or the more recent "significant impediment to effective competition"; which undergird US, EU and South African competition 16 laws are essentially the same, notwithstanding the rhetorical differences. A similar conclusion is reached in the extraterritorial application of these laws. That is, even when they do not expressly so state, the laws have been held by courts in 17 various jurisdictions to have extraterritorial application. The final part of the work is on the impact of recent mergers on law and economy of African countries.

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