Ten frequently asked questions: Merger transactions in Botswana

1. What transactions are required to be notified to the Competition Authority in Botswana?

A transaction is automatically notifiable as a merger to the Competition and Consumer Authority in Botswana (“Competition Authority”) if it falls within the definition of a merger in terms of the Botswana Competition Act, and if the monetary thresholds for compulsory notification are met.

A merger is defined in Section 45(1) of the Botswana Competition Act as the direct or indirect acquisition or establishment of control over the whole or part of a business of another enterprise.

Section 45(3) of the Botswana Competition Act provides a list of the circumstances in which the acquisition of control over the whole or part of another enterprise may be achieved. This includes where a person beneficially owns more than half of the issued share capital of the enterprise, is entitled to vote a majority of the votes that may be cast at a general meeting of the enterprise, is able to appoint or veto the appointment of a majority of the directors of the enterprise, and/or is able to materially influence the policy of the enterprise (negative control).

In the Competition Authority’s Merger Assessment Guidelines (December 2019), the Competition Authority provides examples of the instances in which an enterprise may acquire the ability to materially influence the policy of an enterprise. These examples include:

• Financial arrangements including circumstances where an enterprise becomes so dependent on the lender that the lender obtains material influence over policies or activities;
• Economic relationships including for example long-term supply agreements where a supplier is able to exercise decisive influence over a customer by creating a situation of economic dependence; and
• Minority protection rights which permit minority shareholders to veto decisions that are essential for the strategic commercial behaviour of the enterprise such as budget, business plans, major investments, the appointment of senior management or market specific rights (for example, decisions on technology where technology is a key feature of the merged entity).

2. What are the thresholds for application of merger control?

All mergers that meet the thresholds require notification to the Competition Authority by the merging parties and may not be implemented until approval has been received or the time period for the Competition Authority to make a determination has lapsed.

A notifiable merger is one where:

• the asset value in Botswana of the enterprise being taken over in the preceding financial year is equal to or more than BWP 10 million; or
• the turnover in Botswana of the enterprise being taken over in the preceding financial year is equal to or more than BWP 10 million; or
• the enterprises concerned would, following implementation of the merger, supply or acquire 20 per cent of a particular description of goods or services in Botswana.

3. Does Botswana have a mandatory or suspensory merger regime?

The merger regime is mandatory.

A merger that meets the thresholds set out in Question 2 above cannot be implemented until it has been approved with or without conditions by the Competition Authority, or the time period for the Competition Authority to make a determination has lapsed.

4. Can penalties be imposed for a failure to notify or prior implementation?

The Botswana Competition Act stipulates that a fine not exceeding 10 per cent of the consideration or the combined turnovers of the parties involved in the merger (whichever is greater) can be imposed for failing to give notice of the merger or implementing without approval. The imposition of this administrative penalty came into force in December 2019. We are not aware of any administrative penalties being imposed for failure to notify or implementation without approval at the time of publication.

The Competition Authority can also, where it determines that a merger is being or has been implemented without notification or approval, give direction to the enterprise not to complete or implement the merger, to sell or dispose of shares, interests or assets acquired, terminate any agreements to which the merger was subject, or take measures to restore the conditions that existed pre-merger.

Prior to the introduction of administrative penalties, the Competition Authority directed Universal House (Pty) Ltd to dispose of the 28.73 per cent of the shares it had already acquired without approval in Mmegi Investment Holdings (Pty) Ltd to an entity with no business interests or affiliated in any way with the acquiring entity within three months of the decision date.

5. What filling fees are payable to the Competition Authority in Botswana?

The Competition Authority charges merging parties a fee for analysing a merger. The filing fee is 0.01 per cent of the merging enterprise’s combined turnover or assets in Botswana (whichever is higher). There is no cap on the filing fee payable.

If the merger is abandoned within 14 days from the date the merger notice is received by the Competition Authority, the filing fee will be refundable.

An enterprise classified as small, micro and medium enterprise under the Industrial Development Act is exempted from paying filing fees.

6. What is the timeframe for scrutiny of a merger?

The Competition Authority must consider and make a determination in relation to a notified merger:

• within 30 business days from the date on which the Competition Authority receives the notification;
• within 30 business days from the date on which the Competition Authority receives further information (where such further information has been requested in writing by the Competition Authority); or
• within 30 business days after the date of conclusion of a hearing if the Competition Authority considers it is appropriate that one or more hearings should be held in relation to the merger.

Each of the time periods outlined above may be extended by the Competition Authority by giving notice in writing, for a further period not exceeding 60 business days.

7. What competition test does the Competition Authority in Botswana use when assessing a merger?

The Competition Authority must first determine whether the merger “would be likely to prevent or substantially lessen competition, to restrict the trade or the provision of any service or to endanger the continuity of supplies or services”; or whether the merger “would be likely to result in any enterprise, including an enterprise which is not involved as party in the proposed merger, acquiring a dominant position in the market”.

In addition, the Competition Authority may consider any factor which it considers has a bearing on the broader public interest.

