Summary of Judgment

1. Introduction

These proceedings concerned the approval of a large merger by the Competition Tribunal of South Africa in terms of the Competition Act 89 of 1998. The matter was allocated Case No.: LM021May24.

The primary acquiring firm was African Bank Limited (“African Bank”). The primary target firms were the Commercial Property Finance and Capital Equipment Finance businesses of Sasfin Bank Limited, being the commercial property finance (CPF) and capital equipment finance (CEF) businesses of Sasfin Bank Limited (“Sasfin”), together described in the reasons as the target business.

From a procedural perspective, the merger was investigated by the Competition Commission (“Commission”) and subsequently referred to the Tribunal for adjudication. The Tribunal heard the matter on 26 July 2024, issued an order on 26 July 2024 unconditionally approving the merger, and issued written reasons on 26 August 2024. The Tribunal also addressed a jurisdictional interaction between the Competition Act and the Banks Act 94 of 1990, including the notification of the Minister of Finance and the absence of an assertion of ministerial jurisdiction at the time of referral.

The dispute concerned whether the proposed acquisition of Sasfin’s CPF and CEF businesses by African Bank was likely to substantially prevent or lessen competition in any relevant market and whether the transaction raised any public interest concerns, particularly relating to employment.

2. Material Facts

African Bank was identified as the acquiring firm, wholly controlled by African Bank Holdings Limited, which was in turn controlled (as described in the reasons) by the South African Reserve Bank (SARB). African Bank also controlled Grindrod Financial Holdings Limited, which in turn controlled Grindrod Bank Limited. The Tribunal treated African Bank, its subsidiaries, and controlling firms collectively as the Acquiring Group.

The Tribunal recorded that African Bank’s activities relevant to the assessment included retail banking (including unsecured lending, transactional banking, retail investments, and credit and life insurance products) and commercial banking (including treasury/deposit-raising, platform/alliance banking, corporate/investment/SME banking, and property lending, including vanilla finance, mezzanine finance, and blended facilities). Through Grindrod Bank, African Bank offered financial services to commercial clients, including SMEs.

The target firms were the CPF and CEF businesses of Sasfin. Sasfin was recorded as being wholly controlled by Sasfin Holdings Limited, a public company with widely held shares traded on the Johannesburg Stock Exchange. The Tribunal described the CPF business as providing tailor-made finance products to customers seeking to develop small to medium commercial residential property developments, and the CEF business as providing asset-backed finance, primarily involving industrial assets and equipment.

The transaction comprised African Bank’s acquisition of the CPF and CEF businesses of Sasfin, including the loan books, contracts, goodwill, intellectual property, business claims, and business records, as defined in the relevant sale agreements. After implementation, African Bank would control the target businesses.

On jurisdiction, the Tribunal recorded that the transaction constituted a transaction envisaged in section 54 of the Banks Act 94 of 1990. The Tribunal further recorded that in terms of section 18(2) of the Competition Act 89 of 1998, the Tribunal would be precluded from making an order if the Minister of Finance issued a notice indicating that the transaction fell within section 54 of the Banks Act and that it would be in the public interest for the merger to be subject to the Banks Act rather than the Competition Act. The Commission had notified the Minister in terms of Rule 36 of the Commission Rules for the Conduct of its Proceedings, and at the time of referral the Minister had not asserted jurisdiction under section 18(2)(b). The Tribunal sent a further letter to the Minister on 16 July 2024 noting the merger was before the Tribunal.

As to public interest facts, the merging parties stated there would be no adverse effect on employment in South Africa. The Tribunal recorded that, in terms of section 197 of the Labour Relations Act 66 of 1995, employees of the target businesses would transfer to the acquiring group on the same terms and conditions of employment. The Commission engaged with employee representatives; SASBO raised no concerns, while initial concerns by target employees’ representatives were addressed by assurances that the merger entailed a transfer of business as a going concern.

The Tribunal’s reasons did not identify any material factual disputes requiring resolution; the assessment proceeded on the basis of the information placed before the Commission and Tribunal, including market framing and competitive dynamics, as well as the absence of third-party objections.

3. Legal Issues

The central legal questions were whether the proposed transaction was likely to result in a substantial prevention or lessening of competition in any relevant market, and whether there were any public interest grounds (particularly employment-related) that warranted conditions or prohibition.

A preliminary legal issue concerned jurisdiction, specifically the interaction between the Competition Act’s merger control regime and the potential for exclusive treatment under the Banks Act 94 of 1990 where the Minister of Finance asserts jurisdiction in terms of section 18(2) of the Competition Act.

