JOHANNESBURG (miningweekly.com) – South Africa’s Competition Tribunal has approved the implementation of the $33-billion merger between Glencore and Xstrata, subject to a condition limiting post-merger retrenchments.

The merger was presented to competition authorities in multiple jurisdictions after it was unveiled last year, owing to the fact that the two companies operate in a number of countries. The South African approval followed on from the conditional approval granted by European regulators.

The tribunal convened in mid-January for what was scheduled to be an extensive hearing process, following interventions made by South Africa’s State-owned power utility Eskom, the National Union of Metalworkers and the National Union of Mineworkers (NUM).

Eskom approached the tribunal for imposition of further conditions to ensure that the coal-mining unit of the merged entity was prevented from using its market power in a way that led to insecurity of coal supply and a migration in prices to an export-parity level.

However, Eskom withdrew its intervention on January 18 having reached a confidential agreement with the miners, whereby its concerns were to be addressed through a bilateral negotiation process.

In its submission to the tribunal, the Competition Commission concurred with Eskom that rising coal prices and the effect this could have on domestic electricity prices were cause for concern.

However, it said it did not believe that specific coal-pricing conditions should be placed on the proposed merger to curtail future price rises, as the merged entity would have no additional power to export coal than was the case currently.

Instead, the remedies lay in the enforcement of existing provisions in the mining rights granted to the companies, which stipulated that the coal be disposed of at market prices and demanded that these be non-discriminatory or non-export parity prices. In addition, the Mineral Resources Minister had the authority to prescribe measures, or incentives to support local mineral beneficiation.

In a joint media statement, Eskom and Glencore said the “agreement establishes a framework within which the two companies will cooperate with each other on a mutually beneficial basis and govern the interaction between them regarding existing and future coal supply agreements”.

Besides the employment condition – made in line with a public-interest clause contained in South Africa’s competition legislation – no other conditions were set down by the South African authorities.

“We have come to the conclusion that the merger will not have an anti-competitive effect and therefore we do not have to have regard to the significance of the private agreement reached between Eskom and the merging parties,” the tribunal said in a statement.

The merging parties had also reached agreement with the NUM, which would regulate any job losses that could arise post-merger.

“We are satisfied that the condition is fair both to the affected employees and the merging parties,” the tribunal said, noting that it set a ceiling for the number of employees that could be retrenched.

The deal stated that no more than 80 skilled employees could be retrenched and granted semi-skilled and unskilled employees even greater protection.

It stipulated that the merging parties would conduct a 90-day review to assess whether retrenchments of semiskilled and unskilled employees were required. Should retrenchments arise, these could only take place two years after the end of the review period and no more than 100 employees could be affected.

For those semiskilled and unskilled employees who are retrenched, a training fund had been established and each affected employee would be entitled to receive R10 000 towards an approved training course.

Earlier in the month, Glencore and Xstrata agreed to postpone their merger until March 15, pending the outcome of South Africa’s competition hearings and the ongoing regulatory processes in China.