• Fri. Apr 19th, 2024

Shepco merger with Haggie Rand Zimbabwe approved

ByETimes

Oct 19, 2023

By ETimes

In a bid to survive and not close doors Haggie Rand Zimbabwe, a steel wire manufacturer has seen Shepco Industrial Supplies acquire a significant chunk of ownership according to the latest statement by the Competition Tariff Commission (CTC).

In a statement the CTC said, “In March 2023, the Commission received notification of the acquisition of shareholding in Haggie Rand Zimbabwe (Pvt) Ltd (“Haggie Rand”) by Shepco Industrial Supplies (Pvt) Ltd (“Shepco”).

”Shepco is a business group with mining, industrial and manufacturing operations of nails, bolts and nuts, spares and maintenance for the mining industry, mining equipment such as locomotives, loaders, coco-pans, conveyor rollers, and distributing safety wear.Haggie Rand produces steel wire products including wire drawing, wire ropery, aluminium conductors and chains & fittings.

CTC competition analysis considered theories of harm affecting vertical mergers namely input and customer foreclosure.

“Input foreclosures arise when Haggie Rand restricts access to nail wire that it would have otherwise supplied to Shepco’s competitors such as Coal Zim, Survival Fasteners, Tassburg Fasteners and other competitors absent the merger. Haggie Rand was now producing way below its production capacity due to working capital challenges, constituting at most 1 percent of the market.Its current investors are unwilling to inject funding to resuscitate operations hence Haggie Rand is severely undercapitalized.

According to the CTC, market power is one of the pre-requisites to engage in input foreclosure.

“In this instance, Haggie Rand does not have the ability to engage in such a practice as it is a very small player. Moreso, 90 percent of locally drawn wire is imported. If the merging parties engage in input foreclosure, Shepco’s competitors will resort to imported drawn wire,” said the regulator.

Customer foreclosure occurs when a supplier integrates with an important customer in the downstream market.

In this case, Shepco, which is a customer of drawn wire, is integrating with Haggie Rand, a manufacturer of drawn wire.

“As a result of the proposed merger, the merging parties may deny actual or potential upstream competitors (Steel Force, Continental Wire, BSI Steel, and many other producers) access to a sufficient customer base, constraining their ability or incentive to compete.“

When considering whether the merged entity would have the ability to foreclose access to downstream markets, the Commission examines whether there are sufficient alternative customers in the downstream market for upstream rivals to sell their output,” the CTC said.

In Zimbabwe the market leader in this market is Coal Zim which holds 15 percent, followed by Survival Fasteners which accounts for 13 percent, Scandia Steel and Wire which holds 11 percent of the market, and many other playersShepco has a mere 10 percent market share and does not have market control in the industry.

According to the CTC, “Shepco faces strong competition from established and small players including Coal Zim, Scandia Steel and Wire, National Wire and Fencing and Tassburg.

This shows that many players will remain available as customers to Haggie Rand’s competitor’s post-merger.”

Given the analysis, the commission approved the merger as the merger was deemed pro-competitive and will resuscitate Haggie Rand’s operations which was on the verge of closing operations – Harare

By ETimes

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