Cement companies fined N$5 million for unapproved merger

The Namibian competition commission (NaCC) has fined various cement companies for executing a merger that would significantly impact that sector.

Fan Qingmei, Wang Zhongke and Hong Xiang Holdings were fined after investigations found that the acquisition of Hong Xiang Holdings’ shares by Wang Zhongke from Fan Qingmei, without the commission’s prior approval, would create a monopoly in the Namibian cement market.

In a statement on Wednesday, NaCC spokesperson Dina //Gowases said the transaction failed to meet the notification requirements in the Competition Act, designed to prevent potential anti-competitive effects.

According to //Gowases, the merger would significantly impact competition in the cement sector, which is crucial for the construction industry and national economy.

The settlement agreement mandates that the parties pay a fine of N$5 million and implement a compliance programme on competition law in Namibia.

“Effective competition encourages productivity and innovation which benefits consumers and promotes economic growth,” said //Gowases.

She noted that preventing market structures that could lead to anti-competitive behaviour is part of the NaCC’s role.

Hong Xiang Holdings is the majority shareholder of Whale Rock Cement (WRC), with a 70% shareholding, and accordingly controls WRC.

“Given that Hong Xiang Holdings controls WRC, Wang Zhongke’s acquisition of Hong Xiang Holdings from Fan Qingmei constituted a change of control in WRC,” said //Gowases.

In 2020, the NaCC stopped West China Cement Ltd (WCC) from acquiring Schwenk Namibia due to concerns of potential collusion in the Namibian cement market.

The NaCC feared that the acquisition would increase the likelihood of coordination between Schwenk’s subsidiary Ohorongo Cement and its main competitor WRC.

Before the launch of WRC (operating as Cheetah Cement) in 2018, Ohorongo was Namibia’s sole cement producer.

The proposed transaction would have allowed WCC, a major cement manufacturer and distributor in north-western China, to gain control of Ohorongo.

According to //Gowases, NaCC’s investigation found that the parties contravened section 44 read with sections 51 and 53 of the Competition Act.

“During the investigation of a merger between WCC and Schwenk Namibia, which was prohibited in 2020 as it was likely to prevent or lessen competition in the market for the production and supply of cement in Namibia, the commission detected that Wang Zhongke acquired Hong Xiang Holdings’ shares from Fan Qingmei. The commission’s findings indicated that the acquisition would have resulted in an effective monopoly,” said //Gowases.