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[2015] ZACT 110
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Hebei Zhongbo Platinum Co. Limited v Eastern Platinum Limited (LM005Apr15) [2015] ZACT 110; [2015] 2 CPLR 634 (CT) (16 October 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM005Apr15
In
the matter between:
Hebei
Zhongbo
Platinum
Co.
Limited
Primary Acquiring Firm
And
Eastern
Platinum
Limited
Primary Target Firm
Panel
: Andreas Wessels (Presiding Member)
: lmraan Valodia
(Tribunal Member)
: Medi Mokuena (Tribunal
Member)
Heard
on
: 02 and 14 September 2015
Last
additional information
received
on
:15 September 2015
Order
issued on
: 15 September 2015
Reasons
issued on
: 16 October 2015
Reasons
for Decision
Approval
[1]
On 15 September 2015, the Competition Tribunal (''Tribunal")
unconditionally approved the acquisition by Hebei Zhongbo
Platinum
Co. Limited ("Hebei") of the interests and operating assets
of Eastern Platinum Limited ("Eastern Platinum").
[2]
The reasons for approving the transaction follow.
Background
[3]
The Competition Commission ("Commission") referred the
abovementioned large merger to the Tribunal on 14 August 2015
recommending that the proposed transaction should be approved without
conditions. The Tribunal set the matter down for a hearing
on 26
August 2015.
[4]
On 20 August 2015 the Tribunal informed the Ba Bina Ba Noko Ba
Mampuru Community (hereinafter referred to as the "Community
Trust") of the date of set down since the Community Trust raised
certain concerns with regard to the proposed transaction
during the
Commission's investigation of the matter. This community is located
on the land alongside the "Eastern limb"
assets to be
acquired by Hebei from Eastern Platinum. The Eastern limb assets are
made up of the following projects of Eastern
Platinum: (i)
Mareesburg; (ii) Spitzkop; and (iii) Kennedy's Vale (collectively
referred to as the "Eastern
Limb Projects").
[5]
On 24 August 2015 the Community Trust requested a postponement of the
Tribunal hearing in order to participate in the process
and to make
representations. The Tribunal contacted the merging parties
who indicated that they had no objection
to the Community Trust
making representations at the hearing and further agreed to a
postponement of the matter until 02 September
2015 to allow the
Community Trust to prepare for the hearing. The
Tribunal
then
set
the
matter
down
for
02
September
2015
and
directed
the
Community
Trust to
make
written
submissions
by 28
August
2015.
[1]
[6]
The Community Trust attended and made oral submissions at the
hearings of
02
September 2015 and 14 September 2015. In essence it requested the
Tribunal to approve the proposed transaction subject to certain
public interest conditions. The concerns raised by the Community
Trust included the following issues:
a.
the shipping of chrome out of South Africa after the proposed
transaction, without any regard to some form
of beneficiation which,
they argued, is a key imperative for the development of South Africa
and its mining industry. According
to the Community Trust, this
continued conduct undercuts and undermines the South African
ferrochrome industry. It
suggested that a
local ferrochrome smelter must be built instead of
the chrome being shipped
out of the country in its raw and
unbeneficiated state;
b.
alleged post-merger "anti-competitive" free reign of trade
to a foreign market, as opposed to the
development of the local
communities; and
c.
extensive and continued delays in the development of Eastern
Platinum's mines/mining operations. The Community
Trust
inter
alia
requested a (social) development plan for the assets
being acquired, including details of when such plans will be
implemented and
effected by the merged entity after the proposed
transaction.
[7]
The Community Trust informed us that the communities that would be
affected by the merging parties' mining operations in South
Africa
and that should benefit from the relevant mining activities include:
(i)
the Mampuru community;
(ii)
the Phasha community;
(iii)
the Malekane community;
(iv)
the Bengweneyana community;
(v)
the Makola community;
(vi)
the Mainela community;
(vii)
the Moretsele community; and
(viii)
the Mosehla community.
[8]
We
note
that the Tribunal
after the
hearing of 02 September
2015
requested submissions
from
the
Department
of
Minerals
(DMR)
[2]
in relation to
inter
alia
applications
to
the
DMR
for
mining
rights
in
general
and
specifically
applications
by the
merging parties; the black economic empowerment
(BEE)
requirements of the relevant
l
egislation
pertaining to mining regulation/mining licences; the (time)
requirements
for the development
of mines
and potential sanctions should mining development
be delayed;
and consultations with the merging parties and
the
Community Trust in
relation
to
the
proposed
transaction.
[9]
The DMR's Limpopo Office advised the Tribunal that it does not have
any record of an application for mining rights from the
merging
parties relating to the acquisition of the interests and assets of
Eastern Platinum. According to the DMR, the merging
parties sought
guidance from it based on their intent but had not formally lodged an
application. It further advised that if the
merging parties
intend to continue with the proposed transaction, they would have to
lodge an application with the DMR as prescribed
in terms of Section
11 of the Mineral and Petroleum Resources Development Act (Act No. 28
of 2002) (as amended by Act 49 of 2008)
("the MPRDA").
