The HSF also made oral submissions on 29 August 2018 at Parliament.
The Bill published in July 2018 is the second iteration of a 2017 Bill that seeks to address high levels of concentration and the skewed ownership profile of the economy. It also attempts to enhance the administrative efficiency of the Competition Commission and Tribunal. The HSF’s submission is confined to comments relating to the newly inserted section 18A which introduces national security as a consideration for permitting large mergers by a foreign acquiring firm in South Africa.
On a reasonable interpretation of section 18A of the Bill, the process of intervening in a merger by a foreign acquiring firm will take place in the following way: A foreign acquiring firm interested in pursuing a merger in South Africa notifies a Committee (consisting of Cabinet Ministers and public officials) constituted by the President. Considering a list of national security interests gazetted by the President, the Committee can prohibit the merger, permit notification with conditions or permit notification of the merger without conditions on the grounds that the merger threatens the identified national security interests of South Africa.
The HSF’s primary concerns with this section are:
- The absence of certain definitions – ‘a Committee’ is not defined in the Act or the Bill and we suggest the insertion of a definition. The definition of ‘foreign acquiring firm’ includes the term “effective management” which is undesirably vague and the deficiency ought to be remedied also by inclusion of a definition.
- The appropriateness of locating section 18A in the Competition Act – in the absence of an integrated national security policy the HSF cautions the Committee against pursuing a national security strategy in the arena of competition law. Similar provisions in other jurisdictions appear in defense legislation or in a dedicated Act, this approach should be considered.
- A lack of clarity with regards to the appeal and review processes – no provision is made for internal or external review and appeal mechanisms for aggrieved parties to challenge the decision of the constituted Committee.
- The pre-decision engagement process – the HSF recommended that an opportunity for pre-decision engagement be included in the section.
- The list of factors in s 18A(4) – the list of factors the President must take into account when determining what constitutes a national security interest is concerningly broad. To help rather than hinder the President’s determination we suggest the list be made specific, clear and focussed.
- The President’s ability to delegate the determination in s 18(2) – the Bill goes to great lengths to mandate the President to publish what South Africa’s national security interests are and it does not make sense that such a duty should then be allowed to be delegated.
- The appropriate balance between interests of national security and protection of an open investment policy – the Bill should identify national security as an interest of the state, while it should also make explicit South Africa’s receptiveness to foreign investment.
The HSF’s submission sought to identify legislative deficiencies that if remedied will strengthen the Bill by doing away with vagueness, broadness and ambiguity and improve the rationality of the Committee’s decisions. The recommendations were made cognisant of the need to balance national security interests of South Africa with encouraging an economic environment that is open and receptive to foreign investment.
The HSF will continue to monitor the progress of the Bill.
Download the HSF’s written submission here.
Download the Amendment Bill here.
For Media Enquiries
- Kimera Chetty
kimera@hsf.org.za - Mira Menell Briel
mira@hsf.org.za
