AFRICA is on track to have working regional competition bodies by next year and businesses need to prepare themselves to navigate a plethora of rules or suffer damages.
A director of law firm Cliffe Dekker Hofmeyr’s competition practice, Chris Charter, believes the Common Market for Eastern and Southern Africa’s (Comesa’s) competition commission is on course to have an operational regional competition law in place by its November 16 target date.
Mr Charter said African countries had realised that in order to develop projects quicker and to encourage foreign direct investments, they needed to have legal competition systems that were more efficient and worked better together.
Comesa is a regional organisation which works to develop economic integration through trade and investment in East and Southern Africa.
Comesa has 19 member countries: Comoros, Burundi, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
But Comesa’s regional approach to merger control is not being pursued at the expense of domestic merger control regimes which meant two tiers of merger control would soon persist in Africa, according to Andrew Cadman, a founding director of Read Hope Phillips Attorneys.
"Although the Comesa merger control regime is not yet fully operational, when it does become operational, businesses will face the prospect, when engaging in merger and acquisition activity across Africa, of having to deal with both domestic and regional competition authorities," he said in a paper co-authored with Bridgett Majola, an associate at his firm.
This could add complexities to what businesses needed to do when operating in Africa, or they could suffer severe costs.
"Too often in large transactions with transcontinental effects do African merger control implications go unappreciated or are simply ignored.
"Businesses do this at some risk as the consequences can be severe and include not only administrative penalties, typically calculated as a percentage of annual turnover, but also in some cases criminal penalties," Mr Cadman and Ms Majola said.
They said that in Kenya, for example, failure to notify a merger may result in imprisonment for five years or a fine of 10-million Kenyan shillings ($118,133) or both.
Mr Charter said some of the Comesa states had little or no competition law or merger control as recently as a year ago, but he was sure the Comesa group had put the right structures in place to create a competition regime with a substantial degree of harmony.
"I believe the writing is on the wall. There is no effective community without a competition regime in place."
He said once the Comesa regime was up and running, other regions would follow suit.
"I expect to see an acceleration of local laws and enforcement. There is already informal co-operation between Southern African Customs Union (Sacu) regulators, with respect to technical assistance and capacity building," he said.
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