SOUTH AFRICA Law and Practice Contributed by: Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
Financial Surveillance Department of the SARB The Financial Surveillance Department of the South African Reserve Bank (SARB), assisted by authorised dealers, acting in terms of the Exchange Control Reg - ulations GNR. 1111 of 1 December 1961 (as amended) (the “Exchange Control Regulations”), enforces cer - tain controls on the purchase and sale of currencies to stabilise the economy by limiting the flow of currency into and out of SA (see 2.3 Restrictions on Foreign Certain industries and sectors are subject to their own sector-specific regulators which have an impact on public takeovers and mergers. These include min - ing, broadcasting, telecommunications, banking and insurance. 2.3 Restrictions on Foreign Investments The Exchange Control Regulations place certain limi - tations on the manner and extent to which SA resident shareholders (both institutional and private) may hold shares in a foreign company. The effect of these limita - tions is such that SA resident shareholders are usually not in a position to either accept an offer of foreign shares at all or are only able to accept that offer in part. If the foreign bidder already has, or together with its offer will procure, a secondary or inward listing of its shares on a stock exchange in SA, then there will be no limits on the manner and extent to which SA resident shareholders may accept inward listed for - eign shares as consideration. Investments for further discussion). Other Industry-Specific Regulators As a result of the above, a foreign bidder offering con - sideration in the form of shares in a foreign company will usually provide a cash alternative for those share - holders not able to accept and hold the foreign share consideration. 2.4 Antitrust Regulations The Competition Act regulates competition (antitrust) law in SA. All transactions that are categorised as “intermediate” and “large” mergers must be noti - fied to and approved by the competition authorities before they may be lawfully implemented. A “merger” is defined in detail in the Competition Act and is given further meaning through case law, but is essentially
the acquisition of control by one or more firms over the whole or part of the business of another firm. Unlike other comparable jurisdictions, the Competi - tion Act not only requires the competition authorities to consider the impact on competition (ie, whether or not the transaction will substantially prevent or lessen competition), but also to consider public inter - est grounds as part of the assessment of competition issues in relation to a merger. In this regard, the impact of the proposed transaction on, amongst other things, will be considered: • a particular industrial sector or region; • employment (for example, whether employees will be retrenched as a result of the transaction); • the ability of small and medium businesses or firms controlled or owned by historically disadvantaged persons (HDPs) to effectively enter into, participate in or expand within the market; • the ability of national industries to compete in inter - national markets; and • the promotion of a greater spread of ownership, in particular to increase the levels of ownership by HDPs and workers in firms in the market. Increasing Ownership by HDPs By way of background, the Competition Amendment Act No 18 of 2018 has introduced some notable changes with respect to M&A deals in South Africa. The new amendments, which came into effect in 2020, have added a further notable factor to be considered from a public interest perspective; namely, the promo - tion of a greater spread of ownership, in particular to increase the levels of ownership by HDPs and workers in firms in the market. Whilst the competition authorities are concerned with public interest as a whole, given the high unemploy - ment rate in South Africa, the general state of the economy and the greater transformative imperative, the two key public interest considerations currently relate to the effects of a transaction on employment and the promotion of a greater spread of ownership by HDPs/workers. If a transaction has a substantial negative effect on employment, it may only be justified by an equally
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