[10]
The DMR's Limpopo Office also advised that in the event that such an
application is lodged, the Community Trust's interest
will be
considered in line with Broad Based Black Economic Empowerment
(BBBEE).
[11]
The merging parties clarified that in respect of the Western limb,
i.e.
the
Crocodile
River
Mine
("CRM")
to
be acquired
by Hebei
from
Eastern
Platinum, the
DMR
applications
have
been
l
odged
and
are
being
considered,
[3]
but
an application for the
Eastern
limb
[4]
has not as yet been lodged.
[5]
As
indicated
above,
the
community
represented
by
the
Community
Trust
is
located
on
the
land
alongside
the
Eastern
limb
assets.
[12]
The Tribunal also requested further
submissions from the merging parties
relating
to past retrenchments by Eastern Platinum, the current
employment levels at Eastern Platinum's mines and development
projects, as well as future employment by the merged entity in South
Africa both at the relevant mines and the development projects.
Parties
to proposed transaction
Primary
acquiring
firm
[13]
The primary acquiring firm is Hebei, a firm incorporated in the
People's Republic of China. Hebei is controlled by Hebei Taihang
Jiye
Mineral Resources Co. Limited ("Taihang"). Taihang is in
turn controlled by Mr Yunpu Ma. Mr Yunpu Ma controls a
number of
firms, none of which are active in South Africa. Hebei does not
control any firms.
[14]
The Hebei group of companies is focused
on the mining and beneficiation
of chrome
ore, smelting of ferrochrome and ancillary investment and trade.
Primary
target firm
[15]
The primary target firm is the interests and operating assets of
Eastern Platinum. Eastern Platinum is incorporated in Canada.
The
interests and assets forming part of the proposed transaction
are the following:
•
Eastplats Holdings
Limited ("Eastplats"), a firm incorporated in the British
Virgin Islands;
•
Eastplats Acquisition Co.
Limited ("Eastplats Acquisition"), a firm incorporated in
the British Virgin Islands;
•
Gubevu Consortium
Investment Holdings Proprietary Limited ("Gubevu"),
a firm incorporated in South Africa;
•
Barplats Investments
Limited ("Barplats Investments"), a firm incorporated in
South Africa;
•
Barplats Mines Limited
("Barplats Mines") including the "CRM Project"
currently being run by Barplats Mines,
a firm incorporated in South
Africa;
•
Barplats Mines (North
West) Proprietary Limited (a dormant company) ("Barplats Mines
(NW)"), a firm incorporated in South
Africa;
•
Rhodium Reefs Limited
("Rhodium Reefs") including the "Kennedy's Vale
Project" which is currently being run
by Rhodium Reefs, a firm
incorporated in South Africa;
•
Eastplats International
Incorporated ("Eastplats International"),
a firm
incorporated in Barbados;
•
Eastern Platinum Holdings
Limited ("Eastern Platinum Holdings"), a firm incorporated
in the British Virgin Islands;
•
Royal Anthem Investments
134 Proprietary Limited ("Royal Anthem"), a firm
incorporated in South Africa;
•
Afrimineral Holdings
Proprietary Limited ("Afrimineral"), a firm incorporated in
South Africa;
•
Lion's
Head Platinum Proprietary
Limited
("Lion's Head"),
a firm incorporated in South Africa;
•
Spitzkop Platinum
Proprietary Limited ("Spitzkop"), a firm incorporated in
South Africa;
•
the Mareesburg Joint
Venture (the "Mareesburg JV"), a firm incorporated in South
Africa; and
•
the Spitzkop Joint
Venture ("Spitzkop JV"), a firm incorporated in South
Africa.
[16]
The abovementioned firms will collectively be referred to hereinafter
as the "Target Firms".
[17]
Eastplats is active in the mining and supply of platinum group metals
(PGMs) and owns a number of mines held by the various
subsidiaries
of Eastplats.
[18]
It is important to note that the abovementioned mines consist of (i)
the CRM mine, a PGMs mine located in South Africa's Bushveld
Igneous
Complex, which while it was operational, was put under a care and
maintenance programme since August 2013; and (ii) three
mines that
were in various stages of development and which did not produce any
metal. Thus, none of the mines in this transaction
are fully
operational. The merging parties submitted that under Eastern
Platinum's ownership, the CRM would remain under care and
maintenance
until such time as conditions improve, including the global market
for PGMs.
[19]
The CRM, in addition to producing PGM's, produced chrome ore as a
by-product and small amounts of copper and gold (also as
by-products).
