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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM115Oct23
In the large merger between:
The Compensation, duly represented by the
Public Investment Corporation SOC Limited
Primary Acquiring Firm
And
Rand Mutual Holdings Limited
Primary Target Firm
Panel: L Mncube (Presiding Member)
A Wessels (Tribunal Member)
M Mazwai (Tribunal Member)
Heard on: 20 December 2023
Order issued on: 20 December 2023
Reasons Issued on: 19 January 2024
REASONS FOR DECISION
Introduction
[1] On 20 December 2023, the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger whereby The Compensation Fund (“CF” or the
“Acquiring Firm”), duly represented by the Public Investment Corporation SOC
Limited (“PIC”), intends to acquire [percentage of shares] % of the ordinary
share capital of Rand Mutual Holdings Limited (“RMH” or the “Target Firm”).
[2] Upon conclusion of the proposed transaction, the CF will be able to exercise
negative control over RMH post-transaction.
Primary acquiring firm
[3] CF, a schedule 3A public entity under the Department of Employment and
Labour, it is established in terms of section 15 of the Compensation for
Occupational Injuries and Diseases Act 130 of 1993, as amended (“COIDA”).
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[4] The CF provides compensation for disablement caused by occupational injuries
or diseases sustained or contracted by employees in the course of their
employment, or for death resulting from such injuries or diseases.
[5] There are three primary insurance products provided by CF namely: medical
insurance; compensation for injuries and diseases sustained at the workplace;
and pension funds. The CF also provides in-house administrative services which
are not offered to external third parties. These administrative functions are purely
performed in-house to service the main business activities of the CF.
Primary target firm
[6] RMH is a company incorporated in terms of the laws of South Africa and is a
holding company with no business operations of its own.
[7] RMH is a wholly owned subsidiary of Rand Mutual Assurance Company Limited
(“RMA”). RMA is a non -profit mutual assurance organisation established
pursuant to section 30 of the COIDA.
[8] RMH has numerous subsidiaries which conduct in-house functions to support its
main business related to life insurance such as administrative services, IT and
technology services, property holdings companies and rehabilitation and wound
care facilities.
[9] Of relevance to the proposed transaction are the business activities of Rand
Mutual Life Assurance Company Limited (“RMA Life”) which operates as an
insurance company which underwrites assistance, disability, health, and life
insurance products.
Description of the transaction and rationale
[10] The CF will acquire contractual rights to materially influence the business and
strategic direction of the Target Firm. Therefore, upon completion of the
proposed transaction, the CF will be able to exercise negative control over RMH.
Post-transaction, the CF and RMA will continue to operate independently of one
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another.1
[11] In terms of the rationale for the proposed transaction, the proposed transaction
is in line with the group strategy objectives of the RMA and the CF sees this
transaction as a strategic investment. to target activities designed to alleviate
unemployment, stimulate job creation, encourage job retention, and establish
training and skills development.
Competition assessment
[12] The proposed transaction results in horizontal overlaps in the market for life
insurance products and services. There is a horizontal overlap in the business
activities of the merging parties in relation to the provision of life insurance
products and serv ices related to COIDA claims. This is because CF, and the
Target Group both offer life insurance products and services arising from COIDA
claims. However, these products and services have distinct differences.
[13] In order for a third -party to provide insurance claims arising from COIDA, it is
mandatory for such a third-party to secure a license to do so.
[14] The Department of Employment and Labour has issued two mutual licenses to
RMA, namely Class IV (mining) and Class XIII (building construction) licenses.
The Department of Employment and Labour has issued one mutual licence to
Federated Employers Mutual Assurance Company Proprietary Limited, namely
Class V (iron, steel and metal). The CF provides COIDA insurance services for
all other industries where COIDA claims arise excluding the mining; iron, steel
and metal; and building and construction industries.2
[15] Accordingly, the insurance products and services offered by the CF and RMA
are not demand-side substitutable as they each provide insurance products and
services to distinct industries, underpinned by the COIDA licenses which mutual
assurances are mandated to have in order to provide insurance cover for claims
arising pursuant to COIDA.
[16] We considered the impact of the merger on the supply of life insurance products
1 See Competitiveness Report in Meger Record at para 7.4, p 65.
2 The Commission may find it prudent to use its advocacy function to consult with the Department of
Employment and Labour on what appears to be very limited competition in relation to COIDA claims.
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and services related to COIDA claims in: (1) mining; and (2) building construction
industries in South Africa. However, given that the merger does not cause
competition concerns even on this narrow basis, it is not necessary to conclude
on the precise scope of the relevant markets.
[17] Both CF and RMH (through its subsidiaries) provide administrative services and
own or have interest/investments in rentable office space properties. In relation
administrative services, the merging parties provide these services in -house as
an ancillary fu nction to their main business activities and do not offer these
services to external third parties. In respect of rentable office space properties,
the Acquiring Group has minimal interest/investments in rentable office space
properties of [between 0 – 5%]. The Target Group owns and controls rentable
office space properties through its subsidiary, RMA Property, which is used for
in-house ancillary property functions. Neither of the merging parties lease
rentable office space properties to external third parties. Based on the above, we
noted that in relation to the market for administrative services and rentable office
space property, the merging parties are not active competitors in this market.
Thus, the proposed transaction does not result in any market share accretion in
this regard.
[18] The proposed transaction does not give rise to any vertical concerns.
[19] Therefore, we conclude that the proposed transaction is unlikely to result in the
substantial prevention or lessening of competition in any relevant market.
Public interest
Employment
[20] The merging parties submit that there will be no job losses as a result of the
proposed transaction.3
[21] The employees of the Target Firm were duly notified of the proposed transaction
and did not raise any employment related concerns. However, the employee
3 Merger record, p 11.
[22] We find that the proposed transaction is unlikely to have a negative impact on
employment.
Spread of ownership
[23] The CF is a body of the South African government and does not have a black
based black economic empowerment ("B-BBEE ") rating. RMA (and by
implication RM H) is a level 1 B-BBEE contributor and does not have a HOP
shareholding.
[24] G iven that the government is the ultimate shareholder and the dividends which
accrue to it benefit all the people of South Africa, the Commission concluded that
the proposed transaction does not require any further intervention as regards the
promotion of a greater spread of ownership.
[25] The proposed transaction raised no other public interest concerns.
Third party views
[26] No third party raised any concerns.
Conclusion
[27] We conclude that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market and the proposed transaction does not
raise public interest concerns.
[28] In the circumstances, w e unconditionally approve the proposed transaction.
Signed by:Liberty M ncube
Signed at:2024-01-19 11:45:42 +02 :00
Re ason:W rtnessing Liberty Mncu be
-Prof. Liberty Mncube
19 January 2024
Date
Mr Andreas Wessels and Ms Mondo Mazwai concurring
Tribunal Case Manager:
For the Merging Parties:
Juliana Munyembate
Phuti Mashalane, Nkonzo Hlatshwayo and Dale
Adams of Werksmans Attorneys
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For the Commission: Tarryn Sampson, Raksha Darjiand Grashum
Mutizwa