The issues primarily concerned the application of law to fact: identifying the relevant markets (as framed in the investigation), considering market shares and competitive constraints, and evaluating whether the evidence supported a finding of likely harm to competition or public interest outcomes requiring intervention.

4. Court’s Reasoning

On jurisdiction, the Tribunal proceeded from the statutory position that where a transaction is envisaged in section 54 of the Banks Act 94 of 1990, the Tribunal is constrained by section 18(2) of the Competition Act 89 of 1998 if the Minister issues the requisite notice asserting that it is in the public interest for the merger to be subject to the Banks Act rather than the Competition Act. The Tribunal recorded that the Commission had notified the Minister as required by Rule 36 and that, at the time of referral, the Minister had not asserted jurisdiction in terms of section 18(2)(b). The Tribunal also noted its own communication to the Minister during July 2024 and proceeded to issue an approval order.

On the competition assessment, the Tribunal accepted that the proposed merger gave rise to horizontal overlaps in two areas: the provision of commercial property finance and the provision of asset-backed finance. The Tribunal adopted the Commission’s framing of the relevant markets as national, noting that it received no information suggesting a departure from that approach.

In relation to the national market for commercial property finance, the Tribunal relied on market share evidence indicating that the merged entity would have a combined post-merger market share of less than 10%, with a market share accretion of less than 5%. The Tribunal considered that the merged entity would continue to face competitive constraints from larger market participants identified in the reasons, including Nedbank, Investec, The Standard Bank of South Africa Limited, Absa, FirstRand, and Capitec, among others. On this evidentiary basis, the Tribunal concluded that the merger was unlikely to substantially prevent or lessen competition in that market.

In relation to the national market for asset-backed finance, the Tribunal recorded that it did not receive market share information and instead relied on submissions concerning market dynamics from market participants provided to the Commission. The Tribunal reasoned that the merged entity would continue to face competition from several players, including Absa, FirstRand, The Standard Bank of South Africa Limited, Nedbank, and Investec. It also noted the absence of third-party concerns regarding the proposed merger, supporting the conclusion that the transaction was unlikely to raise competition issues in markets where the parties operated.

On public interest, the Tribunal focused on employment effects. It accepted the parties’ position that there would be no adverse employment impact and recorded the relevance of section 197 of the Labour Relations Act 66 of 1995, under which employees of the target businesses would transfer to the acquiring group on the same terms and conditions. The Tribunal further relied on the Commission’s engagement with employee representatives and the fact that concerns raised were addressed through assurances that the transaction entailed a transfer of business as a going concern. The Tribunal concurred with the Commission’s finding that the merger did not raise employment concerns, and accordingly identified no public interest basis for imposing conditions.

5. Outcome and Relief

The Tribunal unconditionally approved the large merger in which African Bank intended to acquire Sasfin’s CPF and CEF businesses, including the loan books, contracts, goodwill, intellectual property, business claims, and business records.

No conditions were imposed. The reasons did not record any separate or specific costs order.

Cases Cited

No cases were cited in the judgment.

Legislation Cited

Competition Act 89 of 1998.

Banks Act 94 of 1990.

Labour Relations Act 66 of 1995.

Rules of Court Cited

Rule 36 of the Competition Commission Rules for the Conduct of its Proceedings.

Held

The Tribunal held that the proposed merger was unlikely to substantially prevent or lessen competition in the relevant national markets for commercial property finance and asset-backed finance, having regard to the merged entity’s limited market share in commercial property finance, the presence of significant competitors, and the competitive constraints identified in both markets.

The Tribunal further held that the merger did not raise public interest concerns relating to employment, accepting that the transaction entailed a transfer of employees under section 197 of the Labour Relations Act 66 of 1995 and noting that employee representatives’ concerns had been addressed.

LEGAL PRINCIPLES

The judgment applied the principle that merger approval under the Competition Act requires an assessment of whether a transaction is likely to substantially prevent or lessen competition, taking into account market definition, market shares where available, and competitive constraints from existing market participants.

The judgment also applied the statutory jurisdictional principle that where a transaction falls within section 54 of the Banks Act 94 of 1990, the Tribunal’s ability to make an order is affected by section 18(2) of the Competition Act 89 of 1998 if the Minister of Finance issues the specified notice asserting that it is in the public interest for the merger to be subject to the Banks Act rather than the Competition Act.

In relation to public interest and employment, the judgment applied the principle that where a transaction involves the transfer of a business as a going concern, section 197 of the Labour Relations Act 66 of 1995 may operate so that employees transfer on the same terms and conditions, and this may support a conclusion that the merger does not adversely affect employment where the evidence confirms such transfer and affected representatives do not maintain unresolved concerns.