[20]
Eastplats further owns the mining rights to concessions that form
part of the company's Spitzkop project located on the Eastern
limb of
the Bushveld complex. The Spitzkop project is also under care and
maintenance. This project was planned to be developed
after the
Mareesburg project became a producing mine. Eastplats also operated
the Kennedy's Vale project where work was done on
the development of
a concentrator on the Kennedy's Vale site which would have been used
to process ore from the Mareesburg and
Spitzkop mining projects.
According to the merging parties this work was however terminated in
mid-2012 due to depressed PGM prices.
Proposed
transaction
[21]
Prior to the proposed transaction, Eastern Platinum underwent a
restructuring process whereby it acquired the minority shareholding
in the Target Firms so as to hold [...]% of the issued share capital
in each firm, save for Afrimineral where it increased its
shareholding to [...]%.
[22]
In terms of two Share Purchase Agreements, Hebei intends to acquire
[...]% of the issued share capital in the Target Firms
save
for Afrimineral where it intends acquiring [...]% of the
issued share capital. Post-merger Hebei
will have sole
control of the Target Firms.
[23]
In relation to the post-merger participation of historically
disadvantaged South Africans (HDSAs) in the Target Firms, the
merging
parties submitted that subsequent to the proposed transaction, Hebei
will transfer 26% of its interest in the Target
Firms to HDSAs.
Rationale
for proposed transaction
[24]
Hebei submitted that the main focus of the Hebei Group is the
production of ferrochrome. The chrome ore mined and produced
by the
Primary Target Firms will ultimately largely be sold to the Hebei
Group as feedstock for new ferrochrome furnaces being
established in
China.
[25]
Eastern Platinum submitted that the resource sector is under
considerable pressure and that PGMs have been disproportionately
impacted upon as a result of a number of local and global factors
unique to the sector. It further submitted that Hebei has the
ability
to deploy its resources at this time and this will assist in
stimulating production in respect of the Target Firms. Furthermore,
according to Eastern Platinum, Hebei's foreign investment and the
creation of much needed jobs will contribute to the ongoing socio
economic development in areas surrounding the (CRM) mine and
projects.
Competition
assessment
[26]
The Commission found that Hebei is not active within any market in
South Africa and that it has not generated any income in
South
Africa. Therefore, the Commission concluded that the proposed
transaction does not result in any horizontal competitive overlap.
[27]
The Commission however noted Hebei's intention to export the chrome
ore mined in South Africa to China to be used in the production
of
ferrochrome. In light of the above, the Commission sought to
ascertain whether the merger is likely to result in the foreclosure
of ferrochrome producers in South Africa from chrome feedstock.
[28]
The Commission however found that the proposed
transaction is unlikely to result in any foreclosure
concerns in South Africa given that:
(i)
the Target Firms have since the end of 2013 not sold any chrome ore;
(ii)
prior to the end of 2013, the Target Firms had a combined market
share of less than 2% of the chrome ore produced in South Africa;
(iii)
the majority of the chrome ore produced by the Target Firms pre
merger was sold to Chinese firms; and
(iv)
the major ferrochrome producers in South Africa such as Merafe
Resources (Pty)
Ltd, Samancor Chrome Ply (Ltd) and Hernic Ferrochrome
(Ply) Ltd are vertically integrated firms with access
to
their own mines with chrome ore reserves.
[29]
The Commission therefore concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition
in any
relevant market.
[30]
We concur with the Commission's above conclusion.
Public
interest
[31]
The Commission assessed the impact of the proposed transaction on a
number of public interest considerations including the
effect on (i)
employment in South Africa; (ii) a particular industrial sector or
region; and (iii) the ability of firms controlled
or owned by
historically disadvantaged persons to become competitive.
[32]
We shall first consider the employment effects and thereafter the
other public interest considerations, including the concerns
raised
by the Community Trust in relation to each public interest
consideration.
Employment
Merging
parties' submissions
[33]
The merging parties submitted that it is not expected that the
proposed transaction will result in any reduction in the Target
Firms' current work force. On the contrary, the merging parties
submitted that Hebei's foreign investment will likely
result in the creation of jobs in the areas surrounding the Target
Firms' mines and projects. They however did not quantify the
alleged
future job creation.
Trade
unions' submissions
[34]
The merging parties served a non-confidential version of the
merger filing on the National Union of Mineworkers ("NUM")
and the United Association of South Africa ("UASA")
which represents employees at Eastplats.
[35]
On 24 April 2015, NUM filed a
Notice
of
Intention
to
Parlicipate
with the Commission. NUM informed the Commission that it is
currently engaged in a legal battle with Eastern
Platinum
over unfair dismissals and
for alleged unauthorized and unlawful deductions. NUM
therefore
was of the view that its members have financial interests
in the mines and requested that the merger either be prohibited or
approved
on condition that the merging parties must honour the
judgements of the courts in the event that such judgements are in
favour
of the employees.
