COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 107/LM/Dec04
In The Large Merger Between:
Afgri Operations Ltd
And
Nedan Oil Mills (Pty) Ltd
Reasons for Decision
Approval
On 23 February 2005 the Competition Tribunal issued a Merger Clearance Certificate approving
the transaction between Afgri Operations Ltd and Nedan Oil Mills (Pty) Ltd. The reasons for this
decision follow.
The Transaction
Afgri Operations Ltd ("Afgri") is acquiring sole control of Nedan Oil Mills (Pty) Ltd (“Nedan Oil”).
As part of the transaction, Afgri will also acquire the loan account against, Nedan Oil. Afgri is a
wholly owned subsidiary of Afgri Limited, a public company listed on the JSE Securities
Exchange South Africa. Nedan Oil is jointly controlled by the Trihead Trust, Valbridge Trust,
Zamin Trust and Afgri. 1
The Rationale
According to the parties, Afgri is the only shareholder with sufficient resources to assist Nedan
Oil in expansions.
The Parties activities
Afgri has four main operating divisions, namely Afgri Products, Afgri Requisites, Afgri Capital
(Financial and Logistics Services) and Afgri Services. 2 Afgri supplies producers with various
agricultural input commodities and services. Afgri's four divisions focus on the following areas:
1 According to the parties, Nedan Oil has one subsidiary namely, Nedan Agri Business (Pty) Ltd which is
currently dormant and will be deregistered.
2 More detail on the activities of these divisions can be found in Afgri’s Annual Report at page 35 of the
record. Also on www.afgri.co.za
1. Afgri Products manages the grading, handling, storage and trading of agricultural
products through its logistics, trading and risk management business. It also provides
farmers and agriprocessors with hedging facilities and services. This division manages
all the secondary agricultural processing businesses of Afgri;
2. Afgri Requisites markets and distributes an extensive range of products and farming
requisites produced by third parties, including mechanization equipment such as tractors
and farm equipment and services;
3. Afgri Capital provides business and risk management solutions, which include finance,
short term and crop insurance and advisory services, to farmers, traders and agricultural
processors;
4. Afgri Services sells agricultural science and technology to producers.
Nedan Oil inter alia supplies refined edible oils, bulk fats protein for human consumption
(supplied in bulk) and protein for animal feed (supplied in bulk).
Evaluating the merger
While there are no horizontal overlaps in the activities of the parties, several vertical
relationships do exist.
Afgri provides the following services to Nedan Oil:
i. supply of soya beans by Afgri Products ;
ii. the handling and storage for soya beans by Afgri Products ;
iii. provision of finance by Afgri Capital ; and
iv. supply of crude cottonseed oil by Afgri’s subsidiary, Cotton Seed Processors (Pty)
Ltd.
Nedan Oil supplies the following to Afgri:
i. RBD palmolein oil; and
ii. a blend of RBD palmolein and cottonseed oil.
The Commission identified and analysed the following relevant markets:
i. Supply of crude edible cottonseed oil;
ii. Processing of crude cottonseed oil;
iii. Supply of soya beans;
iv. Processing of soya beans;
v. Handling and storage of soya beans;
vi. Provision of credit facilities;
vii. Credit utilisation;
viii. Processing of RBD palmolein oil; and
ix. Food processing.
vii. Credit utilisation;
viii. Processing of RBD palmolein oil; and
ix. Food processing.
For these purposes, it is not necessary to make a definitive finding on the relevant markets, as
we are of the view that the merger will not result in a substantial lessening of competition. 3
However, our only concern was with regard to the handling and storage of soya beans. The
Commission’s investigation revealed that there was spare capacity in the industry, and the
3 Refer to page 616 of the Commission’s report for a detailed analysis of the identified markets.
2
Tribunal was concerned that, post merger, Afgri would allocate all its spare capacity 4 to Nedan
Oil in preference to other firms. According to the Commission downstream firms prefer to utilise
the nearest silo possible. During the hearing, Nedan Oil’s representative, Mr. Kevin Nel,
confirmed that because of the position of the silos, it was not economically viable for Nedan Oil
to utilise Afgri’s spare capacity. 5
We have no other concerns and are satisfied that there are no significant public interest issues
which arise and we accordingly approve this transaction unconditionally.
18 March 2005
N Manoim Date
Concurring: Y Carrim and M Holden
For the merging parties: Craig Roelofsz (Fluxmans Attorneys)
For the Commission: Odie Strydom (Mergers and Acquisitions)
4 According to the Commission, Afgri has 30% spare capacity in its silos.
5 According to Mr Nel: “ We wouldn’t store in a silo that was very far from the factory, whereas other silo
owners have silos closer to the factory .” At page 7 of the transcript.
3