According to the Merger Assessment Guidelines, the Competition Authority will take the following factors into account when assessing the competitive dynamics of the market for purposes of the prevention or substantial lessening of competition test:

• Market definition;
• Market concentration;
• Counterfactual (what would happen without the merger);
• Industry barriers (assessment of entry and expansion constraint);
• Import or foreign competition;
• Countervailing buyer power;
• Removal of a vigorous and effective competitor;
• Effective remaining competition (post-merger); and
• Theory of harm and effects – unilateral/monopolisation effects, coordinated effects and foreclosure.

In most instances where a merger has been prohibited on competition grounds, this has been as a result of the merger creating or entrenching a dominant position and reduced competition due to the removal of a competitor. Other reasons have included high barriers to entry and cross-shareholding through a common shareholder which has the potential to give rise to coordinated and unilateral effects to the detriment of consumers and competitors of the merged enterprise.

For example, on 16 May 2023, the Competition Authority prohibited the proposed acquisition by Akzonobel NV of one of Kansai Paint Co Ltd’s subsidiaries, Kansai Plascon Africa Ltd on the basis that the transaction would result in a substantial lessening of competition and strengthened dominance of the merged entity. The Competition Authority found that:

• The merging parties are close competitors in terms of price, quality and product range and the merger would remove competitive rivalry between the two brands (being Dulux and Plascon), reducing customer choice;
• The merger would enhance Dulux Botswana’s dominant position in the market by removing Plascon Botswana as the only other significant player;
• The merged entity is likely to act unilaterally with less competition restraint from the remaining competitors;
• Plascon Botswana and Dulux Botswana possess strong brand recognition and customer loyalty which provides insulation from competitive pressure and enables these entities to maintain relatively higher market shares despite higher pricing than their competitors. As a result, it takes considerable time for new entrants to offer effective competition to the merging parties; and
• Kansai Plascon Africa’s survival is not dependent on the proposed merger.

The Competition Authority also found that the merger would have had a negative impact on public interest due to the potential for job losses arising from duplication of roles.

8. Does the Competition Authority in Botswana assess the impact on public interest?

In considering a merger, the Competition Authority may consider any factor which it considers to have a bearing on the broader public interest including the extent to which the proposed merger:

• would be likely to result in a benefit to the public which would outweigh any detriment attributable to a substantial lessening of competition or to the acquisition or strengthening of a dominant position;
• may improve or prevent a decline in the production or distribution of goods or services;
• may promote technical or economic progress, having regard to Botswana’s development needs;
• would be likely to benefit a particular industrial sector or region;
• would maintain or promote exports or employment;
• may advance citizen empowerment initiatives or enhance the competitiveness of citizen-owned small and medium sized enterprises; or
• may improve the ability of national industries to compete in international markets.

Where a merger raises paramount issues of public interest, the Minister may provide comments to the Competition Authority which must be considered by the Competition Authority in making its decision.

Public interest conditions which have been imposed include moratoriums on merger-specific retrenchments, redeployment of employees to other operations, creation of an employee share scheme trust, local procurement requirements, requirement that the shareholding of the target firm is 51 per cent for citizens and retain business continuity in Botswana to name a few.

By way of example, in the Heineken/Distell merger (approved in August 2022), in addition to a divestiture condition to address competition law concerns, the Competition Authority imposed a public interest condition aimed at empowering a citizen-owned distribution company as the merging parties’ local distributors were both foreign-owned (and owned by the same company domiciled in South Africa). The condition required the parties to develop a supplier/distribution development programme to capacitate a local citizen-owned distribution company with the aim of absorbing it within the merging parties supply chain.

9. In what circumstances can a merger decision be revoked?

A decision by the Competition Authority approving the implementation of a merger can be revoked at any time if (a) the decision was based on materially incorrect or misleading information for which a party to the merger is responsible or (b) any condition attached to the approval of the merger (that is material to the implementation) is not complied with.

10. What is the confidentiality regime in Botswana?

When submitting information to the Competition Authority, a person, may identify information that is confidential information. Confidential information is defined as “trade, business or industrial information that belongs to an Enterprise, has a particular economic value, and is not generally available to or known by others”.

The Confidentiality Claim Form (which is used by a firm to identify information that is confidential to it, states that the “Authority shall treat confidentially any information identified by you in this form”.

In terms of the Botswana Competition Act, a member of the Competition and Consumer Board (the governing body of the Competition Authority), an employee of the Competition Authority or an inspector appointed in by the Competition Authority to investigate and report on a merger, shall not disclose any confidential information. This obligation does not apply to disclosure of information:

• with the consent of the enterprise;
• where the information is in a form of a summary so that the information relating to a particular enterprise cannot be ascertained;
• that is already in the public domain;
• to facilitate the performance of a function of the Competition Authority (such as giving reasons for its decisions);
• made in proceedings under the Botswana Competition Act; or
• made to a competition authority of another country in connection with a request by that country for assistance.

A person who contravenes the confidentiality regime is liable to a fine not exceeding BWP 30 000 or to imprisonment for a term not exceeding two years or both.

It is important to consider the impact of the proposed transaction on both competition and the public interest at an early stage of a deal. If you have any queries, please contact Norton Rose Fulbright’s competition team for advice. In addition, you can refer to our frequently asked questions for other African jurisdictions.