[36]
The Commission communicated the concerns raised by
NUM to the merging parties and they in response submitted
that the
retrenchments and alleged deductions are not in any way related to
the proposed transaction.
Commission's
assessment
[37]
The Commission investigated NUM's concerns and came to
the conclusion that the proposed transaction
is unlikely to
result in any employment concerns based on the following:
a.
the past retrenchments that have occurred at the Target Firms are not
related to the proposed transaction since
they were the result
of the mine(s) being put under care and maintenance, i.e. the
retrenchments are not "merger-specific";
b.
negotiations for a buyer of the Target Firms occurred several
months after the Target Firms' relevant
mines where mothballed;
c.
any future order by the labour court will be legally binding on the
mines irrespective of who the shareholder
will be. The Commission
communicated this view to NUM; and
d.
Hebei's planned investment in the Target Firms is likely to result in
a positive employment outcome compared
to the Target Firms' current
employment numbers.
Community
Trust's submissions
[38]
At
the hearing
the
Tribunal
sought
clarity
from
the
Community
Trust
regarding
its
employment
concerns.
Counsel
for
the
Community
Trust
raised two
issues
in
relation
to
employment
at
the
Eastern
limb:
(i) job
security
for current
employees,
i.e.
the
guarantee
that
jobs will
be
retained;
and (ii) in addition,
benchmarks
for
post-merger
employment
by the
merged
entity.
[6]
Our
assessment
[39]
The Tribunal requested additional information from the merging
parties on a number of issues relating to employment, including
(i)
the date on which the process to dispose of the Target Firms
commenced; (ii) the date on which operations at the Target Firms
were
mothballed; (iii) the number of employees at the Target Firms when
they were fully operational in 2012, split between
permanent
and contract employees; (iv) the number of retrenched employees since
2012, the dates of such retrenchments and the reasons
for the
retrenchments; (v) the current number of employees at the Target
Firms, split between permanent and contract employees;
and (vi) the
likely number of additional jobs to be created by the proposed merger
(relative to the current employment numbers).
[40]
We shall first consider the past retrenchments and thereafter
the likely impact of the proposed transaction on employment.
Past
retrenchments
[41]
In
relation
to
past
retrenchments
at
the
Target
Firms,
the
merging
parties advised
that
Eastplats
on
19 April
2013
decided
to suspend
funding for
the
CRM
"Development
Plan"
[7]
(the
"CRM
Project").
On
22
April
2013,
Barplats
Mines
[8]
issued
notices
to
employees
in
terms
of
Section 189
of
the
Labour
Relations
Act
No.
66
of
1995
with
respect to
a
care
and
maintenance
and
restructuring
proposal
for
the
CRM
Project.
[42]
Development work and mining operations at the CRM Project
ceased on 31 July 2013 with the effect that approximately 1
185 of
the CRM Project's then permanent employees were either
retrenched or their employment terminated by mutual
agreement. In addition to the
1 185 permanent employees being retrenched
or
terminated by mutual agreement, Barplats Mines also eliminated
approximately 400 contract positions on 31 July 2013.
[43]
The merging parties further
submitted
that from
01 January
2011 to 31
July 2013,
approximately
1
500
[9]
persons
were
retrenched
as a result of cost
cutting
measures
implemented
at the
start of
2011. The
bulk of
these
retrenchments
(approximately
1
200)
occurred in September 2012 following a decision to suspend
development work at the CRM.
[44]
With regard to the sale of the interests and operating assets of
Eastern Platinum, the merging parties submitted that prior
to
Eastplats being introduced to Hebei in 2014, neither the Eastern limb
nor the CRM assets were put up for sale by Eastplats.
[45]
We have found no evidence that the past
retrenchments that took place at the Target Firms are in any
way
related to this proposed transaction. Furthermore, we concur with the
Commission that that any future orders by the labour
courts in
relation to NUM's abovementioned legal action will be legally binding
(on Barplats Mines) irrespective of who the shareholder
will be.
Likely
effect onjobs
[46]
When the Target Firms' operations were fully operational in 2012 and
prior, they employed approximately 2 000 permanent employees
and 1
300 contract employees. However, these numbers have drastically
reduced.
[47]
Concerning current employment at the Target Firms' operations, the
merging parties informed us that at the CRM (which, as stated
above,
is on the Western limb of the Bushveld Complex) and which comprises
of three mine sites, namely Zandfontein, Maroelabult
and Crocette,
both Zandfontein and Maroelabult are currently under care and
maintenance, while the development at Crocette was
stopped in 2012
and the workings allowed to flood.
[48]
The merging parties at the hearing confirmed that there is currently
no mining taking place at the Target Firms. Given that
the CRM is
under care and maintenance, production has stopped whilst still
ensuring that the infrastructure is kept in good
working
condition and keeping the mine afloat,
for
example
by
continuing
with
pumping
operations
to
avoid
flooding.
