Uganda denies reports that it’s a sleeping giant in COMESA

This is through establishing a legal framework that aims to prevent restrictive business practices and other restrictions that deter the efficient operation of the market, thereby enhancing the welfare of consumers in that relevant market.

But Uganda alongside Eritrea and Libya of the 19 COMESA member states is yet to enact one or come up with a competition despite the increasing mergers and acquisitions. Based on this, top executives at the COMESA Secretariat have labeled Uganda as a ‘sleeping giant.’

George Lipimile, the director general and chief executive officer of the Lusaka based COMESA Competition Commission  told journalist during the 5th regional sensitisation workshop in Nairobi, Kenya June 25-26, that without a competitive market, economies cannot produce positive results that would yield the popular talk about economic growth and social transformation.

“These are issues we can’t avoid,” he said, “they are here with us.” “Uganda is a sleeping giant in that area,” he said.

Francis Mangeni, a Ugandan working as the director for trade customs and monetary affairs at the COMESA secretariat, told The Independent on the sidelines of the workshop that Uganda has to speed up the process of forming the competition law and have an authority in place to be able to promote efficiency, fair competition, protecting consumers and small scale enterprises.

“The competition law and authority are very essential for the development of any country,” Mangeni said.

For instance, he said when Uganda had Celtel as the only telecom service provider, mobile phones, airtime, service fee and calling rates were very high.

But when the market received South Africa’s based, MTN and later on other private players, prices fell by more than half, he said.

Mang’eni said the quality of service and innovations improves when competition is monitored by an authority and law like it is done in most COMESA member states.

Uganda started working on the Competition Bill in 2004 but it is yet to be passed in law.

But in a rejoinder, Julius Onen, the permanent secretary of the Ministry of Trade told The Independent that they had made amendments to the bill and sent it back to Cabinet for approval.

One key amendment in the bill, he said, was about creation of a unit in the ministry to manage competition related matters instead of creating an authority.

“It is still work in progress but there is a bit of challenge because it would require creating an authority,” he said adding, “yet government has put a stop on creation of new agencies.”

He said that they hope in the next two months the bill would be in Parliament for legislation.

Asked to respond to comments about Uganda being a sleeping giant in COMESA, Onen said: “Each country is different. We are currently using the COMESA Competition Commission to go about competition matters and to me the many individual bodies do not make sense.”

He suggested that if it were possible COMESA would have a single competition authority to avoid duplication of roles and hiring people who would not have a lot of work to do.

The Private Sector Foundation Uganda Executive Director, Gideon Badagawa has in several interviews with The Independent hinted on the need for this law to support business growth and grow the private sector base.  But it appears lawmakers and the executive are yet to give it the attention they have given to others.

Learning from the neighboring countries like Kenya that already set up a competition Authority and the law, the ease of doing business has been a major marketing point for the country because of the authority, according to Barnabas Andiva, an executive from the Kenya Competition Authority (KCA).

“The last study for the World Bank ranked us favorably because of the high levels of competitiveness,” he told The Independent.

Commenting on the same matter, Willard Mwemba, the manager for mergers and acquisitions at CCC first praised Uganda as a big economy within East Africa and COMESA.

However, he said, the bigger the economy, the more the transactions involving corporate companies which require tight monitoring and supervision by an independent authority.

He added that without that supervisory infrastructure, companies would easily hide transaction details in the case of mergers and acquisitions, hence causing losses to the government.

“At the moment we are working with the ministry of trade in Uganda to get information about mergers and acquisitions but they are not experts and that is why we are insisting that we need the competition authority,”Mwemba said.

In addition, he said having a competition law and authority would build confidence for more foreign investors to invest in the country.

“They (companies) want that when there is an infringement of competition laws by another company there is a law to address that,” he said. In Uganda, he said, they have supported the government on formulating the competition bill “but we can only do what we can and leave the rest to Parliament and the Executive.”

Officials said that strengthening competition in Uganda amongst companies is one key market for Uganda because COMESA is the number one export market for a few countries – Uganda, Rwanda and Kenya – in addition to the European Union market.

Big mergers, acquisitions

One core role of CCC is to manage transactions related to acquisitions and mergers.

Mwemba said that since 2013, when CCC was established, has successfully concluded a total of 175 with total turnover growing from US$5.3bn to US$17.6bn in the same period.

The maximum amount of US$200,000 is the fee charged by the CCC to handle the transactions depending on the turnover that these companies derive in COMESA.

The fee is shared by member states where transactions take place and CCC.

Comparatively, from 1990 to 2018, the European Commission, which is one of the largest handlers of acquisitions and mergers has handled more than 6,950 merger transactions and only prohibited 27, according to CCC’s data. This picture is almost the same with the US anti-trust authorities.

For COMESA, five out of 11 sectors are leading in terms of total transactions.

The energy sector has attracted the highest volume of merger activity in the common market, followed by banking and financial services, insurance, construction, and agriculture.

In terms of member countries, Kenya, Zambia, Mauritius and Zimbabwe form the top four member states receiving the highest number of merger activity since inception.

Mwemba explained that the main reasons behind these transactions are that many companies prefer to enter new territory where they do not have presence through acquisitions and mergers.

He also said that some companies merge so they even expand more and become more efficient.

“They know that united we are stronger,” he said, adding that CCC is yet to reject any merger since 2013.

Mwemba defended this saying; a competition authority that prides itself in rejecting mergers is not a good competition authority. And that CCC as an authority supports new investments, commerce and the integration process. And that a merger in most cases does not raise competition concerns.

Beyond Uganda

Experts in this filed say that mergers and acquisitions are now the most common form of investment as opposed to green field investments world over.

Worldwide, mergers and acquisitions activity exceeded US$3 trillion for the fourth consecutive year in 2017, with announced transaction volumes reaching US$3.7trillion. Cross-border mergers and acquisitions remained strong, accounting for 30%of total volume as companies looked for opportunities to innovate and mitigate technology disruption.

However, the volume of withdrawn deals in 2017 was US$658 billion, partly reflecting continued pressure from regulators.

Quick facts about COMESA

·       Intra-trade within COMESA is now standing at around US$10bn in terms of formal exports; this is up from US$1.5bn in 2000

·       This figure is formal trade in goods; it does not include small scale informal trade which is also a significant figure estimated at 40% of trade

·       This figure does not also include trade in services which is much more than trade in goods. More than 50% of the COMESA economies are made up of services

·       COMESA has a population of over 450 million people

About CCC and facts

·       CCC’s mandate is to promote and encourage competition by preventing and prohibiting anti-competitive conduct by market players which deter the efficient operations of markets partition and erode consumer welfare

·       CCC officials believe that access to and dissemination of information on competition matters is essential to enhance the compliance to the regulations and detection of infringements

·     Since inception, the Commission has handled more than 175 merger transactions, worth at least US$92billion in transaction value
·     This corresponds to a turnover of over US$73.7billion derived by the undertakings in the Common Market
·     The Commission has received close to US$27.9million in merger notification fees, of which 50% is shared with the affected member states
·     In 15 transactions, the Commission attached conditions to the merger approval in order to remedy competition concerns which were likely to arise after