Yet, as the country sharpens its focus on transformation – with the Competition Commission of South Africa’s (the Commission) latest iteration of their Revised Public Interest Guidelines Relating to Merger Control, published in March of 2024 (the Revised Public Interest Guidelines), codifying a more proactive enforcement stance – the spotlight intensifies on the balancing act required. Whilst laudable in intent, there is a growing debate as to whether the evolving public interest regime may inadvertently chill investment and hinder economic growth – particularly where legal certainty and global competitiveness are at stake.

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Two tracks, one decision
Merger control in South Africa is governed by a two-limbed test under section 12A of the Act:
1.    Competition assessment: Will the merger substantially prevent or lessen competition in any market?
2.    Public Interest assessment: Regardless of the competition assessment outcome, can the merger be justified on substantial public interest grounds?

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A 2019 amendment to the Act, through the insertion of section 12A(1A), reconfigured the assessment to be performed by the Commission – clarifying that these limbs are not hierarchical in nature, but rather, parallel. Thus, a merger that raises no competition concerns may still be prohibited or heavily conditioned if it poses a substantial public interest risk.

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The expanding Public Interest framework
If a particular transaction does not pose any competitive or economic risks to any market – but may have a substantially adverse effect on public interest in the country, it may make sense for such a transaction to be prohibited – or at least have conditions imposed that are ameliorative to the negative effects caused. However, the Commission’s interpretation of what constitutes a ‘substantial public interest ground’ is where the dissention lies. 

While the Revised Public Interest Guidelines deal with each of the individual public interest grounds listed under section 12A(3) of the Act – the most notable interpretive expansion pertains to the Commission’s evaluation of section 12A(3)(e), which refers to the promotion of a greater spread of ownership, particularly regarding the increase of the levels of ownership by historically disadvantaged persons (HDP) and workers in firms in the market.

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In this regard, the Commission has unequivocally stated that it views this provision as a strictly positive obligation – meaning that every notifiable merger, regardless of size or structure, is expected to contribute to ownership transformation. This marks a fundamental shift from the previous approach, where HDP ownership dilution was only assessed if it was merger-specific and material.

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For instance, under the Revised Public Interest Guidelines, a proposed transaction could pose no competition risks, have a positive effect on employment, and result in various pro-competitive market efficiencies. However, if the proposed transaction does not bring about an actual accretion of HDP ownership, the Commission will view this as a substantial public interest ground and call for the imposition of corrective merger conditions to curtail the perceived negative effect of the transaction – and even, the possible prohibition of the merger. This would apply even in circumstances where a proposed transaction has a completely neutral effect on HDP ownership levels.

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Further, in a more recent development, the Commission appears to have adopted a revised public interest stance concerning retrenchments. In the event that any retrenchments take place within a 24-month window prior to a transaction, the Commission will consider these retrenchments as merger-specific and treat them as if they form part of the proposed transaction. This approach stems from two recent matters which were heard before the Competition Tribunal: Amandlamanzi Resources // Mylotex  [Case No. LM144JAN25] and Novus Holdings // Mustek  [Case No. LM145JAN25].

Once again, this places a heightened burden on the merger parties when vying for a transaction’s approval, as the Commission will adhere to the view outlined above even in circumstances where the retrenchments took place before the proposed transaction was even contemplated.

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The potential costs of overreach
The rationale for prioritising ownership transformation and employment stability is clear: South Africa faces staggering inequality and unemployment, which markets alone have failed to address. But as public interest considerations gain prominence in merger control, concerns about legal certainty and investment sentiment are mounting.

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Foreign investors, particularly those accustomed to purely competition-based merger reviews, may be deterred by the prospect of post-approval ownership restructuring, protracted negotiations with regulators, and the imposition of burdensome merger conditions that render transactions economically unviable. 

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This is a particular concern with large, multi-jurisdictional deals where the South African merger approval process threatens to scupper the entire global transaction. Under these circumstances, international firms often consider ringfencing the country so that it is excluded from the deal, or in some cases, complete local divestiture. The net effect of this is that South Africa is excluded from the global economy and does not get to benefit from the potential investment and economic growth opportunities that these kinds of transactions often bring. 

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So, the very laws and regulations that have been adopted for the purpose of growing and bolstering our economy can very easily have the exact opposite effect. 

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A balancing act, not a zero-sum game
However, there is no doubt that competition law in South Africa must serve more than just economic efficiency. The Act is a product of its time and place, and any credible regulatory regime must reckon with the context in which it operates.

Typically, where a transaction raises a specific competition or public interest concern, the Commission will try to impose a set of merger conditions that are directly responsive to the identified issue. For instance, if a transaction is likely to result in a duplication of roles for the target entity post-merger, the Commission will likely require the merger parties to agree to a retrenchment moratorium. 

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The same principle applies where a transaction does not give rise to an increase in HDP ownership levels, as the Commission will likely push for the establishment of an employee share ownership plan, or the introduction of an HDP shareholder for the transaction to be approved.

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However, there has been a recent shift in the market, whereby the competition authorities seem more acquiescent to accept merger conditions that do not directly correlate with the perceived negative effects of the transaction. Under these circumstances, the Commission may be willing to accept the establishment of an employee training programme to ameliorate for a possible retrenchment concern – or a commitment to increase the levels of procurement from HDP-owned and controlled firms to offset a potential decrease in HDP ownership levels. The guiding factor under these circumstances is generally that the commitment being made should carry an equal weight to the directly responsive remedy that the merger parties were unable or unwilling to carry out for whatever reason. 

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While this shift seems to signal a more flexible approach by the South African competition authorities, indicating a potential win for business and merger activity – there is a risk that this process could be viewed as the merger parties merely ‘buying’ their merger approval – given that the actual identified regulatory risks and concerns are not being addressed by the merger conditions. This scenario would be akin to the touted introduction of Elon Musk’s Starlink and its possible circumvention of the relevant HDP ownership requirements in exchange for extensive investment commitments. 

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Overall, South Africa’s merger control regime stands at a crossroads. And while public interest should not be viewed as a side issue, for the system to truly deliver on its transformative promise, it must strike a careful balance: promoting inclusion without dampening growth, and enforcing equity without undermining competitiveness.

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Too much emphasis on social outcomes, without regard for commercial realities, may undermine the very goals the regime seeks to advance. But too little attention to public interest would be a dereliction of the country’s constitutional commitments. 

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De Decker is an Associate | Lawtons Africa