[10]
[49]
The merging parties further submitted that if the transaction
proceeds, it is likely that Zandfontein and Maroelabult would
be
brought back into production in phases. The scope and timing of these
phases would be planned in relation to market conditions
and other
operational factors. However, the merging parties claimed that
they could not indicate when the CRM will again
become fully
operational. They did however submit that once the mine is fully
operational, there is every likelihood that the number
of
people employed at the CRM will be in line with the position prior to
it being placed under care and maintenance. They
also submitted that
most of these positions would be earmarked for local labour with the
exception of a few senior and/or technical
positions which may be
sourced from a wider pool of qualified talent.
[50]
Given that the CRM is under care and maintenance, the mine currently
has only 98 permanent employees and 34 contract employees.
In
addition to the above, the Eastern Limb Projects currently employ 13
permanent employees and 13 contract employees.
[51]
We have found no evidence that the proposed transaction will result
in a reduction in the current workforce at the Target Firms
in South
Africa. From the above it is clear that the labour components at the
Target Firms have been severely reduced since the
mines went into
care and maintenance over two years ago.
[52]
In light of the above we concur with the Commission's recommendation
that there is no justification for imposing any employment
conditions on the proposed transaction.
Effect
on a particular industrial sector or region
[53]
The Commission assessed whether the proposed transaction will have an
(adverse)
effect
on the
particular
region
in and
around
the Target
Firms'
mines,
particularly
the
Ga
Mampuru
village
located
in
Limpopo.
The
Commission noted
that
this
region
is
under-developed
with
a
youth
unemployment rate
of
nearly
90%.
[11]
The
Commission
further
noted
that
the need to
develop
the
mines
in this
geographic
region
is
underscored
by the
dire
socio-economic
situation in
and
around
the
area
of
the
mines.
Most
recently, there was violent protest action in and around the region
concerned with
protesters
demanding
clarity
from
the
mining
companies
in
the
area about
their empowerment and hiring
policies.
[12]
[54]
The Commission therefore requested information from the merging
parties in order to ascertain their plans for the development
of the
Eastern limb assets, including information on the investment that
Hebei will be making in the Target Firms in South Arica.
Merging
parlies' submissions
[55]
In relation to the future development of the Eastern limb assets, the
merging parties submitted that while Hebei intends to
continue with
the development of the Mareesburg project and the Kennedy's Vale
concentrator, which Eastplats suspended in late
2012,
significant work will need to be undertaken to determine what this
will entail and the time period within which the work
is to be
carried out. At the time that the work was suspended, approximately
[...]% of the development was deemed completed,
although
test work will have to be performed to determine whether and to what
extent work has to be redone. Post-transaction,
Hebei will reassess
the economic feasibility of completing the development of
Mareesburg and the Kennedy's Vale concentrator.
[56]
The merging parties further submitted that they do not have any
formal business plans regarding their intentions for
the
aforementioned projects, but stated that Hebei intends to invest an
estimated $[...] million into its operations in South Africa.
Commission's
recommendation
[57]
In relation to the development of the relevant mines, the Commission
noted that in terms of
section 25(1)(b)
of the MPRDA, the holder of a
mining right must commence with mining operations within one year
from the date on which the mining
right becomes effective in terms of
section 23(5)
or such extended period as the Minister may authorise.
This is intended to avoid a mining rights holder to significantly
delay
the development of a mine.
[58]
The
DMR informed the Commission
that it
will
assess Hebei's technical
and
financial
capability
once
a
formal
mining
rights
application
has been
submitted
(in
respect of
the
Eastern
limb).
[13]
This
is
to
ensure
that
Hebei will
have
the
capability
to
develop
and
bring
into
operation
the
mine(s)
within a
prescribed
period.
The
Commission noted
that due
to the
specific jurisdiction
of
the
DMR
in
relation
to
mining
development,
the
Department
is
best placed
to
deal
with
this
issue.
[59]
The Commission ultimately recommended that no conditions be
imposed on the proposed transaction in relation to the effect
of it
on a particular industrial sector or region.
Community
Trust's concerns
[60]
As
indicated
above,
the
Community
Trust
raised
concerns
about
the
significant
and
continued delays
in
the
development
of the
Target
Firms'
mines/mining
projects.
Counsel for
the
Community
Trust
stated that
"In
as
far as
the
granting
of
a
prospecting
right
is
concerned,
it
has
to
be
informed
by
certain
-
after
acceptance
of
the
application
it
has
to
be
social
development
labour plans,
which
have
to
be
done,
in
this
case
initially
by
East
Plats"
[14]
and
"
Yes,
the
mines
are
under
care
and
maintenance,
they
are
not
operating
yet. We
understand
and
appreciate
that,
but
there's
a
process
which
precedes
that,
which
is
the
prospecting
application. What
was
submitted
to
the
department
in
as far as that is concerned?
