DealMakers - Q3 2025 (released November 2025)
Beyond the ESOP: A shift toward practicality in public interest enforcement
by Shawn van der Meulen, Lebohang Noko and Gina Lodolo
South Africa’s merger control landscape has been undergoing a quiet shift, as the South African Competition Commission’s (Commission) approach to public interest remedies evolves. After years of the Commission rigidly applying its “ownership” requirements, usually in the form of mandatory Employee Share Ownership Programmes (ESOP) imposed on merger parties – often with the associated delay of transactions and frustration of investors – the Commission has quietly started adopting a more pragmatic and commercially-aware approach to its public interest considerations. This transition (from its previously inflexible 5% ESOP benchmark established post-Burger King and the publication of its Public Interest Guidelines) to a more flexible approach represents an encouraging development for business.
The Commission’s 2021 recommendation to prohibit ECP Africa’s acquisition of Burger King (South Africa) and Grand Foods Meat Plant (Pty) Ltd, because the transaction would result in significant reduction in ownership by Historically Disadvantaged Persons (HDPs) in the target, marked a significant moment. Although the transaction was ultimately approved through a settlement before the Competition Tribunal, the initial prohibition garnered much criticism for the Commission’s rigid approach to the public interest criterion under section 12A(3)(e) of the Act. This provision requires that the Commission consider whether a merger results in the “promotion” of a greater spread of ownership, particularly by HDPs and workers (language that remains open to interpretation as to whether there is an obligation on parties to propose HDP and worker ownership in every transaction). To date, the Competition Tribunal has not substantively opined on the scope or application of this provision, leaving its precise meaning and boundaries unresolved. This continues to generate debate among practitioners.
​
From 2021, the Commission adopted a rigid stance: that all transactions must promote HDP and worker ownership, and other public interest benefits could not offset any ownership dilutions or neutral ownership positions. This approach gave rise to the imposition of specific ownership-related remedies, most notably the requirement for ESOPs as a condition for approval. At the time, the appropriate threshold to remedy such dilution remained unclear, until the Commission published its Public Interest Guidelines on 20 March 2024.
Shawn van der Meulen
.jpg)
Lebohang Noko
Gina Lodolo
While these guidelines are non-binding, they introduced a de facto benchmark, signalling that a 5% (or more) ESOP would be regarded as the appropriate remedial measure for mergers which did not have any other positive BEE or HDP ownership component. This rigid approach and insistence on the imposition of ESOP “remedies”, even where there was no negative effect on ownership, was to the detriment of many deals, which either became too impractical or too costly for the parties.
​
The regulatory shift: From rigid requirements to pragmatic solutions
Recent developments reveal a nuanced shift toward pragmatism by the Commission. As evidenced by trends in its annual reports, and in our experience as advisors, we have observed that the Commission has begun adopting a more pragmatic, balanced and commercially-aware application of the public interest test. Notably, in transactions where there is no dilution of HDP ownership (or a neutral effect), the Commission has shown a willingness to forgo the imposition of a 5% ESOP or similar ownership remedies. In transactions where it is not commercially or practically feasible for parties to include ownership commitments, the Commission has been open to adopting alternative public interest remedies.
​
While the promotion of HDP and worker ownership remains a critical policy objective, the Commission appears more open to assessing deals on a case-by-case basis, and considering broader commercial and contextual factors. Increasingly, we are seeing mergers approved subject to a range of alternative public interest commitments, instead of ownership conditions, across the following three categories:
-
Enterprise and supplier development, localisation and growth conditions involving commitments to procure products from local small, micro and medium-sized enterprises (SMMEs) and HDP suppliers.
-
Employment and head office conditions, including moratoriums on retrenchments, the creation of new jobs, commitments to maintain aggregate employment levels, and training commitments, such as setting up learnerships and providing bursaries.
-
Capital investment and production conditions encompassing commitments to invest in localisation initiatives, programmes to support and develop SMMEs and firms controlled by HDPs, training, bursaries, new outlets or facilities, and reskilling initiatives.
​
From a transaction advisory perspective, this trend towards pragmatism by the authority is positive. It provides greater flexibility in structuring deals and conditions while maintaining public interest objectives, making the South African market more attractive to both local and foreign investors. The shift suggests that the Commission is aware of the need to balance transformation objectives with economic growth and investor confidence, an approach that better serves the complex realities of modern commercial transactions.
However, merger parties must still exercise caution and carefully assess the commercial feasibility of any alternative commitments offered or agreed with the Commission (which may still have a material financial impact on deal values and purchase prices), and not to over-promise on commitments which can’t be delivered later. It is essential for dealmakers to understand and be advised on this evolving landscape when structuring transactions and strategically navigating competition approvals.
​
Van der Meulen is a Partner, Noko a Senior Associate, and Lodolo an Associate | Webber Wentzel
