The Competition Commission has recommended that the Competition Tribunal approve the acquisition of agricultural services group Afgri by private investment firm AgriGroupe Holdings, after an investigation of the proposed merger found that there was no competitive overlap in the activities of the merging parties.

The commission said in a statement on Thursday that AgriGroupe and its controlling entity, Joseph Investment Holdings, offered no products or services that could be considered similar and interchangeable to those offered by Afgri South Africa.

“Therefore, the commission is of the view that the proposed merger is unlikely to substantially prevent or lessen competition in the market for agricultural-commodities-, storage-, trading- and other related services,” it stated.

Afgri received shareholder approval in November for the proposed R2.4-billion buyout by JSE-listed AgriGroupe, which planned to acquire all shares in Afgri at R7 a share.

However, following concerns raised by various stakeholders, the commission conducted an in-depth analysis on the effect of the proposed transaction on public interest issues.

Although not opposed to the proposed merger, government, represented by the Economic Development Department, the Department of Trade and Industry, the Department of Rural Development and the Department of Agriculture, Forestry and Fisheries, raised concerns that, postmerger, AgriGroupe was likely to increase the storage costs of grain in KwaZulu-Natal, Mpumalanga and Gauteng, as it would own the majority of silos in these provinces.

The parties also submitted that AgriGroupe would export grain to the US, Canada and other countries, which would likely increase the price of grain and maize in South Africa.

The African Farmers' Association of South Africa the South African Communist Party (SACP) and the National African Farmers Union raised concerns about the likely effect that the proposed merger would have on farmers, specifically black farmers. The SACP also raised employment concerns. 

“In its assessment of each of the public interest issues raised, the commission did not find any evidence to suggest that the proposed transaction will have a negative impact.

“The commission found that AgriGroupe would not have the incentive nor the ability to direct or control the trading of grain from South Africa to other countries, as it might not be economically feasible to do so and because Afgri in any event does not currently trade in commodities,” the commission noted.

Further, commenting on the possible exclusion of black or small-scale farmers from using Afgri’s silos, the commission found that, as there was currently spare capacity in the silos, it would not make commercial sense to exclude any category of farmers from using them.

“Conditions of access to the silos are typically a subject of negotiations with the roleplayers from time to time, and nothing stops any stakeholder, including government, from engaging on improving such conditions in the interest of black or small-scale farmers,” the commission outlined.

Moreover, the commission did not find any evidence that AgriGroupe would not continue to provide the assistance currently provided by Afgri to small farmers or that it would stop extending loans.

With respect to employment, the commission found that the merger was in fact likely to create job opportunities in the long term.

However, it acknowledged that there were also concerns raised, which were not dealt with by the commission, as they fell outside the parameters within which it was empowered to investigate public-interest issues.

“While some of these may be important, we do not express a view on them as they fall outside the mandate of the competition boundaries. Stakeholders affected can pursue these concerns further with other relevant institutions,” the commission stated.