That's
relevant."
[15]
[61]
The Community Trust explained that the community
which it represents is only affected by the
Eastern limb
assets and not by the CRP. The fear of the Community Trust was that
attention will only be given to the CRP, which
is developed and which
was running, as opposed to the Eastern limb which is still under
development. The Community Trust therefore
submitted that a condition
must be imposed on the merging parties in relation to providing
particularity and details of the amounts
to be spent and the
timelines
for
when
development
plans
will
be
implemented
and
effected by
the
merged
entity
in
relation
to
the
Eastern
Limb
Projects.
[16]
If the
acquiring
party
delayed
developments
of
the
Eastern
limb,
the
Community
Trust
wanted
the
opportunity
to then
develop
it.
[17]
[62]
As
indicated
above,
the
Community
Trust
also
raised
a
concern
regarding
the
post-transaction export of
chrome ore
to China
without
local
value
being
added
to the
chrome
ore.
It
suggested
that
a smelter
could
be
built in
Limpopo to beneficiate and add value
to the
ore.
[18]
[63]
Counsel for
the
Community
Trust
submitted
that
in relation
to
(the
lack
of) local
beneficiation
this
issue
should
be
put
to
the DMR.
He
said
"
there
have
been
attempts
in
the
form
of
Bills
to
deal
with
the
issue
of
beneficiation and
to
actually
make
it
law,
and
for
it
to
be
applicable,
but
those
have
not
been
really
followed
up
and
come
into
law.
So
the
relevant
department
which
is not here
today
to
make submissions
in
this
regard
and
answer
those
questions,
would
be
the
Deparlment
of
Minerals".
[19]
Our
assessment
Development
of
the Eastern
limb
[64]
The Eastern Limb Projects are all development projects. The
merging parties informed us that none of these projects had
started
production by the time they were placed under care and maintenance
midway through 2012 (due to the deteriorating
economic and
social conditions at that time). All planned development was
mothballed when the Eastplats' operations were
put under care and
maintenance.
[65]
From a timing perspective, Eastplats had intended to develop the
projects in series, on the basis that the smaller and shallower
Mareesburg project would be developed first. Once Mareesburg was in
production, it was intended that Spitzkop would be developed,
followed by the larger and deeper Kennedy's Vale project. At
the time that work was suspended in respect of the Eastern
Limb
Projects, approximately [...]% of the required development to place
the Mareesburg project into production was deemed to have
been
completed. Hebei will, however, have to perform tests on the
"completed" development in order to determine whether
(and
to what extent) work has to be redone.
[66]
As stated above, the Community Trust's concern related to the lack of
progress with regard to the development of the Eastern
Limb Projects
of Eastern Platinum pre-merger and potentially post-merger in Hebei's
hands. The Tribunal therefore requested certain
information from the
DMR in relation to its regulation of mining development. The
Tribunal, more specifically, requested the DMR
to indicate if it has
the ability to impose licence conditions in relation to development
deadlines for mines (i.e. to prevent
delays in the
development of mines), as well as potential sanctions should
development deadlines not be met by a mining rights
holder. The DMR
submitted that in the event that the holder (of a righUlicence) fails
to comply, the DMR can invoke the provisions
of either
Section 93
or
Section 47
of the MPRDA.
Section 93
would be an order or instruction
to rectify or suspension of a mining operation whereas
Section 47
would entail suspension or cancellation of a mining right.
[67]
We
understand
the
frustration
of the
Community
Trust
with
the
delays in
the
development
of
the
Target
Firms'
mining
assets
and
as
a
result
the lack of
benefits
flowing
to
the
affected
communities
living on the
Eastern
limb.
However,
the
evidence
was
that
this
situation
existed
prior
to
the
proposed
merger
and
therefore
is
not
caused
by
the
proposed
transaction
under consideration. As stated
in
Walmart,
[20]
one
of
the issues
that we
need
to consider
is whether
or
not
a
specific
public
interest
concern
is
related
to
the
proposed
transaction
under
consideration.
Walmart
describes
this
as follows:
"Expressed
in
less
technical
language,
unless
the
merger
is
the
cause
of
the
public
interest
concems,
we
have
no
remit
to
do
anything
about
them.
Our job in merger control is not to make the world
a
better
place, only to
prevent
it becoming
worse
as
a
result
of
a
specific
transaction.
This narrow construction of
our
jurisdiction
has
not
always
been
appreciated
by
some
of
the
intervenors
who
have
sought
remedies
whose
ambition
lies
beyond
our
purpose. It
is
not
our
task
to
determine
whether
those
ambitions
are
legitimate
public
policy
goals;
only
whether
they lie
within
our powers."
