MANDATORY NOTIFICATION OF MERGERS AND ACQUISITIONS IN ZIMBABWE
Introduction
Mergers can be classified under three different categories namely i)horizontal, ii)vertical, and
iii)conglomerate. Where a merger occurs between players who have a competitor relationship,
the merger is classified as horizontal. Companies are said to be in direct competition if they
are offering similar products or services at the same level of the value chain. Such mergers are
generally regarded as the potentially most harmful to competition as they result in the
elimination of a competitor.
When a merger takes place between a customer and a supplier, it is referred to as a vertical
merger. Vertical mergers take place between companies within the same value chain .e.g., the
acquirer is a bread manufacturer and the target is a flour producer. The last category are
conglomerate mergers which occur between parties with no customer/supplier or competitor
relationship .e.g., a bread manufacturer acquiring a stake in an entity that sells clothes.
Companies merge or acquire other companies for various reasons. Some merge or acquire other
businesses for market expansion, diversification, talent acquisition, vertical integration etc. As
companies make these crucial decisions, it is important for them to understand the regulatory
environment governing mergers and acquisitions in Zimbabwe. This article unpacks mergers
and acquisitions regulation in Zimbabwe, discusses the legal definition of what constitutes a
merger, the notification process and the legal implication of failing to notify mergers.
What is the Legal Definition of a Merger in Zimbabwe?
There is a misconception of the general definition of a merger and its legal definition. The Act
defines a merger as the direct or indirect acquisition, or establishment of controlling interest in
the whole or part of another business. The means by which the controlling interest is achieved
includes the purchase/lease of shares/assets or combination/amalgamation with a competitor,
supplier, customer, or any other means that enable the firm to have a controlling interest in the
whole or part of the business of another.
Controlling interest in terms of the Act is not restricted to having a majority stake in a business
but encompasses any form of control gained as a result of the merger. This may include the appointment of directors and obtaining voting rights. Any of the above is the first indication of
the notifiability of the transaction.
What is Merger Notification?
Merger notification is the process of alerting the competition authority of the intention of
parties to merge. The reason for such notification is to enable the Commission to review the
merger within its jurisdiction, in order to prevent anti-competitive consequences that arise or
may arise as a result of such a merger. Merger notification in Zimbabwe is prescribed in terms
of the Competition Act [Chapter 14:28] (the “Act”). The Act is administered by the
Competition and Tariff Commission (“CTC”), a statutory administrative body. Under the Act,
CTC is mandated, amongst others, in Section (5) to encourage and promote competition in all
sectors of the economy. To achieve this, among other practices, CTC reviews mergers to ensure
that the mergers in or having an effect on Zimbabwe, do not result in substantial lessening of
competition. A review of mergers is done only after it has been fully notified to CTC.
Which Mergers Should Be Notified?
Whether a given transaction needs to be notified to the CTC depends on (a) the definition of a
notifiable transaction, and (b) whether the notification thresholds are met. Current notification
thresholds of a transaction are explained in terms of Section 5 of the Competition (Notification
of Mergers) Regulations, 2020 read together with Competition (Notification of Mergers)
(Amendment) Regulations, 2022 (No. 1). A notifiable merger is one whose combined turnover
or assets of the merging parties in or from Zimbabwe is greater or equal to US$1,200,00.00.
Not Sure Whether A Transaction Constitutes a Notifiable Merger?
Where parties to any transaction are not sure whether the merger is notifiable or not, it is
prudent for parties to seek guidance from CTC to avoid penalisation and/or ‘unscrambling the
egg’ subsequent to issuance an order by CTC. The guidance is issued in terms of the
Competition Advisory Opinion Regulations (S.I 125 of 2020). The fee for the Advisory Opinion
is currently pegged at USD1 500 or its equivalence in the local currency.
Is Merger Notification in Zimbabwe Mandatory?
Section 34A of the Act makes it mandatory for mergers meeting the above stated threshold to
be notified in Zimbabwe. Merger notification should be made within thirty (30) days of the
conclusion of the merger agreement between the merging parties, or the acquisition by any one
of the parties to the merger of a controlling interest in another business. Since notification of
mergers is mandatory, failure to comply has consequences.
What is the Merger Notification Process?
The merger notification process commences with the parties to a notifiable merger completing
a prescribed Merger Notification Form, accessed from the government gazette, CTC’s website
or at its offices. Upon completing the form, parties submit it together with the accompanying
prescribed fee (“notification fee”). A notification will be deemed complete or fully notified on
the date when all of the information and supporting documents required are submitted, and
the notification fee has been paid in full.
How Much is the Notification Fee?
Section 4 of the Competition (Notification of Mergers) Regulations, 2020 read together with
Competition (Notification of Mergers) (Amendment) Regulations, 2022 (No. 1) prescribes the
notification fee payable when making a merger notification. Current merger notification fee is
calculated as 0.5% on the higher of the total combined assets of the merging parties or
combined annual turnover generated in or from Zimbabwe. The minimum and maximum fee
level is US$10 000 and US$40 000, respectively. Payment of notification fees can be done by
either one or both parties to the merger and is payable in either foreign currency or local
currency equivalent.
What happens if A Merger is Not Notified?
CTC may impose a penalty if the parties to a merger fail to give notice of the merger or proceed
to implement the merger without the approval of CTC. The penalty imposed by CTC can be up
to 10% of either or both of the merging parties’ annual turnover in Zimbabwe as reflected in
the accounts of any party concerned. This is in terms of Section 34A(4) of the Act. For more
information, please contact the undersigned:
The Director
Competition and Tariff Commission
23 Broadlands Road
Emerald Hill
Tel +263 864413 7945, +263 242 853127-31
Website: www.competition.co.zw