[21]
[68]
Given the above, we could find no justification for imposing a
condition on the proposed transaction in relation to the post-merger
development of the mining assets to be acquired.
Post-merger
export of chrome ore
[69]
In relation to the intended export to China after the proposed
transaction of the chrome ore produced by the Target Firms,
we note
that this chrome ore forms a very small portion of the chrome ore
mined in South Africa. The Commission found that prior
to the end of
2013, the Target Firms had a combined market share of less than 2% of
the chrome ore produced in South Africa. Furthermore,
the Commission
found that, pre-merger, the majority of the chrome ore produced by
the Target Firms was already sold to Chinese
firms.
[70]
We have no evidence before us that the post-merger export of a
relatively small amount of chrome ore to China will have
a
significant adverse effect on a particular industrial sector or
region. Furthermore, as noted above, this situation already existed
pre-merger. Ability of firms controlled or owned by historically
disadvantaged persons to become competitive
Commission's
recommendation
[71]
The Commission found that the proposed merger
will not have any direct effect on BEE participation
in the
mining sector. Pre-merger, the BEE shareholders held a 26%
shareholding in the Target Firms and post-merger Hebei shall
offer
the same percentage to BEE shareholders. The Commission noted that
this 26% requirement is mainly due to the MPRDA which
enforces strict
empowerment quotas.
[72]
The Commission further made
enquiries regarding the intended structure
of
the abovementioned 26% BEE shareholding in the Target Firms after the
proposed transaction. The merging parties submitted that
this 26% is
proposed to be split as follows: (i) 15% to be shared between the
various mining communities in the area, including
the Mampuru
Community; (ii) 6% to be allocated to one (or two) black
entrepreneurs identified by Hebei; and (iii) 5%
to an employee
share scheme ("ESOP").
[73]
The
merging
parties
at
the
hearing
of 14
September
2015
explained
the
abovementioned
proposed
split
in the
three
components
as
follows:
"under
the
new
one
[Mining
charter]
they
have
got
a
concept
of
meaningful
economic
participation
and
they
tell
you
there
that
an
empowerment
entity
or
an
empowerment
vehicle
or
if
you
want
to
use
separate
vehicles,
the
empowerment
profile
of
a
mining
company
must
have
a
community
component
so
it
is
compulsory,
there
must
be
a
community
component.
It
is
also
compulsory
that
there
must
be
an
employee's
component,
as
well as
an
entrepreneurial component,
so
all
of
those
three
are
articulated
in
the
concept
of
meaningful
economic
participation,
which is part
of
the
2010 Mining
Chartet''
.
[22]
They
further
submitted
"
The
question
that
then
follows
is
how
do
you
distribute
that
equity?
That issue
is
not
regulated
in
the
Mining
Charter
so
the
Mining
Charter
doesn't
tell
you
what
percentage
must
go
to
which
of
these
three
categories
and
that
is
normally
a
product
of
commercial
negotiations,
but
all three of them must be there".
[23]
[74]
The Commission further noted that the merging parties' BEE proposal
for the Target Firms would still have to be considered
by the DMR who
may elect to impose a different set of BEE obligations on the merging
parties. The DMR confirmed that it is engaging
with the merging
parties with regard to this. The Commission was of the view that the
DMR was better placed to determine the spread
of the BEE shareholding
that will result in meaningful economic participation and a greater
share in ownership and to ensure compliance
with the legislative
empowerment quotas.
[75]
The Commission ultimately recommended that no conditions
be imposed on the proposed transaction in relation
to BEE.
Community
Trust's
submissions
[76]
The Community Trust raised the following issues in relation to BEE:
[76.1]
the
actual
value
of
the
proposed
transaction
to
BEE
shareholders since
these
shareholders
often
receive no
form
of
dividend
because
all
the
dividend
pays for
is the
equity
obtained.
[24]
This
is not an
issue that we can deal with as a Competition Tribunal and
we do not
discuss it any further; and
[76.2]
a
concern
that
the
abovementioned
planned
15%
BEE
shareholding
in
the
Target
Firms
to
be
shared
between
various
mining
communities
(see
paragraph
72
above),
may
be diluted
to less
than
15%
due
to
(future)
changes
in the
structure.
It argued
that
the
equity
that
pertains
to
the
community
must
not
be
affected
by
any
change
in the
(future)
structure.
[25]
Our
assessment
[77]
As indicated above (see paragraph 71), the proposed transaction will
not have a negative overall effect on BEE. Current BEE
shareholders
hold a 26% shareholding in the Target Firms and post-merger Hebei
shall offer the same percentage shareholding in
the Target Firms to
BEE shareholders.
[78]
Regarding this 26% and its structure, the DMR in its submission to
the Tribunal confirmed that in terms of the MPRDA each applicant
should have a minimum of 26% allocated to HDSAs (inclusive of
communities and employees as part of BBBEE). With regard
to how this is determined and implemented in practice, the DMR
advised that this is done in line with the Broad Based Socio Economic
Empowerment Charter. The DMR further confirmed to the Tribunal
that if an application for mining rights is lodged by the
merging parties in
relation to the
Eastern limb, the
BEE participation/quotas would in such case include
shareholding by communities.
[79]
Furthermore, with regard to the communities' 15% shareholding in the
Target Firms post-merger (see paragraph 72 above), as
intended by the
merging parties, the proposed transaction represents a positive
outcome for
the
relevant
communities
since
they
currently
have no
meaningful
BEE
shareholding
in the Target Firms.
[26]
There is no
evidence to suggest that this
intended
15%
would
be
diluted,
as feared by
the
Community Trust.
[80]
We conclude that the proposed transaction will not have an
adverse effect on the ability of firms controlled or owned
by
historically disadvantaged persons to become competitive and
therefore impose no condition on the approval of the proposed
transaction in relation to this.
CONCLUSION
[81]
Given the above, we conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition in any
relevant market. In addition, we have found no evidence that the
proposed transaction will raise significant public interest concerns.
We therefore approve the proposed transaction without conditions.
13
October 2015
DATE
_______________________________
Mr
Andreas Wessels
Prof.
lmraan Valodia and Ms Medi Mokuena concurring
[1]
I concur with the decision of my colleagues. However, I take
this opportunity to make a few remarks about the approach
of the
Commission to public interest issues. Public
interest is not limited
to employment
issues only.
Public
interest touches on the effect of the merger on the industry and the
community, economic participation of the affected communities
etc.
If the bill of rights issues are not taken into consideration
or glossed over when merger investigations are conducted,
then, the
Commission is failing to carry out its mandate embodied in the Act
[2]
The Commission must be alive to the purpose of the Act and the rights
embodied in the Constitution at all times. In instances
where
communities raise
social anri economic welfare
Issues, the
Commission must pause, and look a little closer into such concern.
These issues should not be left: to the Tribunal
to raise,
In response to communities submissions,
when the Commission could
have adequately addressed them
during the investigation.
[3]
It is imperative that both the Commission and the Tribunal administer
and implement the Act, alive to the Constitution.
16
October 2015
DATE
______________________
Ms
Medi
Mokuena
Tribunal
Researcher
: Caroline Sserufusa
For
the merging parties
: Ryan Goodman of
ENS Africa for EasternPlatinum
Paul Tindle of Prinsloo,
Tindle and Andropoulos Attorneys for Hebel
For
the Commission
: Seabelo Molefe and Xolela Nokele
For
the Community Trust.
: Adv.
M C Makgato instructed by Badal Inc
[1]
As noted above, the Community Trust also made submissions to
the Commission prior to the Commission’s referral of
the
matter to the Tribunal
[2]
DMR's Office
in
Limpopo.
[3]
This application was
lodged
in the
DMR's
Klerksdorp
Office
(i.e.
in the
North
West).
[4]
This application will be lodged in Limpopo.
[5]
Transcript
of
14
September
2015,
pages 8
and 9.
[6]
Transcript of 02 September 2015, pages 49, 53 and 54.
[7]
Previously
announced
on
12 June
2012.
[8]
A
South
African subsidiary
of
Eastplats
which
ran
the
CRM
Project.
[9]
Of the 1
500
positions eliminated, approximately 700 were permanent employees and
approximately
800 were
contract employees.
[10]
Transcript
of
14
September
2015,
page 6.
[11]
Commission's
source: Sekhukhune
District
Municipality
2014/15
Final IDP R
eview.
[12]
Refer
to
http://www.salabournews.co.za/index.php/componenUcontent/article/70-labour
news/26117-qamampuru-still-burnino-over-construction-of-new-road-and-mininq-jobs-for-locals.h
tml
[13]
Commission's
meeting
with
the
Limpopo
Regional
Director
of
the
DMR.
[14]
Transcript of 02 September 2015, page 30.
[15]
Transcript of 02 September 2015, page 30.
[16]
Transcript of 02 September 2015, pages 54 and 55.
[17]
Transcript of 02 September 2015, page 31.
[18]
Transcript of 02 September 2015, page 54.
[19]
Transcript of 02 September 2015, page 37.
[20]
See Tribunal
Decision
in the
larger
merger
involving
Walmart
Stores
Inc
and
Massmart
Holdings
Limited
(Tribunal
Case
No:
73
1
LM/Dec10).
[21]
See
Walmarl
decision,
paragraph
32.
[22]
Transcript of 14 September 2015, page 18.
[23]
Transcript of 14 September 2015, page 19.
[24]
Transcript of 02 September 2015, page 55.
[25]
Transcript of 02 September 2015, page 31; transcript of 14
September
2015, pages 30 to 32.
[26]
Transcript pages 22 and 23.